Urban legend. A lot of all restaurants go out of business in six months to a year. It's a brutal industry.

I don't know much about Chinese Restaurants, but I do know a good bit about nightclubs, and virtually all of them (in major cities at least) launder organized crime money as a primary business.

On the subject of losing money, anecdotally, two of the coffee shops I frequent are owned by successful business owners (e.g. one of them owns multiple laundromats, other has a portfolio of rental apartments).

My hunch is that they use the losses from the coffee shop to offset their profits at their other cash-flow businesses. Is this a common practice (if it is so)? I know Microsoft's Office and Operating System businesses effectively subsidize the rest of the company (Internet, etc.)

This has been posted here before but "My cofeehouse nightmare" is a good read http://www.slate.com/id/2132576/

I don't get it. Aren't you supposed to use profits to offset losses?

Wait...you mean cooking the books and making it seem like both businesses are doing just okay so they're taxed less...right?

Why would "cooking the books" be necessary? Structure the assets in holding companies properly and they should be able to do it legally.

How many independent coffee shops do you know take credit cards? I know a few but these shops I mentioned are cash only.

Unless you meant fake losses. I don't get it.

$10 profit - $8 loss = $2 - $.50 tax $1.50 net

$10 profit - no loss = $10 - $2.50 tax = $7.50 net + your gov has more money to help everyone out for example those homeless blocking the doorway to your coffee shop