Restaurant industry leader Danny Meyer speaks on tipping, innovation at SXSW

File photo of Danny Meyer, chief executive of the Union Square Hospitality Group. (Evan Sung/The New York Times)

File photo of Danny Meyer, chief executive of the Union Square Hospitality Group. (Evan Sung/The New York Times)

At a conference of tech disruptors and innovators, one of the leaders in both of those fields is a man who runs restaurants. But Union Square Hospitality Group boss Danny Meyer isn’t just a man who runs restaurants, he’s a bold visionary and a leader in hospitality.

He spoke with Bon Appétit’s Adam Rapoport at South by Southwest Friday at the Austin Convention Center and discussed his revolutionary idea to abolish tipping and function under the “hospitality included” model. The change was enacted to help cultivate and keep kitchen talent by paying them larger salaries.

Since the change, the Modern, USHG’s first full-service restaurant to take on the change has seen a massive increase in people applying to be cooks. Those working the line have seen their salaries go up by a couple of dollars an hour.

Despite the change, Meyers said front-of-house staff have no lost incentive to work hard. The Modern now takes 13.5 percent of the restaurant’s top line revenue and spreads it out across the service staff. The distribution is determined by the number of hours and shifts worked by a server. So, if someone works a Monday lunch instead of a Friday dinner, they aren’t punished, and everyone is still incentivized to sell more to raise the revenue number. Eventually Meyer wants to figure out how to rank how the restaurant is performing, and if it succeeds the model, the 13.5 percent could go up higher. He doesn’t have a model in place but joked that maybe somebody in the tech-savvy audience might have a solution. Given SXSW’s history of making connections, I wouldn’t be surprised to see that happen.

But, despite all the numbers talk, Meyer, whose book “Setting the Table” is an industry bible, kept returning to the human element of making the business a success.

“We’re looking for people whose greatest talent is making people happy,” Meyer said about entry-level positions available to people with limited training.

The idea to grade the restaurant and maybe increase the revenue share pool? That came from an employee. Meyer constantly talked about listening to his customers and listening to his consumers. A lesson which all bosses could stand to hear.

Though Meyer always does an excellent job of discussing businesses in human terms, the change was financially driven. Meyer says that you’ll always be able to find a restaurant that allows tipping, but that the industry is a “house of cards that is gonna fall in about five years.” He needed to find a way to pay cooks, to keep his talent, to save his business. Eventually other restaurants will catch on, but Meyer, as always, is ahead of the curve. He recently told the Freakonomics podcast that December was a record month for revenue at the Modern. A true innovator.


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