כשהם גרו במרכז, הם היו הולכים למסעדה הקטנה ליד הבית.

כש־ means when.

So כשהם גרו במרכז means when they lived in the center / downtown.

This is made of:

• כש־ = when
• הם = they

Because Hebrew often attaches short words like this directly to the next word, כש + הם becomes כשהם.

גרו is the past tense, 3rd person plural form of the verb לגור = to live / reside.

So:

• אני גרתי = I lived
• הוא גר = he lived
• הם גרו = they lived

In this sentence, גרו refers to a past situation: they lived there at that time.

במרכז is made of:

• ב־ = in
• המרכז = the center

Together: במרכז = in the center

Depending on context, this can mean:

• in the city center
• downtown
• in the central area

Hebrew often uses המרכז in a general way where English might say downtown or the center of town.

The sentence says:

• כשהם גרו במרכז
• הם היו הולכים...

Hebrew often repeats the subject in the main clause, even if it already appeared in the subordinate clause.

So this is natural Hebrew:

• When they lived downtown, they would go...

English also often repeats they, so this usually feels familiar.

Could Hebrew sometimes omit it? In some contexts, yes, but here repeating הם is completely normal and natural.

This is one of the most important things in the sentence.

• הלכו = they went
• היו הולכים = they used to go / they would go / they were in the habit of going

So היו הולכים expresses a habitual past action.

The sentence is not talking about one specific visit to the restaurant. It means that during that period of their lives, going there was something they did regularly.

A good English match is:

• they used to go
• sometimes they would go

It is built from two parts:

• היו = they were (past tense of להיות, to be)
• הולכים = going / go (masculine plural present form of ללכת, to go)

Together, this structure often expresses:

• repeated past action
• habitual action in the past
• something that used to happen

So literally it looks like they were going, but in many sentences like this, the real meaning is they used to go.

Because Hebrew often forms certain past habitual meanings with:

• a past form of to be (היה / הייתה / היו)
• plus a present participle form of the main verb

So:

• היו הולכים = they used to go
• הייתי קורא = I used to read
• היא הייתה עובדת שם = she used to work there

This is very common in Hebrew.

Even though הולכים is technically a present-form participle, the whole expression is understood as past because of היו.

Because הם is the masculine plural form of they.

Hebrew marks gender in plural forms:

• הם היו הולכים = they (masculine / mixed group) used to go
• הן היו הולכות = they (all feminine) used to go

So הולכים agrees with הם.

למסעדה is made of:

• ל־ = to
• המסעדה = the restaurant

These combine into למסעדה.

This is very normal Hebrew. The preposition ל־ often means to when movement toward a place is involved.

So:

• הולכים למסעדה = go to the restaurant

You could sometimes use אל, but ל־ is much more common in ordinary speech for this kind of destination.

In Hebrew, adjectives usually come after the noun, and they must agree with the noun in:

• gender
• number
• definiteness

Here:

• מסעדה = restaurant
• המסעדה = the restaurant
• קטנה = small
• הקטנה = the small

So:

• המסעדה הקטנה = the small restaurant

Because the noun is definite, the adjective must also be definite.

This is a very important Hebrew pattern:

• ספר טוב = a good book
• הספר הטוב = the good book

Because מסעדה is a feminine singular noun.

The adjective must match it:

• masculine singular: קטן
• feminine singular: קטנה
• masculine plural: קטנים
• feminine plural: קטנות

Since מסעדה is feminine singular, the correct form is קטנה.

ליד means:

• next to
• beside
• near

הבית means:

• the house
• or sometimes more naturally, home

So ליד הבית means:

• next to the house
• near the house
• in natural English, often near home

In context, it usually refers to the home relevant to the people being discussed.

Hebrew often uses the definite form in expressions where English may or may not use the.

So ליד הבית is very natural for:

• near the house
• near home

Without ה־, ליד בית would usually sound incomplete in a sentence like this.

Also, in many everyday contexts, הבית can function almost like home, even though it literally means the house / the home.

It describes a repeated action in the past.

The structure is:

• background situation: כשהם גרו במרכז = when they lived downtown
• repeated habit during that time: הם היו הולכים למסעדה... = they used to go to the restaurant...

So the meaning is:

• while they were living there, this was something they did regularly

If Hebrew wanted to describe one specific occasion, it would more likely use something like הלכו instead of היו הולכים.

Yes, that is grammatically possible, but the meaning changes.

• הם הלכו למסעדה = they went to the restaurant
  This sounds like one completed event, or at least does not clearly emphasize habit.

• הם היו הולכים למסעדה = they used to go to the restaurant
  This clearly emphasizes repeated behavior.

So the original sentence is better if the intended meaning is a routine or habit.

It has two parts:

1. כשהם גרו במרכז
   a time clause: when they lived in the center

2. הם היו הולכים למסעדה הקטנה ליד הבית
   the main clause: they used to go to the small restaurant near the house/home

So the pattern is:

• When X was true, Y used to happen.

This is a very common structure in Hebrew.

A native speaker would usually understand it as something like:

• When they lived downtown, they used to go to the small restaurant near their home.

The key idea is:

• גרו gives the past setting
• היו הולכים gives the repeated habit during that setting

So the sentence has a very natural storytelling feel: it describes what life was like for them during that period.