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Start of Interview with
Danny Meyer, Author and Restauranteur...

Jim:      Danny Meyer, welcome back to Mad Money...  First, I need you to explain the difference why hospitality and service are different concepts...

Danny:     Well, everyone talks about service and they always have. Service really is just a way to say did a company do what it said it was going to do. Hospitality is a way to describe how good the company makes you feel. And I think we all know, whether it is a good economy or a bad economy people are going to flock not only to quality and value, but the real value that they want is that you are somebody that they appreciate.

Jim:      Well, doesn’t it cost money to have people… learn hospitality… managers learn hospitality… and doesn’t it ultimately cost more than the guys who don’t give you hospitality?

Danny:     In the near term I think that it does cost more, because what it means, and it doesn’t surprise me at all to see, at this time, that the Meyer Hospitality Index is down, because if you think about it, the first thing that companies do when their revenues go down, to control cost, is they start cutting their employees. And the first thing that a great hospitality economy company does, is that it realizes and believes that the best way to deliver great hospitality to their customers, and ultimately to their shareholders is to give it to their employees. So the companies that are cutting costs, cutting at the muscle, the fiber of the good will, may have a near term advantage, and I would watch that index go down a little bit more, and then I would probably want to hit hard, because long run, they are going to have much, much better staying power. Because the consumer is going to keep going to the place that loves them the most.

Jim:      It is interesting that you say that in terms of apropos today… Macy’s cut their dividend… cut a huge number of employees… and I am cognizant that maybe they are doing what you are describing.

Danny:     Can I just give you a real quick example?

Jim:      Sure.

Danny:     We have the same pressures in the restaurant business that any of these larger companies have, and one of the things that we try to do is cut our staff last. Maybe we are going to say that we can only pay you for four days instead of five days, but, you know what, since times are rough for you, our restaurant Table, as well as Grammercy Tavern, invites all of our staff members to eat lunch and dinner with us even if they are not working today. We want to make it easier for your, even when we are asking you to sacrifice. Now, near term probably a bigger cost for us. long term better good will from our staff, and therefore better feeling for our guests.

Jim:      Clearly this is empirical for you… are you seeing, in your restaurant, in your restaurant group, the hospitality paying off… taking share maybe… other restaurants not doing as well… it is hard to quantify right, because you are not public?

Danny:     I don’t really look so much at market share when it comes to our businesses. I really look at the depth of the loyalties between our communities, our suppliers, our employees, and our guests. And when we have all of those in motion, that is how we have out lived every single one of these down turns so far.

Jim:      Now, let’s talk about some brands where it doesn’t necessarily lend itself to thinking that hospitality is involved. Timberland was one of them, where is the hospitality there?

Danny:     Well remember hospitality is not just for restaurants and grandma inviting you to Thanksgiving dinner. Hospitality is the way to describe the degree to which a company first treats its employees well, then its customers, then the community in which it does business. It’s suppliers, and it believes that it will return a bigger dividend to the investor. Timberland is actually a company that I have been inspired by for many, many years. They actually have wonderful programs in place, and demand, and almost mandate that their employees volunteer in the community in which they do business. I think that that attracts a higher hq, hospitality quotient, in the first place. And I think that every transaction you have with Timberland, even if it is on the web, feels better, they are happy to see me when I come to spend my money there.

Jim:      Now, Costco I think for those of us who are members, we know this. Right now I feel better going to Costco than I ever have, I got the same people I see, I know that it is well run. But, and this is important, we had Jim Senecal, he is the CEO of Costco on, he admitted that right now… his customers he’s not going to give the hit… he is going to hit his shareholders… in other words customers are going to get a break, employees are going to get a break, but the shareholders may not be first. How about that? Is that something that longer term is good?

Danny:     Absolutely, and I think that he well understands. This is what I meant why the Meyer Hospitality Index may be down for a little bit right now, but long term, it is a good investment. Because he understands in the virtuous cycle of enlightened hospitality, if you want to deliver the most, highest returns to your investors, you first give it to your employees so they give it to your customer, to your community, your suppliers, and ultimately you end up, and the reason that it is a virtuous cycle is that we need happy investors to do the thing that our employees most want, which is to promote growth.

Jim:      Alright, now this is a tougher one for me to understand… old No. 7... now I know that when I was at a bar… I was at the Palace the other day… and someone ordered Jack… and I said oh they didn’t order whiskey… is that the hospitality… where is the hospitality of Brown Foreman in No. 7?

Danny:     Well the hospitality is two fold. Number 1 is that it feels really good to have a Jack. Let’s face that. That is not a bad thing to start with. I think alcohol companies are not a bad bet in general right now. Maybe stay away from the trophy wines that people are sort of done with right now. But, I think that Brown Forman is a company, that wherever they do business they get involved with their community. They make a major, major contribution to Share Our Strength, that fights hunger throughout the country. Heck, even here in New York City they sponsor the Big Apple Barbecue Block Party, that brings barbecue to the whole world. But they also have a huge employee driven culture, and for that reason, I know that that good feeling is going to enyour to every interaction and transaction we have with that company.

Jim:      Okay, how about Men’s Warehouse… where I would think of… wait a second, when I want to give something… you know I would go to one of the fancy department stores… individual stand alone men’s suit place…. this is a chain.

Danny:     Same thing, you have got this amazing confluence of especially high care for their employees, and for their communities, and if they put that first, the profits tend to follow. It also doesn’t hurt in some of these cases, that these are companies that are going to benefit from a flight to value. So that is something that is going to help them as well. But that is not what I made a prerequisite.

Jim:      Alright, one last one… reported a tough quarter today… Mattel has been in the news… it hasn’t been that positive… how do we know… can they turn things around… I mean, this is a company that I think America may not think is not that hospitable because of what happened with China… and paint… this is a good brand though?

Danny:     It is something that I am going to have ask my daughter about, because she knows a whole lot more than me. But I would just say for the exact same reasons, not only is this a brand that has been around for a long time, it is here to stay, it has weathered every other recession. But look at how they prioritize their business principles.

Jim:      While we are done… I have to ask… can Starbucks turn it?

Danny:     I think Starbucks can turn it but I think it is going to take a long time. I think that we are in an economy right now where people are saying do I have enough money? Yes or no. And number two, how does it look, what are the optics of going to Starbucks. I have actually seen people walking around with Choc-full-of-Nuts and Dunkin Donuts because it looks better when they come to their office if they didn’t bring Starbucks in. And that is a tough one to overcome, even though Starbucks may have better coffee.

Jim:      Alright, Danny... you come back. And let’s see if you are right. Because I have got to tell you, people were furious, you came on and said that it may not be a good bet… one of the great calls of our lifetimes… I want to see… we have got the index… the book… Setting The Table… I still recommend it for anybody who is starting a business… I even recommended a couple guys in the restaurant business in my town recently but they noted… they called it the Bible.