The Founder of Shake Shack on the Future of Tipping – and Why Restaurants Will Come Back Stronger

Photo to accompany article on Shake Shack founder Danny Meyer, and his thoughts on tipping Jamie McCarthy / Noam Galai / Getty Images
Danny Meyer, founder of the fast-casual chain Shake Shack, is bullish on the future of the restaurant business.

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Few industries have been hit harder during the COVID-19 pandemic than hospitality, particularly restaurants.

But at least one major restaurateur is bullish about a comeback. 

“What the future does not look like is restaurants and bars full of masked people with plexiglass between every human being,” said Danny Meyer, founder of the fast-casual chain Shake Shack and owner of several notable New York City eateries. 

In fact, he ventured so far as to say that the “next generation of restaurateurs has it really good.”

“If 25% of the leaves fall off the tree right now, I promise you there will be 30% more leaves when spring comes—and I say spring metaphorically,” Meyer recently said during a live streamed conversation with Ric Elias, CEO of NextAdvisor’s parent company Red Ventures. 

“There’s great opportunity for new restaurateurs with new, fresh ideas to get into the business because they will not be saddled with back rent, they will not be saddled with having to lay off people. They’ll be able to start from scratch,” Meyer said.

The flip side of this, of course, is all of the restaurants we will lose in the short term due the restrictions implemented during the pandemic. In fact, a recent study notes more than half of restaurants in the United States will permanently close. As of May, closures already cost almost 6 million people their jobs in restaurants.

Even as cities around the country begin to reopen, the state of dining is still fairly precarious — in New York City, one of the former hotspots of the pandemic, indoor dining is postponed indefinitely. Outdoor, socially distanced dining is allowed, although it’s very dependent on the weather.

Meyer, whose portfolio includes notable New York restaurants like Gramercy Tavern, Union Square Cafe and The Modern, says rent, a major problem for restaurants in big cities, may become cheaper. He sees “lots of much better real estate opportunities, because I think the real estate market is going to be depressed.”

Meyer made headlines last week when he reversed the no-tipping policy he had introduced at his restaurants in 2015. Noting that tipping was tied to many problematic issues including racism, sexism, and pay discrepancies, Meyer and his staff had decided to put the full cost of the meal up front in the price. 

Changing course was “an incredibly difficult decision to make,” he said, but a necessary step as cities around the world begin to reopen. As Meyer puts it, he didn’t want his staff (or potential recruits) to be at a disadvantage at a time when people are going out again and generously tipping their servers, seeing them at an increased risk of infection.

When he does reopen his restaurants, Meyer decided his company, Union Square Hospitality Group, will not only return to tipping but have each restaurant pay a percentage of tip revenues to kitchen staff. That way, when revenue goes up, kitchen staff will also do better.

“Tipping is not the problem,” Meyer said. “It’s the inability for tips to be shared.”

“Once tips can be shared,” he said, “you’re leveling the playing field among genders, races, positions in the restaurant — everyone who contributed to your meal gets to benefit from your gratitude.”

In the meantime, he’s pushing policymakers to eliminate the sub-minimum wage for tipped employees and introduce one minimum wage for all restaurant workers, as well as allow tips to be shared among all hourly workers nationwide. Those changes, Meyer says, would address every problem the elimination of tipping was intended to fight.

According to Meyer, “If you believe that this is not the thing that’s going to end the world and if you believe that this thing has a point at which it’s over, then what you have to ask yourself is: who were you while it was happening and what choices did you make?”