When we at Lucky Peach HQ decided that April would be Money Month, we knew we needed to talk to Danny Meyer. Because don’t you want to know what the man has to say about the restaurant business? We sat down with Meyer over breakfast at Maialino and found out. —Brette Warshaw
Every professional in my family was a businessperson—both my grandfathers were businessmen, and my dad was an entrepreneur—and I think that I’ve always had an innate sense for it.
But it is still kind of breathtaking, what I did not know about business when I opened Union Square Cafe. I didn’t know how to read a profit-and-loss statement. I barely knew how to make a budget. An old college roommate from Trinity, a computer genius, invited me up to his insurance office and taught me how to make a spreadsheet. He created a spreadsheet called “Danny’s Restaurant,” and we did a worst-case, mid-case, and best-case scenario. I didn’t know how to do that on my own; he had to walk me through all of that.
I think when we’re talking about any business, it’s crucial to know what your own gifts are—and to surround yourself with people who are better at your weaknesses than you could possibly imagine. Put yourself in the position to go to town and triple down on those things that are your gifts. I always knew from the beginning that you didn’t want me being the chief guy focusing on the finances of the company. You did want me focusing on the product, and the people, and the guests, and the atmosphere, and all the other aspects of being a restaurateur.
It probably took me a good ten years to care that much about making money. These are the three turning points that got me there:
Number one was with Gramercy Tavern; for the first time in my career, I had an outside investor. An aunt, an uncle, and my mom—that was Union Square Cafe. And while family is wonderful to have as investors, they don’t really test you in the same way an outside investor does. Bringing in someone new created a dynamic where there had to be financial discipline.
This was somebody who had been the original investor in Mondrian, the restaurant where Tom Colicchio had been the chef. Tom had felt so appreciative of this investor for giving him the position, and then, when the restaurant closed, so badly that this person had lost money. He wanted to reciprocate the loyalty and bring this investor into Gramercy Tavern—and hopefully put the investor in a position to make his money back. Which he did. And it was great.
When you’re bringing in an outside investor, I think you have to know what you stand for: what the core values of your business are, what kind of culture you want to create. And you’ve got to convey that to your investors. So tell your investors, Guess what! We think the best way to make the most money for you is to make you the fifth most important stakeholder in the company—behind our employees, our customers, our community, and our suppliers—and if you agree with us, please step in. But understand that we’re going to be making these sort of choices along the way. We think we’re going to make you money over the course of time, but we’re not going to put you first in making short-term decisions, because we think that will come at the expense of the long-term sustainability of our business. What happens over time is that you get the investors you deserve. If you start with your own terms, you end up getting the kind of people you want. You get people who are going to have your back.
There’s a whole host of people who invest in restaurants. There are people with way too much money, who view restaurants almost the way they would view a Broadway show, as a vanity investment. I get to tell all my friends that I can get a table at this restaurant any time I want to. Then there are the kind of investors who want to have the restaurateur and the whole restaurant kowtowing to them. Why be a restaurateur if you just want to go work for someone else? What’s the point?
If you’re fortunate to have great investors—and they’re fortunate enough that you’ve made them some money—the best thing you can do both for your investors and your staff is to invite those same investors along when you’re opening your next restaurant. It provides your staff opportunities to grow financially and professionally, and it provides your investors an opportunity to stay with it. And we’ve done that. There have been some who’ve fallen off through the years for whatever reasons, and then there have been some who have hung in there for every investment since the very beginning. And they appreciate that a lot.
Number two was educating myself on organizational behavior and business through serving on all kinds of boards. You learn a lot this way. You learn about governance. You learn about accountability. You learn about expectations. You learn about metrics.
In New York, in the not-for-profit world, I’ve served on City Harvest’s board, NYC & Company, Union Square Partnership, briefly New Yorkers for Parks—I’m missing several others. And I’ve also been on probably five or six for-profit boards—sometimes as an investor, sometimes not.
I was on the board for Balducci’s for maybe one year, with no investment. Bear Stearns had bought the company for the purpose of expanding it, and it was a great education. I went on OpenTable’s board as an investor in 2000, and I watched them go from a startup to a public company to being acquired by Priceline. Another great education. I went on Sotheby’s board of directors without being an investor. Fantastic education if you want to learn about the global luxury marketplace, what’s happening with wine and art, where the money is around the world. And then The Container Store board, which is an opportunity to learn about how to scale a business that cares about culture. It’s a company that’s been on the Fortune 100 Great Companies to Work For list forever, and that matters a lot to me.
Another great thing about joining a lot of boards was that it took time. That turned me into a better businessperson, because every minute I wasn’t in one of our places meant that I had to do a better job of giving entrepreneurial autonomy and accountability.
If you get good investors, and you get better at business, you’ll get to number three: you’re going to grow. And then your greatest responsibility becomes the livelihood of an ever-growing number of people. Your business becomes what they rely on to feed their families, put a roof over their own heads, to achieve their professional aspirations.
This realization came after opening The Modern—at that point we had Union Square Cafe, Gramercy Tavern, Blue Smoke, Eleven Madison Park, Tabla, and Shake Shack. There were something like 1,200 employees. I said, This is serious. The things keeping me up at night were not about the menus, not about sourcing from this farm or that farm. I cared as much about those things as ever—but that was like going out and playing football, as opposed to doing my homework. I realized that I had a lot of homework to do, and that was to create a sustainable business.
I think that number three-and-a-half was the closing of Tabla, which was the first time we had ever closed a restaurant. We hung in for two years of the recession—until December 2010—and we just couldn’t do it anymore. I remember the morning I had to tell my managers the news, I walked into Tabla full of dread—and the first person I saw was a porter who had been there for twelve years, since the day we opened. He gave me his typical warm smile, and I realized that he was not going to be one of the people I spoke to that day—the rest of the staff wasn’t being told until the following day—and I just ran upstairs and immediately started crying my eyes out.
I always had gotten my psychic payoff by watching happy people eating great food, and by having a great staff that had fun with each other and made pretty good money. But I finally realized that wasn’t enough. Especially when I saw that the staff at Tabla had taken pay freezes for two years, if not pay cuts; it was their sheer loyalty that kept them there. That wasn’t right. That wasn’t the business I wanted to be running.
Usually, when you’re closing a restaurant, it’s because you’ve run out of money. If you give notice, people are going to bail the ship. The landlord is going to come for money. Suppliers are going to put you on COD. I’m proud of how we closed Tabla. We gave a quarter of a year notice, which restaurants do not do. We had a job fair for our employees. Anybody who stayed until the end got a bonus. We had alumni coming in to work shifts because they loved the restaurant so much. I left feeling like we had done the right thing.
What this all made me realize was that it’s a cop-out to value any of your stakeholders more or less than the others, but it’s equally a cop-out not to prioritize how you think about getting them. There’s always a tension. That’s what all businesses are about: solving problems and making choices. How to allocate time and resources; when you say yes, when you say no. As of this minute, I’m not at about a hundred of our businesses. And so I’m relying upon people who act like owners. And so now it’s not just caring for employees, it’s not just caring for investors—it’s caring for the co-owners of my company.
Unlike the kid that says, “That’s my pie; it’s all for me,” I’ve always believed that if you share the right piece of pie with the right kid, you end up with a smaller percentage of a bigger, tastier pie. I now feel a pretty strong sense of responsibility towards those other pie-owners. I want the pie to get even tastier, for all of us.