Danny Meyer opens his memoir with a funeral. Not a person — a restaurant: Tabla, the upscale Indian place he closed in 2010, the first he’d ever had to close. That’s the tell, Michael Ruhlman writes in this weekend’s Journal review of What Could Possibly Go Right?, that a man near the top of his trade set out to give the failures the same weight as the wins. The count, by Meyer’s own tally: over the past 20 years he opened 27 restaurants and closed 10. Oh, and there was the hot-dog cart.
The cart went up in Madison Square Park in 2001. It became Shake Shack (SHAK): more than 700 locations opened across 24 countries in two decades, and the public company it grew into books nearly $1.5 billion a year in revenue. Meyer’s career began in 1985 with Union Square Cafe in Manhattan, when he was 27; the Union Square Hospitality Group that grew from it now runs about a dozen stand-alone restaurants plus private-dining and consulting arms. Gramercy Tavern (1994, with chef Tom Colicchio) and Eleven Madison Park (1998) came with an owner’s ordinary bruises: the Colicchio partnership lasted until 2006, when Meyer bought his partner’s stake, and a foray into juice flopped completely.
The pivot came in a bad week in August 2009. On Aug. 11 the New York Times critic raised Eleven Madison Park to four stars — the week after cutting Union Square Cafe from three to two. It was his first lost star, and it undid him: he walked out of a ballgame to get to the restaurant and somehow ended up at LaGuardia. That’s when, he writes, he decided the job wasn’t running restaurants anymore but running the company that runs them — one that rates its people on what he calls HQ, hospitality quotient, not IQ.
Thirty-five units, minimum
The scaling story is the one for owners. In early 2010 Meyer was introduced to the nephew of Mohammed Alshaya, whose Kuwait-based company licenses Starbucks (SBUX) and Chipotle (CMG) across the Middle East, North Africa and Europe. Meyer had three Shacks open, a fourth on the way and no appetite for the Middle East. Then Alshaya himself called. “We never license anything with fewer than thirty-five units,” he said — but he wanted Shake Shack. A scouting trip to Dubai convinced Meyer: here was a chance to learn to scale far from a New York press already watching for slipping quality. Then came the money: $20 million of equity from a single investor, another $5 million from elsewhere, and enough new Shacks — more than 60 — to take the company public in 2015.
Our read
Owners will read this differently than diners. Ten closings for 27 openings is the number to keep: a healthy portfolio of ventures budgets for the ones that won’t make it, and Meyer treats the closings as tuition rather than shame. The Gramercy Tavern split ended in a buyout; in our experience that tends to end well when the terms — who can buy, at what valuation, funded how — were written while the partners still liked each other (Estate). A buy-sell agreement is the fire exit: install it on opening night, not the night you need it.
The Alshaya call carries the last lesson (IN04): a partner with a 35-unit minimum, in markets Meyer wasn’t interested in, offered his team a place to learn to scale, and outside money raised before the IPO, not from it, built the 60-plus Shacks that got it there. Learn to scale where the stakes are lower and the critics farther away. If you own the business, fifteen minutes on the buy-sell and the closing budget is worth more than the burger.