Shake Shack restaurateur Danny Meyer on why having an appetite for risk is good for business
Scott McDermott
- Danny Meyer is a restaurateur and creator of eateries like Shake Shack and Gramercy Tavern.
- Even when facing short-term chaos, he says business owners should focus on long-term survival.
- You have to go outside your comfort zone and be willing to make mistakes to be successful, says Meyer.
Danny Meyer is no stranger to crisis.
The first crisis Meyer experienced as a restaurateur was just two years after he opened Union Square Cafe. In October of 1987, the stock market crashed, and US markets fell more than 20% in a single day.
"I had never seen anything like that, and I was quite sure my career was ending," he told The Profile. "I learned the impact that Wall Street had on our business."
It also taught Meyer a lesson about resilience. In his 35-year career in the hospitality business, his restaurants have weathered the Sept. 11 terrorist attacks, the 2008-09 recession, and Hurricane Sandy.
But none of those experiences could prepare Meyer for the level of uncertainty and chaos that took hold in 2020 as COVID-19 shook the world. The pandemic forced his company, Union Square Hospitality Group, to shutter 19 restaurants, its events business, and lay off 2,000 employees.
"It was probably the most excruciating three days of my career trying to figure out what to do," he said. "We had spent 35 years building a great organization and a people-first culture. How do we reconcile that with laying people off?"
Meyer started a relief fund for USHG members, contributing 100% of his salary and all gift card sales to it. In total, it raised $1.5 million, which went to former employees that were on his team.
Eighteen months later, Meyer says roughly 1,600 people have been hired, and he just opened a new restaurant in New York City called Ci Siamo.
"The through-line with every single crisis is a question that I always ask now: 'Is this the thing that is going to end the world,'" he said. "And if the answer is no, then obviously life is going to go on at some point."
As a leader, Meyer says his role is to challenge his team to think long-term even during the short-term turbulence of the chaotic event they have to face.
He said, "our guiding compass through every crisis has been [to ask ourselves], 'Who will we have been while it was happening, and furthermore, who will we be when it's over?'"
In this conversation with The Profile, Meyer shares what he's learned about leading in crisis, how he developed his 'hospitality quotient' philosophy, and why he believes in cultivating a culture of experimentation and risk-taking.
This Q&A has been lightly edited for clarity and length.
Take me back to Friday, March 13, 2020, when the world - and your restaurants - shut down in response to COVID-19. What do you remember from that day?
To me, there isn't really one day that comes to mind. It was truly something that started midway through February because I had two international trips planned for the month of March - one to Shanghai for the opening of a brand new Shake Shack and another one to Rome. I was incredibly aware of what was happening in China, and as you know, Italy was the first Western country to get walloped. So I cancelled both of the trips, which were scheduled for the first two weeks of March.
I was aware before many others in my industry in New York City as to what may be coming our way. A lot of folks from the Shake Shack team were in China in mid-February, and I was blown away when they sent pictures of themselves in hazmat suits in order to leave China to go to Japan.
It was very clear that this was not your average kind of virus. We had seen SARS over the years, and we had certainly read about Ebola, but there was something very, very different about this.
Did you try to apply lessons from previous crises that didn't work this time around?
The one thing that did not work this time around is that we couldn't use our restaurants themselves as part of the healing process. For example, during 9/11, when New Yorkers were afraid that something bad was going to happen again, going to a restaurant with people you know and love was actually part of the healing. Hospitality, the root of which is the word "hope," is the antithesis to fear. So we could actually play a very active role in bringing the economy back.
It was a patriotic act to go out and eat. We would not let that act of terror ruin our economy and ruin our emotional fabric. But this time around, we didn't have that tool because going out to eat was an act of danger, and soon, illegal.
Union Square Cafe was a massive success largely because it wasn't about the food, the menu, or the decor - it was about how the dining experience made customers feel. You've said there are three things you can scale: product, service, and feeling. It's the feeling that's the trickiest. How can an entrepreneur scale a feeling?
As is the case with every culture on earth - whether it's a business or a family or a religion - language is the building block of that culture.
You don't have to work to have a culture, but you do have to work to have an intentional and uplifting culture.
Whenever you come to our restaurant, you may have had a bad taxi ride, a bad subway ride, or a bad day at work, and I can't do anything about that. But what we can do is sprinkle a little magic dust and after two hours, we want you to leave feeling better through language and through the intention of hiring people with a high HQ ("hospitality quotient.")
Can you explain what you mean by "hospitality quotient?"
Hospitality quotient is a predictor as to the degree of which every human being feels better about themselves when they make someone else feel better.
In addition to being a great pasta cook, what if you are also primarily motivated to have your pasta make someone feel better? I have an advantage over the restaurant that has a good pasta cook who doesn't care about making people feel better. You really have to be very, very resolute and clear about that up and down the organization. People need to be hired for their emotional skills 51% [of the time] and for their technical skills 49%.
You've said, "Make new mistakes every day. Don't waste time repeating the old ones." In an industry that requires a certain level of consistency and perfectionism, how do you encourage your team to experiment and take risks often without the fear of failure?
As long as your mistake doesn't lack integrity, make it. As long as there's good intent, then you probably took a risk for the purpose of making someone else feel better, and if it didn't work, it's OK.
If you have a culture of fear where people are afraid of getting in trouble because they made an honest mistake, you're going to have a much lower rate of innovation. You're going to have a much lower rate of going outside of your comfort zone to do extraordinary things for people. I think hospitality in any business is truly about customizing experiences for people and that means if everything you do is off-the-rack, then you'll be fine, but "fine" no longer wins the race. Bold and remarkable wins the race.
The only thing I think gets you into the exceptional and remarkable stage is when you do exceptional and remarkable things for people beyond what they expected. And that is going to involve mistake-making.
Generally, you can end up in a better place with the person you made the mistake on if you practice what we call the "5 As of mistake-making." The first is to be aware you made the mistake. Second, acknowledge it, Third, apologize for it. Fourth, act on it and fix it. And fifth, apply additional generosity.
Now, it's time for us to write a great next chapter. If I made a mistake, you're probably going to tell someone about it. I can't erase it. Our job is to write a great next chapter, so that when you do tell that story, you say, "But do you want to know how they handled it?"
Where the rest of the world is either not aware they made a mistake or denying it or blaming it on someone else, we're embracing it, overcoming it, and using it to get you to feel even better about us.
What does your next chapter look like? Are we going to see a next act?
Absolutely. I just don't know what it is. My license to grow is to constantly surround myself with other people who want to grow, and my license to give up things I used to do is to find somebody who can do any one of those things better than I can.
As I wrestle with that, I get to take on something new to me and get that wonderful feeling of incompetence, which I've learned to love. If I'm feeling incompetent at something, I get to learn something new, so we'll see what that is.
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