Danny Meyer certainly knows what a cash-flow statement is now.
The longtime restaurateur has admitted that, when he opened Union Square Café in 1985, he didn’t know what a cash-flow statement was. He only knew this: “When you walked in our front door, I wanted the two hours we had with you to make you feel a little bit better,” he said at the Aspen Food & Wine Classic in 2014. “It was all I knew.”
Meyer on Monday announced his resignation as CEO of Union Square Hospitality Group, a job he will cede to his handpicked successor, Chip Wade.
In the years between the opening of that first restaurant, and his departure from day-to-day duties this week—he will remain Union Square’s executive chairman—Meyer not only learned what a cash-flow statement was but proved that doing “all I knew” was in fact good business.
Consumers, it seems, like going to restaurants. They like excellent food and like great service. And people are far more likely to provide both when they are treated well themselves. This ultimately translates into strong sales and business success.
Meyer’s business strategy has helped prove this repeatedly, while solidifying him as one of those rare operators who have credibility with both investors and foodies.
After Union Square Cafe, Meyer went on to found a number of restaurants that would prove successful, based on his formula of “enlightened hospitality,” including Gramercy Tavern, The Modern and Daily Provisions. All of them are integral parts of New York’s dining scene.
But over time that strategy would prove itself on Wall Street, too. In 2000, Meyer’s director of operations, Randy Garutti, opened a hot dog cart out of the kitchen of Union Square’s Eleven Madison Park as part of an art exhibit. The cart ran for three years. In 2004, Union Square opened a kiosk restaurant in the park that served burgers called Shake Shack.
Initially meant as a one-time deal, it became clear there was a larger market than just park goers. Five years later the company opened its second location in Manhattan’s Upper West Side.
Shake Shack quickly developed a reputation far beyond New York and the unit volumes to boot. The company went public in 2015, feeding off that reputation—particularly among the primarily New York-based investor set. The stock more than doubled on its first day of trading, one of the most successful initial public offerings in industry history.
“We’re not going to change the way we do business just because of the IPO,” Meyer told Restaurant Business in 2015. “We want to make more money than we did last year, too. The only way that is sustainable is if you have a virtuous cycle.” That is, regard for employees, customers, the community, suppliers and shareholders.
Meyer in the years since then has become a frequent investor in restaurants that follow this mission. He plans to remain a managing partner with USHG’s investment arm, Enlightened Hospitality Investments (EHI). That investment arm has put money into companies that are either restaurants or have something to do with them, including Goldbelly and 7shifts.
Among the restaurants the fund has invested in are Dig Inn, Tender Greens, Tacombi, Slutty Vegan, Joe Coffee, Salt & Straw, Bentobox and several others. His two EHI funds have raised more than $550 million.
Not everything has been a success. Shake Shack’s life on the public markets has been tough this year in particular, as it lost some 31% of its value so far in 2022. The weakness in the public markets killed a deal between the special purpose acquisition company (SPAC) he founded and Panera Brands, a deal that would have taken Panera public.
The pandemic was particularly hard on Union Square, leading to layoffs of some 90% of the company’s employees. But he used its comeback as an occasion to become more transparent about its hiring practices and improve its record on diversity.
Meyer is hardly the only one that has demonstrated success with this kind of holistic approach, focusing on workers and service as well as the community. But as he steps aside from the position that made him one of the industry’s most notable names, it’s important to remember how he got there.