Traditional Jewish delis are becoming an endangered species, so Jerry’s Deli of Studio City is reinventing itself.

The iconic deli chain, known for its huge menus, sky-high sandwiches and prices to match, recently closed two of its six Los Angeles County locations, one in West Hollywood and the other in Westwood, laying off at least 100 in the process. With previous closures, Jerry’s now has half the locations in the county that it had five years ago.

However, the chain isn’t ready to plan for its last pastrami sandwich yet. Executives are scouring L.A.’s Westside to find a site for a new concept: an upscale market with a smaller deli inside.

“The old-style deli no longer works in a chain format,” said Guy Starkman, Jerry’s chief executive. “So we’re keeping those locations that still make money for us but we’re now moving towards the market business.”

Starkman said he considered converting the West Hollywood location, across from Cedars-Sinai Medical Center, to a combination market and deli, but the 10,000-square-foot space was too small.

Ami Saffron, executive vice president at Jerry’s, said the goal is to sign a lease by mid-2014 and open the first West Coast market-deli sometime the following year.

But Starkman said finding the right space is a challenge.

“I’m competing with Ralphs and Gelson’s,” he said.

The move toward a market-deli combination is a significant shift for Jerry’s, which opened in 1978 in Studio City to serve nearby entertainment execs, many of whom had grown up with traditional Jewish delis in New York. Emulating those eateries, Jerry’s menu at one point had more than 700 items. Its prices were also somewhat higher than other local delis.

Jerry’s expanded rapidly in the 1990s, opening four more locations in the county and buying two Solley’s Delis in the San Fernando Valley. Jerry’s also purchased a restaurant in Miami in 1996; in addition, it acquired two Epicure markets, which had initially opened in South Florida in the 1940s.

But the expansion came to an abrupt end five years ago, when Jerry’s was hit with a one-two punch. Isaac Starkman, its chairman and chief executive, died, leaving the chain in the hands of his sons Guy and Jason as well as saddled with millions of dollars in debt.

Then came the recession, when the entire restaurant industry struggled as many people stayed home and those that did eat out went to cheaper places. Delis were particularly hard hit. Factor in a trend toward healthier eating and things weren’t looking great for delis.

Faced with huge debts and falling volume, the Starkman brothers started closing locations that were not turning a profit – including stores in Torrance and Irvine – and selling off as much property as possible.

Three years ago, Jerry’s sold its Westwood property to a group of Asian investors and leased back the space for the restaurant. But those investors wanted to open up their own restaurant in Westwood, and with the restaurant losing money, Jerry’s agreed not to renew its lease. The restaurant closed June 28.

“We spent most of the last five years paying down our debt and now I’m pleased to say that as of six months ago, we are completely debt free,” Guy Starkman said. “What’s more, all the locations we have left are now profitable.”

Changing tastes

But that won’t solve the longer-term dilemma facing Jerry’s as the traditional Jewish deli is now in the midst of what many see as a terminal decline. Fifty years ago, delis were the mainstay of Jewish dining culture, with thousands in New York and dozens in Los Angeles. But as the postwar generation fades away, the next generation didn’t adopt the traditions.

“The deli culture is fading,” said Jerry Prendergast, a restaurant consultant in West Los Angeles. “Decades ago, you would have four guys come in the morning for their eggs and then return for their pastrami lunch. But that culture is gone; people now expect something different than corned beef and pastrami on rye.”

At the end of last year, Junior’s Deli in Westwood closed its doors, citing a rent increase that could not be sustained by its declining customer volume. Lenny Rosenberg, owner of Lenny’s Deli in Pacific Palisades, acquired the site and opened a second Lenny’s location there.

Jerry’s has tried to adapt, adding panini, pizza, salads and even trendy Korean items to its menu.

Starkman said the large-format standalone deli – such as the 10,000-square-foot West Hollywood location that closed in May – is no longer viable.

“The rents at large-format restaurants are so outrageous and the margins so small,” he said. “The successful restaurant concepts now are all done in much smaller square footages of 3,000 to 4,000 square feet.”

But just going with smaller-scale delis only buys a little time. The key, Starkman said, is to diversify.

The company operates two gourmet Epicure markets between 20,000 and 30,000 square feet in South Florida and is opening a third. That concept might translate into a next-generation Jerry’s in Los Angeles.

Starkman said one of the Epicure markets in South Florida generated nearly $20 million a year and accounted for one-third of Jerry’s overall revenue.

Billed as “gourmet markets,” the Epicure stores feature their own bakeries, deli counters, a broad selection of imported cheeses and an array of made-to-order dishes.

Saffron, Jerry’s executive vice president, said the plan is to bring the Epicure market format to the L.A. area, with one adjustment: a small-scale Jerry’s restaurant inside. Whether this would be a sit-down restaurant or simply a made-to-order counter has yet to be determined.

Prendergast said he’s somewhat skeptical that such an operation can succeed in Los Angeles.

“First, where are they going to find 20,000 to 30,000 square feet of space, especially on the Westside?” Prendergast said. “Then, even if they do find the space, the rent is going to be so high that they will have to do a huge amount of business – much more than they are doing with those Florida stores.”

He said Jerry’s should look for a smaller footprint to try out the concept here.

“The idea of a market with a deli inside is a good one,” he said. “But I think a size of 10,000 to 12,000 square feet would seem to make more sense than the scale they say they are looking at.”