How the tables turned on Zane Caplansky's deli chain
Restaurateur's new Yorkville location was intended to be the start of a national rollout of franchises. Instead, a series of events stacked up against him, bringing an end to his dream of global domination
In May, 2016, when the new location of Caplansky's Deli opened in Toronto's upscale Yorkville neighbourhood, restaurateur Zane Caplansky heralded it as the next step in his ambitious quest for "global deli domination." The Yorkville restaurant, a spinoff of his College Street location, featured a self-serve mustard and pickle bar and a vintage meat slicer for cutting the deli's signature smoked meat.
Following the humorous branding of Mr. Caplansky's other endeavours, the floor tiles had kitschy sayings on them like "Don't forget the chutzpah" and "Be the sandwich you want to eat."
The new Yorkville location was intended to be the start of a national roll out of Caplansky's franchises. In partnership with retail branding legend Joe Jackman, Mr. Caplansky was offering franchises for $350,000 to $500,000, and estimated he would sell 10 that year. The timing seemed good. In the weeks that followed, the deli got buzz when TV personality Anthony Bourdain visited a Caplansky's outlet at the airport, and again when the touring pop star Beyoncé ordered $3,500 worth of food.
But in January, the College Street location was shuttered and the Yorkville outlet followed soon after, destroying Mr. Caplansky's other business plans and leaving behind a trail of unpaid bills, unemployed staff and disappointed investors. A widely publicized dispute with the landlord was the final nail in the coffin, but the business was already weakened by operational deficiencies. While Mr. Caplansky was skilled at creating buzz and building a brand, the operations of the restaurant received less attention as he juggled TV appearances and ambitious expansion plans.
"We could have survived had there only been one or two and maybe even three events but, not all and not all at once," laments Mr. Caplansky, who says he's been devastated by the closing. "It's so personal for me and it hurts so much that College Street has ended the way that it did."
Local deli lovers, who had coveted the restaurant as an all-too-rare place to find Jewish classics downtown, wondered how a restaurant that seemed to have the makings of a long-lived institution could vanish so quickly.
"I'm very saddened by it," said Brian Greenspan, one of the country's most prominent lawyers and an investor in the deli. "Zane came up with an idea that captivated a lot of us who had traditional deli tastes and background and was part of a renewed generation of people with interest in the traditional European delicatessen. I think his menu and work were stellar and I'm not sure I have the answer to why at the end of the day it didn't succeed, but obviously costs involved in operating a quality delicatessen didn't permit sufficient margin to make it viable."
While many entrepreneurs name their restaurants after themselves, Zane Caplansky – born Zane Caplan – did the opposite and named himself after his restaurant. Searching for the perfect name, he was inspired by his great-grandfather, Benjamin Caplanski, who shortened his name when he moved to Canada. ("Be Yiddish, look British," was the thinking at the time, Mr. Caplansky says.)
Caplansky's Delicatessen sounded like a great, authentic deli name, he thought, and he legally changed his own name to match.
Mr. Caplansky, 49, is from a political family. His mother, Elinor Caplan, was a cabinet minister at Queen's Park and in Ottawa; his brother David was a provincial cabinet minister in Dalton McGuinty's Liberal government. During much of his early adulthood, Mr. Caplansky travelled the world, picking up restaurant jobs along the way. He attended culinary management school and later opened a software business that briefly made him a multimillionaire on paper before it collapsed during the dot-com crash.
After that he bounced around from job to job for years, and even found himself homeless for a time, living in his car in Florida after getting fired from a job.
He made his way back to Toronto and recalls that one day, in 2007, a friend failed to bring him back a promised smoked meat sandwich from Schwartz's in Montreal. In a TEDx talk that demonstrates the showmanship that helped build the restaurant's profile, he tells a dramatic tale of how, frustrated at Toronto's lack of quality smoked meat, he bought a smoker and spices and made his first brisket.
"It was perfect," recalled Mr. Caplansky. "I took that tray it was sitting on and I held it up as a father might hold up his newborn child. And you could see the fat over here, the fat's all dripping down my hands and my arms and I started to cry. "
Driven by passion for his product, but without funds to open a proper restaurant, he took over the kitchen on the second floor of the Monarch Tavern, in Toronto's Little Italy neighbourhood, in 2008. Word quickly spread that traditional Jewish food, which had become scarce in Toronto's downtown as Jews had moved north in recent decades, had been been revived. Rave reviews rolled in. Prominent people such as Mr. Greenspan, the late concert promoter Bill Ballard and the late publishing giant Avie Bennett were keen to see the bar outlet expand into a full-fledged restaurant, and invested money to move to a new location on College Street in 2009, near the formerly Jewish neighbourhood of Kensington Market.
With an expanded menu of deli classics like borscht, knishes and pickled tongue, it quickly became a magnet for tourists, families celebrating bar mitzvahs and Passover seders, and celebrities such as Geddy Lee, the lead singer of Rush. In the years that followed, Caplansky's rolled out a food truck, launched two locations at Pearson International Airport and a brand of mustard that was sold in grocery stores.
Mr. Caplansky's colourful personality and penchant for weighing into topical ideas, such as food-truck regulations and even the Israeli-Palestinian conflict, ensured a constant stream of headlines. Mr. Caplansky started hosting a weekly radio show on Newstalk 1010 and made regular TV appearances on programs such as You Gotta Eat Here, Diners Drive-Ins and Dives, Restaurant Takeover and Donut Showdown.
In fact, his media impact was large when compared with the actual size of his deli empire – Mr. Caplansky won't reveal recent figures, but in a January, 2013, appearance on Dragon's Den, he said the College Street restaurant did $1.5-million in sales the previous year and the food truck brought in $110,000 in the previous six months.
Mr. Caplansky asked the dragons to invest $360,000 for 18 per cent of the business, valuing it at $2-million, which had a skeptical Kevin O'Leary calling him "Insane Zane." Mr. Caplansky stood firm, rejecting offers from the dragons that would have lowered his company's valuation.
The immediate cause of death of Caplansky's Deli was the bitter dispute with the landlord that first burst into public in June, 2016, when the numbered corporation controlled by Walter Kung locked Mr. Caplansky out of the flagship College Street location. The issue in dispute wasn't unpaid rent – Mr. Caplansky hadn't missed any of his $10,521 monthly payments. Rather, the issue was which party should pay for repairs in various areas of the building, such as the fire panel and a skylight on the roof. In a legal filing, Mr. Caplansky's lawyer claimed the lockout was improper, arguing that the restaurant had gone above and beyond what was required to repair items in the building that were the responsibility of the landlord.
In an affidavit, Mr. Kung said Mr. Capansky didn't take care of issues that were his responsibility and had a habit of allowing easily avoidable issues to blow up into major problems. Mr. Kung's anger even extended to a critique of the restaurant's food and service. "Caplansky's has made as poor an impression on a number of its customers as it has on me as a landlord," he wrote, including several negative Yelp reviews with the affidavit.
Judge F.L. Myers allowed Mr. Caplansky to re-enter the premises, but he attributed blame to both sides. "The parties were jockeying for position rather than getting necessary things done," he wrote. "They ended up in a game of chicken which cost each of them significant amounts of money and distress." Looking back, Mr. Caplansky says he regrets not trying to get out of the lease at this point and finding another location.
Legal disputes with the landlord at College Street dragged on over the next year, with Mr. Caplansky's legal costs climbing to $85,000. Meanwhile, revenue at the restaurant, which Mr. Caplansky says had previously risen 20 per cent every year, declined by 20 per cent. Mr. Caplansky attributes the drop to the lockout. While it lasted less than a week, he says media coverage of the reopening wasn't as widespread as the original coverage of the closing, and customer visits dropped.
In the fall of 2016, when Mr. Caplansky hit trade shows to try to sell franchises, he said the lockout, which many assumed was due to unpaid rent, prevented him from closing any deals. "What I heard overwhelmingly from potential franchisees was 'What happened with your landlord?'"
Disputes with the landlord continued, and in December, Judge Myers ordered Mr. Caplansky to pay Mr. Kung $15,000 for repairs, property tax and legal costs. The business slowdown had left the restaurant with dwindling resources, so Mr. Caplansky approached some investors for a cash infusion. But with the next lease renewal in jeopardy and no end in sight to the legal disputes, it was a hard sell. "I think people decided that we were just throwing good money after bad," says Mr. Caplansky. "I just kept getting nos from everybody that I tried with and it was very quick."
On Jan. 3, he put a notice on the door and e-mailed his 20 or so staff to tell them not to come in. The next day the landlord locked him out. For Elaine Gold, a long-time server who was well known to regulars, it was a dark day. "I was just really upset and sad, mourning the loss of the deli," she says. "I'm 62 and I thought that was going to be my last job and I really miss it."
Meanwhile, other parts of the Caplansky deli empire had been quietly losing steam. Within weeks, the partner in the Yorkville location, which was just breaking even, bought out the lease and closed that location. The Caplansky-branded mustard was no longer being produced; it hadn't sold fast enough to continue production after the supplier raised product-run minimums.
One of the two airport locations is still running – Mr. Caplansky says the Terminal 1 location was shuttered several years ago when the airport needed the space – but he is not involved in the day-to-day operations, and is paid a licensing fee by the operator, HMSHost. The food truck, which had stopped operating for the season, was less profitable than it had been in previous years; as of last week, it was listed at a liquidation auction along with kitchen equipment from the College Street restaurant.
The closure of the College Street restaurant left more than 20 employees out of work. Back pay and vacation pay were distributed, but some were given temporary layoff notices, meaning the employer has 35 weeks to rehire them or pay them termination pay.
Investors are also out money. Mr. Greenspan, for one, says he wasn't motivated to invest by financial returns and the loss won't affect his financial health. At least one investor, however, was an employee of more modest means, who put in several thousand dollars of her own money through an employee share-ownership plan. Legal issues are continuing with the landlord, and Toronto-Dominion Bank and the Canada Revenue Agency are owed money.
Suppliers are also waiting to be paid. While some, like Gordon Food Services and Del-Kem Industries, say they are working out deals with Mr. Caplansky, one supplier expressed anger at being out $4,200. "We are a small food distributor, which is a low-margin business so it takes a long time to earn back that much," says Barb Cromb of Sheridan Specialties, which started selling meat and spices to the restaurant last summer. "It's most galling that Caplansky's hadn't been a customer long enough for us to have made much profit before it closed and stuck us with the bill."
While the landlord dispute triggered the closing, general mismanagement issues are also to blame for the collapse of Caplansky's. The restaurant industry is notoriously tough, and with the margin of error so narrow – Restaurants Canada says the average profit margin for a restaurateur in Canada is 4.2 per cent – any weaknesses can quickly plunge a business into the red.
On the food truck, for example, Mr. Caplansky says after several experienced managers left for various reasons, problems mounted with portion control and labour costs. He recalls times when the truck was sitting idle at a busy event after running out of food.
The College Street restaurant also had management issues, and as Mr. Caplansky got increasingly busy with TV projects and franchising, he wasn't around as much to keep an eye on day-to-day operations. After key employees left, issues around labour costs, portions, and food waste festered.
"As the business grew in complexity, I had to do things I am simply not great at," Mr. Caplansky admits. "I was not in denial about this and tried for the last few years to find someone to join me as an operations manager so I could focus on the food, the guest experience and the media work that brought in new guests and potentially franchisees as well. I was never successful in finding that person."
While Mr. Caplansky's big personality was great at landing him on TV, it could be a challenge for employees working under him. Restaurants are known to be tense workplaces, but staff describe a dramatic environment and say Mr. Caplansky was unpredictable and prone to yelling at employees. "You didn't know what would set him off," says Michelle Rabin, who worked as a catering manager several years ago. "It was difficult to work for him." While the restaurant had a notable crew of long-term, loyal employees, the at-times volatile atmosphere may have contributed to turnover. Mr. Caplansky doesn't deny yelling at employees, saying at times stress led him to act in ways that he regrets.
Lastly, there was the food. Delis are more difficult to run profitably than other restaurants. In recent years, formerly cheap cuts of meat like brisket and tongue have risen in price, and the process of curing, pickling and smoking deli meat is time- and labour-intensive, yet customers won't pay premium prices for a sandwich.
The small-scale methods first employed at the Monarch – dry curing and rotating the briskets in spices for two weeks in a handful of Rubbermaid garbage pails – had to be changed as the business grew. Mr. Caplansky is cagey about recent methods used, but says that different companies have been involved in producing his recipes at different times, something he says kept quality high while improving consistency. While the restaurant continued to have loyal regulars, some deli purists grumbled that the quality of the food had declined.
While Toronto's deli king may be temporarily dethroned, Mr. Caplansky hopes it won't be for long. He wants to open another Caplansky's Deli in downtown Toronto, eventually.
"I'm a sucker for a redemption story and I will do everything in my power to make good on trying to redeem myself and my business and to get back in the game. I'd like to do it better the next time, focus on the things I'm better at focusing on and hopefully be able to find other and better people who can complement my own weaknesses."
- With additional research by Stephanie Chambers