Today, an article from New York Magazine on the city's prince of hamburger, Pat LaFrieda. Pat's third generation family business wholesales meat to restaurants in New York. He's the man behind the meat for many famous burgers in town, from Danny Meyer's Shake Shack burger ($7.25) to Minetta Tavern's Black Label burger ($26).
It's a really interesting article that you can read from many perspectives.
From one angle it gives insight into the service levels, fulfillment obligations, and straight up wack madness it takes to run a wholesale operation for Manhattan restaurants.
From another, it makes most restaurateurs look like lemmings, which might not be far from the truth.
Third, it shows you how totally apeshit NYC is for hamburgers right now.
Fourth, and the reason I'm sharing it, is the business side. This article has a Harvard Business case buried inside, deep below the intent of the story. There is a butcher who sells hamburger. What was once a completely undifferentiated product, a commodity, he has successfully differentiated. He's no longer tied to the standard market price for hamburger that every other butcher sells for. If you buy the prices in the story — I don't, but I bet they're not that far off— he's getting six times the price for his hamburger than normal. That's a tale in itself.
But I kept waiting for the story to tell me why the price was higher in the terms I'm used to, the terms of provenance. Who was the rancher? What did the cattle eat? How long did they live? How were they slaughtered? Surely that must be the reason prices are higher? I got few answers there. It's not because they have secrets. It's because the answers are not special. Their source for meat sells corn-fed cows just like everyone else. Pat doesn't sell get his high prices because the cows are special.
So how does he get to sell for such high prices?
The answer is that he creates custom blends for each customer. You want your restaurant's own blend of chuck, sirloin, cheek, jowl, dry cured, wet cured —whatever — for your hamburgers? No problem. LaFrieda meats will do it for you every day. Order tonight, you get it tomorrow. As Pat says, "“What we do, basically, is become a different supplier for every restaurant.” He even does it if you're a little guy who doesn't order much. In fact, he seems to like little guys. In the article two big guys call him — the legendary steakhouses The Homestead and Peter Luger — and he essentially tells them "Nope."
In other words, it's LaFrieda's operations that get him a higher price. It's his operations that perform his marketing. Operations drive the sales. How does he get to sell for such high prices, how does he get in all the best restaurants, how does he get this magazine article written about him? Basically, it is because he works in small batches with short lead times and customizes selection for all customers. Sound familiar?