Shake Shack: Danny Meyer

Back in 2001, as part of an initiative to revitalize Madison Square Park, Danny Meyer set up a simple hot dog cart. At that time, he had been a leader in New York City's fine dining scene for years, and the hot dog cart was just a side project, something fun to do for the summer. But that one temporary hot dog cart led to Shake Shack, a fast casual restaurant chain known for its burgers, its namesake milkshakes, and its lines out the door. Today, Shake Shack is a publicly traded company with over 250 locations in 15 countries. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 0:45Guy Raz?

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• 1:30Guy Raz?

  based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2:00 AM kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one Hard question. How do we make sure AI goes well for people?

• 2:14Guy Raz?

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• 2:54Guy Raz?

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• 4:21Guy Raz?

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• 5:06Guy Raz?

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• 5:26Guy Raz?

  Hello, Danny.

• 5:28Speaker 01

  Hi.

• 5:28Guy Raz?

  Hi, it's Guy here. How are you doing?

• 5:31Speaker 01

  Oh, it's good to hear your voice.

• 5:32Guy Raz?

  You too.

• 5:33Speaker 01

  I think my conversation with you was probably one of the last conversations I had.

• 5:38Guy Raz?

  Yeah.

• 5:38Speaker 01

  Was that a Thursday or a Wednesday?

• 5:42Guy Raz?

  It's a Thursday.

• 5:43Speaker 01

  Well, that was the day. That was the day we made our decision that night.

• 5:47Guy Raz?

  Where are you right now?

• 5:48Speaker 01

  So I'm up in northwestern Connecticut, where I've been since March 13.

• 5:53Guy Raz?

  Have you been inside the whole time, pretty much?

• 5:56Speaker 01

  Yeah, yeah, yeah. In fact, we have four kids, all of whom are somewhere between 20 and 26. And we have conversations every single day. You know, I'm 62 years old, so I'm in the category that should probably play it safer.

• 6:16Guy Raz?

  Danny, as you mentioned, we did this conversation. This is the last conversation we did in the studio before we were all kind of sheltered in place. Let's listen to it because the story is the same. I mean, how you built this incredible company still stands. So let's listen to it and then at the end, kind of come back and just get an update on what's going on now. Is that OK?

• 6:36Speaker 01

  OK. Let's cut right to the chase. This is one of the greatest pieces of advice I got from my late grandfather, Irving Harris. He said, you know, stop complaining about problems. He said, problems is the definition of business.

• 6:54Guy Raz?

  Yep.

• 6:55Speaker 01

  The people who do best in business aren't the ones with the least problems. They're the people who solve their problems better and have more fun doing it with better people.

• 7:08Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 7:22Guy Raz?

  I'm Guy Raz, 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.

• 7:42Guy Raz?

  A few years ago, I interviewed Tony Hsieh, the founder of Zappos, on the show. Zappos 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

• 8:27Guy Raz?

  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

• 9:12Guy Raz?

  team at Union Square Hospitality Group to figure out what to do next. 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.

• 9:52Guy Raz?

  In fact, after college, Danny floated around a bit before he decided to apply to law school.

• 9:59Speaker 01

  I was never interested in the law, but I didn't know what else to do. And the true story is that the eve of taking my LSATs, I was out to dinner with my aunt and uncle and my grandmother here in New York. And my uncle said, I don't know what's bugging you tonight. And I said, well, I have to take my LSATs 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 going to 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 going to be alive.

• 10:44Speaker 01

  Why in the world would you do something you don't want to do? And I said, because 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,

• 11:29Speaker 01

  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, he said, no son of mine is going into that awful business. So my pal dropped out, felt terrible about leaving me in the lurch. And he said, I feel so bad that I want to introduce you. Our bank, US Trust, has exactly one restaurant client. And this was an Italian seafood restaurant. And the restaurant was called Pesca. And my interview.

• 12:16Speaker 01

  Consisted of the owner asking me to walk back and forth a couple of 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.

• 12:33Guy Raz?

  It was an interview to do what?

• 12:35Speaker 01

  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.

• 12:52Guy Raz?

  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. Was that?

• 13:07Speaker 01

  Absolutely.

• 13:08Guy Raz?

  Okay. So this was a very strategic decision that you were making already, thinking, I've got to learn this.

• 13:12Speaker 01

  Completely strategic. And I told my parents that I was going to try this.

• 13:17Guy Raz?

  And?

• 13:18Speaker 01

  The way that I could get them to sort of take it seriously was not to say I was going to be a restaurateur, but to say I was thinking about becoming a chef.

• 13:27Guy Raz?

  Huh.

• 13:28Speaker 01

  And my plan was, let me do, you know, a year or so at Pesca to see if I like it. And then after that, the plan was that I was going to go cook in Italy and in France. And my dad agreed to connect me with one or two of his friends. So he connected me with a restaurateur in France, and I got to work there. I got to live with the chef and

• 13:56Guy Raz?

  Wow.

• 13:57Speaker 01

  Go to the market every morning and work in two of this guy's restaurants. I took cooking classes from 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 can, I couldn't get it out of my system. 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.

• 14:33Guy Raz?

  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. You've got some savings. And this is the mid 80s in New York, a very different New York than it is today. Big parts of New York, I think people don't realize this, were comparatively affordable to today. Like, you could take, like, a normal person could take a lease on a building.

• 14:59Speaker 01

  As a matter of fact, the place that I bought, what I did was, I just started walking. That's all I did for January of 1985 was walk. But I was walking everywhere. I was walking 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 Meatpacking District. And nobody was there back then. I got to know Union Square. Nobody was there. And finally, I walked into a, what I would come to learn, was a 49-year-old beloved vegetarian restaurant called Brownies, the first vegetarian restaurant in New York City. And I just introduced myself. And I said, could I meet the owner?

• 15:44Speaker 01

  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?

• 15:52Guy Raz?

  Yeah, there was no, there was no sign out, said for lease. There was nothing.

• 15:56Speaker 01

  No.

• 15:56Guy Raz?

  You just liked the spot?

• 15:58Speaker 01

  Yes, I liked 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.

• 16:13Guy Raz?

  So basically, I guess it turned out that you were able to purchase this restaurant you found because luckily, the owner was wanting to retire. And the deal, you took over the lease on that space, which you had, what, 14 years left on, I read?

• 16:28Speaker 01

  Correct, correct.

• 16:29Guy Raz?

  Now, I think about this. You're like, what, 27 years old? I mean, 14 years must have felt like a really long lease. I mean, weren't you scared of making a commitment to a lease for 14 years?

• 16:40Speaker 01

  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. And it just, 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 going to spend all the money that I had. And I was also confident that I had nothing to lose because 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.

• 17:21Guy Raz?

  And do you remember what the, what the lease was going to cost you?

• 17:26Speaker 01

  $240,000.

• 17:28Guy Raz?

  For the 14 years?

• 17:29Speaker 01

  For the 14 years, and then I spent $500,000 building it. And that was it.

• 17:36Guy Raz?

  That's actually, to put this in perspective, that's an insane bargain, certainly by today's standards.

• 17:42Speaker 01

  Well, today, I don't think I could build a, you know, a restaurant for that amount of money.

• 17:46Guy Raz?

  A parking lot, stop. You couldn't build a, you can get a parking spot for that today in New York. You got a 14-year lease for $240,000, and then you put in $500,000 to build out the restaurant.

• 17:58Speaker 01

  Yeah.

• 17:59Guy Raz?

  Presumably, you had to ask people for, to help you out, right? You couldn't do this with all your savings.

• 18:02Speaker 01

  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 outs back at that point, which, which is really sad, but I also think that he felt somewhat threatened by it. And to my mom's credit, my aunt's credit, my uncle's credit, we all structured this as a loan, which was great because they then put me in a position where I could actually own all the equity after I paid off all the loans. So it was a, it was a good deal.

• 18:39Guy Raz?

  All right. So you borrow this money to build it out, but like, you got to find a chef and a staff. And like, what did you, how did you start to do that?

• 18:46Speaker 01

  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, cooking, but you learn a lot. And so when I-

• 18:59Guy Raz?

  Where would you advertise, just like in the classifieds?

• 19:01Speaker 01

  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 l'Academy du Vin in New York. And there was 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. 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.

• 19:39Speaker 01

  The New York Times has just hired me to become the journalist responsible for a column called Diners Journal. I wrote him back and I said, guess what? I've got really good news. I'm going to 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 Sarrazin, who knew every chef and sous chef at all the French restaurants in New York.

• 20:22Speaker 01

  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 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. I hired them to be sous chefs.

• 20:43Guy Raz?

  By the way, where were you doing this? What kitchen were you using?

• 20:46Speaker 01

  We were using the kitchen in my apartment on the Upper East Side at that time.

• 20:51Guy Raz?

  So you started to kind of piece together a team. But you were kind of collecting names and meeting people who you knew, I guess, down the road could help you build this restaurant. Is that, is that right?

• 21:03Speaker 01

  You're, you're absolutely right. And.

• 21:07Speaker 01

  I had a vision for what I wanted to do, and it was a weird vision. The vision was to open 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. You 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.

• 21:49Guy Raz?

  And so you, so you basically said, all right, we're gonna make this restaurant. It's gonna be this sort of, you know, high-end food, but not a high-end feel.

• 21:57Speaker 01

  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 want to hire you.

• 22:09Guy Raz?

  Why?

• 22:10Speaker 01

  I was looking for, because I didn't think of New York as being a very friendly place back then. I wanted a place that, that was welcoming. And basically, that's, that was the gift I got from growing up in St. Louis. And I did like going out to eat in St. Louis, but much more for the hospitality, it turns out, than for the food.

• 22:29Guy Raz?

  When, when did you open in, in 1985? It must have taken a, a while, right?

• 22:34Speaker 01

  Yeah, we opened, I'll, I'll never forget, the first day of construction was Memorial Day weekend of 1985, and, and then we opened October 21 of 1985. And 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.

• 23:00Guy Raz?

  Wow.

• 23:00Speaker 01

  And the next thing that happened was, we got our first review from the New York Times, and it was Brian Miller.

• 23:06Guy Raz?

  It was Brian Miller, your old friend that you met in that wine class.

• 23:10Speaker 01

  Yeah. And I was so nervous, leading up to this point, because he and I had stopped talking to each other, because we couldn't.

• 23:17Guy Raz?

  Yeah.

• 23:18Speaker 01

  But we ended up getting a really, really good two-star review. 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. And that two-star review that we got, I think it tripled our business overnight.

• 23:45Guy Raz?

  Wow. And you were always there in the restaurant, every day?

• 23:49Speaker 01

  Always.

• 23:49Guy Raz?

  And did you ever cook in the kitchen?

• 23:53Speaker 01

  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. Because as far as I was concerned, the restaurant was not going to be busy on the Friday night after Thanksgiving. And so I had my Brooks Brothers suit and red tie on with a white shirt, and 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.

• 24:37Speaker 01

  We were so far behind. So I threw on kitchen whites over my suit. 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.

• 25:05Guy Raz?

  Oh, man.

• 25:06Speaker 01

  I go out into the dining room. And true 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 pushed him out the door. And lo and behold, what I didn't know is that the restaurant critic of the Daily News

• 25:50Speaker 01

  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 things transpired that made me wonder.

• 26:06Guy Raz?

  Danny, did you, as Union Square Cafe really grew in prominence through the 80s, what did your dad think about it? I mean, you know, 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 he must have been proud of you. But I mean, did he?

• 26:25Speaker 01

  Well, he was, but unfortunately, I didn't learn that really until after he died. He died in 1990. 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 I tell my own kids in their real life.

• 26:43Guy Raz?

  Because you didn't know.

• 26:44Speaker 01

  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.

• 27:02Guy Raz?

  Sure.

• 27:03Speaker 01

  10 years after opening Union Square Cafe, when I finally had the courage to open a second restaurant, so that was in 1994. But a big part of what I had to prove was that I was not an imposter, 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. And so that led to Gramercy Tavern. And Gramercy Tavern ended up working out. Not immediately, but it worked out pretty well. And then what was kind of fascinating was that for many, many years, Union Square Cafe

• 27:48Speaker 01

  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. And I realized there was something that was working at that point.

• 28:04Guy Raz?

  I read that when shortly after Gramercy Tavern opened in 94, Union Square Cafe went down to like number three in the Zagat rating from two. And you were kind of kicking yourself, thinking, oh, this was a mistake. I can't do both things really well. I can only do one thing really well. And now I'm like, I'm taking my eye off the ball at Union Square Cafe. And was that, were you, did you have anxiety about that?

• 28:28Speaker 01

  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. I think service 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 while you're doing it?

• 29:10Guy Raz?

  How do you train 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's not that simple, right?

• 29:28Speaker 01

  Right. And 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.

• 29:49Guy Raz?

  Yep.

• 29:50Speaker 01

  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 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, we're all solving problems all day. And the question is, who do you want to be solving those problems with? Who's-- it's kind of like if you were a tennis player, who do you want to have a beer with after you're done playing doubles?

• 30:19Guy Raz?

  Yeah.

• 30:20Speaker 01

  Right? And so I was able to identify in 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.

• 30:39Guy Raz?

  What are they?

• 30:40Speaker 01

  It's kind optimism.

• 30:41Guy Raz?

  Yeah.

• 30:42Speaker 01

  It's curious intelligence.

• 30:44Guy Raz?

  Yeah.

• 30:45Speaker 01

  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 that 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.

• 31:19Guy Raz?

  When 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 in 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.

• 31:57Guy Raz?

  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 11 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.

• 32:26Speaker 01

  Here's how this story goes. So I sat down to negotiate this lease with the company that owned the beautiful 11 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 1898.

• 32:49Guy Raz?

  Yeah.

• 32:49Speaker 01

  So we together created something called the Campaign for the New Madison Square Park. And we raised money. We raised $11 million. And fast forward several years, we engaged the Public Art Fund, a wonderful organization in New York City, to help us bring art to the park. And there was an artist from Thailand, and his idea was to have four taxicabs on stilts with a working hot dog cart to go with it. And he needed someone to operate the hot dog cart. And so I said, well, of course, we'll be glad to do it. And all of my colleagues at 11 Madison Park and Tbla, our Indian restaurant, which was

• 33:31Speaker 01

  right next door, 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.

• 33:39Guy Raz?

  That's what you wanted to do, Chicago-style hot dogs?

• 33:42Speaker 01

  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 at 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, because everybody, for almost everybody, there's like one of those eight toppings you don't like.

• 34:09Guy Raz?

  You don't want, right?

• 34:11Speaker 01

  Yeah. I don't like mustard, or I don't like... Neon relish or sport peppers.

• 34:15Guy Raz?

  You like the sport peppers. You gotta like the sport peppers.

• 34:17Speaker 01

  I love the sport peppers. Love them.

• 34:18Guy Raz?

  Tomatoes, gotta go for the tomatoes.

• 34:20Speaker 01

  I'm okay with the tomatoes.

• 34:22Guy Raz?

  Celery salt, you gotta have the celery salt.

• 34:24Speaker 01

  You're showing off now, you got them. So, so anyway, we hired our out of season coat 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 11 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 100 people in line every single day that summer.

• 34:59Guy Raz?

  And this was, as far as I understand, this is a nonprofit, right? This is not a for-profit, I don't understand.

• 35:05Speaker 01

  Well, what we had done was to offer to give all of our profits back to the Madison Square Park Conservancy.

• 35:12Guy Raz?

  Got it.

• 35:13Speaker 01

  And it was pretty easy because we lost about 5,000 bucks that first year. And then 9/11 happens and the city was really not only in an economic depression, but also an emotional depression. And so the following summer, 2002, 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?

• 35:36Guy Raz?

  Oh, wow.

• 35:37Speaker 01

  And serve us, because it feels good. So we did that.

• 35:39Guy Raz?

  It was a one-off that you didn't intend to return to, but you nicked it.

• 35:43Speaker 01

  Correct. So we, we did it again in, in 2002. Then we did it the third year, 2003. And that year, we made 7,000 bucks, 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?

• 36:29Speaker 01

  And could it potentially create a revenue source for the park?

• 36:33Guy Raz?

  This is going to be a standalone building in Madison Square Park that you would build or that you would give to the city?

• 36:41Speaker 01

  It turned out that we had it built modularly somewhere in New Jersey. And so you woke up one morning in 2004, 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.

• 36:56Guy Raz?

  Wow. And this was going to be a hot dog stand? Or did you just say, let's make this something different?

• 37:02Speaker 01

  Yeah, so I said, we've got to 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 95% what we serve at Shake Shack to this day. And it was basically just going into my own memory bank from growing up in St. 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 16, the whole point was to get out of the house and be with your friends. And 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... People don't have cars. Kids don't have cars. So there's not that culture. But we do have parks.

• 37:46Speaker 01

  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, and 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.

• 38:07Guy Raz?

  Yeah.

• 38:08Speaker 01

  And that became Shake Shack. But what I didn't know was that Shake Shack would work as well as it did work.

• 38:15Guy Raz?

  What I think a lot of people, you know, when we think about Shake Shack now, 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've always been regional, great regional burger chains. But when Shake Shack opened, like, 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. But did you expect that? Did you expect it to be just...

• 38:44Speaker 01

  No.

• 38:46Guy Raz?

  What explained it? Well, how did you explain it to yourself?

• 38:48Speaker 01

  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. Meet up 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 crowd adopted Shake 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 going to be a place that kind of forced you to just slow down a little bit

• 39:32Speaker 01

  and to, and to be with people.

• 39:34Guy Raz?

  Here's what's amazing, because I mean Shake Shack was in New York for like five and a half years and people were literally like getting off of the flights or at the 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 kind of slow fast food.

• 40:03Speaker 01

  I call it fine casual.

• 40:04Guy Raz?

  Fine casual, right? Were you thinking, "I don't know if we can really expand this out"?

• 40:09Speaker 01

  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 11 Madison Park or the Modern. You know, 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.

• 40:35Guy Raz?

  Why, why not?

• 40:36Speaker 01

  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.

• 40:44Guy Raz?

  Yeah.

• 40:44Speaker 01

  And so this was a fascinating moment because... We knew that we needed to learn some of the systems that 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 30s. And he wanted to run Shake Shack. Cornell grad, named Randy Garudy. Randy lives on the Upper West Side, and he kept passing this space, and he kept bugging me and saying, can we please do a second Shake Shack? He said, what's the biggest complaint we get at Shake Shack?

• 41:27Speaker 01

  And I said, 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 opened on the Upper West Side, 77th and Columbus, five years, 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 opened on the Upper East Side, and then we opened at Citi Field with the Mets with their brand-new ballpark. Then we opened in the Theater District. And every single time we opened one, we'd have the lines. And, you know, it just was kind of blowing our minds, and we're trying to figure out, what do we have here?

• 42:12Speaker 01

  We've got to figure this out.

• 42:13Guy Raz?

  Was it, was it a challenge for your team to adapt once Shake Shack started to take off? Because, I mean, I mean, by this point, you had gotten really good at running these higher-end restaurants, right? But, I mean, Shake Shack is a totally different business model. It's, it's a burger joint, right? There's, there's counter service, you're cooking burgers and fries and making shakes. So, so, I mean, you don't have to buy foie gras and have a fancy wine list or do all those other things that, you know, that make 11 Madison Park work as a restaurant, right?

• 42:40Speaker 01

  That's true. There's about 70% 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 maître d', or a reservationist, or a florist, or a 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.

• 43:12Guy Raz?

  Yeah.

• 43:13Speaker 01

  And the old rule of two that we all grew up hearing about, whether it's construction or 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?

• 43:28Guy Raz?

  Yep.

• 43:28Speaker 01

  That's the rule of two.

• 43:30Guy Raz?

  Yep.

• 43:31Speaker 01

  And so, fast food always told us, you can have it cheap and you can have it fast, but obviously, your beef is not going to be antibiotic and growth hormone free and blah, blah, blah. So, we realized we were actually on to something by accident, which was, it's still the 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.

• 44:07Guy Raz?

  Yeah.

• 44:07Speaker 01

  And the quality of what you put in your mouth was just as good because it's the exact same butcher that we use at Union Square Cafe, Pat LaFrida. And you're going to have to come up and get your own food when your buzzer goes off. We're not going to 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, .65 plus .65 plus .70 equals two. And that was new.

• 44:37Guy Raz?

  Were you surprised? I'm just going to fast forward here for a moment because today, I think there are more than 250 Shake Shacks around the world. And I read that the average revenue of a Shake Shack location is like $4 million, which is really, I mean, that's doing very well when you compare that to your competitors. But were you surprised back then in 2010, 2011, how Shake Shacks were performing in comparison to your fine dining restaurants?

• 45:05Speaker 01

  Yes, yes. They were grossing, today, they're grossing on average a little bit more than $4 million per shack. There's 278 of them in the world. And if somebody had told me that we'd be in 14 countries in addition to the United States with 278 of these, and this is 16 years after we opened our first one, and yet... It's only 11 years after we opened our second one. You know, we didn't create burgers in the first place. And so you ask yourself, well, what is it that makes people love it so much? And again, I come back to hospitality. And I believe that if, that there's a lot of restaurants that exist to create something you've never thought of or heard of in your life.

• 45:50Speaker 01

  There's a lot of really, really imaginative chefs who, you know, you could give a duck to 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 people are nice to you.

• 46:08Guy Raz?

  You know, there are parallels. We interviewed Steve Ells a couple of years ago on the show. He founded Chipotle. And his dream, well, he worked at Stars in 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. There's a similarity here, right?

• 46:35Speaker 01

  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 I think he deserves a hell of a lot of credit for that.

• 46:58Guy Raz?

  What, what was it about? I mean, you say you were surprised when you started to see these numbers. Were you sort of saying to yourself, how did I not see this until this point?

• 47:07Speaker 01

  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, 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.

• 47:36Guy Raz?

  So at a certain point, it became clear that Shake Shack, you need to spin this out and make it its own business away from the Union Square Hospitality Group. Was that just a clear direction? Was it just the obvious place to go?

• 47:50Speaker 01

  Yes. It was a horse that wanted to run and it would have been irresponsible to choke it at that point. We really, we let the reins out and we had the right leadership team. We had a bunch of people who were at the point in their career where they said, I may have started at the Modern or Gramercy 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 the chairman of the board, but I don't run the business.

• 48:22Guy Raz?

  Right.

• 48:23Speaker 01

  And I'm proud that the culture is, if anything, stronger than ever right now.

• 48:29Guy Raz?

  You have had, I want to make it clear that you have had significant failures along the way, because if it's just success, you're not interesting. I'm just being honest. Success to success is boring. And you've had to close restaurants down.

• 48:43Speaker 01

  Yes.

• 48:44Guy Raz?

  Particularly Tableau. Tableau was like one of the juggles in your crown. It was an Indian restaurant, high end, beautiful space. 2010, after years of losses, you very reluctantly had to shut this place down. And I guess your team kind of had to push you to do this. They had to say, Danny, we've got to shut this down.

• 49:02Speaker 01

  Yeah. You know, I think that I had a really bad relationship with the notion of failure. And it took me a long time to realize that not every restaurant is going to 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 keep people on the team just because they were so loyal. And they were not getting raises and they were not getting promotions,

• 49:47Speaker 01

  which just isn't right. And everybody got a job somewhere else. We held job fairs for them. And we went through the same thing a couple of years ago with a restaurant called North End Grill.

• 49:57Guy Raz?

  Yeah.

• 49:58Speaker 01

  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 goal is to actually not feel that bad. With Martina, what I tried to do was to learn how to fail faster and not hang in longer than I should have.

• 50:22Guy Raz?

  Yeah. Do you, when you think about all that has happened to you, I mean, you opened this restaurant in 85, did really well. You opened a second one, did really well. And then Shake Shack was just exponential. It's a publicly traded company. It does $600 million in annual revenue. It's a huge growing business. Do you think that all this happened because of your talent and your hard work? Or do you think a lot of it really had just to do with being lucky?

• 50:49Speaker 01

  I would say 80% luck and 20% work ethic.

• 50:55Guy Raz?

  Any other thoughts on that?

• 50:57Speaker 01

  Nope.

• 50:59Guy Raz?

  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 want to 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 to talk to him about the very big challenges that he and all restaurants are facing going forward. All right. So Danny, as I mentioned at the beginning, as our listeners, I think, know, we recorded this right before pandemic shut everybody in and we were still uncertain what was going to happen. You really were the first major restaurateur to decide to

• 51:43Guy Raz?

  shut down all of your restaurants immediately and you had to let go, I think, thousands of people. Tell me, how did you guys come to that decision? I mean, I'm sure it was agonizing. Walk me through what happened.

• 51:55Speaker 01

  Yeah, the every day has been agonizing. Every day for the last 11 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 had no idea how long this was going to last. As a matter of fact, when you and I last spoke, it was the first day of spring break for our kids and college, et cetera. And we were pretty sure that they might go back to school. We weren't, you know, we just didn't know how long this was going to be. And I think there was a really pivotal day in very early April where one

• 52:36Speaker 01

  of our former colleagues, a beloved chef by the name of Floyd Cardo's passed away from COVID. And it was about then, or even maybe right before that, that I said, look, as much as we want to pay all these employees of ours, we can't. We're going to, we're going to 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 shifted into this whole mindset of, okay, if we cannot be good employers right now, how can we possibly recast ourselves as being really good unemployed? And we

• 53:18Speaker 01

  started making a whole host of decisions. The first one was pretty easy for me and that was that we would Set up an employee relief fund. 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 we would create a whole range of resources for our, our laid

• 53:58Speaker 01

  off team members. And um, it 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.

• 54:13Guy Raz?

  Yeah.

• 54:14Speaker 01

  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's not at all connected to business strategy. It's, it's only connected to people and how they're feeling.

• 54:29Guy Raz?

  Danny, are you able to open up most Shake Shack locations, at least for takeout?

• 54:34Speaker 01

  Shake Shack from the outset stayed in business in most of its locations, but immediately pivoted to a strictly curbside pickup and/or delivery mode.

• 54:47Guy Raz?

  Right.

• 54:47Speaker 01

  And it's only been very, very recently that a small handful of them have returned to welcoming guests inside the restaurant.

• 54:55Guy Raz?

  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 Shake Shack raised a lot of money from investors and I think in April and, and it sounds like Shake Shack will be okay, that it will have enough cash to weather out the storm.

• 55:16Speaker 01

  Yes, that is true. I don't find it awkward at all to talk about. I think that um, Like every restaurant company, the bottom dropped out at the end of March and the beginning of April. And the opportunity, because of the drop in the stock price at that point, to buy a piece of the company at a price that everybody certainly hoped would represent an outstanding value was there. And 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 going to need more than ever right now.

• 56:01Guy Raz?

  Yeah.

• 56:01Speaker 01

  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, which did not exist before this. But you won't be able to do any of that if you haven't been able to raise funds to do that with.

• 56:21Guy Raz?

  I want to ask you about optics. This is a really challenging time, obviously, for business. And of course, there was this moment, I think, earlier on, when Shake Shack came under some criticism because you'd accepted or applied for a loan from the government and then returned it. And people criticized it. They were like, why does this restaurant group need the money when small business needs the money? Were you surprised at the reaction?

• 56:48Speaker 01

  I was surprised at the reaction for about 10 minutes, and then I completely understood it.

• 56:54Guy Raz?

  Yeah.

• 56:55Speaker 01

  Shake Shack, obviously, would not have applied for the loan if it didn't perceive a need. And the 10 minutes of surprise were also connected to another big surprise, which is the day that Shake Shack made it public that it had applied for and received the loan, was within 24 hours of the government announcing that it had run out of money for this whole program.

• 57:18Guy Raz?

  Right.

• 57:19Speaker 01

  That's when I said, well, of course, of course, there's outrage right now. I look back, and I'm incredibly proud that, you know, within 36 hours of understanding the government had run out of money, the company 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.

• 58:02Speaker 01

  And so it became a very simple decision to return the funds at that point.

• 58:07Guy Raz?

  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. I mean, do, or do you?

• 58:25Speaker 01

  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 wood burning from the fireplace and, and see 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. And yet, if you walk by Gramercy Tavern today, you see a window papered with a big mural that says, "We miss you." And then about 800 things we miss. And I just,

• 59:05Speaker 01

  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 going to be. And, and when they do, if the law says that the only way to do it is for Gramercy Tavern to be at 50% 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 80% 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.

• 59:48Speaker 01

  And then you go, and as a steward of my business, I have an obligation to stop losing money because we've had 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 turned to this 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's just, it's true in good times, and it's certainly true when you don't know where you're going.

• 1:00:25Guy Raz?

  An update from Danny Meyer, founder of Union Square Hospitality Group and Shake Shack. Thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. You can also write to us at [email protected]. And if you want to tweet at us, it's at How I Built This or at Guy Raz. Our show was produced this week by Casey Herman, with music composed by Ramtin Arablouei. Thanks also to Julia Carney, Candace Lim, Sarah Sarason, Eva Grant, and Jeff Rogers. I'm Guy Raz, and you've been listening to How I Built This.