Big Apple Business

Interesting article in New York Magazine about various New York city enterprises and their struggle to make a profit.

Every company setting up in the city finds itself plugged into its myriad historical, cultural, and regulatory quirks. The biggest one, of course, concerns our island’s most precious commodity and its most enduring obsession: real estate. New York businesses live and die by the rent; if you’re a retailer leasing here, “making the rent” becomes the yardstick of solvency. The unofficial golden rule of restaurants dictates that the rent be made in a week and take up no more than a quarter of revenue. The bar version of the rule is even simpler: The rent should equal your Friday-night take. With each year, another company succumbs to the strange realization that where it sits may be more valuable than what it does. Even Macy’s, that icon of consumerism, may be worth more as a building than as a store. We’ve picked a disparate cross section of New York institutions and examined their inner workings. Some are nonprofits (a soup kitchen, a private school), some are not profitable (a fledgling yoga studio, the Yankees—at least on an annual basis), and at least one, Goldman Sachs, is stratospherically lucrative (though a lazy meth dealer ekes out a higher margin). A note: Where companies wouldn’t provide figures, our estimates are based on analyst reports, tax filings, and interviews with former and current employees.

An example, the restaurant Nobu:

How It Works: “There’s a saying that you’re only as good as your lease,” says co-owner Drew Nieporent. “It’s true.” Cheap rent lets Nobu work a lower-price, higher-volume game than many of its top-of-the-line brethren: The median check, including alcohol, is $75. The strategy makes for 90 percent dinner occupancy and 200 to 250 meals per day. Nobu’s spinoffs, Nobu Fifty-Seven and Nobu Next Door, share office and marketing costs and lower the cost of food for the original. “It’s like buying for your famous cousin—you get a better price because suppliers know there are other restaurants,” says restaurant consultant Clark Wolf. “That’s 3 to 20 percent lower costs, which is all bottom-line money.” Most restaurants pockets a dime on the dollar; Nobu banks twice that.

Annual Revenue: $8.5 million from Tribeca location ($1.7 million is profit).

Most-Profitable Item: Black cod with miso ($20): The restaurant’s top-selling item is cheap per ounce. Cost to Nobu: about $7.

Least-Profitable Item: Toro tartare ($32): Tuna belly is extremely pricey per pound. Cost to Nobu: Depending on markets, can be $20.

Added Value: Spare Japanese design pays off: Tight seating maximizes capacity, with no pricey tablecloths to launder.

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