Danny Meyer on His Career as a Restaurateur

CHRISTIANE AMANPOUR: Our next guest is asking a very simple question. Why should anyone go to a restaurant that doesn’t roll out the red carpet? Restauranteur Danny Meyer is well-known for turning shake shack from a hotdog cart in Manhattan to a global burger empire. He’s also the founder of some of New York’s most acclaimed names, including the Gramercy Tavern, Union Square Cafe, and Maialino. The key to his success? Great service. Meyer sat down with our Walter Isaacson to talk about his illustrious career breaking all the rules.

WALTER ISAACSON, CONTRIBUTOR: Danny, welcome to the show.

DANNY MEYER, FOUNDER & CEO, UNION SQUARE HOSPITALITY GROUP: Thanks, Walter.

ISAACSON: It’s about 35 years ago you opened Union Square Cafe. And it kind of transformed what a restaurant could be. What was your thinking?

MEYER: I just wanted to create a restaurant in New York that if only it existed would have been my favorite restaurant. When I went to a restaurant growing up, when I went to my favorite trattoria when I was 20- year-old working in Rome, they were genuinely happy to see you. And if you came back, you felt like you belong there. So I wanted to make a place that made you feel like you belonged and what I was finding in New York, especially if you think about the 1980s, post-disco era, into the nightclub red velvet rope era, those places were thriving. And a number of the French restaurants were somehow riding a wave of exclusion rather than inclusion. In other words, the more they pushed you away, the more you thought you needed to be there. And I just didn’t get it. It didn’t resonate with me. And I said I understand good food, I care about good food, and I also knew good hospitality. And I just said put them together. It’s not brain science.

ISAACSON: So growing up in St. Louis and a father was in food and travel and that sort of business, we biographers, kind of feel it’s all about dad. But your dad went bankrupt. Explain to me why you followed in his footsteps.

MEYER: Well, it is all about dad and I would say mom. I really do think it’s both. The role my dad played was that he was not only in love with travel and in love with food. In fact, he and I cook together all the time, spent just as much time playing catch. He was my baseball coach, little league baseball growing up. So he was a really, really involved dad but he also was an entrepreneur. And I was watching. I was watching how he always would take these ideas that he had and try to come up with a fresh approach to business. Yes, he went bankrupt twice. By the time I was 20-years-old, I saw him go bankrupt twice. You know, I can still cry thinking about those family meetings where he would be ashamed and talk to us about how things just hadn’t worked out this time. And I didn’t really understand fully what had happened because I thought his ideas were good. As a matter of fact, he would ride the wave way up high and then it would come down. And I thought his flaw was expansion. I thought that the two times he had gone bankrupt were both associated with growing his company. And so I promised myself I’m going to take the good stuff from him but I’m just never going to expand. And for that reason, I didn’t have a second restaurant which should become Gramercy Tavern for 10 years. I had one restaurant for the first 10 years. The real issue that I came to learn was that he really needed to be the king. And he needed to surround himself with people who made him feel better about himself as opposed to people who were strong where he had weaknesses. As a result, I think that some of his business lessons became mine. And to this day, I’m still wary of growth but more than that, I’m really, really focused on surrounding myself with talented people that challenge me to be better.

ISAACSON: So your restaurant group and you’ve opened, after your dad, Union Square Cafe and Gramercy Tavern. And before, you do Shake Shack. You do a lot of one-off restaurants at a very nice, very casual but also fine-dining. Tell me about each of the concepts and how you picked them out.

MEYER: Well, it’s so funny because this is not how a typical business school would ever advise you to do it. Every single one of those businesses was an episodic reaction to an opportunity that felt right. The most frustrating thing about Union Square Cafe, the first one, is that it’s actually not on Union Square. And so when we got a call from Met Life who was thinking about redesigning their building, which had been designed in the 1920s, and completed in the 1940 right on Madison Square Park overlooking the park, I said we got to do something. The deal was you had to do two restaurants. And I looked at the space and construction, I said that’s an American brasserie. That became 11 Madison Park. On the other side of the historic wall that couldn’t come down, we had to do a second restaurant. Our chef, Michael Romano at Union Square Cafe, had been cooking with Indian spices so much so at Union Square Cafe that half of our wines didn’t go with our food anymore. And so I said, Michael, why don’t we extract the Indian spices and open a green market-driven Indian restaurant. That became Tabla. So we opened both of those restaurants and before too long, we had four restaurants each of which had three stars.

ISAACSON: Why did you decide to do shake shack which is really just a franchise of burgers and fries and everything else? It doesn’t fit into your fine-dining concept. It really doesn’t fit into your healthy eating concept.

MEYER: It fell squarely into the concept we called enlightened hospitality. And I had grown a little bit weary of hearing people tell me that hospitality is only for fancy restaurants. And so when we started the Madison Square Park conservancy to really restore that park, one of the visions was that you can have a revivified park that is beautiful, that if you don’t give people a reason to use it, it’s just going to tank again. And I thought that having public art in Madison Square Park would be a great reason for people to come use the park. We’ve worked with the Public Art Fund of New York. They brought in an artist from Thailand. And the artist said I’ve got this piece of art with four taxi cabs on stilts and I’m going to design a hot dog cart that looks like a taxi to go with these things. We just need someone to operate the hot dog cart. So I said we’re going to do it. We’ll do the hot dog cart for your art. And we’re going to do it because I want to prove that you can go to something as mundane as a hot dog cart and get exceptional hospitality. Well, lo and behold, this was the summer of 2001 pre-9/11. And we had lines of 60, 80, 100 people waiting to get these hot dogs. And it worked so well but the next summer, the art is down, city was obviously depressed. We got the community called please bring back the hot dog cart. We did it a second year. We did it a third year. Year four, I wanted to put to the test the notion of building community wealth. So I said let’s turn that hot dog cart into a kiosk. We called it Shake Shack. Raised the money philanthropically, gifted the kiosk to Madison Square Park so it would become the landlord. We would own the business. No idea that it would be successful. I scribbled a menu on a piece of paper in about eight minutes. That became Shake Shack.

ISAACSON: And how many are there now?

MEYER: Almost 250, globally right now. Remember, I told you that we gifted the Shack to the park so the park would become the landlord. Madison Square Park, which is the landlord, now has an income annually from that one shack of just shy of a million dollars. That goes right back into the park. That feels good.

ISAACSON: You’ve been on a crusade against tipping, which is one of the things I think that makes fine-dining uncomfortable for a whole lot of people. And it also feels ethically kind of queasy as you’re sort of judging sort of these people. How is that [13:45:00] fight against tipping going?

MEYER: I think tipping feels queasy in any setting because — I mean when was the last time you went to go buy a cup of coffee at a coffee shop and you already pay a lot of money for your cup of coffee, they either do or don’t remember to leave room for milk and they turn around the little register and now you have an opportunity while they’re watching you to either put in 50 cents or another dollar or $2. And you feel bad either way. I’ve been hell-bent on trying to make hospitality a validated professional career. Perhaps to get rid of a chip on my own shoulder. It was not the business I was supposed to ever go into it. When you pay your people yourself, based on their merit, and you provide the types of benefits that real companies provide, whether it’s health care, whether it’s paid family leave for a long time and you don’t ask your guests to judge something that they’re not qualified to judge. And in fact, they don’t judge. What we found with our studies, 20 percent tippers are always 20 percent. They don’t say this is a 19 percent. Bad service or hospitality was a 17 percent. They just — we don’t get any feedback whatsoever. And I also don’t want to hire the kind of people who would look at their station of five tables and judge who am I going to be nice to base on who I think I can extract the most money from. I want people who are who they are because it’s their pleasure to deliver hospitality.

ISAACSON: So how is it going now? Have you gotten rid of tipping in most?

MEYER: We’ve gotten rid of tipping in I believe in all but one of our places for now and we’re almost there. We’ve rolled out since 2015 an additional restaurant every six months or so. And I’ll say that there’s a reason this is not happening across the board. The math is challenging. The cultural shift is challenging. Asking your employees and your guests to have a whole different way of paying and being paid is challenging. Having menu prices that are all-encompassing with no monkey business. It’s not like room service in a hotel where your $3 cup of coffee becomes $18 after the room charge, the service charge, the tip and all this kind of stuff. There’s no line to do anything else. We decided to get rid of the incentive to be nice to people. That’s called your job. But we retain the incentive to sell. So we take a revenue share at the end of each week and divvy it out based on the number of hours you work, not the night or that lunch you work. The two biggest reasons we decided to make this move, that really troubled me, one is that every year since I’ve been a restauranteur in a tipping situation, the gap between what a tipped employee and someone who is legally not eligible to accept tips, also known primarily as cooks, the gap has grown and grown and grown, probably by 300 percent. Because every time a menu price goes up, and I’ve never seen one go down, your tip which becomes a multiplier of that menu price makes that person make more money but the cook never gets more money. Since we’ve known this, all of our formerly tipped employees are now making, on average, eight percent more, and our non-tipped employees are making 37 percent more. So gradually, we’re closing that.

ISAACSON: Do you think the minimum wage should be raised then in all of the hospitality industry?

MEYER: I think we should get rid of the adjusted minimum wage that started off as $0 an hour, the day after slavery was abolished. And our industry along with the Pullman train car industry succeeded at petitioning the U.S. government to say it’s not slavery if we can get the customers to pay. It’s a brilliant scheme that our industry has pulled, which is now inculcated in our entire society, which is we don’t have to pay for half of our workers because you’re going to do it separately.

ISAACSON: So in other words, for tipped workers, you could pay zero?

MEYER: You could pay zero. That went up some years ago to an adjusted minimum of $2.13. There remained over 20 states in this country today where the adjusted minimum wage for tip workers is $2.13. In New York, it’s up close to $10 an hour right now. But my feeling is that the minimum wage, whatever it is, should be the minimum wage for everybody. And what I love about our system is that every time minimum wage goes up, we’re so far above it because we have eliminated tipping, that it’s not going to cause inflation in our restaurants.

ISAACSON: You always seem to break rules like that. Like breaking the rule on tipping. Why do you break rules and what other rules are you looking to break?

MEYER: The first one, I think, that was probably the scariest thing was in 1990 with just one [13:50:00] restaurant, Union Square Cafe. And this was very, very shortly after my dad had died from lung cancer and I was angry and sad. I was also really frustrated that every night I would come home smelling like an ashtray. So that was a scary kind of going in a different direction, kind of move to eliminate smoking. A full 12 years before it became law in New York City. And everybody said you’re crazy, it’s going to kill your business. We just got busier. If you’re in an industry leadership position and you’re not trying new things, that you think are right because you’re afraid that it’s going to somehow put you out of business, I don’t think you deserve to be an industry leader.

ISAACSON: Sexual harassment and sexual aggression have plagued a lot of industries but the restaurant industry is particularly prone. I know you’ve had to deal with it a lot. And were there things you probably should have done better?

MEYER: No question. I should have been a lot more aware of that. I believe that I was so proud of what we had done in the 1980s and 1990s to really extricate the old French kitchen hierarchy that was really like the military where it was do as I say because I’ve got the power. And we never ever put up with chefs who would yell at you, whether you’re another cook or whether you’re a worker or whether you’re a server. We had a couple of examples of a chef and sous chef who were called out and who had been given warnings by our human resources department. But maybe we haven’t fully understood or maybe people hadn’t fully expressed what was going on and it was painful. It was painful for me as a leader to say that was happening and you didn’t know about it. And I think we’ve taken some really important steps since that point. We’ve had to — thankfully, it’s been a while but terminated quite a few people because we shined a light on it and we said speak up. We want to hear about it. In addition to inviting people to speak up and create those forums for people do so and they did. We also created what we should have had in the first place, which was an anonymous 24-hour line, not associated with our company. It would give people a fair opportunity to express whatever they wanted to and knock on everything I can knock-on. We are a way stronger company because of this. And I do have to say that some of the misbehavior we learned about was guests misbehaving with our staff. Eliminating tipping has helped with that dramatically because if I’m a misbehaving guest and I know that your entire income is based on your putting up with how I’m treating you, that’s now been taken away. So that’s good. But I think the other thing that has been really important for us is who has a seat at the table? I learned the hard way because I just hadn’t given this the proper thought that we didn’t have enough women at the table in senior positions. We — I thought we did. We had eight of our senior executives are women but then I looked at our board of directors, men. I looked at our board of directors, all white. Today that changed. And we’re a better company.

ISAACSON: You said you didn’t feel destined for the restaurant industry. Where did you think you were heading?

MEYER: Well, being a political science major and being someone who’s just always been interested in politics and interested in issues of the day, I thought that I was either going to be a journalist or a politician. And to become a politician, the obvious step, at least back then, was to become a lawyer. And it was literally on the eve of taking my LSAT here in New York City that I just kind of freaked out because I knew I didn’t want to be a lawyer. And I was just lucky that on that night my dinner partner was my highly provocative uncle who challenged me and he said you’ve got to be crazy because you’re going to be dead forever. You’re going to be alive for that long. Why would you do something you don’t want to do? And I said because I don’t know what else I could do. He said you’re absolutely crazy. All I’ve heard you talk about your entire life is food and restaurants. And it had never dawned on me that that would be an incredible career path. It’s not the kind of thing that I ever thought I was going to go tell my parents I’m going to do for a living but thank goodness. I would have been just about the world’s worst lawyer ever.

ISAACSON: Danny Meyer, thank you for being with us.

MEYER: Thanks, Walter.

ISAACSON: Great.