Shake Shack: Danny Meyer

Hello, Danny? Hi. Hi, it's Guy here. How are you doing? Oh it's good to hear your voice. You too.

I think my conversation with you is probably one of the last conversations I had. Yeah. Was that a was was that a Thursday or a Wednesday? It's a Thursday. Well, that was the day. That was the day we made we made our decision that night. Where where are you right now?

So I'm up in uh northwestern Connecticut. Where I've been since March the thirteenth. Are you have you been inside the whole time pretty much? Yeah, yeah, yeah. In fact we have we have four Kids all of whom are Somewhere between twenty and twenty six.

And We have conversations every single day, you know. I'm sixty two years old, so I'm in the category that should probably play it safer. Danny, as you mentioned, we did this conversation. This is the last conversation we did in the studio before um before we were all

Let's listen to it. 'Cause the story is the same. I mean how you built this incredible Company. Um it still stands. So let's let's listen to it and then at the end kinda come back and just get an update on what's going on now. Is that okay?

Okay. Let's cut right to the chase. This is one of the greatest pieces of advice I got from my my late grandfather Irving Harris. He said, you know, stop complaining about problems. He said Problems is the definition of business. The people who do best in business aren't the ones with the least problems or the people who solve their problems.

better and have more fun doing it with better people. From NPR is How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Roz and on today's show, how a project to revitalize an old city park led New York restaurateur Danny Meyer to create the very first Shake Shack and then Turn it into a billion dollar hamburger empire. A few years ago, I interviewed Tony Shay, the founder of Zapos, on the show.

Zappo sells shoes and clothes, but that's not how Tony thinks of the company. He described Zappos as a customer service company that happens to sell shoes. Now it's kind of the same story with restaurants. Ask a lot of chefs and restaurateurs what business they're in and You'd think they'd say the food business.

But actually, food is what they happen to sell you. The business they're in Is hospitality. Restaurants are places where in normal times People come together.

where we gather, where we have an experience. Now when it comes to any business, only about half of them survive long enough to celebrate their five year anniversary. But for restaurants, only a fifth will make it that long. The food industry is a tough industry. And Covid?

has made it even harder. So many restaurants will not survive this crisis. And that also goes for some of the restaurants created by Danny Meyer, today's guest. Which should give you a sense of how deep this crisis is hitting restaurants because Danny Meyer? He's widely considered to be the most influential restaurateur in the United States.

And not just for Shake Shack, but for his higher end restaurants like Union Square Cafe and Gramercy Tavern in New York City. Danny's influence is so deep that many chefs and restaurant owners are looking to his team at Union Square Hospitality Group to figure out what to do next. Mm. In the meantime Shake Shack is still a huge business, a publicly traded company valued at more than$2 billion.

You may have read about how Shake Shack received a government payroll loan, which it promptly returned, but still caused some controversy. Danny will talk about that later in the show, but for now A little bit about how Danny got started. His dad ran a travel agency when Danny was growing up in St. Louis. So from an early age, he was able to visit Europe and learn about food, which didn't immediately launch his career in the restaurant industry. In fact, after college Danny floated around a bit before he decided to apply.

to law school. I was never interested in law, but I didn't know what else to do. And the true story is that the eve of taking my L S A Ts, I was out to dinner with my aunt and uncle and and my grandmother here in New York. And um my uncle

Said I don't know what's bugging you tonight. And and I said, Well I have to take my L S A Ts tomorrow and he said, Well, of course you do. You want to be a lawyer And I said, Uh uh And he got really, really mad and he asked me probably the most pivotal question of my life, which was

Do you have any idea how long you're gonna be dead? And I said, No. And he said, I don't either, but I'll tell you one thing, a hell of a lot longer than you're gonna be alive. Why in the world would you do something you don't want to do? And I said,'Cause I don't know what else I would do.

And he said You gotta be kidding me. All I've ever heard you talk about your entire life is restaurants and food. I really did love the idea. Of becoming a restaurateur, but I didn't have any idea what that meant. And probably it was the Monday morning after that that I called

One of my best friends from college, and I said You know. You know how much fun we used to have going out to eat all the time up in Hartford? I said, I'm actually thinking about maybe opening a restaurant. But I need some help. How about if I be the food guy

And you be the money guy. I said, I just found out there's this thing called the New York restaurant school. And there's a course in restaurant management. Would you consider taking it with me? And he said sure. And he was He was in a bank training program at that time with US Trust.

So he took the class with me and we went through Two out of the eight. By the time his dad found out And his dad who was a very proud Yale said, No son of mine is going into that awful business.

Yeah. So my pal Dropped out. Felt terrible about leaving me on the lurch. And he said, I feel so bad that I wanna

introduce you our bank, US Trust, has exactly one restaurant client, and this was an Italian seafood restaurant. And the restaurant was called Pesca. In my interview Consisted of The owner

Asking me to walk back and forth a couple times and then stand in front of him. And as I stood in front of him, he looked me, you know, from my Curly hair down to my wallabies. And he said, You'll do. That was my interview.

It was an interview to do what? Well, it was an interview to become the assistant lunch manager. And so Every morning I would check in the waiters, make sure they had done their side work, and then I would type the specials in consultation with the chef. And so I got what I wanted. I I'm curious, I mean, you weren't going to Pesca to be

the assistant lunch manager and to turn that into a career. You were really going there to learn the business because in your mind already at that point you thought, I want to open a restaurant. Absolutely. So this was a very strategic decision that you were making already thinking, I've got to learn this. Completely strategic and and I told my parents That I was gonna try this. The way that I could get them to sort of take it seriously was not to say I was gonna be a restaurateur. But to say I was thinking about becoming a chef. Uh.

My plan was Let me do, you know, a year or so. At Pesco to see if I like it. And then after that, the plan was that I was gonna go cook in Italy and in France. And my dad

Agreed to connect me with one or two of of his friends. So he connected me with a restaurateur in in France. Um and I got to work there. I got to live with the chef and Go to the market every morning and work in two of this guy's restaurants.

I took Cooking classes from a A woman who was purported to be the Julia child of Italy in Milan. And I also got to work In Rome. And so

Being in the restaurant business for me, once my uncle opened that that can I couldn't Get it out of my system and and it was like having a mosquito bite where everybody says don't Scratch it. Don't go into that business.

And It kept itching. And when no one was looking I would itch it. So you go to France, you learn a little bit more about cooking. And you come back to the US with a plan.

To open a restaurant, um you've got some savings. And this is the mid eighties in New York, a very different New York than it is today. Big parts of New York. I think p people don't don't realize this we're Yeah, r comparatively affordable to today. Like you could Take a like a normal person could take a lease out on a

No as a matter of fact, the the the place that I bought Um I what I did was I just started walking. That's all I did for January of nineteen eighty five was walk. But I was walking everywhere. to neighborhoods and just trying to imagine

What might that neighborhood one day become? And so I got to know Tribeca. And it wasn't hot back then. I got to know the meat packing district and nobody was there back then. I got to know Union Square, nobody was there. And finally I walked into a um

What I would come to learn was a forty nine year old beloved vegetarian restaurant called Brownies, the first vegetarian restaurant in New York City. And I just Can I meet the owner? Well, he's not here right now. Why?

Well, I just want to see if he's ever interested in selling the restaurant. I mean, can you imagine saying that to somebody? Yeah, there was no there was no sign out. No. Yes, I like the spot because it was a half a block off of the Union Square Green Market. And it reminded me of What I had done in France and Italy, which was starting every morning shopping for food with the chef at the market.

So Basically, I guess it it turned out that you were Able to to purchase this restaurant you found because uh luckily the owner was wanting to retire. Mm-hmm. And the deal you took over the lease on that space which you had what fourteen years left on, I read.

Correct. Correct. what, twenty seven years old? I mean, fourteen years must have felt like a a a really long lease. I mean, weren't you scared of making a a commitment to a lease for fourteen years? No, not at all, because I think I've come to learn that a hallmark of being an entrepreneur is that You are

Upsided as in You can only see up. You don't see what could go wrong. Not only did it never Dawn on me.

That this thing Would fail or could fail, but It almost didn't matter because If it had failed. I was confident that I was not gonna spend all the money that I had.

And I was also confident that I had nothing to lose. 'Cause reputationally nobody had ever heard of me, so Who would know or care if it failed? I just had to get it out of my system. And do you remember with the with the release?

Was gonna cost you. Two hundred and forty thousand dollars. For the fourteen years. For the fourteen years and then I spent Five hundred thousand dollars building it. And that was it. That's actually w put it in perspective.

That's an insane bargain. Certainly by today's standards couldn't today I don't think I could build a You know, a restaurant. A parking lot stuff. You got a fourteen year lease Effort. Two hundred thousand and then you put in Five hundred thousand dollars of to build out the restaurant. Yeah. Presumably you had to a ask people for to help you out, right? You couldn't do this with all your savings.

Yeah, I asked my so I asked my mom And one of my aunts and one of my uncles. And I did not ask my dad, and sadly my dad did not come to the opening. We were sort of on the outspack at at that point, which which is really sad, but I also think that he felt somewhat threatened by it. And um

We all structure this as a loan, which was great because They then um put me in a position where I could actually own all the equity. Mm. After I paid off. All the world.

So it was a it was a good deal. All right, so you borrow this money to build it out, but like You gotta find a chef and a staff and like what did you how did you start to do that? Well, remember now I've I'd spent an entire year working in a restaurant in New York and in Europe with chefs, living with chefs. Um cooking.

But you learn a lot. And so when I w where would you advertise? Just like in the classifieds? I didn't advertise anywhere. This is an interesting part of the story. Before I went to France. I was taking a wine class at a place called La Carmi du Vin in New York. And there is a person in the class

who I really hit it off with, and every night after the class the two of us would try to go discover a new restaurant in the city to go eat at. His name was Brian Miller. And He had just

left the Hartford current. As a young journalist. Mm. So I'm now in France cooking. And I get a letter one day from Brian.

And his letter says I've got great news. The New York Times has just hired me to become the journalist responsible for a column called Diners Journal. Mm. I wrote him back and I said. Guess what? I've got really good news. I'm gonna be opening a restaurant in New York.

And so I don't want to diminish the role that Brian Miller played in helping me because he introduced me to Some pretty Important people in the food world. People like Craig Claiborne, who was really the first restaurant critic in America. People like

The top Meat purveyor to all the French restaurants in New York named Marc Sarazin. Who knew every chef and su chef. At all the French restaurants in New York, and that was back in the days when You weren't taken seriously as a chef if you were not.

Able to cook in a French restaurant. So he introduces me to a a young guy. And his audition with me. Was the same audition that I think I had given to Two other people and I hired them too.

By the way, where were you doing this? What kitchen were you using? We were using the kitchen in my apartment, uh on the upper east side at that time. So you started to kind of piece together a team But you were kinda collecting names and meeting people. Who you knew I guess down the road could help you build this restaurant. Is that is that right? You're you're absolutely right. And um

I had a vision for what I wanted to do and it was a weird vision. The vision was A restaurant that you couldn't necessarily put your thumb on and that was different. You had Italian restaurants. You had French restaurants, you had American restaurants.

But you didn't have eclectic restaurants. She didn't have a restaurant that had A little bit of Rome with a little bit of Tuscany, with a little bit of Lyon, with a little bit of Bordeaux, with you know With a little bit of San Francisco, I might add. And and so when Union Square Cafe opened, even though we had absolutely no idea what we were doing, and we made mistakes left and right.

And it was a different kind of restaurant, and and it worked. And so you so you basically said, All right, we're gonna make this restaurant, we're gonna it's gonna be this sort of You know, high end food but not a high end feel. Exactly right. And At a fraction of the cost and without one ounce of snootiness whatsoever. And you know, my my hiring

If you were from New York I didn't Pretty much wanna hire you. 'Cause I didn't think of New York as being a very friendly place back then. Hm. That was the gift I got from growing up in Saint Louis. And I I did like going out to eat in Saint Louis, but much more for the hospitality

It turns out then for the food. When when did you open in in nineteen eighty five? Did it it must have taken a a a while, right? Yeah, we opened. I'll I'll never forget the first day of construction was Memorial Day weekend of nineteen eighty five and and then we opened October twenty one of nineteen eighty five. And um we didn't have the internet, I didn't have a PR agency.

It was pretty slow at the beginning. It took us an entire month before we ever needed to use any more than One of our three dining areas. Well. And the next thing that happened was we got our first review from the New York Times.

And it was Brian Miller. It was Brian Miller, your old friend that you met in that wine class. Yeah. And I was so nervous. Leading up to this point because he and I had stopped talking to each other'cause we couldn't. Yeah. But we ended up getting a really, really good two star review. Oh.

To this day, Brian will say that if anything, he was extra tough on us because he did not want to be seen as being favorable and he actually had He had been so concerned about this that he had asked others from the New York Times to come to the restaurant and he asked what their opinions were. But it really put us on the map in that two star review that we got. I think it tripled our business overnight. Wow.

And you were always there in the restaurant. Every day. Always. And did you ever cook in the kitchen? I cooked in the kitchen I think a total of Three times.

One of which was disastrous. It was the first Thanksgiving we were open, and by this point The chef and the sous chef had fallen in love and we were not very busy, and when The Sous chef said that she wanted to take the chef back home to meet her parents. I said that's fine,'cause as far as I was concerned, the restaurant was not gonna be busy on the Friday night after th Thanksgiving.

And so I had my Brooks Brother suit and red tie on with a white shirt. And um The kitchen went down. Everybody in the dining room was begging for their food. Where is it? Where's my appetizer? Where's my salad? Where's my bowl of soup? We couldn't even ladle soup. We were so far behind.

And I started trying to help the kitchen dig out of all of this mess that we were in. And the next thing I hear from one of our servers is Danny, I need you in the dining room right now because

There's a gentleman who's had too much to drink. He's walking around the dining room with a tie tied around his forehead. And he's complaining that we don't have baked potatoes on the menu. No man. I go out into the dining room. And Truen enough, there was the guy walking around.

And he said. You can't cut me off. Your server just told me they won't serve me anymore. And I said Yes we can. Here's your bill. And he said, You can't make me pay. We then go chest to chest.

And I said, I can't make you pay, but I can make you get out of my restaurant. And we start walking chest to chest up the stairs and he throws a punch, lands right on my jaw. And for the first time in my life, I punched someone else right in the face. Right in front of everybody. And I

And uh Lo and behold, what I didn't know is that the restaurant critic of the Daily News was sitting in the restaurant watching the whole thing. And that would become part of our review, which was How much He loved the restaurant except for this one night when the food was absolutely horrible and other other things transpired that made me wonder.

D Danny, did you w w as Union Square Cafe really grew in prominence? Through the eighties. Um what did your dad think about it? I mean you y you know, I I g I gather your dad did not come to the opening Maybe there was some tension between the two of you and I don't know, maybe I don't know what, but um

I must have been proud of you, but I mean d did he Well he was, but unfortunately I didn't learn that really until after he died. He died in nineteen ninety. But he told a lot of people how proud he was, and so after he died. the floodgates would open with people sharing those stories and I Really do hope that's the same. I tell my own kids in their real life.'Cause you didn't know.

I I I didn't know. And you know what I wasn't so much doing this to make him proud. I was doing this to prove To myself. That I could do this because I think All of us

are to some degree motivated by trying to prove something to either ourselves or to somebody else. Sure. Ten years after opening Union Square Cafe when I finally had the courage to open a second restaurant. So that was in um nineteen Ninety four. But a big part of what I had to prove was that I was not an impostor because I had this nagging feeling

That Union Square Cafe had been all luck. That I never could have opened it if it hadn't been for getting that loan from my mom and aunt and uncle. I never could have succeeded if I hadn't known Brian Miller before opening. Um and so That led to Gramercy Tavern.

And um Ramacy Tavern ended up working out. Not immediately, but it worked out pretty well. And and then what was kind of fascinating was that for Many, many years Union Square Cafe and Gramercy Tavern were like these Two siblings that had the biggest rivalry. And they would vie for one and two as Zagat's favorite restaurants in New York City. А най реаз

There was Something that was working at that point. I read that that when shortly after Grammar Sea Tavern opened in ninety four Union Square Cafe went down to like Number three in the Zigat rating from two and um and you were kinda caking yourself thinking, Oh, this was a mistake. I can't do both things really well, I can only do one thing really well, and then I'm like, I'm taking my eye off the ball and you need square cafe and was that g w were you did you have anxiety about that?

Oh boy did I have anxiety. I was so depressed. But It really forced me to learn to articulate a bunch of things that had perhaps been intuitive before, but that I had never actually been intentional about. The biggest one was that I really, really understood the power of hospitality. For the first time, I understood that hospitality was a completely different thing than service.

А тінь сервис. Is a way to describe The technical delivery of the product did you do what was expected? Did you get the right food to the right person? And I think hospitality is a very different thing, which is oh by the way, how did you make the recipient of your service feel?

Yeah. How how do you trained for that? How do you hold people accountable to that? You can't be in both restaurants at all time. How are you able to Make sure that Because it's not you can't just say to somebody, be really nice to the people who come in. Be really kind to them. Like it it's not that simple, right? Right. And let's let's just let's cut right to the chase. This is one of the greatest pieces of advice I got from my my late grandfather Irving Harris. He heard me complaining one day soon after Union Square Cafe opened about

How hard something was or He said, You know, stop complaining about problems. He said Problems. Is the definition of business. Yeah.

And he said the people who do best in business aren't the ones with the least problems or the people who solve their problems better and have more fun doing it with better people. And so I s I think about that all the time because Whatever you do for a living, whether it's what you do or what I do or what a banker does Wrong. solving problems all day. And the question is, who do you want to be solving those problems with? Who's

It's kinda like if you were a tennis player, who do you want to Have a beer with after you're done playing doubles. Yeah. Right. And so I was able to identify and our top performers

that there were six emotional skills that were always present at a very, very high level. And we could celebrate them and we could teach people how to spot them in an interview. But we couldn't teach you. It's kind optimism. Yeah.

It's Curious intelligence. Yeah. It's work ethic, it's empathy. Self awareness. And integrity.

And so in one Respect, we made our lives a lot tougher because I'd say it's challenging enough to find a great pasta cook, but I don't let our chefs hire that pasta cook. Unless they believe

That the pasta cook. has those six emotional skills meaning Then now you've got someone who's really good at what they do and who is motivated to do that thing. Because they are happier themselves when they're making You feel better.

Why don't we come back in just a moment? How Danny took his ideas about hospitality and fine dining. and decided to try them out in a different setting, a hot dog cart. Madison Square Park. And how it still took him five years to realize that

That idea? could become something much, much bigger. Stay with us, I'm Guy Raz, and you're listening to How I Built This. From NPR. Hey, welcome back to how I built this from NPR.

So it's the mid-1990s and Danny Meyer is looking to expand his business. He has his eye on a building on Madison Square Park in New York's Flatiron District. He wants to open a fine dining restaurant called Eleven Madison Park. But the park's not in great shape. New York is just beginning to think about revitalizing its public spaces, and Danny wants his new restaurant to be part of that movement.

Here's here's how this story goes. So I sat down to negotiate this lease with the company that owned the Beautiful Levin Madison building. But before Even talking about money, I said, I need to know that you would join me in an effort to restore this park because this park could be gorgeous just like it was In eighteen eight. Yeah. So we together created something called the Campaign for the New Madison Square Park.

And We raised money, we raised eleven million dollars. And uh Fast forward several years. We engaged the public art fund a a wonderful organization in New York City.

To help us bring art to the park. There was an artist from Thailand and his idea was to have four tax on stilts. With a working hot dog cart to go with it. Hm. And um he needed someone to operate the hot dog cart. And so I said, Well of course we'll be glad to do it. And you know, all of my

Eleven Madison Park and Tabla. They looked at me like I was crazy, like the last thing we need to be doing is Chicago style hot dogs in the middle of a park. That's what you want to do, Chicago style hot dogs. I wanted to try to prove that this hospitality concept that I'd been thinking about so much

was not just for fancy restaurants, but it was everywhere. And I wanted to prove that it even mattered And a hot dog cart. The reason that I wanted Chicago style hot dogs was there's eight toppings And I wanted the people who worked the hot dog cart to remember everybody's favorite toppings. For almost everybody there's like one of those eight toppings you don't like.

Right. Yeah. I don't like mustard or I don't like Neon relish or sport peppers. You kinda like the food. I love those four fibers. Tomatoes, you gotta go for the tomatoes. I'm okay with the tomatoes. Celery salt. You gotta have the celery salt.

You're showing off now. You got'em. Um so So anyway, we hired our out of season co checkers so they would now have a job You know. A full four months before coat season. So they were happy.

And we cooked up in the private dining room of eleven Madison Park. That's where the hot dogs were cooked. And lo and behold this this hot dog cart. Just killed it. We had you know, it was covered by Peter Jennings, Tom Brokaw, Dan Rather, CNN covered it. And

There would be a hundred people in line every single day that summer. And this was for as as far as I understand, this is a non profit, right? This is not a for profit stand. Well, what we had done was to Offer to give all of our profits back to the Madison Square Park Conservancy. That was pretty easy'cause we lost about five thousand bucks that first year.

Um and then nine eleven happens and the city was really not only in a economic depression, but also an emotional depression. And so the following summer, two thousand two, The community basically said Even though we've moved on to a different piece of art in the park. Can you just bring back the hot dog cart and and serve us,'cause it feels good. So we did that. Correct. The third year two thousand three.

And that year we made seven thousand books. Gave it to the conservancy, but meanwhile We were Cooking up this idea. And we got permission.

to create a permanent kiosk. In Madison Square Park. And so I convinced my mom to join me. In gifting this permanent kiosk, starting with hot dogs. Let's gift it to the park, so the park will actually be the landlord.

We will own the business. But if it works. The goal the only two real goals we had were Can it attract people to using the park morning, noon, and night? And could it potentially create a revenue source for the park?

This is gonna be a standalone building in Madison Square Park. That that you would build or that that and that you would give to the city. It turned out that we had it built modularly somewhere in New Jersey. And so

He woke up one morning in um Two thousand four. And it wasn't there and you woke up the next morning and there it was. Almost like the house in the Wizard of Oz. And and this was going to be a hot dog stand, or did you say, let's make this something different? Yeah, so I I I said it we gotta start with hot dogs and I just sat down one day just scribbled on a piece of paper

The menu. And the menu I scribbled that day is kind of ninety five percent what we serve at Shake Shack to this day. And it was basically just going into my own memory bank from growing up in Saint Louis All the things that I used to love doing. You know, as soon as you got your driver's license at the age of sixteen

The whole point was to get out of the house and and be with your friends and the The safest place to do that was a parking lot. It was usually a parking lot connected to a burger joint. And New York didn't have a a People don't have cars. Kids don't have cars. So there's not that culture, but we do have parks. And I said, What if we could

do for this park what parking lots always did for us and have a place that people could come together So on the menu, joining the hot dogs would be the same kind of burgers I had loved growing up. The same kind of shakes I had known growing up, and we just added You know. Crinkle cut fries, which I had loved growing up. Yeah. And that became Shake Shack.

But What I didn't know was that Shake Shack would work as well as it did work. When we think about Shake Shack now and it sounds like a no brainer, but like This was still I mean

There was five guys and you know, obviously on the West Coast you've always had In N Out Burger and there have always been regional, great regional burger chains. But when Shake Shack opened, like for for one thing it's in Madison Square, it's in New York. But it was a phenomenon. Like there were lines around the block. I mean they were really good burgers Really good fries and shakes. Um

But did you expect that? Did you expect it to be just No No. What explained it? Well, how did you explain to yourself? I think we hit a really lucky point in time, and there was one winter where there was a massive snowstorm. And somebody used Twitter to announce big snowball fight in Madison Square Park. Meetup at blah blah blah. And we heard about this.

And we started giving away hot chocolate to everybody for free. Who was in this snowball fight. And somehow the tech crow adopted Chache Shack. at that moment. And It became something more than a burger place. It became exactly what it was supposed to be, which was

a place that you went to to see people. And and this was gonna be a place That kind of forced you. to just slow down a little bit and to and to be with people. Here's what's amazing, cause I mean Shake Shack was in New York for like five and a half years and people were literally like getting off of flights, uh Penn Station, they were going there. It's like there are things that people did. when they got to New York and people were going to Shake Shack and there were people saying, please, like open this up. And I'm sure you were hearing that for five and a half years.

But I think you guys were sourcing your meat from like a really great meat place and You were really I mean it was fast food, but it was kinda slow fast food. I call it fine casual. Fine casual, right? Were you thinking I don't know if we can really expand this out. Well, yeah, I was saying that wasn't why we did it in the first place. We did it to take care of this park. And we were learning a business that was very different from anything we had ever done. I mean it was nothing like Gramercy Tavern or Eleven Madison Park or the modern

No, we were serving. over a thousand people every single day and learning learning the business, learning how to do it. And also keep in mind I still did not want to be viewed as a chain. Why why not? Because chains.

And fine dining. People never wanted to be seen in the same room. They thought we were stupid and we thought they didn't have any taste. Yeah. And so this was a fascinating moment because We knew that we needed to learn some of the systems the chains were expert at. We were also really fortunate that

We had a young guy. Who had been a general manager of Tabla and a general manager of Union Square Cafe, who had been our director of operations still in his early thirties. And uh He wanted to run Shake Shack.

Uh Cornell Cornell grad named Randy Garudy. Randy lives on the upper west side. And He kept passing this space and he kept bugging me saying Can we please do a second shake shack?

He said. What's the biggest complaint we get at Shake Shack? And I said th the line's too damn long. And he said, What if we could actually cannibalize our own line a little bit? Wouldn't that be a good thing? We'd stop getting that complaint. So we opened We've opened on the upper west side, seventy seventh in Columbus.

Five years to almost to the day later. And Not only did it work, but the line got longer. In Madison Square Park. And I said, Uh oh. This is And then we open on the upper east side. And then we opened

It's Cityfield with the Mets with their brand new ballpark. Then we open in the theater district. And every single time we open one We'd have the lines. And you know. It it just was kind of blowing our minds, and we're trying to figure out what do we have here? We gotta figure this out. Was it was it a challenge for your team to adapt once Shake Shack started to take off? Because I mean by this point you had gotten really good at running these uh higher end restaurants, right? I mean shake shake is a totally different business model. It's uh it's a burger joint, right? There's there's counter service, you're cooking burgers and fries and and making shake, so so I mean, you don't have to buy f foie gras and have a fancy wine list or do all those other things that you know, b that make Eleven Madison Park work a as a restaurant, right?

That's true. Th there's about Seventi percent of the cost. taken out. There's not a if if you look at any Shake Shack, there's not a chef, or three sous chefs, or a pastry chef, or a maitre D, or a reservationist, or a florist Or linen company. And I you know, that's probably only half the cost I'm talking. There's no bartenders

If if you just take out all those costs But then you continue to give the same level of quality ingredients. You start to have a pretty interesting value proposition and the the the old rule of two that we all grew up hearing about Whether it's construction or you know, certainly fast food.

Which is There's only three salient issues an architect will tell you. Speed Quality. And price. Which two do you want? Yep. Yep.

And so fast food always told us. You can have it cheap and you can have it fast, but obviously Your beef is not gonna be antibiotic and growth hormone free and blah blah blah. So we we realized we were actually onto something by accident, which was

It's still a rule of two. But whoever wrote the rule that it has to be one plus one plus zero and what we found is that It was Not as fast as fast food, but it was a lot faster than a full service restaurant. And It was not as inexpensive.

As fast food, but it was a lot less expensive than a full service restaurant. Yeah. And the quality of what you put in your mouth was just as good. 'Cause it's the exact same. butcher that we use at Union Square Cafe, Pat La Freda and um and you're gonna have to come up and get your own food when your buzzer goes off. We're not gonna bring it to you. So if you're willing to put up with a little less of the niceties, we can deliver 100%. And so what we found was the rule of two was working basically 0.65 plus 0.65 plus 0.70 equals two. And that was new.

Were you surprised at it I'm just gonna f fast forward here f for a moment,'cause today I think they're like more than two hundred and fifty Shake Shacks around the world and and I read that the average revenue of a Shake Shack location is like four million dollars, which is really I mean That's doing very well when you compare that to your competitors, but I mean were you surprised back then in in two thousand ten, two thousand eleven, how Shake Shek's were performing in comparison to like your fine dining restaurants? Yes, yes. They were grossing

Um today they're grossing on average. A little bit more than four million dollars uh per shack. There's two hundred and seventy eight of them in the world. And if somebody had told me that we'd be in fourteen countries In addition to the United States with two hundred seventy eight of these And this is sixteen years after we opened our first one, and yet It's only eleven years after we open our second one.

You know, we didn't create burgers in the first place. And so so you ask yourself, Well, what is it that that makes people love it so much? And again I come back to to hospitality. And I believe that if that There's a lot of restaurants. That exists to create something you've never

thought of or heard of in your life. There's a lot of um really, really imaginative chefs who Yeah, you could give A doctor and they would Create something you've never imagined. And I think what Shake Shack does instead is It takes food you know and cooks it better than you knew it could be and and

People are nice to you. You know, there are Parallels. We interviewed Steve Ells a couple of years ago on the show. He found a Chipotle and his dream w he worked at Starz and San Francisco and his dream was really to be a fine dining chef. He wanted to open up a four diamond or Michelin three star restaurant. That was his dream, you know, and he opened Chipotle to be to generate money so he could open a fine dining restaurant. But of course Chipotle turned into Fast casual place, high quality, all the food is made on site. It's there's a similarity here, right?

Well Chipotle I think Steve and Chipotle really deserve an enormous amount of credit for really being the first national Chain to break. the barrier that fast food could not be

Gastronomic. There's real cooking that takes place in real time and and I think He deserves a hell of a lot a lot of credit for that. Вот амі юсаюст. when you started to see these numbers, mm-hmm, were you sort of saying to yourself, How did I not see this until this point? No. No, because it just

It was never my goal. My goal was to help beautify a park and help keep it funded, you know, something that that I'm incredibly proud of just going back to the initial goal was that That one Shake Shack in the original the original Shake Shack in Madison Square Park Pays in rent.

uh depending on the year, anywhere between half a million and a million dollars per year right back into the park. So it did what we expected it to do. Did a whole lot more than that. So w w at at certain point it became clear that Shake Shack you need to spin this out and make it its own business, uh o away from the Union Square Hospitality Group. Was that just a clear direction? D just was it just the obvious Place to go. Yes.

It was a horse that wanted to run and it would have been irresponsible to choke it at that point. We let the rains out and and We had the right leadership team. We had a a bunch of People who were at the point in their career where they said

I may have started at the modern or Gramacy Tavern or Union Square Cafe. To this day, our leadership team almost all came from our fine dining restaurants. And I feel so proud. I'm I'm the chairman of the board, but I don't run the business and um Ам прав да ти кальчу.

Uh is if anything stronger than ever right now. You have had uh I I want to make it clear that you have had significant failures along the way,'cause if it's just success, you're not interesting. I'm I'm just being honest. Success to success is is boring. Mm-hmm. And You've had to close restaurants down. Particularly Tabla. Tabla was like the one of the jugals in your crown is an Indian restaurant.

High end beautiful space two thousand ten After years of losses, you very reluctantly had to shut this place down. And I guess your team kinda had to push you to do this. They had to say, Danny, we've got to shut this down. Yeah, you know, I think that uh

I had a really bad relationship with uh the notion of failure. And it took me a long time to Realize that Not every restaurant.

is gonna live forever. And what I also came to terms with Is that I had probably kept it open two years longer than I should have. And that In doing that. My rationale was I don't want to put people out of work. But

in keeping it open two years longer than I should have, where we couldn't make ends meet. I was actually doing something incredibly unfair, which was to key people on the team just because they were so loyal and they were not getting raises and they were not getting promotions. It just isn't right. And everybody got a job somewhere else. We held job fair for them.

And we went through the same thing a couple of years ago with a restaurant called North End Grill. Yeah. And then we had a third restaurant that didn't work. Called Martina. And That restaurant.

made it just barely over a year. So We've made mistakes and The the goal is

Bad. With Martina what I try to do is to learn how to fail faster. And not Hang in longer than I should have. Yeah.

Do you when you think about all that has happened to you, I mean you open this restaurant in eighty five, Did really well. You open a second one did really well. And then Shake Shack was just exponential. It's a publicly traded company. It does uh six hundred million dollars in annual revenue. It's a huge growing business. C do you think that all this happened because of your

Your talent and your hard work, or do you think a lot of it really had just to do with being lucky. Uh I I would say eighty percent luck and twenty percent work ethic. Any other thoughts on that? Nope.

Fair enough. That's Danny Meyer, founder of Union Square Hospitality Group and Shake Shack. And of course, given everything that's happened since this interview was first recorded on March 11th, 2020. We didn't wanna just leave it there, so I caught up with Danny about a week ago to hear what's been happening in the past few months. and talk to him about the very big challenges that he and all restaurants are facing going forward.

All right, so Danny, um as I mentioned at the beginning, as our listeners I think know, we recorded this right before um kinda pandemic shut everybody in and we we we were still uncertain what's gonna happen. You really were the first kind of major restaurantur um to decide to shut down all of your restaurants immediately.

And you had to let go, I think. Thousands of people. Um Tell me how did you guys come to that decision how I mean I'm sure it was Agonizing. Walk me through what happened.

Yeah, the the every day has been agonizing. Every day for the last eleven and a half weeks has been agonizing because You're alternatively in Reaction mode to something that you've never faced before. It was clear really quickly that

While we we had no idea how long this was gonna last. As a matter of fact, uh When you and I last spoke. It was the first day of spring break for our kids in in college, et cetera, and we were pretty sure that they'd Might go back to school. We weren't You know.

We we just didn't know how long this was gonna be. And uh I think there was a really pivotal day in very early April where one of our Former colleagues would be loved Chef by the name of Floyd Cardos.

Cast away. From Covid. And it was about then, or even maybe right before that, that I said, look As much as we wanna Pay all these

Employees of ours. We can't. We're gonna we're gonna run out of money. And then where will where will we be? We will we will not be around when this is over. We won't be able to get back to being good employers. And that's when we shift it into this whole mindset of, okay If we cannot be good employers right now

How can we possibly recast ourselves as being Really good on employers. And we started making a whole host of decisions Uh the first one was pretty easy for me and that was that we would

Set up an employee relief fund. Yeah. I gave a hundred percent of my compensation to the fund. Um we started selling gift cards for a week with a hundred percent of the revenues going to the fund. That was a quick

four hundred thousand dollars right there. Bottom line is we've we've raised About one point four million dollars. Already granted out about one and a quarter million of that. And so We just felt that

Yeah, we would create a whole range of resources for our or laid off team members. And um was everything from emotional resources to An amazingly robust job board because it turns out that a lot of like minded companies

are in fact doing really well right now and they wanted to recruit members of our team. Yeah. It's a lot. It's a lot. You know, every Thursday morning I host something called Coffee with Danny and it's smaller groups and it it's not at all connected to business strategy. It's it's only connected to uh people and how they're feeling. Danny, are you able to open up most Shake Shack locations, at least for takeout?

Shit chair. from the outset stayed in business in most of its locations, but immediately pivoted to a Strictly curb side pickup andor delivery mode. Right. Um and it's only been very, very recently that A small handful of them.

have returned a welcoming guests inside the restaurant. With respect to Shake Shack, um clearly a vote of confidence I mean it's sort of awkward to talk about this, but a vote of confidence from investors because the Shake Shek raised a lot of money from investors in I think in April and

will be okay that it will have enough cash to weather out the storm. Yes, that is true. I don't find it awkward at all to talk about. I think that um Like every restaurant company the

the bottom dropped out at the end of March and the beginning of April. And The opportunity Because of the the drop in the stock price at that point. to buy a piece of the company.

At a price that Everybody certainly hoped would would represent an outstanding value. uh was there and the the company said, look, this will be over and when it's over There will be lots of opportunity to if you have money on your balance sheet.

Number one, you can rehire. Number two, you can beef up your all the technology toolkits that you're gonna need more than ever right now. Yeah. And number three. There will be some especially for a company that's growing as Shake Shack is. There will probably be a lot of really outstanding real estate opportunities, um Which did not exist before this.

But you you won't be able to do any of that. If you haven't been able to raise uh funds to do that with. I wanna ask you about optics. Um, this is a really challenging time.

Obviously for business. And of course there was this moment at the be I think earlier on when um Shik Shek w came under some criticism because you'd accept it or applied for a a loan from the government and then returned it. Um and

people criticized it. They were like, Why does this, you know, restaurant group need the money when small business needs money? Were you surprised at the at the reaction? I was surprised at the reaction for about ten minutes and then I completely understood it. Yeah. Shake Shack obviously would not have applied for the loan if it if it didn't perceive a need. And the ten minutes of surprise were also connected to another s big surprise, which is the day that Shake Shack made it public.

Uh that it had applied for and received a loan. Was Within twenty four hours of the government announcing that it had run out of money for this whole program. Right. That's when I say well of course.

Of course, there's outrage right now. I look back and I'm incredibly proud that uh You know, within thirty six hours of Of understanding the government had run out of money.

The company uh and its board made the decision to return it. And it was the first of any public company to do so. And that actually began a cascade of What I'm told is well well north of

two or three billion dollars of funds that were returned subsequent to that. So That's the kind of example. That I would want to set. It was of course never Shake Shack's intention to elbow their way to the front of the line to exclude other people. And so it became a very simple decision to return the funds at that point.

W in terms of like just thinking about what's next, I mean, you've been in business for a long time. You've dealt with a lot of Difficult moments. I have to think that you still have optimism about the restaurants recovering. Or do you I

On most days. On most days I do. I think It's now been long enough that while I can still remember what it feels like to walk into Gramercy Tavern and smell the The wood burning from the fireplace and

And see th three deep at the bar and every tavern table. full of people with cocktails and glasses of wine and and rich conversation and the clinking of glasses. Um and yet If you walk by Gramacy Tavern today, you see a window papered with a a big mural that says, We miss you.

And then about eight hundred things we miss. And I just Since I don't know what When are New Yorkers going to

to start feeling normal about going out to restaurants. I just don't know when that's gonna be. And and when they do. If the law says that the only way to do it is for Gramacy Tabern to be at fifty percent occupancy with six feet between tables. And understanding that The economics of a restaurant are such that You can really only turn a profit when you're at least at eighty percent occupancy.

It starts to be a difficult equation because you start to go, look, as a citizen of New York and as a citizen of the restaurant industry. I have an obligation. to turn this engine back on. Because people need it emotionally. Yeah. And then you go

And as a steward of my business I have an obligation. to stop losing money because we've had, you know, practically zero revenue now since The middle of March. And every day we lose money is another day we cannot hire someone back. So

You know I turn to this uh Maya Angelou quote. Almost every day, which is something along the lines of Long after people forget what you did and what you said, they will remember how you made them feel.

And it just It's true in good times and it's certainly true when you don't know where you're going. An update from Danny Meyer, founder of Union Square Hospitality Group, and Shake Shag. Than so much for listening to the show this week. You can subscribe wherever you get your podcasts. You can also write to us at hibt at npr.org.

And if you want to tweet at us, it's at how I built this or at guy. Our show is produced this week by Casey Herman, music composed by Ramtin Arablui. Thanks also to Julia Carney, Candace Lim, Sarah Sarrison, Eva Grant, and Jeff Rogers. I'm Guy Raz, and you've been listening to How I Built This.

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