In inflationary times, the art and science of pricing Manny’s corned beef on rye
Across the city, the cost of food and labor is pummeling restaurateurs who risk losing their most loyal diners when they raise prices.
In inflationary times, the art and science of pricing Manny’s corned beef on rye
Across the city, the cost of food and labor is pummeling restaurateurs who risk losing their most loyal diners when they raise prices.By Michael Gerstein
About a mile west of downtown, on a grim, drizzly Chicago afternoon, the lunchtime crowd inside Manny’s Cafeteria & Deli is a little sparse.
What used to be Manny’s busiest day, Friday, in prime election season, is now “a ghost town,” said Dan Raskin, the fourth generation co-owner of the city’s beloved Jewish deli, a longtime favorite for devoted regulars, out-of-towners and power-broking politicos.
Like just about everything these days, a lot of things on the menu are pricier than they used to be. The quintessential Manny’s order is a corned beef sandwich that boasts a pile of briny, succulent meat stuffed between two pieces of rye, with a layer of mustard and a pickle on the side.Two years ago, that sandwich cost $15.95; today it’s $17.95. And people are starting to grumble, Raskin said.
The fastest-rising inflation in 40 years has put value-minded delis and diners in a quandary: raise prices too little and face even thinner margins after years of financial turbulence, or raise prices too much and lose customers.
In response, eateries are cutting hours, shrinking plates, taking items off the menu and raising prices to make up for higher costs on everything that goes into getting a sandwich — or anything else — onto a customer’s plate, said Sam Toia, president and CEO of the Illinois Restaurant Association.
“When you’re working in an industry and it’s just pennies — you gotta cut corners here or there a bit,” Toia said. “You’re seeing price increases everywhere.”The restaurants hardest hit are mid-scale family establishments, like Manny’s, that don’t serve alcohol.
For Raskin, raising prices is a tightrope. People have less disposable income than they did a year ago. And they have less patience too.
He tells a story of a customer who bought a 12-ounce sandwich and complained that she thought there wasn’t the proper amount of meat on it.
“It’s got three-quarters of a pound of cooked meat on it, but you could tell she was frustrated,” Raskin said.
Yet unlike other restaurants, Manny’s hasn’t cut quality or quantity, Raskin said. And the $2 increase doesn’t come close to covering higher costs for everything that goes into a corned beef: the grain for cattle, the cattle itself, higher wages for slaughterhouse workers and truck drivers, much more expensive fuel inside those trucks, more expensive packaging that the meat is shipped in, higher electric costs and property taxes on top of higher wages for the deli workers, more expensive wheat, cheese — you name it.
Take just the price of flour: It has nearly doubled over the past two years — from $10-$12 to almost $24 for a bag, Raskin said. But Chicago isn’t New York. You can only raise prices so much.
“People don’t want a $25 sandwich,” said Raskin.
A hand-sliced turkey sandwich with pickles, for example — another Manny’s staple — is $12.95, the same price it was two years ago. But pay for employees has gone up about 30% over the past three years and the price of turkey has risen about 2.5 times compared to 2019, according to the latest data available from the Federal Reserve Bank of St. Louis.
Raskin kept the turkey sandwich price flat and raised prices on other items. Compared to 2020, a pound of sliced turkey from the deli display case is up $4. Beef stew is up $3 ($16.95 in 2020, $19.95 now) and salads and other soups are more expensive too.
Manny’s also has been pushing online orders, which quadrupled when the pandemic hit and stayed that way, Raskin said. “You have to keep evolving,” he said.
Margins were tight for small restaurant owners before the pandemic, with 97 to 99% of an average restaurant’s money going into food and labor, said the Restaurant Association’s Toia.
With higher costs, 68% of Illinois restaurants have cut hours and 41% have closed on days they’d normally be open, according to the Illinois Restaurant Association. Yet many still are understaffed.
“It’s a strange economy we’re in right now, with a high inflation and a strong labor market and strong economy,” said Phillip Braun, a finance professor at Northwestern University’s Kellogg School of Management. The combination of customers having less money and food prices being very high “doesn’t look good” for restaurants, he added.
Nationally, people are already starting to cut back on restaurant visits, according to NPD, a global market information company.
Family establishments like the 50-year-old Golden Nugget Pancake House — a classic Chicago diner with large yellow signs and a 13-page menu of crepes, pancakes and burgers available at all hours — are feeling the sting.
“It’s hard for all of us,” said owner Cathy Guzman. “For people coming out to eat, for people just trying to run a business. It’s getting impossible. There’s no margin anymore.”
The Golden Nugget has raised prices a little, but, like Manny’s, it has very little headroom before losing customers.
“You need to pay someone to make that food for you, someone to clean up the dishes. One thing just fires up 10 more. Some people understand with raising prices, and others, they probably will not,” Guzman said. “It’s very hard right now — the economy’s not great, there’s a lot of people without jobs still. To live daily life is not easy for people right now.”
Jim D’Angelo, the chief operating officer of Lou Malnati’s Pizza who’s been at the company for 40 years, said the classic Chicago deep dish chain has raised prices more in one year “than ever in our history” — an 8% increase across the board from 2021.
But it still doesn’t make up for a 20% increase in wheat because of the war in Ukraine, a 30% increase in tomatoes, a 20% increase in dairy and a 40% increase in vegetables, D’Angelo said.
In 2021, a large cheese deep dish cost around $22 in the suburbs, D’Angelo said. It’s now up to $26.19 as of November.
But that’s still a pretty good deal, D’Angelo argued. Split four ways, it’s about $6.55 a person.
The Federal Reserve is trying to tamp down inflation by spiking interest rates, so executives like D’Angelo are proceeding with caution. Management at Malnati’s is thinking much more strategically about when and where to expand and whether to borrow money — with higher rates — or use cash reserves. But D’Angelo said he’s hopeful that the Fed’s policy is working and that the worst has passed.
Back in Manny’s, the restaurant almost feels a world away from the trouble outside.
Yellowed newspaper clippings line the walls advertising the restaurant’s storied past and the political haymakers who used to eat here, including Barack Obama. A plaque says “David Axelrod’s table” — although the former Obama adviser and CNN commentator isn’t there that day. The restaurant celebrated its 80th anniversary in August.
Manny’s was for many years a favorite breakfast stop for Chicago’s political power brokers. Now it’s closed for breakfast. And it’s a slow Friday lunch hour, but somehow still feels like a refuge.
Mark Stroud, a 76-year-old Hinsdale resident, said he’s been coming to Manny’s for 50 years.
“The food is always the same and good. I stop here periodically,” he says, giving a to-go bag for his wife a pat. “So we’re good for the day.”
A couple of other regulars, Richard Sabonis, 90, and his friend Alan Cohen, 71, have likewise been coming to Manny’s for a long time.
Sabonis — who calls himself “the Lithuanian prince from Bridgeport” — was trying to settle a good-natured debate with Cohen about whether another deli in Northbrook is better than Manny’s.
The dish of comparison was the sweet-and-sour cabbage.
“I said, ‘They’re both good, but this place uses a little bit more vinegar in their sweet and sour, which is a good idea.’ But just a whisper. That’s the end of the story,” Sabonis argued.
When asked if higher prices mean the pair visits less, the Lithuanian prince from Bridgeport asked, “So we have to make a decision between our stomachs and our wallets, right?”
Even for Sabonis, that was a tough question. He paused to consider it, chewing thoughtfully amid the clatter and clink of forks and knives at nearby tables.
“Which one do we prefer? Ah. There’s psychiatrists and religious people been trying to figure that one out for a long time.”
His friend laughed. Then Sabonis took another bite of beef and wiped his mouth with the paper napkin tucked into his shirt.
Michael Gerstein is a freelance writer based in Chicago. Follow him on Twitter @mikegerstein.