February 13, 2024 • 49min

Danny Meyer - The Power of Hospitality - [Invest Like the Best, REPLAY]

Invest Like the Best with Patrick O'Shaughnessy

Danny Meyer is the founder and CEO of Union Square Hospitality Group, which comprises some of New York's most acclaimed restaurants like Gramercy Tavern and Union Square Café. He is also the founder and chairman of Shake Shack. In this conversation with Patrick O'Shaughnessy, Danny discusses how great hospitality leads to great business, regardless of sector. He shares insights on scaling hospitality, leadership, handling mistakes, creativity in business, and striving for excellence.

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Key Takeaways

Hospitality is the foundation of Danny Meyer's business philosophy - It's about making people feel like they belong and creating an essential place in their lives
The "51% rule" - Hire people who are 51% emotionally-driven (with high "hospitality quotient") and 49% technically skilled
ABCD: Always Be Collecting Dots - Gather information about guests to make meaningful connections
Scaling hospitality is Danny's key focus - Can you successfully scale a feeling of welcome across many locations?
80/20 rule for scaling - 80% consistency, 20% customized to local community
"Constant, gentle pressure" as a leadership approach - Be consistent but not harsh in driving change
Mistakes are opportunities - Handle them well using the "5 A's": Aware, Acknowledge, Apologize, Act, Apply additional generosity
Frame inward approach to creativity - Start with the context/constraints and work inward to develop new concepts
Excellence is a journey, not perfection - Constantly strive to improve and fix what's not right

Introduction

Danny Meyer is the founder and CEO of Union Square Hospitality Group, which comprises some of New York's most acclaimed restaurants like Gramercy Tavern and Union Square Café. He is also the founder and chairman of Shake Shack. In this conversation with Patrick O'Shaughnessy, Danny discusses how great hospitality leads to great business, regardless of sector. He shares insights on scaling hospitality, leadership, handling mistakes, creativity in business, and striving for excellence.

Topics Discussed

Early Experiences and Lessons in Hospitality (03:41)

Danny reflects on his experience as a 20-year-old tour guide in Rome, which taught him valuable lessons about hospitality and group psychology:

Dealing with jet-lagged, grumpy tourists and turning their experience around
Learning to read people and tailor his approach
Gaining culinary and cultural experiences that would shape his future career

Danny emphasizes: "I wasn't thinking about the word hospitality. I wasn't thinking about any of this, except feeling it intuitively. And I was actually learning like crazy."

The Foundation of Hospitality in Business (08:17)

Danny explains why hospitality is central to his business philosophy:

Going beyond good food and service - In competitive markets like New York, you need more to stand out
Creating a sense of belonging - Making guests feel like they're part of something
Emotional connection - Focusing on how you make people feel, not just what you provide

He states: "We had to make you feel like we were on your side, which is hospitality. But then take it a step further. We had to really make you feel like you belonged."

Early Lessons from Union Square Cafe (11:50)

Danny shares key learnings from his first restaurant:

The importance of the front door - First impressions set the tone for hospitality
Recognition and genuine welcome - Making guests feel seen and valued
Transitioning from transaction to relationship - Building lasting connections with customers

He emphasizes: "The front door is the first signal that you get when you go to a full service restaurant as to whether this is going to be a transaction... or it could be recognition, eye contact, a smile, a sense that I'm happy to see you, a sense that I do see you, a sense that you matter."

ABCD: Always Be Collecting Dots (15:17)

Danny introduces his ABCD concept:

Gathering information (dots) about guests to make meaningful connections
Using these connections to create a sense of community
Showing genuine interest in others to receive interest in return

He explains: "ABCD simply means always be collecting dots. So you can always be connecting dots and in this case, dots... I'm talking about a morsel of information that matters to you. And if it matters to you, then it better matter to me."

Scaling Hospitality (20:45)

Danny discusses the challenge of scaling hospitality across multiple locations:

80/20 rule - 80% consistency, 20% customized to local community
Sending teams to understand local culture and cuisine before opening new locations
Incorporating local elements into menu, decor, and community involvement

He shares an example: "When Shake Shack first opened in New Haven, next door to Yale, the walls were made from recycled bleacher seats from the original Yale bowl. The special hot dog was named after the Yale mascot, and a special recipe went with it."

Hiring and Cultivating the Right People (24:56)

Danny explains his approach to hiring and developing talent:

The "51% rule" - Hiring people who are 51% emotionally-driven and 49% technically skilled
Six key emotional skills: optimism, curiosity, work ethic, empathy, self-awareness, and integrity
Seeking people who derive happiness from making others happy

He states: "We're looking for people who have six emotional skills at a very, very high level. Kind optimism, curiosity, intellectual curiosity, amazing work ethic, highly empathetic, highly self aware, and a high degree of integrity."

Leadership Approach: Constant, Gentle Pressure (29:34)

Danny outlines his leadership philosophy:

Having a clear vision and communicating it effectively
Persuading people to buy into the vision rather than using command-and-control
Applying "constant, gentle pressure" to drive change without breaking morale

He explains: "The notion of constant, gentle pressure is that I believe you need all three words. As a leader, you better be consistent with it... If you're constantly playing the fish and reeling it in in one direction and you're keeping the pressure on. You don't let up on any of those things."

Handling Mistakes Well (33:00)

Danny shares his philosophy on mistakes and how to handle them:

Viewing mistakes as a "renewable resource" and opportunity to learn
The "5 A's" of mistake-making: Aware, Acknowledge, Apologize, Act, Apply additional generosity
Using well-handled mistakes to build stronger relationships

He emphasizes: "You can actually end up in a better spot with someone for how well you embraced and overcame a mistake than if you had never made it in the first place."

Creativity and Entrepreneurial Spark (36:28)

Danny discusses his approach to creativity and developing new concepts:

Drawing inspiration from diverse life experiences and observations
Working "from the frame inward" - starting with context and constraints
Balancing unique, location-specific concepts with scalable ideas

He shares: "I feel like I do some of my best work artistically. When you give me the frame and you say, what do you think belongs in that frame?"

Balancing New Ventures and Existing Businesses (40:32)

Danny explains how he decides between expanding existing concepts and starting new ones:

Comparing restaurants to wines - some are meant to be unique to their location, others can be replicated
Identifying concepts that have potential for growth vs. those that should remain singular
Example of Daily Provisions - a concept born from constraints that proved scalable

He reflects: "Every now and then, we'll get one that just feels like there's not gonna be hundreds of them... That doesn't really excite me that much."

The Excellence Reflex (45:52)

Danny discusses the importance of striving for excellence:

Surrounding yourself with people motivated to be champions
Different motivations for excellence: beating competition, fear of losing, outdoing personal best
Constantly looking for ways to improve and fix what's not right

He emphasizes: "Excellence is a journey. And I believe excellence is honoring the work you did yesterday, all the mistakes and everything. You gave it your best. But d**n it, figure out how you could do it a little bit better today."

Kindest Thing Anyone Has Done (50:25)

Danny shares a personal reflection on the kindest act he's experienced:

His wife saying "yes" when he proposed
The support and grounding influence she has provided
Helping him maintain authenticity while pursuing hospitality

He expresses gratitude: "She's, I think, more than anything, helped me to become real. I think there's a fine line between wanting people to be happy so much that you end up losing a piece of your own authenticity, and that never happened to me, thank goodness, and I give her all the credit for that."

Conclusion

Danny Meyer's insights on hospitality, leadership, and business philosophy offer valuable lessons for entrepreneurs and leaders across industries. His emphasis on creating a sense of belonging, scaling hospitality, handling mistakes well, and constantly striving for excellence provides a framework for building successful, customer-centric businesses. By focusing on the emotional aspects of service and cultivating the right team, Danny has created a unique approach to hospitality that has proven successful across various concepts and scales.