Pod Insights The Knowledge Project #115 Danny Meyer: Hospitality and Humanity About this episode Celebrated restaurateur Danny Meyer discusses the intersection between hospitality and humanity, and why we are all in the hospitality business regardless of where we work. Meyer defines hospitality and how to deliver it with every interaction, how we can scale a feeling, hiring great people and when to let them go, and so much more.
Meyer is the Chief Executive Officer of the Union Square Hospitality Group, which comprises some of New York's most beloved and acclaimed restaurants, including Gramercy Tavern, The Modern, and Maialino. In 2004 Meyer and USHG founded the wildly popular Shake Shack, a New York fast-casual restaurant chain that has since grown to more than 250 locations around the world.
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0:00 Speaker 00 If you reach out to give me a hug, and I like you, I'm going to probably hug you back. And then we each get a hug out of the deal. That's called hospitality. Hospitality exists when you believe that the person on the other side of the transaction is on your side, when you trust that they're on your side. It really starts with the people you work with. In business, I think that the first people who need to receive hospitality are the people who work in an organization. Because if when you come to work, you feel like your colleagues are on your side, your boss is on your side, the people genuinely want to see you succeed, that's probably going to bring out the best in you. And so this is what we call the virtuous cycle of enlightened hospitality.
0:58 Shane Parrish? Welcome to The Knowledge Project, a podcast about better thinking, problem solving, and decision making. I'm your host, Shane Parrish. If you're listening to this, you're not currently a supporting member. If you'd like special member-only episodes, access before anyone else, transcripts, searchable transcripts, and other member-only content, you can join at fs.blog. Check out the show notes for a link. Today, I'm speaking with Danny Meyer, the founder and CEO of Union Square Hospitality Group. Danny's behind some of the most acclaimed restaurants in New York City, like Union Square Cafe. He's also the founder and chairman of Shake Shack, which has one of the best burgers around.
1:39 Shane Parrish? We talk about hospitality, what it means, how to deliver it, why we're all in the hospitality business, how you scale a feeling, whether he's a bricklayer or a mason, hiring great people, why restaurants that survive more than a year fail, and so much more. I hope you enjoy this conversation as much as I did. It's time to listen and learn.
2:07 Shane Parrish? Danny, can you briefly tell us how it is that you came to be what you call a restaurant generalist?
2:13 Speaker 00 I came to be a restaurant generalist really as a reaction to almost backing into being a specific thing called an executive chef. I love cooking. When I decided to get into the restaurant business, it was a time back in the 1980s where it wasn't nearly the acceptable entrepreneurial career choice that it is today. And there was something in my mind that said, my parents are gonna totally reject the idea of me being a restaurateur because that's a sketchy job, but they might accept if I say I'm gonna be a chef. Because we had started to see some celebrity chefs, Paul Prudhomme, Wolfgang Puck, I remember,
2:58 Speaker 00 Jeremiah Tower from the West Coast. We were reading about Alice Waters with Chez Denis, and I said, there's a bunch of people I could aspire to. And so I got myself trained a little bit in France and Italy, and just enough to learn that there's a whole lot of people out there who would be a whole lot better than I as a chef. Because I just, I don't think I have ADD, but I definitely did not have what it took to just delve singularly into one topic. And meanwhile, what I loved about getting to run a restaurant as a 27-year-old in New York City was I could dabble in everything.
3:38 Speaker 00 Writing, marketing, tasting food, tasting wine, learning about all those things, teaching those things, hiring, decor, welcoming guests all day, seating people. I just really loved all aspects of it. And I knew that if I just did one thing, there's a whole lot of other things I would not have gotten to do.
3:58 Shane Parrish? Before you opened your first restaurant, you looked at over 100 locations. I'm wondering what the key ingredients are to a location. How did you think of it then?
4:07 Speaker 00 Well, the location becomes the stage set for the play you're trying to write. And there's a lot about locations that you can change, but there's a lot you cannot change. And you really, really have to understand that. The one thing you can never change about a location is where is it? And what surrounds it? You can't go knocking down all the buildings around you. You can't go building buildings where there aren't any. You know, if you want greenery outdoors, tough luck if you're on the wrong street in New York City. So it's really important to understand what is the, what is the location saying? How did people get there? How did they feel when they were there? What were they doing before they came to you?
4:53 Speaker 00 And I really have always looked at restaurant spaces the way a winemaker looks at a vineyard, which is that there is a terroir. And the terroir is, is really in charge. So for example, if you're a great winemaker in France, you don't wait to read The Wine Spectator to tell you what grapes are in fashion today. You listen to the soil, which says, guess what? We're in Burgundy. And Pinot Noir grows really, really well here. And if you want white, Chardonnay happens to grow really well here, too. But don't try Seirac because it doesn't work. If you go to Bordeaux, don't try Pinot Noir or Chardonnay because they're not going to work.
5:34 Speaker 00 And so the same exact thing happens with, with restaurant spaces. And if, if you're really observant, the space will tell you exactly what it wants to be. And sometimes what the space says is, don't plant anything here. This place should not be a restaurant. And that happens actually more than not. You wouldn't believe how many times I've looked at, at restaurant spaces. And the first question I ask myself is, would I want this even if it were for free? And guess what? Ninety-eight percent of the time, the answer is no. If it's something I would want, now I gotta negotiate to get a, a deal because, you know, most restaurant leases are very, very long leases, 10, 15, 20 years.
6:18 Speaker 00 And so you're signing up, you're making a big commitment. And again, I'll make another analogy with, with winemaking. When a winemaker commits to growing a grape in a certain vineyard, They're actually making a 10-year commitment because most vines don't become productive with really good grapes for at least 10 years. So there's a lot we have in common. There's a reason that if you're, if you love wine, that you know that there are certain vineyards that make good wine year after year after year. And even in the worst vintages, like the weather was really bad, they probably make the best wine of that vintage. It may not be their best wine,
7:00 Speaker 00 but even in a bad vintage, they'll make a good wine. So now how does that relate to our business? Well, I've always felt that our job is to start by picking the best site. You want to pick a site that has what it takes. It's got bones. It's got a feeling that transports people. That's why people want to go out to eat. It's not just because they don't want to cook or do the dishes. They want to be transported to a social environment. And you ask yourself, can I make something here even before, even before you taste anything? Can I make something that's going to make people feel good just being here? Like you know that feeling when you walk into a restaurant and you go, this place, this is going to make me feel good. So you pick your site. And now you've got to pick the right grapes. And in our case,
7:46 Speaker 00 the grapes we're trying to pick are the people who work for us. We want to pick people, whether they're cooks, or servers, or bartenders, or matrones. We want to pick people who we believe can thrive in this soil. Because that soil is, that's our culture. And we got to, we got to feed our culture, by the way. You, you got to take care of your soil. You can't just say, okay, that's our culture. See you in 20 years. Culture changes all the time and you've got to keep it healthy. But the next thing you have to do, you got to train those vines. You got to train them so they grow up, so they don't just grow every which way. Next thing you have to do is you've got to prune the grapes that shouldn't be there. If you don't prune some of the grapes on the top,
8:30 Speaker 00 they are going to provide so much shade that the grapes down below aren't going to get the nutrients they need. And furthermore, the ground is going to have to feed so many grapes, it can't do it all. So sometimes there's people we have to fire. In any great culture, you have to do that. If you want the rest of the vine to truly thrive. So now you've got great soil, great grapes, well-trained, you've pruned it, so it's really, really healthy. And the next thing you have to do is pray for good weather, for a good climate. And we have to do that, too. You know, if the economy is horrible, if we get a blizzard or a hurricane, whatever could happen, we have got to make the best wine in that particular vintage. And so it goes.
9:14 Speaker 00 And after doing this year after year after year, vintage after vintage, your business will gain a reputation. I have favorite wineries, and I kind of feel like they don't know how to make a bad wine because they have so much integrity about what they do, that it's always a good wine. I really wish people would say that of our restaurants. And it's really hard, and it's what we strive for. But you've got to be intentional about it. It all starts with which vineyard did you select?
9:45 Shane Parrish? Before we started recording, we were talking about the right idea, the right chef, and the right soil. And I think those things come together nicely there. You've said before, the basis for everything that you do culture-wise is hospitality. And you've said that we were all in the hospitality business. I'm curious as to your definition of hospitality and how you see us all in it.
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10:59 Speaker 00 Yeah, well, I think we all are in the hospitality business because every one of us is going to succeed when our stakeholders are rooting for our success. And it's going to be a whole lot harder to succeed if people are rooting against our success. So, kind of human nature, if you reach out to give me a hug, and I like you, I'm going to probably hug you back. And then we each get a hug out of the deal. That's called hospitality. Hospitality exists when you believe that the person on the other side of the transaction is on your side, when you trust that they're on your side. It really starts with the people you work with. In business, I think that the first people who need to receive hospitality are the people
11:44 Speaker 00 who work in an organization. Because if when you come to work, you feel like your colleagues are on your side, your boss is on your side, the people genuinely want to see you succeed, that's probably going to bring out the best in you. And then you're probably going to do even better things for your customers. And if your customers believe you're on their side, and you do great things for your customers, they're going to probably come back for more because it feels good to do business with you. And the same thing goes for your community. When your community sees that you are doing good things for the community, your community's going to root for your success. And then come your suppliers. Like in my business, we always want to get the best fruit, the best fish, the best vegetables,
12:28 Speaker 00 the best wines, the best prices. Our suppliers are going to take exactly as much interest in us as they believe we're taking in them. And when they know we're on their side, they're going to want to see us succeed. It's it's just human nature. And that leaves us with our investors. And if you've got a staff that is all out to win and you've got customers that are your biggest fans, and they can't wait to come see you do it again, and your community is rooting for you and your suppliers want you to have the best. Do you not believe that you're going to have more leftover for your investors than the next guy? And by the way, if you do have more leftover, also known as profit, those investors are going to probably
13:11 Speaker 00 end up doing even better things for your employees. They're going to want to invest in more of your growth, and every time you grow, people on your team are going to get promotions and raises. And so this is what we call the virtuous cycle of enlightened hospitality. I think you can see where this works in organizations of all stripes. One of my favorite professional moments was being invited to speak to the National Governors Association, which is a bipartisan group, it's all governors. They wanted to talk about the power of hospitality in government. I was nervous because I was going like, what the heck does a restaurant guy have to do talking to these people? And what you learn is that governors run an organization, just like we do in business.
13:56 Speaker 00 They have a staff who works for them, their customers are probably the taxpayer. They have lots and lots and lots of suppliers. They have stakeholders, just like the rest of us, and they need, just like the rest of us, they need their stakeholders rooting for their success. When they deliver the goods, which all starts with how does it feel to work there? How is the, what is the working environment like? If if you have a winning culture at work, I promise you that the voters are going to have a better experience being on the receiving end.
14:28 Shane Parrish? How do you create that winning culture? I'm curious, you sound like somebody's put a lot of thought into the the curation of this culture and how you grow it. And I'm interested in how you grow it internally. And how do you scale hospitality? Like, how do you scale a feeling across thousands of employees?
14:47 Speaker 00 Well, culture is a language. It's almost like culture is the brick, but language is the mortar.
14:55 Speaker 00 And it's a common language that actually drives a culture forward. And you see this in any culture you know. You see it in religions, fraternities, you see it in sports teams, you see it in families, you see it in businesses. And what the language does is, is two things. It clarifies what we intend to do.
15:16 Speaker 04 Hmm hmm.
15:17 Speaker 00 And it creates a sense of belonging because we all know what this means. I mean, I've seen this when our kids were younger and they went to summer camp. There were languages at these camps or languages within the cabins of the camp. And they, it could be language via a song. It could have been language via a chant. And I had no idea what they were doing, but I could see that they felt this bond. Because they knew what that language was. So here, here's something I think I've learned along the way. Early on in my career, I would have people say, our culture doesn't feel the same anymore. I, I would melt. I feel like, oh my God, we're failing. It doesn't feel the same around here anymore. And I finally realized, well, you're damn right.
16:02 Speaker 00 It doesn't feel the same anymore. And the culture isn't the same anymore because culture is not something that wants to be contained or maintained. Culture is like a shark. It's constantly moving or it dies. And if you define culture as the way we do things around here and you're a growing organization, well, of course you have to be doing things differently. You have to do things differently around here. The one thing that must not change is your value system. That's your compass. And north always has to be north and west has to be west and east has to be east. But your culture does have to, have to change. And so the question is, how do we do things around here?
16:46 Speaker 00 Well, I better start off by telling people what our values are because that's what supports our culture, which will change. And I better tell people how we need to behave while we're doing it. That's my job. And I better hire people who say, I want to work in a place where people behave that way. I want to work in a place that has that kind of values. And now I want to work in a place where I can use my heart and my mind to evolve the culture for the purpose that that, that company exists. So now you're, you're asking a really important question, which is, How do you scale culture? And I would say, I may have a job for the rest of my life if that's what I'm working at because it's that hard to do.
17:28 Speaker 00 Now, in our industry, the most successful person at scaling systems was Ray Kroc. Whether or not you eat at McDonald's, you'd have to say that it's for the first time in the world, somebody could get french fries to taste exactly the same way on every continent of the world. That's not easy to do. Well, what we do will never, ever be anywhere close to as large as McDonald's. But I can also bet you that Ray Kroc didn't spend a lot of time thinking about how do you scale a feeling. He was very interested in how do you scale technical systems? We want our french fries, metaphorically, whatever it is we're serving, we want it
18:08 Speaker 00 to taste consistently good, but I'd say, maybe even more importantly for us, we want it to feel consistently amazing. We want the human experience, the human exchange. That's our culture. How we do that has to change because as we grow, it becomes more and more about how did we advance our culture? How did we use our growth to advance our culture? As opposed to how do we worry that our growth is going to prevent us from maintaining our culture? And the way we do that is to make sure that we're very intentional about who the culture carriers are, what are the emotional skills that we need to promote? Because every time someone gets a promotion, the rest of the organization is watching
18:51 Speaker 00 very carefully and asking, so that's who I have to be if I want to get a promotion in this company? That's how I have to behave. That's what kind of values I have to put out there. And every time we get that wrong, we actually set ourselves back many, many fold.
19:08 Shane Parrish? What are those six emotional skills that you hire for?
19:11 Speaker 00 It's going to sound like second grade stuff because it's really obvious, but I'll tell you one thing, I've been doing this for a long time. And every time we take our eye off these six obvious emotional skills, our batting average goes down quite a bit. We want to get a hundred percent employee, just like our employees want us to be a hundred percent boss. Now, no one, I never get a hundred on my test as a boss. I'd be really, really happy to get something in the mid 90s, believe me. If I could have brought home an A minus on my report card, straight A minuses, my parents would have sure been proud. Cause I didn't do that. But the way we ideally get to 100,
19:53 Speaker 00 49 of those points are going to be how well someone does the job they do. How good of a cook are you? If you can make the best bowl of pasta I've ever had in my life, you get 49 points. That leaves 51 points if you want to get 100. And the 51 points are all going to have to do with your HQ, your hospitality quotient, which is the degree to which you are happier yourself when you make someone else feel better. Has nothing to do with how good of a pasta cook you are. Has everything to do with what are your motivations behind the amazing technical skills you have? I need them both. So here's what the six emotional skills that we always see at a very high level
20:37 Speaker 00 when someone's got a high HQ. The first one is optimistic kindness. Now that's, it's kind of a twofer. I can look in someone's eyes and tell you whether they have kind eyes or not. Because they've been using those eyes their entire life to express emotion. You cannot lie in an interview if you don't have kind eyes. Cause I can, I can see that you have not been smiling for a good deal of your life. Um, I can see that you may worry a lot. I can see you may be angry a lot. But I'm looking for kind optimism. And the reason optimism is important. Over and above your being a great cook. I want to know that, that your actions can make the world better, can make me feel better.
21:22 Speaker 00 Uh, skeptics tend not to thrive in the world of hospitality. I think there's a role for people who are good at managing risk, but that's different than approaching a situation from the outset. As that old cartoon character would say, "It'll never work." That's not gonna probably work. So kind optimism, number one. Number two, curiosity. Can't overstate how important it is. I want people on the team who are not a finished product, who look at every day as an opportunity to learn something new. The kind of people who, you know, in Manhattan, even though they walk to work every day, they find us a different block to walk on because they might just learn something new.
22:05 Speaker 00 Tomorrow, they look up at the cornices instead of down at the sidewalk. Or they look across the street as opposed to the same side of the street because they just might learn something new. Intellectual curiosity.
22:17 Speaker 00 Number three, work ethic. I want someone who, in addition to learning how to do the job well, cares deeply about doing that job as well as it can be done. These are people who have a very sensitive excellence reflex. People with an excellence reflex see something that could be better and they fix it. They don't just walk right by because it matters to them. And the fourth emotional skill is empathy, which is a sense that you're able to put yourself in someone else's shoes and ask yourself, "Hey, if that were me, I might want this." And real empathy actually rejects the old golden rule. The old golden rule says, "Do unto others as you would have done unto you." The hospitality golden rules, which is driven by empathy, says,
23:03 Speaker 00 "Do unto others as you believe they would want done unto them." It's a subtle but very important difference if you try to walk in their shoes. Fifth is self-awareness, which is an understanding that we all have different drives and we all feel different every single day. And I I would define self-awareness as understanding my own personal weather report for a given day. Just as the weather is slightly different every single day of our lives, I don't think I've had two exact same weather days in my life. So too is my personal weather report. Some mornings I wake up tired. Some mornings I wake up full of energy. Some mornings I wake up nervous. Some days I wake up
23:49 Speaker 00 like I can go conquer the world. It's important, if you're going to be a member of a team, to know what your own personal weather report is because you will be either raining on other people or shining on other people or creating humidity for other people. And unless you're aware of where you are, you're going to probably be impacting the rest of your team in ways that you did not intend to. And then sixth is integrity, which is having the judgment to do the right thing, even when it may not be in your self-interest and even when no one else is looking and caring about doing the right thing. So now you go, alright, cool, I've got a a pretty tough job in my business trying to find
24:33 Speaker 00 someone who's a really, really good pasta maker. And now you're going to tell me that they made the best pasta in the world and they only get a 49 on their test. And I'm going to say, yep, because in addition to making great pasta, I need that person to be friendly, optimistic, curious, have a great work ethic, have empathy for other people, be very self-aware and have integrity. And you're going to go, good luck. And I'm going to go, that's right. And wait till you see how our cuvée of grapes taste when we make wine out of it. It's going to, it's going to blow your socks off.
25:08 Shane Parrish? What I like about these is like, all of these skills can be learned, but they can't really be taught. They don't show up on paper. How do you, is there key questions that you've learned to ask people that are revealing, especially around sort of work ethic and empathy and curiosity? How do you figure out who has them and who doesn't?
25:26 Speaker 00 Well, let's go back to the first thing you said. I'm not sure they can be learned and I'm not sure they can be taught. I think we can teach people how to identify them in others. I'm sure that we can teach people how to celebrate them when they see them happening. And I actually believe that this is a classic bell curve population. I think that there is a tiny population that has these emotional skills, you know, in such abundance that you could lock them in a closet for 30 years and they would come out whistling Dixie. Tiny population. And I likewise, I think there's a tiny population of people who Don't really care about making other people feel better, ever.
26:09 Speaker 00 The vast majority live in the middle of the bell curve. And when they go to work, they genuinely want to do a good job. They genuinely hope that their work becomes part of a winning team. The thing that can be taught is to be very, very articulate and purposeful about why you are hiring for those skills. I talk about this in an opening interview with someone. We make this part of our performance reviews. And when we see these behaviors come to light in a big way, we celebrate them. And in a way, what that's trying to do is to look at the field of people on our team almost as if they're a field of sunflowers. And they will turn wherever the sun is shining.
26:55 Speaker 00 If you constantly shine your light on those emotional skills, you will, you'll feed the flowers and you'll get much, much more success from a team that genuinely wants to do that. I, I don't know how to measure it. We, we would love to get to that point where we could actually measure HQ. HQ, by the way, hospitality quotient is the term we give to this compendium of six emotional skills. Where for people who have them at a very high level, those are people who tend to be happiest themselves when they're making other people happy via the thing they do. It's really important for me to say this. I know lots and lots of people who don't have a very high HQ. And I can love them a lot and not want to hire them.
27:40 Speaker 00 It just, there's a lot of people who are not primarily motivated by how much better they can make other people feel. But I'll say one thing. In a day and age where we're all in, where what you know how to do can be so easily copied by everybody. I really believe that that 51%, which is how do you make people feel while you're doing it, can truly become the alpha that can differentiate different organizations and teams.
28:06 Shane Parrish? I want to come back to that in just one second because it sounds like there's three things that you can scale. You can sort of scale your product, you can scale your service, and you can scale a feeling. And the feeling is the most tricky, even though product is extremely difficult to have replication all over the world, across different cultures and different continents, and having a similar taste. It sounds like removing people that don't have a high HQ would be a huge component to, how do you identify the people that, oh, we made a mistake with these people and we should move on quickly?
28:39 Speaker 00 Yeah, I'm actually not great at that. I'm trying to get better at it, but the good news is you can tell your culture is working when the frontline people who work with that poor hire, or it may not be a poor hire, it's just somebody who's not working out. The culture tells you pretty quickly and they spit them out. And you can tell just how strong the culture is. Now, as a leader, I try to be, number one, self-aware. One of the things I'm aware about is that I definitely am loyal to people who are trying hard, trying hard to learn. You've got to be careful that you haven't created a cult.
29:19 Speaker 00 A cult can be exclusionary to everybody else who's not the same. That would be horrible in a business. That would absolutely be the kiss of death to have a team of people where everybody believes the same things, behaves the same way, comes from the same backgrounds. One of the things I'm aware about is that I will stick with people longer in belief that they can actually thrive within the culture of enlightened hospitality. And I have seen many, many people come into our company who came from different cultures and they had to learn a new language and not everybody gets it right off the bat. Now, we've learned something that works very, very well. This is born out of my own self-awareness
30:04 Speaker 00 that I have sometimes stuck with people too long. I'm not the quickest to pull the trigger because I believe in people's goodness and I believe in people's capacity to grow. But something that we learned from some friends in the restaurant business, actually, was to create a four quadrant chart. On the X-axis, you would have on the left side, can't. And as the X-axis moved over, it would say can. And then on the Y-axis, at the top, it would say won't. And at the bottom, it would say will. And so you now have four different quadrants.
30:48 Speaker 00 And one is can't and won't. One is can't and will. One is can and won't. And one is can and will. What we did, which was incredibly helpful in terms of, you know, really helping to manage the emotion out of some of these decisions and really take a good look is to assign for every one of those four quadrants, both an action step and a tenure timeframe. So for example, can and will, that's the easiest one there, but it still has an action step, which is celebrate. Because I've met a lot of people who will and can, they've got great attitude and lots of competence.
31:33 Speaker 00 In an organization, there can be a tendency to take them for granted. You've got to celebrate, shine a light, because that's going to pull others over. And the timeframe is forever, okay? Now, if you have someone who can but won't, which is, come on, for someone who's as good as you are at what you do, why are you being such a schmuck while you're doing it? Why will you not do it according to the behaviors we expect of people in this organization? And that's a category that often gets a free pass in a lot of organizations. And they shouldn't be there. I don't care how good you are at something, but we're all really good at making excuses and saying...
32:13 Speaker 00 Oh my God, we can't get rid of Johnny because no one is as good as Johnny is at accounting. And the fact is, you cannot afford to keep Johnny because he is making me look like a fool. Every time he behaves in a way that's contrary to my stated values and behaviors. He is actually making everybody else look at me like I'm full of it. And that's on me at that point. So for, for someone who can and won't, we put the fire under their rear end. And we will do that for probably 90 days. And that's basically saying, it would be a crime for you not to figure out how to behave the right way because you're so damn good at what you do. And by the time you get to 90 days, it'd basically be a conversation that sounded like,
32:59 Speaker 00 this is really hard because you're so good at what you do. But I've just run out of coaching techniques. And I don't have anything more I can give you to help you get to that place. So it's been great, but you're not going to be able to work here anymore. The can't and won't is pretty easy. That should not be more than a 30 day timeframe. That was probably just unsuccessful hire altogether. The can't but will, that's in my opinion, somebody that I'm willing to give, you know, 120 days, I'm, I'm willing to give that person a really, really good shot. Because that's a competence issue and it could be that I've hired the right cultural fit for the wrong job.
33:43 Speaker 00 And maybe this person who's not thriving at shortstop would be amazing in right field. I, I, but I gotta, I gotta try a couple of other things before I'm willing to crumple up that piece of paper and toss it in the trash can. So that one's going to get a ton of coaching, ton of teaching, and a lot more time than some of the others.
34:03 Shane Parrish? I really appreciate you going into depth there. When it comes to the Johnnies of the world, the fact that you used a timeline is really interesting to me. Because when it comes to the Johnnies of the world, I find that the people that tolerate them the most tend to be super short-term oriented people.
34:19 Shane Parrish? Long-term oriented people know that this goes nowhere. It ultimately implodes, it destroys the culture, it falls apart. It's not a win-win, it's not sustainable. Short-term people are like, oh, this will help me make the quarter. This will help me make the month. Totally agree. When it comes to scaling, I was thinking about this because you have a variety of different restaurants that you've created. I can't, I can't really decide if you're a bricklayer, a mason, or both. So hear me out here. You have these smaller restaurants that don't really scale. You couldn't open them in every city or every corner around the block. And then you have something like Shake Shack, which I love, by the way, which is about scaling not only production, but service and feeling across a variety of different cultures, hundreds, if not thousands of locations.
35:01 Shane Parrish? Size tends to move people to treat employees almost like bricks, right? They have a standard shape and size. You have standard processes and a good bricklayer can sort of lay a thousand bricks a day. A mason, on the other hand, with a lot more tools and different experiences, might lay half as much, working with field stones, because they're not shaped the same. They're a regular, they're a bit more of a puzzle. So cutting, shaping, and pairing them is a lot of work. Some organizations tend to build with bricks and some with field stones. It seems like you're almost doing both. If you want repeatable and fast, you tend to use bricks. If you want unique, use a mason. One has employees that are uniform and fit sort of low tolerances for deviations.
35:44 Shane Parrish? And the other allows for more personality and character, allowing people to complement one another. And your spectrum of offerings has me wondering, to what extent you see yourself as a bricklayer or a mason?
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36:53 Speaker 00 No, I love your distinction and I definitely, I'm fascinated by both. And it reminds me of a story, which is that 15 years ago or so, I was approached by a gentleman from Tokyo, whose family business called Wonder Table. They were in the restaurant business, the real estate business, theaters. He wanted to bring one of our restaurants to Tokyo as a license. And we ended up doing something called Union Square Tokyo. It's now called simply U S T. Cause it's not, it's never really been Union Square Cafe. There's only one of them.
37:33 Speaker 00 And this is a company that has multiple units of several of its own restaurants. His name is Taka, Taka-san. I asked Taka-san upfront, why was he so interested in working with us? And his answer, I think, addresses your question a little bit. He said, "We're really trying to learn about hospitality. And it's something that you guys do in America way, way better than we do. But on the other hand, we do service a lot better than you do." He said, "I'm going to make some generalizations here, but when you come to Tokyo," and I've now done it at least three times. He said, "If you look at someone in a department store or an art museum in a certain way, they will bow."
38:17 Speaker 00 Whether or not you want to be bowed to, because that's how we've been taught it's supposed to be done. We are great at regimentation. We will do the same thing, the same way every time, once you teach us how to do that. I bet if you give us one of your recipes, we can cook that recipe at least as well as your cooks can. If you give us a piece of music, we can play that piece of music as well as you've ever heard it before. And he said, but you know, there's a reason that we are very taken by jazz, which is uniquely American. Because what you do better than we do is improvisation, and that's what jazz is.
38:56 Speaker 00 You all agree on a song, but then you give everybody in that band an opportunity for self-expression, also known as a solo, and you never know how it's going to come out. And that solo is often a dialogue with the audience. And so every single performance is slightly different. We don't know how to do that in Japan. And he said, if we do something together, the thing that we want to learn from you is how to improvise, so that we customize the experience for each guest. And the thing maybe you can learn from us is some systems so that you can make your restaurants more consistent.
39:36 Speaker 00 That story is, is an illustration of my answer to you Shane, which is both. I want to always try to do things more consistently well, but I always want to customize the experience for you because the two words "for you" are always present in a true hospitality experience. It's the difference between an off-the-rack suit and a custom suit just made for you. The only way that you can feel like I'm on your side is if I customize it for you because you're different than everybody else in the world. The temperature that you like is different than everybody else's temperature. The lighting is different, the sound is different, the level of salt is different.
40:20 Speaker 00 Everything, the pace of the meal is different. So every single thing we do begins with a pretty regimented, off-the-shelf experience. It better be a damn good one. But now we have to listen with every one of our senses, our eyes, our ears, our hearts, to try to understand, okay. It's standard that the food is going to take this long, but I see that Shane wants it quickly. It's standard that the meat comes with this vegetable, but I see that Shane is allergic to that, the nuts that are in that vegetable, whatever. This is where we want to be masons and bricklayers both.
41:00 Speaker 00 And the thrill, I think, in creating Shake Shack, which was, we didn't have a second Shake Shack for five years, by the way. We had one Shake Shack for the first five years. And, you know, the next 300-plus Shake Shacks have all happened in the 16 intervening years after that, or maybe the 11 years after that. Yeah, I think I got my math wrong. So this notion of laying bricks and being a mason, I like, I actually like the blend of that. And I think that is partially why Shake Shack has succeeded is that it's a fine dining version of a fast food restaurant. I call the category fine casual because I don't know too many situations where you've
41:43 Speaker 00 had a mashup of all these people who started Shake Shack came from restaurants like Union Square Cafe and Gramercy Tavern and the Modern, and they learned systems necessary to scale a business, which is very different than people who come from the quick serve industry, who have those systems down pat, who are then trying to learn how to retrofit philosophies and choices that a full-service restaurant makes in terms of site location, design, hiring, culinary technique, sourcing, community relations, all those kinds of things.
42:22 Shane Parrish? In fairness, that reference between the two, a friend of mine gave me that framework to think about things, and I thought it was an interesting lens to put on top of this conversation. And it almost sounds like you want systems in the backend and then judgment. To apply the Mason sort of quality coming out the front end. So you have this off the shelf offering, which is setting the, you know, that's the table stakes or sort of like setting the bar. And then you apply judgment to that, but that's so dependent on finding the right people, which is why I love your, your sort of way of hiring. I want to come back to something you said there, which is, why did it take so long to open the second Shake Shack? In this world of scale, rapid, go fast, walk me through that.
43:06 Speaker 00 I've shared this story before, but, but it's true that having watched my own father, who was my entrepreneurial role model, experienced two different bankruptcies. One, when I was 10 or 11 years old, and then another one when I was in my twenties. I just always, probably incorrectly, but for whatever reason, I always associated those bankruptcies with expansion. It seemed to me that they happened when he was growing his business. Sometime to other cities, to other countries even. And I just never, ever, ever wanted that to happen. I, I was okay with taking the risk of being an entrepreneur in a way that I almost couldn't contain.
43:51 Speaker 00 I think that, I think I've spoken with enough entrepreneurs to, to really believe this analogy that it's almost like having a mosquito bite and someone telling you, you're not supposed to scratch it. You just, you just don't have a choice. You could try everything possible, but at a certain point, you're going to give in and go crazy on it. And that's how I was with being an entrepreneur, but I, I wanted to take a risk that was safe at the same time. And I believe that if I ever expanded in any way, nevermind doing a second version of something, that it would be the end. And that's why it took me 10 years to open my first second restaurant, which was Gramercy Tavern. And that's, that's definitely why it took five years to open a second Shake Shack.
44:32 Speaker 00 It just was never part of, Shake Shack wasn't born for the purpose of being a multi-unit operation, nevermind a public company, nevermind a global company. But the way I've been able to deal with that, the first thing is that my dad died at a very young age. He was 59. And when he died, I was, I was 32. So from the time I was thirty-two on, I did probably what anyone would have done at that point, and I got myself some therapy, some analysis, and I realized something pretty obvious, I'm not my dad. Point number two, not every business that has grown or scaled has gone bankrupt.
45:15 Speaker 00 So those are two pretty important things to come to terms with. And then I started saying, alright, so it's not predestined that I'm gonna end up like my dad. It's not predestined that scaling equals bankruptcy, and that there's some pretty good principles to put into play to help with that. One is, since it wasn't just growing, what was it that led to those two really, really tough failures? One, biggest one was, he didn't surround himself with enough talent to compensate for his weaknesses, and to support his strengths. He had both. And so I've made an absolute point of understanding both my strengths and my weaknesses, and
45:59 Speaker 00 hiring in a compensatory way, and hopefully making, you know, making a great work environment for really talented people who know how to do things I only wish I could do, but I love learning, I love learning what they know how to do, and I think together we help make each other better. So, that's been a big deal for me, always, and I've learned to trust, I've learned to trust both of those things. I'm not my dad, I got some really good things from him, so the last thing I want to ever do is sell my late dad down the river, but he never met a good idea that he didn't think he could add something to, and I definitely have that. He never met a good plate of food, or a good glass of wine that didn't make him want to
46:44 Speaker 00 take a taste. He never met a good trip that he didn't want to take, somewhere, to go learn about other cultures and about other people. He was a remarkably good writer, and something I strive to do, and I'm not anywhere close to as good as he was. And finally, He was an amazing linguist. He was actually recruited by the Army's Special Language Program in Monterey, out of college, and recruited to be a counterintelligence officer stationed on the border of France and Germany because of his language, his foreign language skills. And I think foreign languages are so important. It's almost to a person what learning to be
47:26 Speaker 00 a scuba diver is for a swimmer. You see a whole new world when you learn someone else's language that you otherwise didn't even know existed. So I just want to be really clear that with all the cautionary lessons that I think I took from my dad, I also took a lot of amazing gifts.
47:45 Shane Parrish? One of the questions I have about restaurants is that if you make it past the first year, which I think is the hardest sort of milestone, there's a lot that survive to six, seven, eight years, and then they fail. Why do restaurants that survive tend to fail?
48:01 Speaker 00 I think restaurant economics have always been challenging, but never more so than probably the last, I don't know, 10 years or so, especially in cities where there are many, many restaurants. There's been downward pressure on your pricing ability, but meanwhile, lots and lots of upward pressure on your prime costs, which are talent, real estate, and your food and beverage product. And those prices just keep going up every single year, but the ability to charge appropriately hasn't. And I think the biggest area that our industry has failed at is to educate the public that we are a people business, and we have been
48:46 Speaker 00 underpaying people for many, many years. We've somehow, in the fine dining world, have taught people to pay up for better quality ingredients. You know, you take Shake Shack even. You cannot compare the prices of Shake Shack to any fast food without smiling, because we've educated the public that all natural beef, i.e. beef raised without growth hormones or antibiotics, with proper animal husbandry, costs a lot more than your run-of-the-mill fast food burger. And people understand that, and they're willing to pay for it. But we haven't succeeded at doing that with people.
49:26 Speaker 00 And as cities, states, and now the entire country move to a higher minimum wage. And then perhaps one day, one wage for everybody as opposed to a second tier for tipped employees, which, which I believe is not going to last forever, can't. You're going to start to see restaurant prices go up as they should because we cannot be an industry that is really good at giving people their first job and really bad at promoting people to a job that pays a fair living wage. We just cannot be that industry. We do too much good for so many communities.
50:10 Speaker 00 We have to make it so that to be a sustainable industry, we're doing good things for the whole economy. And I think that what COVID exposed in our industry was that we were like that elderly patient with pre-existing conditions that probably would have died pretty soon anyway. And all it took was COVID to just to knock us out. And you'll see that when this industry does come back, it's going to come back different. And for the for keeps, I really believe that. I think that it's going to be a more diverse community of workers. I think workers will be paid better.
50:49 Speaker 00 And I think that the public is going to understand that the true cost of dining out includes doing the right thing for people, not just for animals and not just for plants.
51:00 Shane Parrish? I like that a lot. I like the idea, like, if you're working in the community, you should also be able to live in the community in which you work. And so often the case in large cities anyway is that police, teachers, people who work in restaurants, they're all getting priced out of the communities that they serve. And I think that that that doesn't create a long term win win for anybody.
51:23 Speaker 00 You're so right.
51:24 Shane Parrish? You call mistakes the greatest renewable resource on earth. I'm curious as to how we better learn from our mistakes. And I think you have sort of the five A's of making mistakes, if I remember correctly.
51:36 Speaker 00 Yeah, well, the reason I call it the greatest renewable resource on earth is that as a human being, we were obviously programmed to just make mistakes all day long. I made about five mistakes just trying to get on this podcast with you. And the question is, alright, you know, since we make so many mistakes, what are we gonna do with them? And assuming they're honest mistakes, uh, that don't lack integrity, how do you end up in a better spot for having made a mistake and addressed it really well than if you had never made the mistake in the first place? That's what I want to try to figure out. In other words, if, if human mistakes are like waves in the ocean, you, there's always another one, you just don't know how big it's gonna be or what the timing is gonna be.
52:21 Speaker 00 How do you use that for good? How do you use that match, that recurring resource for good? And so we came up with what we call the five A's of mistake making as a way to teach our team members. The first thing is, don't be ashamed you made a mistake. Uh, I'm talking about honest mistakes now. If, if you made a mistake that lacked integrity, you should not have a job with us. So I'm leaving those aside, but believe me, there's plenty of honest waves in the ocean, plenty, and they just, they don't stop. So the five A's of mistake making are, be aware, that's the first one. If you're not aware, you're nowhere. I've made many, many mistakes that I didn't even know I made,
53:03 Speaker 00 and the person on whom I made the mistake might have been carrying around a bad feeling for years. I mean, I've, I've walked by tables in our dining room and inadvertently knocked into someone's menu that then knocked into their champagne glass that then spilled on their lap and didn't even know I had done it. I was unaware I had done it until a waiter sheepishly came up to me to say, uh, Danny, you just, you just spilled on table forty-four. So, first thing, be aware. Number two, acknowledge it. Number three, apologize for it. You wouldn't believe how many people, when they make a mistake, they try to hide, they try to run, they deny, they blame someone else. No, that's just not how you do it. So, fourth,
53:48 Speaker 00 act on it. In other words, fix it. And number five, apply additional generosity. So ask yourself, if someone had just spilled champagne on me,
54:01 Speaker 00 What would I want them to do for me besides apologize and acknowledge it?
54:08 Speaker 00 Okay, now the obvious thing is pay for my dry cleaning, get me some club soda, offer me a new glass of champagne. I want you to do something additional on top of that. I want you to, I want you to believe that this mistake is something that the person you did it to is going to tell the whole world. Hey, how was dinner at Union Square Cafe? It was good, but you know what happened? Danny Meyer spilled champagne all over me. They're going to tell everybody. So now I want the outcome of these five A's to lead to what I call writing a great next chapter. Cause when they tell the whole world that story about what Danny Meyer did to them, I want them to say, but do you know how he handled it? And if you do that, you have now
54:51 Speaker 00 put that mistake. You've turned that mistake into additional energy that is going to actually propel your business because of how well you took a negative and turned it into a positive.
55:03 Shane Parrish? I tell my kids that all the time. It's not the mistake that sort of does you in, it's how you handle it at the end. And I like how you specifically ruled out integrity and you said mistakes of integrity are a different beast. I have a friend who has a saying which is forgive everything but malicious intent. And I feel like that's a really good way to live life. Danny, I want to thank you so much for your time today. This conversation's been amazing.
55:28 Speaker 00 Well, I've enjoyed being with you Shane and thanks for sharing me with your listeners.
55:33 Shane Parrish? Can we get a Shake Shack in Ottawa, by the way?
55:38 Shane Parrish? Hey, one more thing before we say goodbye. The Knowledge Project is produced by the team at Farnham Street. I want to make this the best podcast you listen to and I'd love to get your feedback. If you have comments, ideas for future shows or topics, or just feedback in general, you can email me at ShaneFS.blogspot or follow me on Twitter at Shane A. Parrish. You can learn more about the show and find past episodes at FS.blogspot/podcast. If you want a transcript of this episode, go to FS.blogspot/Tribe and join our learning community. If you found this episode valuable, share it online with the hashtag The Knowledge Project or leave a review. Until the next episode.
56:32 Shane Parrish? Danny, can you briefly tell us how it is that you came to be what you call a restaurant generalist?
56:42 Speaker 00 Oh, I'm so sorry. If you reach out to give me a hug, and I like you, I'm gonna probably hug you back. And then we each get a hug out of it.
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