Next time you get ready to inhale a ShackBurger at Shake Shack, the American fast-food chain with restaurants across the U.S. and internationally in countries like China and Qatar, remember this. Founder Danny Meyer’s Shake Shack meal of choice is a plain cheeseburger, fries and a coffee milkshake. His all-time favorite meal anywhere? Sausage and mushroom pizza.
A foodie since he was a boy, Meyer launched his career as a restaurateur in 1985 at age 27, building an upscale, fine-dining empire with top New York City restaurants like Union Square Café and Gramercy Tavern. He is currently executive chairman of the Union Square Hospitality Group, which owns several restaurants.
Along the way, Meyer decided to bring his special brand of hospitality to the fast-food industry, launching Shake Shack as a humble hot dog cart inside Madison Square Park in New York City in 2001. Today, Shake Shack operates some 360 restaurants worldwide in 83 countries, generating about $740 million in annual revenues.
In a career spanning 40 years, Meyer has collected stories and business insights, many of which he shared in his book Setting the Table, published in 2006. He recently visited the Wharton School of the University of Pennsylvania for a McNulty Leadership Program Authors@Wharton interview with Adam Grant, a Wharton professor and thought leader in management and workplace dynamics.
Here are 4 tasty tidbits from their conversation:
The LSATs, an uncle, and a course correction. You’ve heard it before – follow your passion. That’s not always so easy to identify. Such was the case for Meyer who, after taking a first job out of college selling electronic tags to stop shoplifters (he was a star salesman!), decided to become a lawyer. The night before his Law School Admission Test, he joined his aunt, uncle and grandmother for dinner at an Italian restaurant in New York City. He was anxious about the test, mostly because he wasn’t excited about becoming a lawyer. “That night my uncle asked me the best question I have every been asked,” recalled Meyer. “He said, ‘Do you have any idea how long you’re going to be dead?’ I said no, I hadn’t really thought about it. He said, ‘I don’t know either, but it is a hell of a lot longer than you’re going to be alive. Why in the world would you do something you have no passion around?’ I said, I don’t know what else I could do. He said, ‘You’ve got to be kidding me. All I’ve ever heard you talk about your whole life is restaurants and food.’ From there, Meyer took a restaurant-management course (after gathering the courage to tell his parents his new plan), got an entry-level job at a restaurant, and never looked back.
Salmon and stakeholders. A recurring theme around Meyer’s business decisions has been getting mad as a motivator. After becoming successful with Union Square Café, he decided to start a second restaurant, Gramercy Tavern. A long-time satisfied Union Square customer came up to him one day after eating lunch at Gramercy and said, ‘You’re never going to make it here.’ The restaurant staff had not acknowledged her plate of uneaten (overcooked) salmon for the entire meal, and then wrapped it up for her to take home – something that never would have happened at Union Square. Meyer stewed over this poor service for a few days, called an all-staff meeting, and presented what would evolve into his signature business model for long-term, sustained profitability: enlightened hospitality. “I said, we have the exact same five stakeholders as every business on earth,” noted Meyer, naming them as employees, guests, community, suppliers and investors. “We get to pick the order in which we are going to prioritize them,” starting with ourselves (employees) and ending with investors. “The thing I expect is to create a virtuous cycle, where one good thing leads to something even better. If you want to have really happy investors, then you better make sure all those other inputs are singing…The cool thing is that this has been the operating system for every single thing I’ve ever done.”
“The biggest misperception people think about me is that Mr. Hospitality is not incredibly competitive.” -Danny Meyer
Taking risks, topped with mustard and pickle relish. Given Meyer’s strong reputation in fine dining, most people didn’t expect him to experiment with another segment of the restaurant industry, like fast food. But he got tired (mad!) of people saying that his enlightened hospitality approach only applied to upscale restaurants. When he was approached to consider opening a hot dog cart as part of an art installation in Madison Square Park, he jumped at the chance, choosing to make Chicago-style hotdogs with a choice of eight classic toppings. “My colleagues looked at me like I was crazy,” he recalled. “I wanted to see if we could infuse a hot dog cart with hospitality…and we had lines around the corner. I came up with [the name] Shake Shack. I had no idea it would turn into a business, a public company [or] an international company.” What’s the most important question to ask yourself when you’re considering taking a big risk? “How will I handle things when they go right? I think that’s part of the curse and blessing of being an entrepreneur. It’s important to ask yourself, what if this works?”
French fries prove the power of intuition and evidence. While researchers like Adam Grant approach problems by analyzing data and information, Meyer admits to being a more intuitive decision-maker who relies on instincts and experiences. He has, however, learned the value of both intuition and evidence. Following a poor New York Times review of Shake Shack in which the writer called out the restaurant for serving frozen, not fresh fries, Meyer took action. “It really got under my craw, and I said, we’re going to show him,” said Meyer (mad again!). He converted all existing Shake Shacks (at the time around 30) to begin serving fresh French fries. Little did he know – because he hadn’t done the research – that you’ve got to fry fresh potatoes three separate times and hang them between each oil dip. Even then, for a variety of reasons, the quality and taste are inconsistent. “Frozen fries are picked at peak when fresh and flash frozen so they never change their molecular structure. They’re actually coated with something that acts like a raincoat, sealing in the heat, sealing out the oil,” Meyer explained. “We were so proud and free of evidence and not listening, and it was the biggest lesson that I think we learned,” said Meyer, who after more than a year decided to bring back Shake Shack’s frozen crinkle cut fries, improved with non-GMO potatoes. “That was the biggest one-day bump in business we’ve ever had.”
In the competitive restaurant business, Meyer has long focused on quality goods and services, variety and innovation. And he wants you to know his least favorite expression: nice guys finish last. “The biggest misperception people think about me is that Mr. Hospitality is not incredibly competitive,” he said. “I love winning, and I think that hospitality is a perfectly fine competitive trait.” In fact, suggested Grant, it may well be Danny Meyer’s competitive edge.
Are you a Shake Shack regular? Were you surprised to learn about its inception at the hands of an upscale restaurateur?
Wharton’s Adam Grant and Danny Meyer talk about the combination of evidence and intuition. How do you believe the two should strike a balance? Should one be weighted more than another? What is your optimal experience-to-evidence ratio? Have you tested this theory? How?
Why do you think that Danny Meyer says it’s important for entrepreneurs with big ideas to ask themselves what will happen if it works?