Company Profile

COMPANY:Shake Shack

HEADQUARTERS: New York City, NY

YEAR FOUNDED: 2004

2015 9-Month Revenue REVENUE: $139.5 M

EMPLOYEES: 2215

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Starting a business is like any other beginning: The first task is survival. But even in those early days, what founder doesn’t dream of doing something really huge--like building a business that rapidly remakes a fusty sector, as Warby Parker’s Neil Blumenthal has, or seizing an early opportunity to dominate an industry, the way Whole Foods’ John Mackey has? The entrepreneurs who fulfill such dreams are the ones we call icons, and we know them when we see them: Barbara Corcoran slyly grilling a supplicant on the hit show Shark Tank, for instance, or Shake Shack founder Danny Meyer, as he succeeds on his mission to boldly transform American dining. How does one proceed from frantic founder to ultra-successful entrepreneur? We've taken a close look at four icons to find out.

A Change of Plans

The world came close to being without a Shake Shack or Gramercy Tavern; Danny Meyer almost became a lawyer. In the early ’80s, after he had moved to New York City, he took the LSATs, and then realized he didn’t want that career. “But I didn’t know what else to do,” he recalls. He knew he loved good food, so he got a job as a host at Pesca, a seafood restaurant. Two years later, he opened his first restaurant: Union Square Cafe. 

That’s where Meyer began to realize that the role of a restaurant was more than putting good stuff on the plate and in the glass. “It’s also to make sure people are a little happier when they leave than when they came in,” he says. As Union Square Cafe racked up awards for its spectacular food and service, Meyer was there every night, working the room. “The thinking back then was, to have a successful restaurant, the owner had to be there 24/7,” Meyer recalls. “If you wanted a day off, you should close the restaurant. And if you wanted a vacation, you should close for two weeks.”

Going Slow

It took nine years and a death in the family for Meyer to open his second restaurant, Gramercy Tavern, in 1994. He had seen what had happened to his father, a serial entrepreneur who had owned hotels, restaurants, and a travel agency--and who had filed for bankruptcy at age 42 and again in his 50s. “I waited until he died to give myself permission,” Meyer says he concluded later on. “I equated expansion with bankruptcy. He did too much--so I wanted to do one thing really well.” 

Within one week of opening Gramercy Tavern, the managers started talking about opening a third restaurant, which made Meyer panic. “This was already the scariest thing I’d ever done in my life,” he says. “I was completely convinced that I was an imposter--that Union Square was somehow a fluke.” To his mind, Gramercy Tavern wasn’t as successful as Union Square had been, and Union Square was suffering because of his divided focus. “That caused me huge anxiety,” he says. “I couldn’t sleep. Union Square Cafe dropped from No. 2 to No. 3 in the Zagat survey of New York City’s best restaurants, and I said to myself, ‘See? You failed.’ ” 

It took time for Meyer to realize he was being too hard on himself. “Some people are near- or farsighted--I’m thorn-sighted,” he explains. “The thorns on the rose are in really sharp definition for me, the rose petals a little fuzzier.” 

Admitting Defeat

In the first paragraph of Meyer’s 2006 memoir, Setting the Table, he lists the 11 restaurants he had opened by then and states, “So far, I haven’t had the experience of closing any of them, and I pray I never will.” But the 2007 recession caused Tabla, an upscale Indian restaurant that Meyer had opened in 1998, to struggle. “I learned that you shouldn’t take your most esoteric concept and fit it into the largest space with the highest fixed costs,” Meyer says. “It puts too much pressure on the restaurant to hit grand slams every day when there just aren’t enough people who want to watch that sport.” 

Meyer felt a deep loyalty to his staff, and some of the managers had agreed to pay cuts to keep the restaurant going. As Tabla continued to lose money, Meyer personally subsidized it for two years to keep the doors open. Finally, his leadership team at Union Square Hospitality Group, which Meyer had launched in 1998 to oversee his properties, staged an intervention. “They argued that keeping a sinking ship afloat was the worst possible way to take care of the staff,” recalls Meyer. “They said, ‘If you truly want to take care of these people, you need to close the place. It’s actually being selfish not to.’ ” 

Meyer shifted his focus from saving the restaurant to saving the people who worked there. “I started thinking, ‘What if we could get these people more uplifting job opportunities either within or outside of our company?’ ” Meyer says. “Still, I don’t think I’ve ever cried so hard in my life as the day that I went to our managers to tell them it was over.” He felt better once he was able to find other jobs for most of the team. The former general manager and assistant general manager of Tabla now run other Danny Meyer restaurants.

Fostering Entrepreneurs 

As Meyer’s company took off, he started to see there wasn’t enough room for people to grow within it. “If you rose to a certain level, there came a point when we were almost forcing you to take the off-ramp, because there weren’t entrepreneurial opportunities for you,” he says. So when Nick Anderer, the chef from Maialino, Meyer’s Roman trattoria on Gramercy Park, wanted to open a pizzeria called Marta, Meyer backed the idea and let him take the lead. And when Mark Maynard-Parisi, the managing partner of Meyer’s barbecue joint, Blue Smoke--who used to take reservations at Union Square Cafe--wanted to open a Southern bar, Meyer met with him. 

He looks for fresh ideas that can attract a fervent following--and talented, passionate leaders. “Once I greenlight an idea, the leadership team meets to decide if the numbers add up,” says Meyer. They did for the Southern bar; Porchlight opened in March. Over the years, Meyer has seen his role change dramatically. “Earlier in my career, I needed to be the writer, casting director, set designer, leading man, and producer,” Meyer says. “I’ve been eliminating a lot of those jobs. I’m an executive producer right now. I still get to pick the best screenplays.” 

From Hot Dogs to Hot IPO

Shake Shack started as a hot dog cart in Madison Square Park--part of a community art project to support the park. It was so popular that Meyer received a permit to open a permanent kiosk there, and he expanded the menu and introduced a “fast food” concept that adhered to his rules of excellence--the hamburger meat was from Pat LaFrieda (the same butcher who supplied some of Meyer’s high-end restaurants), the “special sauce” was made in the kitchen of Meyer’s upscale Eleven Madison Park, and the frozen custard is something Meyer says he’d be proud to serve at any of his establishments. “My job is to give and get pleasure from delivering this great food to you,” he explains. “That shouldn’t apply only to the rarefied experience of fine dining and the small population that can afford that.” Word spread, and the lines grew. 

By February 2015, Shake Shack had opened more than 60 locations worldwide, spun off from Union Square Hospitality Group, and raised $112.3 million in an IPO with Randy Garutti as CEO. “I first interviewed Randy in 1999 for a job at Eleven Madison Park,” Meyer recalls. “He then became general manager of Tabla--and he’s now running Shake Shack in a way that is far better than I ever could.” This makes Meyer happy. “I never had a desire to be COO of a chain,” he says. “Shake Shack really taught me how to let go to the right people.” The long-term plan is to expand to 450 locations in the U.S. Still, the sheer volume of restaurants feels surreal at times. “Today, we opened a Shake Shack in Boston, and I’m not there for the opening,” he says. “It’s a big deal. I’ve come a long way from having to be able to watch all the restaurants. Can you imagine not going to the opening of a restaurant?”

From the May 2015 issue of Inc. magazine