Danny Meyer’s Lessons Learned From Going Cashless, Eliminating Tipping, and the Shake Shack IPO

April 6, 2019, 12:00 PM UTC

As the CEO of Union Square Hospitality Group, the founder of Shake Shack, and arguably one of the most powerful people in restaurant world, there are few people better to ask advice of and lessons learned in this industry than Danny Meyer.

While discussing USHG’s latest opening, Cedric’s at The Shed in New York City’s Hudson Yards district, this week, Meyer also answered a few questions about some of his more headline-grabbing business moves lately, including the elimination of tipping at his restaurants (meaning incorporating gratuity for service into menu prices, a standard practice outside the United States) as well as controversy surrounding going cashless.

Over the last two decades, the management team says it’s seen the percentage of cash transactions dropping precipitously, partially serving as the catalyst to setting up credit card only/cashless checkout at some of its more fast casual establishments. But there has been an outcry that such practices are discriminatory.

Along with the discussion about the inspiration and goal for Cedric’s, here are more excerpts from that interview, edited and condensed for clarity.

Fortune: There’s been a bit of a backlash to going cashless, which you’ve written about before. Philadelphia, notably, is planning to ban restaurants from going cashless. What’s your response to this?

Meyer: The fact is that most of our guests use credit cards anyway. So it’s almost irrelevant. When I wrote an article about this for LinkedIn, if someone absolutely can’t get credit, and yet they can afford to eat with us, we find some way to serve them. And we always have. Sometimes we give it away. We’ll obviously abide by whatever laws there are. I do think that the world is moving to using less cash. I don’t go to the ATM nearly as much as I used to. Look, I’m sensitive to the notion that some people can’t get a credit card, including, by the way, kids. Say a kid has a really big allowance and they can afford to eat at one of our restaurants, but they can’t get a credit card. I still want to take care of that kid. We always find a way to serve a guest.

This is all kind of ironic. Because in the old days, the controversy was that restaurants only took cash and wouldn’t let you use your credit card because they didn’t want to pay the fee. And so the irony is that now restaurants are willing to pay more of a credit card fee, often for the safety of their staff. It is a very dangerous thing to have cash around a restaurant. That’s been the primary motive for us.

What was the biggest takeaway from the push to eliminate tipping, or incorporate it into your menu prices?

That it wasn’t nearly as scary as people think. That consumers have been very, very willing and ready to accept it. One of the last ones we converted was Porchlight (a Southern-inspired cocktail bar in New York). Because we said, of all places, a bar!

We found that, too, when we eliminated smoking. The one we were most concerned about was our jazz club, the Jazz Standard. Everyone smokes in a jazz club, don’t they? But that only helped our business. And the artists were happy that they didn’t have to be inhaling that when playing a saxophone.

Given how many IPOs there planned are this spring, what was the biggest lesson you learned from the Shake Shack IPO? What surprised you?

The thing that surprised me was how you learned there are really two parallel universes: the business you’re running and the business that people react to. You have consumers who are, hopefully, in love with your business. And you have Wall Street, which either is or is not in love with your stock. And the thing we’ve learned is to focus on running the business and things will work out.

But they’re very different things. Shake Shack stock (SHAK) popped for some interesting reason. Within probably four months, it spiked from $21 per share to $90 something. On the one hand, you have people in love with your restaurant. On the other hand, you have people not in love with the stock price. And you just can’t get distracted by that. As someone much smarter than me once said, “On a day-to-day basis, the stock market is a good voting machine. In the long term, it’s a good weighing machine. And the weight generally evens out.”