Video Transcript

00:12 Scott Gerber: Your next sort of principle, which is the Virtuous Cycle of Enlightened Hospitality, where you sort of order the important people in a business, sort of, the different folks that the business touches. Can you go through that real quickly and explain what that principle is to you?

00:25 Danny Meyer: Sure I think that there's no business or organization on earth that doesn't have the exact same five stakeholders. You could go to a church or a synagogue or a hospital or a public library or a Fortune 500 company, and 100% of them have employees, customers, a community in which they do business, suppliers and investors, someone who took a financial risk to put them in business. There's nothing new about that. The only question is that when you go into business for yourself, you have an obligation and you have an opportunity to decide in which order are you going to care for those stakeholders.

01:07 Gerber: And I notice specifically, whether this was by example or just through listing them just so many times, you put investors last on that chain. And I feel like that's purposeful.

01:18 Meyer: Well, it's not that they're last in a linear sense, one, two, three four, five, but they are last in a cycle. Meaning that if you break the cycle at any point, you've broken the entire thing. And when we talk about a virtuous cycle, what we mean is, it's the opposite of a vicious cycle where one bad thing keeps leading to something even worse. If you can set a virtuous cycle in motion, one good thing leads to something even better. We don't put our investors fifth in that cycle because we don't wanna make them a great return in a sustainable way. In fact, to the contrary, if you believe in a virtuous cycle you would never put them first because you're not gonna be able to feed that cycle by the time it gets to them.

02:04 Meyer: If our recipe is to lead to great hospitality, go select the best people you can find, handle them, treat them with incredible respect and then let them make a great recipe for your guest. And we just think that if the business we're in is great guest satisfaction and sustainable profitability for our investors, you would never put your guests first and you would never put your investors first.

02:35 Gerber: So, I can understand that wholeheartedly if you've been in business with a track record of some kind, but if you're starting out, and the first thing you're trying to explain to an investor is perhaps that they're not the first priority, do you think that's almost trying to find the right investors then? If an investor wants to be the first person on the top of mind, is that the wrong investor for a business then?

02:52 Meyer: Yes.

02:53 Gerber: Why?

02:53 Meyer: Yes. I would not hire someone who, in the act of being selfish, was making the wrong business decision. I think the greatest way to be selfish is to go last. I think when you have incredibly gratified employees and incredibly pleased guests in a community that loves the fact that you've opened business there and suppliers who are dying to get you the best raw products to work with, whatever your company, that's gonna lead to more profits.

03:28 Gerber: So in this Virtuous Circle of Enlightened Hospitality, number one is your employees. Why are they the most core part of the business? Many people would say the old mantra of "put your customers first, the customer is always right" all these things that seemingly put the customers front, center, right at the top of the line.

03:45 Meyer: Well first of all, it's a lie to say the customer is always right because no one on earth is always right. You know that, I know that. I'm wrong a lot, my kids are wrong a lot, our employees are wrong a lot, our customers are wrong a lot. So that's complete hogwash and I think it's demoralizing. When you tell the people who work for you the customer is always right, you're basically creating a recipe for people to feel badly because they know in this situation or that situation that they had to eat their own self-esteem in order to do their jobs. So that's not cool. So we've actually taught our staff; don't worry who's right and who's wrong. The only salient issue is that the customer must always feel heard. And we tell our staff that, you must always feel heard. We're not always gonna agree with each other.

04:38 Meyer: You may not get the shift you wanted, you may not get the station if you're a waiter that you wanted, but you must feel heard, and that's part of our job as employers. The other big part of our job is to let our staff members know that their number one priority is doing thoughtful things for each other. And that's how we set the virtuous cycle in motion. When our staff members come to work with the primary focus of doing something thoughtful for the people they work with, therein lies the reason for why you shouldn't be late for work. Not because Danny said don't be late for work. It's because when you're late for work, you didn't do something thoughtful for someone you work with. That means they have to pick up your slack. That's the reason that you go out of your way to help someone else. That whole way of behaving gets picked up on by our guests.