The Unique Challenge of Reopening a Massive Restaurant Space

Like many restaurant operators, George Chen faced one obstacle after another this year trying to keep his business afloat. But running what he deems the country’s largest mom-and-pop — the 30,000-square-foot Chinese food emporium China Live in San Francisco — came with some fairly unique challenges. And getting it back open again, keeping in mind the different requirements and interest in food halls, fine dining, events, retail, and bars, is its own unique challenge.

Chen, a longtime veteran of the industry, came on Eater’s Digest this week to discuss that unique challenge as well as how his business is forever changed and why he’s still bullish on the future. He launched 10 ghost kitchen operations to extend his delivery zone to new cities and regions, expanded his takeout menu, and has a large product line. How does he recalibrate as indoor and outdoor dining return? And how does he see expansion now, as he pulls out of his long-anticipated Amazon campus space in Seattle and instead eyes new opportunities to bring his “Chinese Eataly” New York and Chicago?

Listen and subscribe to Eater’s Digest on Apple Podcasts, and read the condensed and edited transcript of our conversation with George Chen below.

Tell us about China Live, for people who aren’t aren’t super familiar.

George Chen: China Live was my 16th restaurant. My first restaurant was Betelnut, and I’ve had restaurants in Shanghai as well. China Live is a big, ambitious project. It’s about 30,000 square feet. Four floors. I’ll probably never do that again … I bit off a little bit more than I can chew, but we have established ourselves here.

People look at China Live as the modern Chinese food emporium. Food hall marketplace. We have retail. We have different venues for events. We have a curated cocktail lounge called Cold Drinks Bar. Eight Tables by George Chen is the fine dining component. It really has only eight tables. And so, on multiple floors we have this monster of a place. Some people say, “Oh, it’s kind of like Chinese Eataly.” Or, “Chitaly.”

We’re right in the heart of Chinatown on Broadway, and we help revitalize some of the energy in Chinatown. It’s the oldest Chinatown in the country. And I really wanted to do it there, even though it wasn’t a great walk-by traffic location. But we’ve done okay. Before the COVID, we were the 63rd highest grossing restaurant in the US.

I know you’ve been through a lot during COVID, but I want to ask you about reopening, because that’s really the phase we’re in right now. What is it like to reopen such a massive space like that with so many different moving parts?

It’s really tough. The reason that I never shut down, even after March 16th last year, is because I know that … Of course, we have a huge investment, but we immediately moved to heavy take-out and had a volunteer group. We didn’t know what was going on. It was like a bomb was going off and nobody has felt the effects yet.

And so, we kept to-go. And then, we did outdoor dining when that was allowed, and just followed along. If we had shut down completely, it’s really hard to reopen, because all your electricity and plumbing, your stoves, your refrigeration.

You lose your core employees, most importantly. I had over 200 employees when we went into shelter-in-place. Now, I have only about 65. And I don’t think I’ll ever get back to that number. I’m just trying to do things a lot more efficient.

And then, of course the business level is not what it was. It’s also differentiated now, because so much delivery and meal kits and things like that. Opening this time, hopefully, is for good. Opening a big place like this takes a lot of planning in phases, because you have multiple venues with different people with different skill sets.

Eight Tables didn’t really do any take-out until the last time now in December when we were allowed to open for like three weeks. That crew, I only kept the chef de cuisine, and then we had to try and bring everybody else back. A lot of people are just not around.

Number one is getting the key people back. Number two is just the physical space of planning, because you move so much furniture around to make distancing and all this for whatever potential percentage are allowed to open. And then, you can reconfigure a restaurant, you have plastic barriers or whatever.

We didn’t have too many of those because we have a huge space, but it’s a tremendous amount of work. We kind of felt like we got jerked around a lot. Supposedly, June 15th, we’re allowed to open 100%. Let’s keep our fingers crossed.

What’s it like on the fine dining side versus the rest of your venue?

Fine dining is different in that, first of all, you don’t know if people are willing to spend that much. When I reopened Eight Tables, I lowered the price to $175 per person for 10 courses and everybody else raised their prices. Because people were saying, “Well, the cost of restaurants is just so much more expensive.” But we realized that there is actually good demand for high-end, at least at Eight Tables.

And so, we’re lucky that we’ve been booking up pretty well. We brought it back to the old price of $225, but it’s a different feel. It’s like running multiple restaurants that are very different. The team at Eight Tables don’t really cross-train much downstairs. They’ll help out once in a while, when we get in a jam, but they’re dedicated to a different style of cuisine.

And downstairs, where you’re dependent on a lot of people being in one space at a time, do you see that business coming back? Or you think it’s just going to be slow and you’ll get there by the time you’re allowed to open 100% capacity?

Well, I don’t think we’re going to. Obviously, Europe is still Code Red. And so, the European or the other country travelers — we get a lot of Asian travelers — you don’t see a lot of those people. I think domestic travel is picking up, because everybody has this pent-up energy to travel and to go out and see things. And so, we’re seeing domestic visitors, but China Live is not really a neighborhood restaurant.

We did some big data stuff and found out that 85 percent of our business came outside of 9.7 miles. You can imagine during COVID with deliveries, that’s your perimeter, if you will. Your area of service for all the delivery apps. When you lose 85% of your business and that’s not in your neighborhood, let’s say, then you have to find other ways to do this business.

We did ghost kitchen. We had to, to enlarge our geographical footprint. I think it’s going to be slow coming back, until business traveling. It’s not just the tourists, it’s the business conferences, and also tech companies. We have a lot of tech companies here in San Fran. Right?

When people are allowed to work two, three days from home remotely, if you’re a downtown restaurant by, say, Salesforce Tower, I would be really scared, because it’s a ghost town down there. Same thing up in Seattle, in the South Lake Union. I don’t know about New York. But certain parts of the country are back, like Texas, Miami. They’re almost like a different country.

Right now, for us here in San Francisco, it’ll come back bit by bit. We’re seeing improvement even in the last month, we’re probably up 20 percent on sales month over month. We’re seeing better check averages and higher foot traffic. But it’s not going to be what it was. We used to do over a thousand covers a day.

When you say you did ghost kitchens, what does that mean? Did you just come up with whole new restaurant concepts out of your kitchen?

No. We have some brand identity, even though we’ve only been around since ‘17. There’s certain signature dishes that people really come for, like my SJB. The Sheng Jian Bao, the pan fried dumplings.

And so, I looked at a lot of ghost kitchen opportunities and I really didn’t believe in them. Because, first of all, the quality generally doesn’t travel. Two, the costs of setting up a ghost kitchen is like setting up a separate small restaurant without indoor dining. And then, you have to advertise and get the word out.

With our ghost kitchen, which is done with VKC, Virtual Kitchen Corp, they came to us and they had a couple of chef guys from French Laundry and from Chez Panisse that we worked with it on saying, how do we take my best dishes that can travel, and then have you guys [finish it]. It’s like par-baked bread, but it’s a lot more complicated than that.

How do you guys then deliver it? If you think, it’s like taking Chinese food, taking it out of your fridge and reheating it in the microwave. That’s not going to work for me. It was tough. We actually went through four months of testing, and now we have 10 locations, from San Jose to Berkeley. We do about $3,000 bucks a day with our ghost kitchen business. They don’t like to be called a ghost kitchen, they like to be called a virtual kitchen. But I think they’re going to lose that battle.

When you’re opening in San Jose and you’re opening in different cities, has that been a separate marketing campaign? Or are you letting the delivery apps do the work for you?

The delivery apps will sponsor some exposure, like $5.00 off or no delivery fee, because they know that by dealing with us in San Francisco, in Chinatown, that we do $10,000 a day in to-go on a regular day. DoorDash is the biggest one. They’ll do $5,000, $6,000 a day just with us, so they know that we have numbers. And so, they understand that, “Hey, if you have a good product, you need to get it out there.”

We’re an independent restaurant and only one really large location, so we don’t have crazy marketing dollars. We’ll buy $100 in Instagram or a Facebook ad, and that’ll drive some support.

We do a pop-up in Marin, and we do between $5,000 – 10,000 on the third Thursday of every month. And we don’t use a delivery apps for that. We just send the email out, people order on our website. And then, we drop the food off at a friend’s nursery in Marin, and people come and pick it up. That’s not a ghost kitchen deal They don’t service Marin. They don’t service Walnut Creek and in that corridor, and that’s a big market.

We’re trying to do everything we can to bring quality food to a bigger area, because people are starting to travel. I see the traffic is getting much worse in certain parts of the city, but I still think it’s not going to be the same behavior. There’s still a lot of people here in California, in San Francisco, that don’t feel comfortable dining out, and certainly, indoors yet.

Especially, because you have such a huge space … Were you frustrated with the general perception of what it meant to push for indoors throughout the pandemic?

Oh, yeah. I felt that they just lumped us all in the same pot. There were better operators and there are not so good operators. Some bars will secretly — a lot of people are not wearing masks, and they’re like the old days. People are going to get sick. And then, there are people more like us, where we had temperature robots, contact tracing for our employees, mandatory checks of COVID tests every two weeks for our employees.

Thank God we had the PPP. Because we do large volume and high payroll, we got a large PPP, but all that money went towards this indoor “getting ready.” What really bugged me, or pissed me off actually, was last December. Early December, they shut everything down, including outdoor dining. That was brutal. That almost took the air out of all of us. Thank God, now we’re 50 percent, and hopefully opening up a bit more.

But we have to stay open. Because shutting down completely, and then to try to reopen a place this size is, I would say, nearly impossible.

But you must be happy that you didn’t panic in the beginning. I think if I had a restaurant in March 15th or whatever, I probably would have closed it.

Yeah. I’ve been in this business a very long time and I’ve had restaurants that have had to close for various reasons. I had a steakhouse in Shanghai when the trade wars happened. American steaks and American wine went up to 100 percent plus tariff. How do you do business there? Sometimes you have to shut the doors.

My first restaurant, Betelnut, was there for 21, 22 years. And so, it’s shuttered finally as well. Restaurants tend to have a lifespan. The institutions that last 50 plus years are very rare. With our investment and what we’re trying to do … I just couldn’t imagine, towards the latter part of my restaurant career, to just give up.

There’s an old saying that Abe Lincoln said, “You can’t fail unless you quit.” We weren’t going to quit. If we don’t quit, maybe we don’t fail. And so, there was no choice in the matter. Did I panic? I was freaked out. I even said to Eater, when they interviewed me that next day, I said, “It’s like Armageddon.” I had not experienced anything like this.

We’ve been through SARS and Bird Flu and 9/11 and the dot-com bust and god knows what else. The Great Recession. The restaurant business gets hit a lot, but this one directly more affected our industry. It’s like other people can still work remotely and get paid. Well, if you can’t open restaurants, nobody gets paid. And then, what do you do? You’ve got so many variables.

I thought it would be over by summer. And I thought it was Armageddon. Now, we’re approaching Summer 2021. It was just unbelievable to me. If I had known last year, March 16th, that it was going to last over a year, I may have said, “Okay, we got to rethink this. Can we survive a year?” The government’s certainly been helpful now, with the Restaurant Relief Fund. I think that’s what they’re calling it. And some other …

Will you be applying for that?

Oh, heck yeah. My wife and I are the primary owners, so she’s a female minority. And there’s some terms in there that says, “If you were disadvantaged because of AAPI hate,” or whatever. We’re going to try and get first dibs of that pie. The pie is not big enough, just to put it simply. It is just not big enough. Everybody’s going to be competing for it on Monday. A lot of restaurants are going to be trying to jump the gun and get in there. We’re doing that right now.

Since you’re such a big business, will the maximum cover your losses?

Oh, I don’t even want to tell you what my losses were last year. It’s horrific, but at least we have enough reserves from the second PPP to keep pushing. Obviously, we’re still losing money, but a big place like this just has certain overhead. Our PG&E bill, our energy bill is over $20,000 a month. Our trash is over $10,000. It’s crazy.

Your insurance is crazy. You can’t not insure your place. Especially, in COVID times. And so, these fixed costs are … not to even mention trying to renegotiate our lease. There’s still variables. It’s still scary. I’m confident that we’ll make it, but there are no guarantees.

Are there other pivots in addition to the ghost kitchens that you guys have done that you think will stick around, that were successful?

I don’t know if meal kits will survive. I’ve studied tons of meal kits, and some of them require so much work from fine dining restaurants. “Put this in your convection oven.” What if you don’t have a convection oven? Some, like from Goldbelly, it’s pretty expensive. It’s like twice what you would pay, and so …

Quickly, for those who don’t know Goldbelly, essentially, it lets you order famous dishes from restaurants all over the country, and they’re packaged up and ready to cook at home.

If you’re stuck at home and you’re bored and you haven’t been out, and you want to say, “Hey. Well, maybe I want to go to that Jewish deli in New York?” Well, how? But I think you try it once, and you just paid 20 bucks, 30 bucks for a sandwich or whatever.

Look, I don’t know if that model will sustain once people can travel. I think fine dining restaurants … We stopped doing to-go at Eight Tables, because you can’t do both well. We’ve stopped, but downstairs, China Live is … Chinese food is one of the largest delivery components, like pizza.

And so, that’ll hopefully keep up. My decision is, shall I reduce the menu? Before COVID, I had a very limited menu for to-go, because I didn’t think certain dishes traveled. And then, during COVID, okay, we give up on some quality. Because we all did. Right? And so, I expanded that menu to include a lot of stuff that I wouldn’t have delivered.

A lot of restaurants are getting into this problem of, I’m doing this much to-go, and then now I’ve got indoor dining coming back. Now, outdoor parklets are meant to be staying. And so, where do you put all that stuff?

Your production is crazy. You can’t have boxes stacked up where diners are. I think some of those issues will resolve themselves. We’re working on it every day. We’ll see, but we’re not out of the woods.

Right before COVID hit, you had announced you were expanding to Seattle. I think it was supposed to be this year. Is that still on? Is it happening next year now?

Seattle is going through some of the same. It’s considered a tech center. We were going to go into an Amazon corner, 50 yards from the Spheres and the AWS building. We just had a conversation, you’re the first to know, we’re not going to do Seattle.

I think it’s not the right concept in the right location. I have friends up there, and they said it’s really dead.

It was a mutual decision to end the lease. We had signed the lease a year and a half ago, and if push came to shove, we would have done it. But they felt as well that it was best to just terminate the lease, so we’ve done that. And we appreciate all their support. A lot of people don’t like Amazon. I’m an Amazon fan. I order stuff from them all the time. It’s just convenience. But we’re looking at Chicago and New York right now.

I’m going to head out there on the 23rd, and we have some meetings that week. I can’t tell you what space, but it’s very exciting. I think the location is right, the opportunity is right. There’s a lot of repurposed spaces now, even food halls, that will suit us well.

Because it reduces your capital costs. New York is the Big Apple, and we want to be in the Big Apple, but it’s a big flag to plant.

Have you noticed rents becoming more affordable as you’re looking at spaces fresh now?

I think so. I think commercial real estate is down substantially. A lot of restaurants closed. There were thousands that closed in New York.

I see it coming down. I see people still wanting experiential, which was a big word before COVID. We’re still going to do part of that, but in a more safer, distanced way. Using a lot more technology, and a lot more safety concerns, and things like that to enhance that experience. I think you have to transform your business now in restaurants.

You can’t just have four walls and hope everyone jams your place forever. It’s just not going to happen. You got to reach out to your ghost kitchens or deliveries. But still, rents are coming down. You just have to find the right opportunity. I think there are a lot of opportunities.

If you are a restaurant person and you actually believe that things are going to get back to normal, it’s a great time to get in it, because you’re going to get the best deals. I encourage people to get back into the business, because I hate to see San Francisco particularly lose a lot of good people in this business.

It must be really interesting looking at neighborhoods now, because you don’t have these worker centers. That Amazon campus would have been a home run two years ago, and now it seems like a dud.

In New York, as I’m thinking about the different neighborhoods here, FiDi, there were a lot of office workers there. Will that come back? Midtown, will it come back? And so, I think it changes the calculus when you’re choosing where to set up shop.

We’ve been revising our business model ever since COVID started. I created a commissary where there was corporate offices, so that we can make our in-house sauces. Like our chili bean sauce is a huge seller and people love it. We make everything in-house, but if you’re doing it in a kitchen, it’s just getting in the way.

We did that, and we’re trying to sell our branded products. We have a whole line now. We have snacks, like duck fat popcorn, and broken fortune cookies with chocolate, and Asian granola and things like that. It’s ways to survive and produce and sell outside of your box.

If you don’t have that model, then you’ve got to go small and neighborhood-y, maybe. There are a lot of places that can survive and do good business in your neighborhood. But we’re not really, I hate to say, a neighborhood restaurant. We have to look at different demographics, different economics.

After everything that’s gone on, are you still glad to have these mega-restaurants?Or would it be easier to have smaller operations spread throughout the city?

It’s much easier to manage a large sum of revenues under one roof. We all know what happened to Eataly at the Flatiron, right? They did huge business. I once had five restaurants in the Bay area, and I couldn’t get from one to the next store in the same day without dealing with traffic and loss of time.

My feeling is, I’m still going to look at more of a hub and spoke model when China Live is in New York. But we’ll try and reach out to the different neighborhoods even the suburbs a little bit through geographical distribution. I don’t think I’m ever going to take on a space this size. The one we’re looking at in New York is half the size, the one in Chicago is half to a third of the size.

We’re looking still to do this concept, but get a lot more efficient. Your first restaurant is never your prototype. We made a lot of mistakes in China Live, in San Francisco on multiple floors, which I don’t want to do. Really, at most, maybe one floor and maybe a part of a second or a part of a basement. But it’s not a multi-story concept. It’s just too hard to maneuver.

Will I have another floor just for events? No. The real estate is not going to make sense. You have to be much more flexible in your design.

Well, George, thank you so much for all this time.

All right, guys. Really appreciate it.

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