In the cutthroat world of New York restaurants, Danny Meyer is known as the host with the most. He reigns over some of the hottest and most successful eateries in a city with a reputation for some of world’s finest cuisine: Union Square Cafe, Gramercy Tavern, Eleven Madison Park, Blue Smoke, Shake Shack — 24 properties in all. His story is well-known in the hospitality industry, and he has spread the gospel in a book called Setting the Table: The Transforming Power of Hospitality in Business. Meyer has succeeded in an environment where 60% of restaurants fail by the third year, and not by focusing on the food or the location alone, but instead by looking at the restaurant industry as a hospitality business. Before his keynote address to an advice-hungry crowd at this week’s CTAM in New York conference (Oct. 5-7), Meyer carved out some time to chat with Multichannel News editor in chief Mark Robichaux about customer loyalty, his “air conditioner” theory and why the customer isn’t always right. An edited transcript follows.
MCN: What can a restaurateur teach the cable industry?
Danny Meyer: There are two things that I think everybody wants with every transaction in their lives: They want to make sure that the thing works really well and they want to make sure that the experience of using the thing feels really good. And I think that, unfortunately in life, the number of things that work well is small, the number of things that feel good is small and the number of things that both work well and feel good is miniscule. We think that the highest compliment that you can pay any person or any thing or any business is to say, ‘that is my favorite’ fill in the blank. When someone says one of our restaurants is their favorite restaurant, they are telling us that the restaurant is good at what it does and it makes them feel really good. If it didn’t do both of those things, it would not be your favorite. And I think that in the cable industry it’s an incredibly challenging time because it’s not just that you have competitors within your business, you now have competitors coming at you from all kinds of other businesses.
DM: So that you’re not only having to be the best at what you do, but you have to reinvent what you do and while you’re reinventing it, you have to make it feel good. It’s almost as if the cable industry is like the Orient Express train that has to convert itself into a high-speed train while its passengers are on the train and make the ride feel good, even while they’re changing the entire construct of how they’re traveling. So I completely understand how difficult this whole experience must be.
MCN: But you’re saying the strategy should be wrapped around that ethos, that mission?
DM: The strategy has to begin with, “Whatever it is that we do, we have to do [it] better than anyone else.” And we also have to be the best at how we make the experience feel and we have to start with our team; it’s gotta feel great for our team. That’s because if the people coming to work to make this thing and to sell this thing aren’t having a whole lot of fun dealing with the problems the business presents — and that’s what business is, it’s just a series of problem-solving — if they’re not having a great time, then forget about the next customer.
MCN: What about customers?
DM: You know, we believe that every business in the world has five customers, and it’s really how you prioritize those customers that makes all the difference. And we believe that the way you create a virtuous cycle is to make the first customer your own staff ; your second customer the customer that buys your product; the third customer the community in which you do business; the fourth being your suppliers; and the fifth being your investors. And we think that if you look at that as a cycle, the happier investors are, the more reinvestment that provides even more career-growth opportunities for your employees. And the happier they are and the more productive you are, obviously the happier your paying customers are going to be and so on and so forth.But it really begins with taking care of your own first.
MCN: The cable industry has always said it is working on “customer service,” but what it called customer service 10 or 20 years ago has changed into something more meaningful today. Is there a difference between service and hospitality?
DM: I would say the Internet changed everything for all of us. The shelf life of innovation is now two seconds at the most. In the old days, in order to be your favorite restaurant at Union Square Cafe, we had to have your favorite roast chicken. And if we could consistently provide a good product and do the things we said we were going to do, getting the right food to the right person at the right table at the right temperature at the right time, you would say, “I love that restaurant because I like what they do and they do it every single time.” That’s called performance. The product was good and the service was good. It’s a way to describe the technical delivery of the product. Today, once we got the Internet and everybody had instant access to information and a bigger megaphone than ever for word of mouth, what it meant was that having the best roast chicken was no longer enough, because now if someone thinks our roast chicken is all that good, they just type in a couple key words and they get our roast chicken recipe. Or they take a picture of a pasta that they like and they email it to their chef, and that chef has it on his menu the next day.
MCN: How does that relate to cable?
DM: I call it the ‘air-conditioner theory.’ In the old days, stores used to distinguish themselves in a town by putting a sign in their front window with a picture of a polar bear and an igloo and they would say, “Brrr, come in, we have air conditioning.” And the next store that didn’t have air conditioning went out of business until everybody said, “Oh, I have to get air conditioning.” And so, the very advantage that you used to have by having air conditioning now went away so that rather than becoming an advantage, you’re just out of business if you don’t have it. So in my case, the very thing that used to make me your favorite restaurant is no longer enough to make me your favorite restaurant; if I don’t have good chicken, if I don’t seat you on time for a reservation, if my air conditioning doesn’t work, you just don’t come back. So now what we believe is that performance, which is having a product that works and that does what it’s supposed to do, that’s service. I expect you to come on time for your appointment. I expect you to fix it if you say you’re gonna fix it. Th at accounts for only 49% of what it takes to succeed today, and we think that the remaining 51% all falls under the category of hospitality, which is how do we make you feel while you’re using this product that works, that does what it says it’s gonna do? How do we make you feel?
MCN: Because so much is dependent upon the team, how do you know when you’ve got the right person in hiring?
DM: We definitely believe that there is something called ‘hospitality quotient,’ HQ, just in the same way that there is something called IQ. But we think that someone’s HQ is a reflection of, and a way to measure, the degree to which they derive pleasure from providing people with pleasure. And we believe in identifying people who have a high HQ and making sure that the batting average of people on your team who have a high HQ is as high as possible … People with a high HQ possess the compendium of emotional skills necessary to win that 51%.
MCN: How do you identify that — you know it when you see it?
DM: You definitely know it when you see it, but the first thing is to name what they are. And there’s six different emotional skills that we are looking for: No. 1, optimistic warmth; No. 2, curious intelligence; No. 3, work ethic; No. 4, empathy; No. 5, self-awareness; No. 6, integrity.
MCN: This would be a list for a lot of people for a spouse.
DM: We have developed a series of different kinds of questions and/or observations to identify these traits.
MCN: What’s the strangest one?
DM: I think the strangest one is, “How have you been able to use your natural empathy as a business tool in your last job?’ I would say that four out of five people look at you like you’re crazy. And that tells you something right there. But every now and then, you get somebody who pulls out an amazing story that shows something very thoughtful that they did. And we think that the word ‘thoughtful’ is a contraction of the two words “thinking” and “feeling.” When people are thinking and feeling and they’re really good at what they do, chances are your product is gonna work really well and the person on the receiving end, whatever customer that is — whether it’s someone you work with or whether it’s someone who’s buying your product or the community in which you work or one of your suppliers or one of your investors — is gonna feel good about the experience.
MCN: What’s your favorite mistake?
DM: That’s a tough one, because I think every day is full of them. We think mistakes in strategic judgment lead to wisdom. We think mistakes in integrity don’t have any place in the business. And by making those distinctions categorically, we allow people on our team to be human, to feel good about their mistakes, to profi t from their mistakes, to end up in a better place than they would’ve if they had never made the mistake in the first place.
MCN: Is the customer always right?
DM: Absolutely not. Nobody is ever always right. It’s one of the best ways to create poor morale in your organization is to perpetuate the myth that the customer is always right. It’s irrelevant and it’s not true and everyone knows it’s not true. What we’ve learned is that the only relevant question is, did the customer feel heard? Because at the end of the day, you and I both know that when a customer brings a problem to us our job is to hear it, make sure that the customer feels heard and do everything we can to address the problem. But it’s not to bury our own integrity of what we know the truth to be.
MCN: Do you watch much TV?
DM: I watch a lot of sports and I watch a lot of news. It’s funny, my wife and I were just speaking last night about how we used to watch a lot more TV than we now do in terms of series. But she said, “I would watch a lot more TV if I had any idea what was on.”