Katz’s Delicatessen: How the iconic deli stays in business against the odds
Joyce Park stashed this in Food
Stashed in: Business Facts, Recommended Products!, Good Eats!, Awesome, New York, Meat!, business, New York
This article totally gives you permission to get the matzoh ball soup, extra latkes, and TWO Dr Brown's celery sodas next time you hit up the Temple of Pastrami that is Katz's.
I also did not realize that pastrami and corned beef are no longer a high-margin profitable business:
The fundamental problem facing every remaining deli, Katz’s included, is that the gargantuan sandwiches for which they are known aren’t very profitable. Rather, they’re a legacy of the early 20th century, when brisket (used in corned beef) and navel plate (the fattier, bovine belly meat Katz’s uses for pastrami) were considered cheap trash cuts and hundreds of Jewish restaurants could compete for immigrant clientele with rock-bottom prices. But the days of inexpensive navel and brisket are long gone—thanks in part to the national love affair with Texas-style barbecue—and delis can only raise their prices so high before turning off customers. As a result, the margins on a pastrami or corned beef on rye are perilously thin. In his 2009 book Save the Deli (an indispensible read for lovers of Jewish comfort food), David Sax writes that “most New York delis are breaking even or losing money on their namesake item.” Profitable sandwiches, he reports, make margins somewhere between 5 and 15 percent.
To put that in perspective, keep in mind that after subtracting food and labor costs, the median sit-down restaurant has a margin of roughly 35 percent (the exact number varies with average check size). “If all I did was sell sandwiches, I couldn’t pay the staff,” Dell tells me.
All of this might sound a bit suspect to someone who casually glances at Katz’s menu, which currently charges a hefty $19.75 for a pastrami on rye. But stop and consider it for a moment, and its easy to see how a nearly $20 sandwich might not actually be much of a moneymaker. Preparing a proper pastrami is a painstaking, labor-intensive process. At Katz’s, the raw navels are wet-cured for weeks before being coated in a dry rub of salt and spices, then smoked at a low temperature for about three days. Afterward, they’re steamed to soften up the meat, before the deli’s famous countermen—who are unionized, with health benefits—hand-slice it on the spot for customers. Cutting thinner slices with a machine would probably be more efficient and lead to less waste, but would leave the sandwich’s texture and character unrecognizably altered. In the end, it probably takes somewhere around a pound and a half of raw meat to yield a single, three-quarter-pound Katz’s sandwich.
“It’s a terrible Catch 22,” Dell says of the art of pastrami. “Because the thing that makes us loved is also the thing that makes it hardest from an economic standpoint.”
New-generation delis can pack less meat onto the plate, which would be anathema at an old-school deli like Katz’s.
I think the rule these days is that chemicals are profitable, foods are not. So the closer something is to a chemical -- sodas, boozes, highly processed items -- the more margin there is in it.
So once they figure out how to make delicious meats in a lab, profits will return?
9:22 AM Oct 28 2014