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[muSIC PLAYING] [APPLAUSE]
RANDY GARUTTI: That earlier ask was a little ridiculous. Who here has been to a Shake Shack? Can we get it again? Thank you.
We got about 20 minutes here. Can we have a little fun for this session, mix it up a little bit? Let me say that again. Can we have a little fun for this session, mix it up a little bit?
Let's kick it off with a little visualization exercise. Everybody close your eyes. I want you to take back to the last time you had fast food. What did that smell like? What did that person treat you like at the cashier? What did the bathroom look like? Did you even go inside? Just take your visual of that for a second.
Open your eyes and hang on to that. It is my good fortune and honor to tell you our story today, to tell you a little bit about the company that I'm lucky to lead, to have been a part of since we created it, and that's called Shake Shack. Shake Shack was an incredible accident, something that we never intended to become what it is today.
And as I stand here today, we just opened a restaurant in Philadelphia-- our 35th Shake Shack. I stood on this stage three years ago for another conference and gave a speech about Shake Shack, and we had two. So we're in a fun place right now.
I do want to add the legitimacy of my Cornell freshman ID. I'm a little older than Cheryl. Cheryl and I worked together at Tabla restaurant. Little known fact of the day, I'm so old that I was RJG1@Cornell.edu. So I'm getting on in years. Here, this is my graduation at Schoellkopf. It was a definitely real Cornell story.
I grew up working in restaurants. Since I was 13, it's all I've done, and it's all I'll probably ever do. I worked in a bagel shop in New Jersey. Through school at Cornell I worked at Chili's, and I can make an awesome blossom in the fryer as good as anybody. I worked at the Marriott. I studied in Paris, and then when I graduated school and I lived in Aspen, Colorado-- then I moved to Maui in Hawaii. And in Seattle I met a guy named Danny Meyer, and he gave me hope for the New York restaurant business, which I never-- I was from here.
I did not want to work here. I did not want to come back here. I was skiing, and surfing, and having fun, and Danny changed my mind on what restaurants could be. So 14 years ago I came back when I was 24. He basically said, you're not ready for this, but we're going to give you a chance to run one of our restaurants, and that was Tabla. So that's my history of getting here.
Let's talk a little bit about this little thing we call Shake Shack, the community gathering place. What we tried to do was take that old roadside burger stand that everybody had in their hometown and bring it up to these times, and this is what came. If you remember nothing else about what I say today, Shake Shack is about the experience of people coming together. It's not about the great food. It's not about the sincere hospitality. It's not about the cool design. It is about the experience.
So my job today is-- I've learned a long time ago it's not my job to give advice to a bunch of smart people. A lot of people are smarter than me-- most-- all of you. And my job is to tell our story, and to tell the stories and the lessons that we've learned, and hope that it'll help you in your own way.
So the story kicks off in 1985. That's Danny Meyer. You talk about something and nothing-- Danny Meyer in 1985 started Union Square Cafe. Anyone ever been there, Union Square Cafe in New York City? Perennially one of the top restaurants in New York. At that time in '85, every restaurant in New York that was good had a le or a la in front of it, and there was some stuffy guy in a tuxedo, and he made you feel really bad if you didn't have a reservation and if you didn't order an expensive enough bottle of wine. That's what dining was in 1985.
Danny said, why can't we roll up our sleeves, be comfortable, and still give you the best food, the best wine, the best sincere hospitality, and make it feel right? And that's what Danny did, and we are all living in an age of restaurants that we go to defined by this restaurant right here. And that's what Union Square Cafe looks like today.
Gramercy Tavern Danny did nine years later-- our second restaurant. He never intended to have a second restaurant. He just wanted to have one. He did Gramercy Tavern. Over the years, we opened some more restaurants-- Tabla and 11 Madison Park. And this amazing thing happened outside of Madison Square Park.
If anyone's ever been there 12, 13 years ago, that park was pretty bad. I worked there at night, and I'd walk around it at night. It was homeless. It was drugs. It was a beat up-- rats this big coming out. It was bad.
And Danny got together with a group of people and decided we're going to raise some money to rejuvenate Madison Square Park. And as with any great rejuvenation, any great neighborhood renewal, it begins with art. The first art project in Madison Square Park was a guy who decided he wanted to put taxis-- New York taxis on stilts, and as a part of it, he wanted a hot dog cart. He wanted New York hot dogs, the most democratic of things-- taxis and hot dogs. That was the art exhibit.
We ran this for three years, and we did it the way we know how to do restaurants. We had some fun with it. We did Chicago style hot dogs. We made fresh baked cookies. We made fresh ice cream, and people lined up. All of a sudden there would be 50 people on line for this little hot dog cart-- then 75 and 100 people. And the thing just took off.
And three years later, they did an RFP to decide if this little hot dog cart should become a kiosk, and we won it, and we set out to decide, what should this thing be? Every great entrepreneur has their back of the napkin moment. This was Danny's. He wrote it down. One day he just wrote it down and said, this is what it should be. So by the way, if you've done this, save your napkin. You guys all have one somewhere.
We thought there should be fun ideas. Up top we thought the first name was going to be Custard's First Stand, or The Parking Lot, or The Dog Run, and this was the menu Danny envisioned that we should do. And all it was supposed to be was this little thing to sell dogs, and Shake Shack was born. We set out to design it. We had a dialogue with the park. We always asked the question, what can we add to the dialogue when we build a restaurant? And this one was about the park and how would it feel, and how it would it taste, and should we use the same leaves and ivies growing in the architecture?
And throughout this process, we always ask the question, whoever wrote the rule that it needs to act this way? I'm going to take you back to your visualization. Whoever wrote the rule that what you just experienced in your last food fast food experience is how things need to work? That's pretty much how it feels, right? Whoever wrote the rule?
You know what they did over 60 years? Fast food started out as a pretty good thing, right? It was the place that people came together. It was fresh. It was good.
And then it became, how efficient can it be? How fast can we get you in and out of here? And you know what would be our favorite thing? Don't even come in. That's the best thing that could happen to our business is if you don't come in. And we turned that on its head, and we made Shake Shack.
And a few years ago, a number of the leading burger brands were using this as their slogan-- 100% beef. You saw these commercials. Lots of them were doing it. We asked the question, what the hell was it before that was your tagline?
I mean, are you serious? That's what they were talking about? So we said, we're going to 100% all natural. No hormones, no antibiotics ever. Ground fresh 100% this morning.
If everyone else is living on factory farms, we're going to work and be sustainable. Work with small farmers doing it the right way. When we put bacon on a burger, it's coming from these guys in a small farm, and it's grown the right way. If everywhere else you go you get a shake and it's been frozen for days in some machine, or they're scooping out ice cream that might be three months old, we said, you know what? We're going to spin our frozen custard fresh ice cream all day long. You go get a shake at Shake Shack, that was just made hand spun.
Where everyone else says no dogs allowed, we said we're going to make a menu item and call it the Pooch-ini. A really cool little bakery in the West Village in New York makes Shack burger dog biscuits, and we put a little peanut butter, and some frozen custard on there. And we want you to bring your dog, let him hang out outside, and he can have the experience of Shake Shack, too.
When everyone else says, how can we build restaurants so they're so efficient, and they-- just so hard that you come in, and you leave as fast as possible-- come again. Thanks so much. And we said, what can you use again? And we took reclaimed bowling alleys from all over the country, and we now take them apart by hand in Brooklyn, and build them back, and that's the tables you sit on-- are all reclaimed bowling alleys.
We're trying to do our part to lessen our impact on the environment. If everyone else builds a restaurant, and puts up a bunch of construction plywood, and says post no bills, we want to have them seeing green. We took that idea, and we did a huge wall of live plants that we kept alive for the whole construction process, and when we were done, we took it down. We donated all those plants, and that's what that looked like when we took it down.
If everyone else has big construction boarding that says, post no bills, coming soon, Shake Shack, we found an artist, who, after Hurricane Katrina in New Orleans, wrote, "before I die I want to" hundreds of times on a wall. This is our team out at midnight one night writing this on a wall. By the next day, we had given a place for people to share their dreams, and that's what it looked like.
And this is what happened. People came from all over New York City to share their dreams, and we were really worried. People said, we can't do this. People are going to write something pornographic. It's going to be terrible. What are we going to do?
And you know what got written? Things like, before I die, I want to find God. Before I die, I want my brother to get sober. People came and shared their dreams for Brooklyn and what they wanted that neighborhood to be. Every day we wiped that clean, and every night it looked like that again. It was incredible, and that's that restaurant in Brooklyn.
It's funny that Cathy beat me to this one, so I'm not taking the afternoon session again, but Cathy said it in a different way. There's two things that hang on my office wall if you come in. One is Danny's original back of the napkin sketch, and the second one is this. The bigger we get, the smaller we need to act.
And here's how we think about that. Upstairs our good friend Pete Wells-- I'm sure he's hearing me now. He's the food reviewer for The New York Times, the most powerful voice in food in the country. A year and a half ago, he gave us one star in The New York Times. I don't know if there's ever been a $4 burger joint that got a star in The New York Times. It was awesome, but you know what he killed us on? Our fries.
"Mr. Meyer runs all of the world's great restaurant companies. Can't one of his chefs show him how to make a decent French fry?" And then that day, Pete showed us a mirror and said, for nine years, people have been telling us that our fries could be better. They're frozen. They're frozen. I admit it.
And we said, you know what? We're going to change this, and about a month ago, I sent Pete that t-shirt. It landed on his desk upstairs. It just said, heard. Thank you for helping us see what we knew was right all this time.
I'll tell you, when you have 35 restaurants, and you're serving thousands of people a day at every restaurant, do you know how hard it is to hand cut potatoes and fry them in house fresh, never frozen? And guess what? That's what we're doing. We're converting every Shake Shack over this next six months. One of the hardest things to get-- the bigger we get, the smaller we need to act. We work with guys like the Mast brothers out of Williamsburg in Brooklyn-- probably the most sought after cool little two guys making-- roasting everything in Brooklyn using their own chocolates.
You ever hear of the cronut? You guys hear about this thing? If you haven't, you missed the biggest story in food. This cronut thing got mad. It got crazy. We found out cronut guy, Dominique Ansel was a Shack fan. So we called him up and said, let's do something cool. So we created a frozen custard with butter caramel and his cronuts, and that's how many people lined up. Before we opened at 10 o'clock in the morning, 350 people lined up. 1,000 portions, one day-- gone by 1 o'clock. 100% of the money went to two charities that us and Dominique cared about. We weren't making money on that.
But here's the thing. All of you can do all of that. It's really easy. What I just said, anybody can copy us. A lot of people do.
This is what we do differently. This is it what we live by. People will forget what you said. People will forget what you did, but people will never forget how you made them feel. When we talk about hospitality, we talk about it in three ways. Hospitality happens, number one, when I'm on your side. How often, in those fast food experience that you thought about, were people on your side?
Number two, hospitality occurs when things happen for you, not to you. And last, we teach our team to live by the charitable assumption. I'm going to tell this quick story here I like to tell to illustrate this. So a woman is a real road warrior, probably like a lot of us here. She goes to the airport one day, grabs a box of cookies, sets them down next to her. She's waiting for a flight. She looks over, and the guy next to her is eating her cookies.
Five minutes later, she looks back again. She's so upset. She can't even believe this. She doesn't say anything. She looks back. The guy has the guts to lift up her cookies and offer her one. And she is pissed. I mean, she's just like, get me out of here, and she just walks out, and gets on the plane, and doesn't even say anything. I can't believe this is happening.
An hour later, she opens her bag on the plane. Guess what's in there. Her cookies. As New Yorkers, we're born not to trust people. Most every interaction we have in this city in most of our life is mistrusting out of the gate. We teach our team to have a charitable assumption, to trust, to use hospitality to take care of our team and take care of each other.
So where are we going? I'm going to play a quick two minute video for you, if we can tea that up, from our most recent opening in London. So there you go.
[VIDEO PLAYBACK]
[MUSIC - YOUNG KATO, "DRINK, DANCE, PLAY"]
- (SINGING) So it's begun, and there's no excuses. You're already under the thumb. Can you break away from the lines that have been drawn? So. So clap your hands. Let's play. You're moving my way. What's in store no one can say.
So clap your hands. Let's play. You're moving my way. Last night I heard you say. Whoa. We drink, and we dance and I finally take off your clothes. You stood on the edge, and I watched you falling. Now days are gone, and you're aimlessly searching for a light that once shone. Think again. Who is this all for?
So. So clap your hands. Let's play. You're moving my way. What's in store no one can say. So clap your hands. Let's play. You're moving my way. Last night I heard you say. Whoa. We drink, and we dance and I finally take off your clothes. You stood on the edge, and I watched you falling. We drink, and we dance, and I finally take off your clothes. You stood on the edge, and I watched you falling.
[END PLAYBACK]
[APPLAUSE]
So today this is the first opening I'm missing-- this one in Philadelphia-- because this happened to be the day, and I sent our guys a text this morning. I just said, guys, just have fun today. Remember something. We're not curing cancer. We're not cleaning up nuclear waste here. It's just lunch.
[LAUGHTER]
Just have a good time. And have you ever seen a burger joint that looked like that last two minutes? And that's what we're trying to do. So even though we're small, we believe that, by going a little bit more around the world, it's the right way to grow.
So I just want to show you some fun projects we're working on. That was London. This we did a couple of years ago. This was Citi Field, and we tried to change the question of whoever wrote the rule that food at ballparks has to be bad. We just need the Mets to start winning a little bit more to have a little more fun, but this is Westbury, Long Island in the suburbs-- the first time we ever built one out of the ground. And that whole roof is solar panel. We're getting about 10% of our energy needs for that shack out of there. There is no ROI on that project, none whatsoever on doing a $150,000 solar array that gets a little bit of energy out. We believe it's the right thing to do. That's why we do it.
This is Goldman Sachs headquarters actually feeling like a community center and fun. That's what we built down there. That's what we do. That's London. That's a 500 year old building in Covent Garden. This is Istanbul blocks away from Taksim Square, where you watched a lot of news this summer. We just opened this one. I was there the day that that all erupted on Taksim Square.
This is Kuwait-- one of the coolest places in Kuwait. And this is our second Shake Shack in the same mall, believe it or not, because it's so popular over there. This is Dubai in Jumeirah Beach. And I show you these just because they're fun examples of how we think differently, and how we're not here just parachuting our brand in and deciding how it should be. We are every time designing it to fit the place that it belongs.
Take you back. When we sat down, no one ever dreamed that I would be on stage talking about the 35th restaurant or saying anything of value to you guys. This is a total accident. It was a hot dog cart that was supposed to help an art project. It was this chicken scratch that turned into something special, and we are going to grow, because by growing, we're going to put a lot of other cool people in business, too. The bigger we get, the smaller we need to act.
Now, I know we're going to have a few minutes for questions, but I do want to whet your appetite that, since this is a Cornell event, we made a Big Red velvet frozen custard for you that's waiting downstairs. So that's going to end the whole Q&A session.
[APPLAUSE]
Now, we're early here, so just bear with me. If it's either melted or too frozen by the time we get there, just hang in there. We're doing our best to walk 400 portions of frozen custard down the street right now from our 44th Street location. So our guys are trying hard. Thank you for your time. I'd love to take some questions. Appreciate it.
[APPLAUSE]
SPEAKER 2: People were submitting questions until you said there was custard outside.
RANDY GARUTTI: Actually, we got time before they get here, right, Dave?
SPEAKER 2: That's right. They're actually still turning the corner, I hear.
RANDY GARUTTI: Good. Good.
SPEAKER 2: So we actually do have some time for questions here. So let's see here. So how did you stay ahead of the competition as you were building Shake Shack? Is one of the first questions. And do you even think of the competition as competition? I would also add to that.
RANDY GARUTTI: Most of our fine dining restaurants are all within walking distance of each other, and we grew up in New York. Now, you can count on one hand how many international chains came from New York. It doesn't really work that way. They usually come out of places like Orlando, or Columbus, or Phoenix. They're a lot cheaper to do business. Generally people who figure it out in New York can't figure it out outside of New York. It's a very complicated thing to translate your business.
So we learned how to run restaurants in New York, and we don't really believe that competition is the thing that matters the most, and we never look at our competition and say, because they did this, well, we better then move over here. Our job is to be great at what we do every day. And if we can do that, there's enough human beings in the world that want to eat a burger that we're going to be fine. So we don't worry about competition. We worry about ourselves and the way we're living every day.
SPEAKER 2: Why does everyone say that the restaurant business is so hard? Why do so many restaurant businesses fail? What's your take on that?
RANDY GARUTTI: I think restaurants are cool and fun. And when I'm at a cocktail party and everybody's talking, there's a guy who's a lawyer, and there's a guy who's a finance guy. And we've got the circle, and everybody's talking. And this guy says, I'm a lawyer, and the conversation kind of ends. And then I say, I work at Shake Shack, and everybody's like, oh, no way. You work at Shake Shack?
People can relate to the restaurant business. It's like if your buddy is an architect people want to talk to that guy. I got a house. You've got a house. I eat. You eat.
So I think the problem with the restaurant business is that, because of that, everybody wants to do it, and people who don't realize how hard it really is get into that business. And it's tough, man. It is low margins. It is crazy hours. It is tough.
You think it's easy? Working in that original Shake Shack there-- we're going to serve 2,000 people today. Those guys who work for us-- it's like going 10 rounds with Mike Tyson to work a shift. It's tough work, man. And now we're making you cut potatoes. You think they like that idea?
At lunch, I didn't stay. I went down to Grand Central where we opened last week, and I talked to the potato guy. He was there working it. It's damn hard work, but it's fun. It's fun. We're having a good--
SPEAKER 2: There's another question here about how you choose locations. And also as part of that, how did you choose between going the franchise model route or doing an owned and operated route?
RANDY GARUTTI: So everything in the United States we operate and own, and then internationally this total-- part of the accident of Shake Shack again-- when we had two restaurants, a man named Mohammed Alshaya came and met with us, and we sat with him. We never really heard of him before, and he said, I want to bring Shake Shack to Kuwait. We had two.
We were like, what are you talking about? And then we learned these guys have 700 Starbucks. They have H&M. They have Pottery Barn. They have every great brand. They've never done a brand like Shake Shack, and he said, this is special. I want you to come see.
And when we went-- we did two trips-- and what we came back with was realizing that, you know what? First of all, the Middle East was thirsting for a community gathering place like we gave. And mostly Western brands over there with the right partner are better run than they are here. I won't name names, but if you go there, and you hang out in a mall in Dubai, and you see the brands that you see down the street here, they are so good over there. They do a great job.
So choosing locations, we want it to be a beehive of activity. If you look at every location we've ever chosen, it's a place where people from all walks of life can come together. Shake Shack works because your richest friend and your poorest friend can meet there. We sort of grew up in a bad economy here. Really, in the last five years, is when we did all of our growth. And if you were that guy who lost your job at an investment bank, you could still take somebody on a date to Shake Shack and not be a total loser, you know?
And that works, so it's cool, and everybody can afford it. So we put ourselves in places where that's happening naturally. And then we do what we do on top of that, and it just becomes this really community fun place.
SPEAKER 2: Well, I hosted my wife's 30th at Shake Shack, so I don't know what that makes me.
RANDY GARUTTI: You're a good man.
SPEAKER 2: But it was pretty awesome.
RANDY GARUTTI: Thank you.
SPEAKER 2: What about brand and design? So obviously brand and design is something you guys hold and really value? A lot of restaurants and companies don't. How did that come about? And how does that sort of been preserved?
RANDY GARUTTI: I was up on this stage a week ago with the panel for Adweek, and the subject was brand. And it was about, how did you guys get this brand and all this? And it's because we thought differently about it.
So when I went out and got a marketing director last year, I said, I don't want to talk to anybody in the restaurant business. I will not interview someone who knows about restaurants. I ended hiring a guy who runs marketing for GQ to run Shake Shack's branding. We have to think about it differently.
We do not advertise. You won't see us doing newsprint or these other things, which pissed off a lot of the guys at Adweek, incidentally, last week. But we do it on-- and if you follow us on social media, you'll see we never are selling anything. We're not pushing at you. We're making you part of the community, and I think that's what's made our brand so strong-- to be the anti-chain chain, to grow, and to use-- to make those hard decisions.
It's hard to open a restaurant in Dubai and make it feel and taste like Shake Shack, but if you go there-- and I hope some of you will-- I guarantee you you'll be proud of what it feels like. It's a cool thing. So we're blessed with a good brand that is mountains bigger-- the brand is mountains bigger than the company-- thank god-- today. And we're doing our best to keep it that way.
SPEAKER 2: There are two related questions here about a Shake Shack coming to Ithaca, or just some great Shake Shack ice cream or custard coming to-- [INAUDIBLE] alumni. No, but how about Ithaca? Is that ever going to be in the cards?
RANDY GARUTTI: I sure hope so. I think right now we're concentrating on places that are a little bit busier than Ithaca most of the year.
[LAUGHTER]
SPEAKER 2: Understood.
RANDY GARUTTI: But I love Ithaca.
SPEAKER 2: I'm going to be in trouble if I don't ask these questions here.
RANDY GARUTTI: No, I got people really upset with me because we have one in New Haven near Yale. We just announced that we were opening in Cambridge near Harvard. Listen, you got to have a place where people who can't get into Cornell go to school. It's all right.
[LAUGHTER]
We're so thankful that we're going to Harvard. It's going to be an awesome place. And then we just opened today at U Penn. So the ivies are coming. We're going to get there. I promise.
SPEAKER 2: Well, if you don't go to Cornell, you have a contingency plan. You can get Shake Shack. What about--
[LAUGHTER]
What about training? Obviously training is really important to you for the employees and the hospitality experience. Can you give us a little insight into how you get people trained and enthusiastic about their jobs and how you keep them?
RANDY GARUTTI: So we talk about leaders training future leaders. That's what we're doing. We spend a ton of time on that. We do a couple of things that are different. First of all, we pay higher than minimum wage in these other-- what these other brands do. But in addition, we give 1% of the top line revenue of the company every month to the lowest paid workers on there as a bonus on their paychecks. So if we have $100,000 a month, we take $1,000, and we give it up to those guys who are making $9, $10, $11, $12 an hour. It's immediate revenue sharing and immediate we want to be busy, too, because we're getting a cut of that. And that really has worked for us well. And it is about developing leadership. We'll have two big leadership seminars coming up here that we will go away for a few days, and just bond, and create intimacy with our teams, and allow them to continue to figure out how to be stronger leaders.
SPEAKER 2: And when you said you're redoing the whole fries thing, are you getting rid of the crinkle fries and replacing them with this--
RANDY GARUTTI: Crinkles are gone. You saw them in that video. Enjoy them, because they're going out, and there's never been a more polarizing thing.
SPEAKER 2: Just wanted to get that straight.
RANDY GARUTTI: It's like your mom's apple pie is always going to be the one you think apple pie should taste like. It is polarizing. A lot of people are upset, and I'll never forget reading Steve Jobs book. And I can't remember if it was the phone, or the iPad, or whatever where he was quoted as saying this is a bet the company moment. For Shake Shack, as minuscule as it sounds-- we're talking about potatoes here-- it's a bet the company moment.
And I am so confident on the other side of this-- you may like those old ones better, but you can't argue with me when I tell you that they were frozen. And you know frozen fries stay crisp? They put a lot of stuff on top of them that you don't want to eat. That's why they stay so crispy and yummy. So these are potatoes, oil, and salt. It's hard for you to argue with that. And it's hard for that to taste bad, anyway.
SPEAKER 2: Great. Randy, one last question before we get some custard here. How big do you envision Shake Shack becoming? And what do you think the key challenges will be as you really continue the expansion?
RANDY GARUTTI: Everybody asks us that. People who are potential investors-- everybody wants to know, well, how many can it be? How big can it be? If, when I took this over, building-- I told you we we're going to have 35. I would've said you're nuts. This is how we think about it. If every Shake Shack gets better by opening another one-- if the existing ones get better every time we open a new one, then we should keep growing.
If we're developing the leaders in step with the great people that we need to run these restaurants, then we should keep going. And when communities call us, and ask, and say, hey, I want a Shake Shack-- which in the last three days I've gotten calls from Hong Kong, Manila. I mean, you name it. It just gets out of control. SPEAKER 2: Ithaca.
RANDY GARUTTI: Ithaca now. And we're going to keep going as long as we feel like we're doing the right thing, and today we certainly feel that way.
SPEAKER 2: Randy Garutti, thank you very much.
RANDY GARUTTI: Thank you.
SPEAKER 2: Thanks again.
Shake Shack CEO Randy Garutti '97 shared his passion for what started out as a hotdog stand in a New York City park at the second Cornell Entrepreneurship Summit NYC Oct. 11, 2013. His business has grown into an international brand with 32 stores including one in Dubai.
