strategy and business

DANNY MEYER’S RECIPE FOR SUCCESS

In December 2014, a year shy of its 30th anniversary and as popular as ever, New York City’s Union Square Cafe faced a crippling rent increase. The soaring rents around Union Square Park, and the steady revival of the neighborhood over three decades, are in no small part due to the beloved upscale modern bistro Danny Meyer opened at 16th and Broadway in 1985.

After months of consideration, Sam Lipp, the restaurant’s general manager, made the case for simply closing the restaurant. “Let’s go out with a bang, on top and on our terms,” he suggested to Meyer. “Icon restaurants rarely prosper after moving.” Within 10 seconds, Meyer shot him down. “No, Sam, you’re wrong. It’s our heart, our soul, our mother yeast. Let’s move.” Regardless of the economic logic, and the fact that Meyer operated a dozen-odd other thriving restaurants, closing Union Square Cafe (USC) altogether was unthinkable. He told the team to find a more affordable space in the neighborhood, which they did, reopening a few blocks north, at 19th and Park Avenue South, in late 2016.

Putting soul into all his business decisions — many of which have been similarly counterintuitive — has been Meyer’s modus operandi since he started his first restaurant at the age of 27. “I’ve often wondered whether we have made much more money by choosing the right things to say no to,” he noted in his best-selling management memoir, Setting the Table: The Transforming Power of Hospitality in Business.

In growing Union Square Hospitality Group (USHG) into an internationally admired restaurant business, Meyer, along with the people who helped him build the company, has relied as much on his management prowess as on culinary creativity to stand out from the intense competition. As founder and CEO, Meyer has made his concept of “enlightened hospitality” the animating factor of the operating model, and has spurred the rise of an artisanal, soulful, and convivial restaurant empire.

Enlightened hospitality drives a virtuous business cycle that revolves around respect, relationships, and revenues. The cycle starts with hiring naturally empathetic people, whom workplace psychologist Adam Grant calls “givers,” and continues by investing in their professional and personal growth. Employees share their goodwill with customers, and that positive dynamic drives the repeat business that is so critical to restaurant profitability. “Hospitality is not our end goal. Being essential is,” says Meyer. Diners who frequent high-end New York restaurants have a lot of choices — more than 23,000, according to a scan of the reservation engine OpenTable. In general, repeat business contributes 50 percent of revenues, according to the National Restaurant Association. In

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