Junzi Kitchen Is Using $5M Fund to Save Chinese Takeout Restaurants With Retiring Owners

When Yong Zhao was a graduate student at Yale, his landlord would often mention to him that he wanted to retire from his Chinese restaurant business in New Haven, but couldn’t since he didn’t have anyone to take over the family business.

It inspired Zhao to get into the restaurant business. Fast forward six years and he is the CEO and co-founder of Junzi Kitchen, a fast-casual Chinese restaurant that dots Manhattan. Along with chef Lucas Sin (Eater Young Gun ‘19), Junzi has filled a Chinese-sized hole in the modern fast-casual world with salad and noodle bowls, but it’s distinct from the older takeout operations that focus on Americanized dishes such as orange chicken and lo mein.

But this year, Zhao is taking his commitment to his initial idea one step further — raising $5 million from investors such as Union Square Hospitality Group president Chip Wade in order to save more takeout Chinese restaurants.

He is currently in talks to buy several Manhattan Chinese restaurants whose owners were planning to close their longstanding carryout businesses in order to retire. He plans to modernize the restaurants’ operations, branding, and design under the Junzi umbrella, though the restaurants will maintain their own menus and identity.

“It’s like an exit plan for a lot of these hardworking immigrants and families who now want to retire,” he says. “We’re here to take that and carry their legacy and do a lot of improvements through modernization,” citing changes such as new branding and turning more processes digital.

Zhao just closed a $5 million fundraising round for Junzi from several investment groups like DOM Capital, LDR Ventures, and Uniwill Ventures, and other similar entities, and he’s targeting reopening the first of the updated restaurants next year. He’s still on the lookout for more investment, too.

Junzi sees the strategy as a way to shape the future of Chinese food in America. The restaurant’s own research, which included looking at Yelp and data from recruitment companies, shows that Chinese takeout restaurants are quickly closing. They found that about 10 percent of America’s more than 28,000 Chinese-American takeout restaurants — places that Junzi defines as those with limited seating, no table service, and more than half of sales through takeout — closed their doors in 2018. It’s something Zhao has been trying to stave off, and something that’s informed Junzi’s identity from the beginning.

In New York City, some places such as Legend and Yee Li have indeed closed in recent years. A spate of modern restaurants from younger owners have opened in their wake, like MáLà Project, Little Tong, and Mimi Cheng’s, and still more like Hao Noodle and HaiDiLao have expanded from China.

But other than Xi’an Famous Foods, Junzi is one of the few focused on the modern fast-casual space and updating the Chinese takeout model for this era.

“From the beginning, the mission was to basically drive this modernization of Chinese food [in the U.S.] so we can make this kind of food become a better everyday food for a lot of people,” Zhao says.

There are several issues contributing to the decline of Chinese American takeout restaurants, he says: Owners are retiring, there’s a shortage of Chinese immigrant labor, and few use modern business technologies. The food is also often falling behind trends happening in modern day China, where dishes such as tomato egg noodles, jaja noodles (fried black bean and soy bean paste sauce), and burning noodles (numbing spicy) are popular now.

Junzi will try to address that by acquiring older restaurants and applying the Junzi model of training non-Chinese people to cook Chinese food, as well as leveraging tech in the kitchen and in store design such as combination ovens or more automation in cooking.

Beyond buying the older businesses, Junzi will also keep focusing on opening more stores and launching inside Zuul Kitchens, a new “ghost” kitchen in Soho that solely serves as a delivery launchpoint for several restaurants.

Junzi started in 2015 in New Haven as a part of the Yale Entrepreneurial Institute and now has three locations in New York City. Zhao has ambitious plans to take it much further beyond that with thousands of stores and a public offering down the road, all in the goal of becoming “an iconic brand for modern Chinese food,” he says.

Correction: December 2, 2019, 4:15 p.m. This article was corrected to show that there are approximately 28,000 Chinese restaurants in the U.S.