Chinese Restaurant Tax Shenanigans, Part 3

 

 

One of the first articles I ever wrote for Menuism was entitled "Why Do Some Chinese Restaurants Change Their Names So Often".  In that article, one of the reasons cited was a sales tax dodging scheme, whereby a restaurant would not report sales tax receipts to the government, then fold up their operating entity and set up a new one to continue their business, waiting for the statute of limitations to run on their past unpaid sales taxes.  More recently I wrote about the well publicized schemes of restaurants like the Sam Woo chain which used a cash only requirement for sales to avoid not only sales tax reporting, but also the much more lucrative evasion of federal and state income taxes.

Item 2 in the hiring sign above highlights probably the most prevalent tax related secret in the Chinese restaurant community.  Not that everybody doesn't know about the practices of restaurants not reporting cash sales, and paying employees at least partially in cash.  However, there are some interesting twists to this arrangement.  First of all, there is a symmetry required between cash that the restaurant receives and pays it.  Most people assume that to the extent a restaurant owner has cash sales that they pocket the entire amount that they receive.  But as I first learned as a rookie accountant nearly 50 years ago, that is nowhere near the case.  Not reporting $1,000 in cash sales doesn't mean that $1,000 in reporting of income has been avoided.   Rather if some of that cash is used to pay out expenses of operation, such as employee wages, then that amount would not be deductible for income tax purposes (since there is no documentation of the payment), and the restaurant has avoided the tax only on the net cash retained, if any.  In some cases there may not be any such net cash.

But the biggest surprise of all is that in a number of cases, restaurant owners are forced into this situation, and are not pleased about it, as I learned when one of them complained to me about the system.  That is because a lot of Chinese restaurant workers demand at least partial payment in cash, which enables them to minimize the income they report to the government, qualifying them for various social services available to low income individuals.  This is becoming even more of a dilemma for restaurant owners, because to make this system work, the restaurant has to have cash sales.  And as our society becomes more and more cashless, particularly as influenced by the pandemic, there are fewer cash receipts available to make cash payments to employees.  Indeed I wouldn't be surprised that item 2 in the sign is a direct response to the dwindling number of cash transactions.

If there's a takeaway in the help wanted poster, it may well be that paying Chinese restaurant workers in cash may be a more common practice than any of us were aware of.

Chinese Food at USC--Filling In The Blanks

 

Years ago I wrote a number of articles in various publications on how since around 2010, college and university campuses in the United States had become hotbeds of authentic Chinese food, due to the arrival of hundreds of thousands of students from Mainland China.  College towns whose only experience with Chinese food consisted of chop suey, egg drop soup, and moo goo gai pan were suddenly hosting significant number of Chinese students, many from the interior Mainland, even bringing Chinese dishes to local restaurants not to be found in Los Angeles Chinatown.

Amid this new wave of Chinese food in the United States, there was one anomaly, the University of Southern California in Los Angeles.  USC had the second greatest concentration of Mainland Chinese students in the United States, yet in the adjacent commercial areas to campus, there were no authentic Chinese restaurants to be found.  The best explanation for this strange dichotomy was that there were already enough Chinese restaurants in the general Los Angeles area, so no restaurants dedicated to this audience were needed.  Indeed Los Angeles being the undisputed leader for Chinese food in the entire United States, and particularly the regional foods that would appeal to the mainland Chinese student body at USC, existing restaurants were sufficient to serve the needs of the Mainlanders even though the restaurants were not proximate to campus.

But still, not every Chinese student could find their way to the San Gabriel Valley for every meal, and Mainland Chinese students are unlikely to become attached to the local American cuisine as most of them will be headed back to back to China after they complete their USC studies.  It took a while for me to fill in the blanks, and I partially did in my articles from the 2017-2018 era, discovering the existence of Chinese food trucks based in the San Gabriel Valley parked outside of campus, mostly on Jefferson Bl., west of McClintock, with names like Tasty Wok Express and Fluffy Tacos (the latter obviously a former taco truck bought by a Chinese operator who didn't bother to repaint the truck). 

 

 

I also found that food delivery services like 626ToGo would deliver meals from name brand San Gabriel Valley Chinese restaurants to anywhere in the greater Los Angeles area  for a delivery fee of about $1 mile, a pittance to the wealthier segment of the Mainland Chinese student community, or groups of students who pooled their orders.

Subsequent to the articles I wrote, a number of real Chinese eateries did open up near campus, such as Northern Cafe, Qin West, some boba parlors and more recently in the new USC Village, Street Food.  This may have something to do with the subsequent disappearance of the food trucks on Jefferson, after USC Village opened up, though the Tasty Wok Express truck has recently returned to a new spot on Jefferson Blvd.  

 

I also learned that certain restaurants in Koreatown attracted USC Chinese students, most likely appealing to Northeast Chinese students whose homes were near the Korean border, and hence shared a commonality of food style. A few Koreatown restaurants, such as Pixiu Mala Hong Tong, serve Sichuan style mala soup pots and dry pots, so I'm fairly certain these are some of the USC student destinations. 

 

 

I also heard that the since shuttered Lao Sze Chuan in Glendale was a magnet for USC Chinese students.  And I still haven't figured out why no restaurant appealing to USC students ever opened up in Los Angeles Chinatown, which still has only a slight representation of non-Cantonese Mainland food.  

The one thing I am just hearing about now, however, is that a large provider of Chinese food back when I wrote my articles was through the type of WeChat groups that I later wrote about that launched a service called Yunbanbao, that brought Chinese food to Wall Street in Manhattan.  At that time there was a service called Chef Town which solicited bulk orders from USC students who wanted name brand San Gabriel Valley Chinese food.  Assuming Chef Town operated like Yunbanbao does now, the students would sign up the previous day to have their food delivered at a particular drop off time and location on or near campus. This would result in lines of Chinese students queuing up in random places to pick up their orders from unmarked delivery vehicles, to the puzzlement of observers who didn’t know what was going on.

 

With so many Mainland Chinese students on the USC campus, there had to be a way for them to get their Chinese food fix.  Unlike most other college campuses nationally, where restaurants opened up near campus, the answer here was much more complicated and largely under the radar.

 

 

A First Look At Colette

Not that long ago, almost any new Chinese restaurant opening up in the San Gabriel Valley would be guaranteed large crowds for a period after opening as all the looky loo's passed through to kick the tires.  However, more recently the model seems to be that many people now won't try the newest Chinese restaurant until they hear something good about it.  Consequently most new Chinese restaurants aren't terribly busy when they open up.

Consequently, I was recently stunned when a new Chinese restaurant called Colette opened up in the Hastings Ranch neighborhood of Pasadena, an area which was devoid of decent Chinese food, and within less than a month's time became the most talked about Chinese restaurant in the Los Angeles area.  Indeed the buzz was so loud, and the lines so long, that I figured I would have to wait a while until the furor calmed down before driving crosstown to check it out.  But with so much continuous buzz, I decided that arriving right when they opened at 10:30am on a weekday might be a solution, and that did work.  Indeed, at that early hour, the restaurant was empty.

The kitchen at Colette is run by Peter Lai, who had most recently been chef at the rebooted Embassy Kitchen in San Gabriel, having been recruited from the Peninsula Hotel in Hong Kong.  At Colette he gets to combine his Hong Kong training with what he picked up in his year at Embassy Kitchen.  We were only able to scratch the surface of the menu at Colette, particularly since due to the early hour of our arrival, we paid too much attention to the dim sum, which was just ordinary.

The signature dish is the crispy stuffed chicken, which has been air dried and stuffed with shrimp paste.  This was one of the famous dishes of the original pre-pandemic Embassy Kitchen which was very popular.  However the Colette version is totally out of this world.

 

Fried rice has been elevated in this black truffle beef fried rice.

Something visual, new and delicious is the almond beef cubes, in a delicious honey/fruit sauce.

 

Simple is delicious with this fried cabbage with bacon.

The dim sum is not bad, but with all the interesting appetizers and entrees on the menu, I would recommend passing on these unless you had a hankering for a particular item.

Many more items remain on the menu for us to check out, though after the dining room started to fill up and looking at the food at the other tables, it certainly looks promising.  I wouldn't be surprised if Colette is the elevated Cantonese restaurant that the San Gabriel Valley and Los Angeles area has never had before.

 

 

 

Chinese Restaurant 8,000 Coming Up - What's A New Restaurant?

 

As I will be hitting the 8000 Chinese restaurant mark this month, I thought this would be a good time to mention my ground rules for what is and isn’t a different restaurant for purposes of determining my restaurant count.  

 

 

So in keeping track of how many Chinese restaurants I’ve eaten at, I need a uniform convention for determining what is a new restaurant.  My primary convention is the restaurant name.  If the name changes it’s a new restaurant.  So if a new owner takes over an existing restaurant, but doesn’t change the name, whether they keep the existing menu and operations or change everything completely, it’s not a new restaurant. 

 

On the other hand if restaurant ownership doesn’t change but the owner changes the name, it’s a new restaurant whether or not anything else changes.  These are the only practical solutions since whether there’s a new restaurant or not shouldn’t depend on how much you know about what’s going on behind the scenes.  

One complication is that it’s not that unusual for the new owner of a restaurant not to change the exterior signage.  After all, that costs money.  For example you will drive by New Qingdao in Alhambra and not realize they’ve been gone for over two years.  And in fact, two subsequent restaurant occupants have decided to leave the old signage up.  For somebody like me who discovers new Chinese restaurants by driving around and looking for new signage, this makes it difficult to meet my goal of maximizing my Chinese restaurant total.  Or when Papa Lu’s Kitchen opened up in the location that I thought was previously occupied by Three’s Kitchen, when we got there we were served drinks in cups that read New Three’s Kitchen.  Which means I missed out eating at a new restaurant that I never knew about.  Oh well.  Unless you actually go in the restaurant and look at the name on the menu, business cards, etc. you might not know you’re at a new restaurant.  

 

Note that adding “New” to the name of an existing restaurant is a common practice, and usually reflects some kind of change of ownership where the original owner does not want to be associated with the new operation.  As such it should count as a new restaurant.  

 

Another tricky area is where an existing restaurant moves to a new location.   If you move next door or down the street, that clearly shouldn’t count as another restaurant.  But at some point, one might not know whether a new location is actually in addition to the old location, or in lieu of the old one.  Again having or not having this kind of detailed information shouldn’t be determinative, so my convention is that if a restaurant shows up in another city, I will treat it as a different restaurant no matter what.   And what if a restaurant shuts down, then subsequently reopens months or years later in the same city?  My convention is to treat it as the same restaurant.

In any specific situation, the use of these conventions could produce the wrong result.  But the most important thing is to have conventions that are consistently followed, in which any specific inaccuracies should cancel each other out in the long run and provide the most accurate count.e

 

For the record, here are the previous milestone Chinese restaurants.

1000 - BoBo China, Niagara Falls NY

2000 - Eat First, Washington, D.C.

3000 - House Fortune, Gaithersburg, MD

4000 - Sun Dou Dumpling House, New York City

5000 - Miu Kee, Falls Church VA

6000 - Zheng Family Garden, New York City

7000 - Dim Sum Inn, Salinas CA

A Blast From The Past--The Return of the Sheephead

 

A blast from the past is this pair of sheephead from Elite Restaurant in Monterey Park.   

 

In the late 1980s and 1990s we in Los Angeles gorged ourselves on steamed sheephead.  California sheephead was a junk fish that sold for 10 cents a pound.  But in the 1980s the Chinese seafood restaurant craze crossed over from Hong Kong to the US and Canada, and California Chinese chefs discovered that sheephead, considered by locals as ugly tasting, was a superior variety of fish when steamed live, Cantonese style.  

 

However after more than a decade of glorious dining, this unwanted junk fish turned into an overfished endangered species later in the 1990s with limitations placed on catch size.  Furthermore, sheephead are hermaphroditic, fish that turn from female to male as needed to balance the population.  However, with the larger, male fish being caught for consumption, the new converted males are smaller, and less attractive for dining.  

 

Consequently, sheephead pretty much disappeared from Chinese restaurant menus in California for quite a while.  They’re back on the menu in some restaurants but aren’t the attraction they used to be, perhaps because two smaller fish don’t have the punch you get from one bigger one.

 

Of course, as you may have heard, Elite Restaurant had a serious kitchen fire a couple of weeks ago.  When I posted that event on Instagram, there were snarky remarks such as "insurance time!" and comments on how bad business has been recently at Elite.  Sadly any time a Chinese restaurant burns, everybody's initial reaction is to wonder whether the fire was deliberately set to save a fading business through fire insurance proceeds.  And clearly there have been enough of true examples of this happening in the past to justify considering these events automatically suspicious.   

 

On our last visit to Elite, the dining room was totally empty on a Thursday night, though two private rooms were occupied.  However this is not necessarily alarming because this reflects a trend going back more than five years where your larger dim sum/Hong Kong style seafood restaurants do an excellent business for dim sum, but pare back at dinner time, even on weekends.  For example I’m not sure whether there was even a waiter on duty at Elite when we were there, or whether the manager doubled as waiter, as in the private room the manager brought in the dishes.  

 

It is hard to figure out why these dim sum palace type restaurants do such a massive business at lunch but are so quiet at night.  Most plausible explanation I’ve heard is that the next generation Chinese Americans, known as the “626 Generation “ in the San Gabriel Valley are all into dim sum, but would rather go someplace else for dinner that is more casual, more economical, more trendy, or perhaps not even Chinese.  Thus dinner time at these restaurants is left to the old folks like us.  Furthermore a similar pattern extends beyond the San Gabriel Valley, as informants have indicated that that the bustling dim sum lunch/sparse dinner crowd phenomenon is also present in Chinese communities across the country.

In the case of Elite, I would be surprised if this wasn't just a kitchen accident.  With Chinese restaurant food being prepared at such high temperatures, and with all the grease and oil flying around, the chances of a kitchen fire in a Chinese restaurant are much higher than other types of restaurants.  Meanwhile empty dining rooms at night are currently a fact of life with sit down Hong Kong dim sum and seafood restaurants and are part of the equation in operating such a business.  Shortly before the fire, Elite had been named to the Los Angeles Times prestigious listing of the 101 Best Restaurants in Los Angeles, which was sure to bring them an influx in business.  And finally, insurance companies are well aware of the checkered history of Chinese restaurant fires, and nobody is going to get an insurance payout unless the facts clearly support an accidental event.