Why Do Some Restaurants Change Their Names So Often?
When your favorite Chinese restaurant suddenly disappears and a new one takes its place, you might wonder what is going on. There’s nothing uncommon about Chinese restaurants changing names. One tenant space in San Gabriel, outside of Los Angeles, has had 16 different Chinese restaurants in a 20-year period, an especially staggering statistic when considering that one of these tenants kept the space for nine years.
Chinese restaurants change names for various reasons. Most commonly the restaurant is sold to a new owner and the name is not part of the transaction. In other cases, the lease expires and the landlord refuses to renew it and re-leases the space to a new tenant, or the restaurant plain goes out of business and a successor tenant is found. And occasionally the existing owners of a restaurant decide to start from scratch and rebrand their restaurant with a new name, a new menu, even a new style.
One interesting subcategory is where the name of the restaurant changes, but the restaurant’s operation is otherwise unchanged, with the same menu, same waiters, and so on. Sometimes the name change is hardly noticeable, such as a slight change in the spelling of one of the words in the restaurant name. On other occasions the new name is completely different. Oftentimes when this happens, only the English language name of the restaurant changes, while the Chinese name remains unchanged. One restaurant I know of underwent four English name changes while retaining the same Chinese name all along.
These types of Chinese restaurant name changes are often quite innocent. A good reason for this type of name change is a partial change in the ownership lineup. Chinese restaurants often have multiple owners, and a slight change in name could be notice that the lineup of owners has changed, sometimes a little, sometimes a lot. This may or may not involve the substitution of a new legal entity for the old one. Less often, but still seen from time to time, is a complete change of restaurant ownership, but with the new owner opting to keep existing operations completely in place under a different name.
Then again, once in a while there are the more nefarious reasons for these name tweaks. Sometimes the change in name indicates a new ownership entity as noted above, but brought about by the desire to stiff certain creditors. Now, few creditors are dumb enough to continue to do business with a successor entity if the predecessor entity has skipped out on their obligations. But there is one category of creditor who often does not ask any questions — the government. A Chinatown accountant who handles a number of Chinese restaurant clients told me that it is not unusual for a Chinese restaurant to fold up its legal entity and reincorporate into a new one for the express purpose of stiffing the government of unpaid sales tax proceeds. You’d think that the government would be smart enough to figure out the connection between old and new restaurants, particularly with similar sounding names, at identical locations. But clearly this is not always the case.
A casual conversation with a waiter at another Chinese restaurant suggests another angle. One day, a popular, longstanding restaurant changed its name to something radically different. Being only an occasional visitor to the eatery, I couldn’t tell if there were any changes besides the new signs and new menu, so I asked the waiter if this was the same place. He said that it was the same place as always, then rather cryptically said that when you have been in business for a long period of time, sometimes the government makes you do these things. He was likely referring to the unemployment tax rules, where the taxes the employer pays is based on the magnitude of prior employee claims for unemployment made against the employer. You see, if you’re a brand new business you have no past experience of unemployment insurance claims which can be used to set your rate. So brand new employers are assessed at an arbitrary rate, but a rate which may well be less than that paid by existing employers with an experience rating. Consequently, it can pay for a longstanding Chinese restaurant which may have a high unemployment tax experience rating to go out of business, set up a new entity, and start all over again with a lower tax rate. Of course there are laws against such a change of identity for the purpose of lowering one’s unemployment tax rate, but apparently here too, the government is sometimes asleep at the wheel.
Editor’s Note: Have you noticed restaurant name changes in your town? What do you think precipitated them? – KK