The Secrets of Steakhouse Riches

The vault at a Smith & Wollensky location.Photo: Corbis
Smith and Wollensky, which has made a bundle selling unexceptional meat at high prices in a series of nearly identical steakhouses, has been on the upswing even by its ca-ching standards: This past December, the organization raked in over $15 million, up 9 percent from December of the previous year. Which explains why Landry’s Restaurants Inc. has made an offer to buy it. But all this begs a larger question: Why are steakhouses in general so obscenely profitable?

One: You don’t have to pay a name chef; the steaks are cooked by nameless functionaries whose only job is to throw them in a broiler. Two: The meat at any given restaurant is purchased in bulk from a single supplier and delivered in one truck. Three: Though this meat may not be USDA prime — in fact, it probably isn’t — the restaurants can charge an arm and a leg for it; people come to steakhouses in Dionysian mode, expecting to spend money. For that reason, you can also count on them to drink a lot of liquor and wine. (The Wollensky Group, fully aware of this fact, is known for its extensive wine lists.) These are the reasons steakhouses have been popping up all over town like so many mushrooms (despite the fact that, because of agribusiness-style breeding, there is less and less great meat every year). S&W; caught on to the game before anybody else; if owner Alan Stillman sells, he’ll truly be living a Dionysian fantasy.

Landry’s offers $64.5M for Smith & Wollensky [Crain’s]