Masters of Scale Live: Shake Shack founder Danny Meyer with Caffè Panna's Hallie Meyer

0:00Scaling a business in the US can feel like a maze. Each state has its own payroll, benefits, and compliance rules, pulling your focus away from growth, which is why founders use Deal. Deal is the professional employer organization, or PEO, that gives you a dedicated HR expert, plus Fortune 500-level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one. So, if you're scaling, make it simple with Deal. Go to deel.com. slash MOS and get up to three months free. If you're in private capital, you understand that your next great deal starts with who you know.

0:41That's why over 3 ,000 firms trust Affinity, the CRM platform purpose-built for private capital. Affinity's relationship intelligence reveals your team's strongest paths to founders, investors, and decision makers using insights It's hidden in emails, calendars, and meetings. With powerful AI tools like Affinity NoteTaker and Deal Assist, you'll spend less time managing data and more time closing the right deals. Learn more at affinity.co slash marketplace. Welcome to a very special edition of Masters of Scale. We recorded this one with a live audience in New York City just this month. I'm Jeff Berman, your host.

1:27I was so grateful to have hospitality legend Danny Meyer join me on stage for this first in a series of live events presented by Capital One Business. You probably best know Danny Meyer as the founder of Shake Shack, which now has more than 500 locations in 23 countries around the world. And it was just announced we'll be serving their world famous burgers on Delta Airlines. Danny also leads an ever-growing portfolio of one-of-a-kind restaurants and investments through his Union Square hospitality group. Midway through our conversation, we invited a rising entrepreneur to join us on stage. And it's one who made a lot of sense for this conversation because it was Danny's daughter, Hallie Meyer.

2:13She's making her own name in New York City as the founder of Cafe Pana, a growing ice cream empire of her own.

2:47We'll be right back.

2:53Well, that's just how you do it. We haven't made it just how you do it. This is Masters of Scale.

3:04We kicked off the event with a recording from a story that we did with Danny several years ago with a live musical score from the artist Margot McDonald.

3:26I'll never forget the first time I finally figured out that almost every Roman trattoria has the exact same pastas on the menu, and every one of them is related. There's the cacio e pepe, which is simply spaghetti with pecorino cheese, olive oil, and lots of black pepper. Then, by simply adding guanciale, the bacon that comes from the cheek of the pig, it becomes spaghetti alla grigia. Or, by adding eggs, that same exact recipe becomes spaghetti alla carbonara. And if you omit the eggs and add tomato sauce instead, you get spaghetti alla matriciana. Four different pastas, all related. Great Italian cooks really cherish and respect their ingredients.

4:10A little olive oil and salt doesn't provide much disguise if the tomato itself isn't perfectly sun-ripened, or if the basil isn't fragrant. One of the things I discovered about myself in Rome that I prize wherever I find it is an Italian word called sprezzatura. Sprezzatura is what happens when the food or the painting or the athletic endeavor or the architecture comes across as having been effortless. In other words, you can dig into a bowl of pasta that is so amazing and makes you so happy and it appears to be effortless. That's sprezzatura. It's so easy to fall into the trap of believing that more is better.

4:55But whenever I find myself thinking that way, I try to remind myself of the simple bowls of pasta that I first discovered in Rome, and that little things can make all the difference.

5:34Now for him, please. Danny, we were backstage together. I was watching you listening to that. What did that bring up for you? It's actually bringing up a lump in my throat. Truly. I can't believe this is happening right now.

5:53Can we go on to a different question? Sure. No, you know, I think I've just composed myself. But first of all, I recorded that well before the pandemic. In fact, my voice even sounds younger then. But I think what I was trying to get at is the joy of discovery and how infrequently that happens as you get older. The fact that you get to taste something for the first time, see something for the first time, smell something, experience something for the first time. And they're still out there. In fact, one of the reasons I love traveling and I just constantly stay curious, Audrey and I go to new restaurants all the time, right here in New York or wherever it is we're traveling, but is to get new discoveries.

6:39It's just – for me, it's like the greatest joy there is is to learn something new that you never thought of before. And then – and I'll just share one other thing because I know you guys think about entrepreneurialism and innovation all the time. But innovation for me is never about inventing something that was never there. It's truly about how many of these discoveries did I store in my taste memory, my heart memory, wherever. And then use that file cabinet and pull out those things and combine them at the right time and maybe freshly in a way that seems fresh, but it really isn't. What's something that you've discovered or rediscovered recently that's influencing what you're doing or how you're thinking about the world?

7:27You know, I think Audrey and I were recently in Portugal, which I hadn't been to since I was really, really young. and the joy of going to a country where I don't know the language. I can speak Italian and French, but I can't speak Portuguese. And just kind of soaking up different streetscapes in the wine country, a completely different landscape in the Douro Valley. It's just so exciting. I just love learning how people live, and I've always learned the most by learning how people eat. So I want to go back to that trip to Italy at 12 and a source of so much inspiration for what you've done in your life and career.

8:11You've talked about your dad having declared bankruptcy a couple of times in your youth. One might imagine that would be daunting then for someone to go and be an entrepreneur and build businesses. What do you think got you there to being an entrepreneur? Well, definitely, yeah. I don't think I ever considered anything other than being an entrepreneur. That was what I grew up with. I watched my dad doing that. And I loved the creativity aspect of it. I loved that he was a great writer. He always had a fresh idea up his sleeve. And it wasn't daunting for me to take something that I was obsessively passionate about, which is going out to restaurants and knowing how I wanted to be treated and trying to create a restaurant, which became Union Square Cafe, that if only it existed would have been my favorite restaurant.

9:00It was really easy for me. And in retrospect, it just made complete sense. We didn't have any restaurants in New York in 1985 like Union Square Cafe. We had really fancy places and we had a couple chain places, but we didn't have a place that you could eat really good. Like today, there's hundreds of them in New York City and Brooklyn, you know, where you can eat really good food and it doesn't matter whether you're wearing jeans or a coat and tie and they treat you well. It used to be in New York that the restaurants that treat you the worst were the most popular. Bizarre but true. If someone had told me, you know, during the first 10 years of my career, I only had one restaurant.

9:38If someone had told me I was going to one day be on a show called Masters of Scale, I would have said, you're absolutely insane. I will never, ever open a second restaurant. Why not? Because I didn't want to end up bankrupt. And I associated both of my dad's bankruptcies with scaling his business. And he did scale his business. And I'm really sad that it wasn't until after he died at the very young age of 59 that I gave myself permission to realize I'm not my dad. And number two, there's a whole lot of businesses in the history of the world that have scaled and not gone bankrupt. And it really helped me to understand that it was not about scaling.

10:24It was about his Achilles heel, which is that he didn't surround himself with enough really talented people who complemented both his strengths and his weaknesses. and instead he surrounded himself with a lot of people that made him feel somewhat exalted, which is what he needed emotionally. And I made a determination finally when I did expand after almost our 10th birthday at Union Square Cafe opening Gramercy Tavern, which is now 30 years old, that I was going to constantly surround myself with people who could do things better than I could. And that gets easier and easier as life goes on because, you know, one of the really fun things about all these years of growing and doing this is that I feel like it's my responsibility to constantly take inventory of what I do during the day.

11:22And truly, because none of us is ever going to invent more hours in the day. So the real question is, if I am ruthless about saying, here is how I'm spending my time, and I do this about once a quarter, literally with a piece of paper and pencil in my office, invariably 20 % of the things I'm doing are things that someone else on our team could do as well or better than I do it. And every time I do that, it's an act of generosity because someone else gets to grow. Every time I don't do it, it's an act of selfishness. But I think even more importantly, every time I don't do it, it's an act of stupidity because I don't get to grow.

12:05And my license to grow is to increasingly do fewer and fewer and fewer things, but increasingly only those things that uniquely I can do better than anybody else on the team. Yeah. I love that insight. And I appreciate that having a team that complemented with an E, not an I, you, allowed you to take the leap. But what got you over the psychological barrier of taking the leap to go and launch Gramercy and have a second restaurant and then go beyond? Yeah, two things. Actually, three things, I'd say. One was a fair amount of therapy, psychoanalysis. I mean it. Three days a week on the couch, really learning about what was motivating me and what was demotivating me.

12:53Did that start after your dad passed or did you start that before he passed? It ramped up, that's for sure. And then I'd say the second thing was, I got a knock on the door one day from a guy who was a really good chef. Audrey and I would go to his restaurant called Mondrian. We loved it. And his restaurant had gone out of business. And he knocked on the door. Basically, we saw each other at the Aspen Food and Wine Conference, a guy named Tom Colicchio. So some of you may know him from Top Chef. And he said, I want to be your partner. I love Union Square Cafe, and I think we could do something special together.

13:30And that became really the second kind of way that I created a restaurant with Union Square Cafe. It was I've got this idea that I'm really passionate about, and now I've just got to find the right place for it and the right chef for it. With Gramercy Tavern, because of Tom, it's like, I've got this chef that I really, really want to work with. And now I've got to figure out the right idea and the right place for it. So it was therapy. It was Tom. And there was a third. Yeah. Audrey said, if you don't open a second restaurant, you're stupid. So marry well. One of the interesting things about your universe is you have restaurants like Manhattan that are one-offs and I think probably designed to be one-offs.

14:19You have restaurants like Daily Provisions that have expanded but are still relatively small. And then you have Shake Shack, which is incredible scale and scaling. How do you decide which ones are meant to be what? Well, that's a great question. that implies that I ever decided Shake Shack was going to be a scaled concept because I didn't. It started as a hot dog cart. And this was the summer of 2001. We didn't open a second Shake Shack for five years. So getting back to your question, I had my hand on the emergency break of scaling forever because of the stuff you asked me about earlier. And really the thing that pulled me over the edge to open a second Shake Shack, it's not anything I ever wanted to do, was another two things.

15:09The first one was that the biggest problem we had with that first Shake Shack was way before there were apps on telephones, you know, where you could cut the line by having an app. And the biggest problem we had was people complained, I'd go there more often, but the line is too damn long. I was one of those people. Yeah, I remember. And we tried everything. We had a shack cam so that you could look online in real time and see exactly how long the line was. And people actually loved that. They used it. But the second reason was that Randy Garudi, who had become the, it was before he was CEO of the company, but he was definitely running the business at that point for us, lived on the Upper West Side.

15:51And he walked by this space every single day that had been closed for years. It used to be called the museum, the museum cafe. And he said, we've got to open a second Shake Shack. It'll help us cannibalize the lines. I said, all right, if you really think so. And we spent more money than we ever thought we could building this place. Never thought we would make the money back on the second one. Second one opens. The good news was that the lines were around the block. The bad news was we got robbed on the first night we were open. Someone broke into our safe. And the better news was that the line at the first Shake Shack didn't get cannibalized.

16:33It got longer. And so we said, we got a tiger by the tail. So most of the restaurants we opened, I call restaurants of terroir. They're like a single vineyard wine. They belong where they were planted. Gramercy Tavern. Not only did we name it after the neighborhood, but you feel like you're there. Union Square Cafe, you feel like you're there. And as you said, Manhattan, the modern, those are restaurants of terroir. We call those our hardback books. But then Daily Provisions is another example. Never intended it to be more than one. Now there will be seven by three weeks from now. So it's still tiny relative to Shake Shack, but if you find that people have found a place in their heart for something you're doing and it's becoming essential, it's becoming part of their lives, you don't have a right to hold it back from people.

17:31You don't have a right to not employ more people. You don't have a right to not give this gift to communities. But you've got to really be clear that they love it. So then you can put it into paperback, and that's the difference. You have this knack. I mean, let's be honest. You can see a space or you can meet a Tom Colicchio and you see the opportunity. And I appreciate almost following the lead of the business and the brand and the customer. You're almost following them on the journey is what I'm hearing you say. It's a dialogue. When you start a restaurant, and I assume this is the case for a lot of businesses, you definitely start with a huge amount of belief and passion that your idea is fresh enough that it's going to solve a problem for somebody that didn't exist.

18:16I've never been excited about doing a replica of something else that I've already seen. I like to, we call it writing a new chord with the same existing notes. So in the same way that if you're a musician, there's only eight notes in the octave plus some majors and minors. No one's inventing a new, but that doesn't mean there cannot be an unlimited number of new songs. And in our case, what I'm always doing, and this gets back to discovery, is I like to take five different experiences that have stayed with me. Could be mostly restaurant experiences and ask myself, if you merge those all together, what would you get?

19:00One of the other ways that you are achieving scale is through an investment fund. And it's interesting going through your portfolio because you are in Salt and Straw, the ice cream company. You're in Pinky Cole's Slutty Vegan. But you're also in Clear, the company that helps you get through lines more quickly. Gold Belly. How are you deciding where to make investments to help others on their scaling journey? Yeah, well, so after Shake Shack had its public offering in 2015, a couple things happened. That was another thing I wasn't all that excited to do, but I'm really glad we did because it was a wealth creator for people on our – 100 % of everyone on our team at that point got a chance to buy stock at the strike price, which was$21.

19:45The first trade happened at$46. We never – people were retiring mortgages and school loans and car payments. We never, ever could have done that on our own. But I said to myself, this was so great. Could we do it again? And I realized that I'm not smart enough and I don't have enough ideas necessarily to ever do that again. And so that's when we came up with the idea of what if we could identify other entrepreneurs who had fantastic ideas we wish we had come up with but we just hadn't and who were leading cultures that we would be proud to associate with Union Square Hospitality Group. In terms of being an employee first, caring deeply for the guest experience, caring deeply for their communities and their suppliers and obviously their investors had to be good businesses.

20:35And so we raised a first fund and then we raised a second fund and we've got about 26 investments at this point. And I get a chance to be – I'm not on any one of the boards, which is great, but I'm at meetings three days a week with the investment committee and I get to be sort of the great uncle. I'm no one's dad, but I'm sort of like a great uncle. All the founders know that I'm a phone call away and it's a good chance for me to share stuff, mistakes I've learned, so that they don't have to make the same mistakes. They can make new mistakes, but they don't have to make the same old ones. When we talk to investors, they're often talking about betting on the entrepreneur.

21:17It just feels like you've got a nose for the idea as well. How much of it for you is the person and how much is the concept? Well, we're learning because we look back. I think anyone who's got a fund, you look back at the good ones you missed and fortunately, you look back at a lot of the bad ones you're happy you missed. And I think we probably made more money by not betting on the ones that were happy we missed. But I do think that in general, the leadership is probably even more potent than the idea itself. I think a great leader can pivot and make a decent idea even better, but I've never seen a great idea overcome bad leadership.

22:04More with Danny Meyer and we'll meet his daughter Hallie to hear how she's growing her popular New York City ice cream business, Cafe Pana, in just a minute. Real leaders don't back down when the stakes are high. They innovate, they push forward, and then they take the stage at the Masters of Scale Summit. Join us in San Francisco, October 7th to 9th, to hear from the CEO of the New York Times, scientists using cutting-edge technology to find cures, the leader of crypto powerhouse Coinbase, a retired four-star general, and many, many more. Apply now at mastersofscale.com slash apply25. That's mastersofscale.com slash apply25.

23:15aws.amazon.com slash activate and start building. Expanding your business in the U.S. can feel like a maze. Every state has its own payroll, benefits, and compliance rules, which can pull your focus away from growth. That's why founders use Deal. Deal is the Professional Employer Organization, or PEO, that gives you a dedicated HR expert plus Fortune 500 level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one. So if you're scaling, make it simple with Deal. Go to deel.com slash M-O-S and get up to three months free. Welcome back to Masters of Scale.

24:03You can find this conversation and more on the Masters of Scale YouTube channel.

24:10One of the other ways you're scaling is by raising the next generation of entrepreneurs. So I'd love to invite your daughter, Hallie, up and join us on stage.

24:25Thanks for having me. I'm thrilled you're here. Hallie, part of your journey involves Rome as well. Will you tell us about what Rome is for you in your journey? It's kind of alarming how similar the journey of inspiration is, especially since growing up, I think, and especially since I've started my own business, there's been a lot of kind of tension between, well, are you doing exactly what your dad's doing? Are you doing something totally different? And it's a very interesting tension, but it's no denying that Rome is a huge thing for both of us. It's just the place that, for me, I think the story started when I traveled there with my family growing up.

25:07But I think it really kind of solidified when I had an experience in, actually, after the 2016 election, I decided to leave the startup I was working on because it didn't feel like the right thing to do anymore. Was it in the food space? It was. It was in the food tech space, actually. Yeah, it was a home-cooked meal delivery service, which there are many of now, actually. But at the time, I said, you know what, I want to sign up for a year of AmeriCorps service. And that year of service didn't begin until the following school year. I was like, I think I want to open an ice cream business eventually.

25:44So I think I should just go to Rome because it's a place that I've loved growing up. And I found a cooking job at a place called the American Academy in Rome, Rome Sustainable Food Project, which is still hosting cooks from around the world, actually, in this fellowship program. I made it a goal to eat at at least two gelaterias in Rome every single day I was there. Great goal. and I definitely did at least two. Good for you. And it recorded all of the experiences, but all of it was, you know, with in mind, like how can I put these notes together? Yeah. So tell us about Cafe Pana and what have you taken from your experience growing up with your dad and what are you doing differently?

26:28So I'll start with Cafe Pana. So Cafe Pana is an Italian-inspired ice cream store or business now because we have two locations. We make everything in-house. We change the menu daily, which is kind of the most fun part for me. And that's based on the ingredients that are available at the market or that's based on? It's based on a lot of inputs. I would say like one is just whim. The next is definitely the ingredients available. The next is customers sending dozens of emails a week saying, you really need to do this take on a Swedish dessert I had. It's banana with meringue and Nutella. Got it.