Danny Meyer on laying off 2,000 people while keeping culture intact

Executive overview

When COVID-19 shut down restaurants overnight, Union Square Hospitality Group lost all revenue but kept fixed costs. Danny Meyer laid off 2,000 employees — nearly his entire workforce — in a single day.

His framework: enlightened hospitality — a stakeholder priority order (employees, customers, community, suppliers, investors) — guided every decision. Breaking the cycle anywhere breaks it everywhere.

Protecting people in the short term is the only way to protect their jobs in the long term.

The decision to close and lay off

• Closed individual restaurants days before the city mandated it, after employees reported flu-like symptoms
• Revenues disappeared overnight; fixed costs — rent, utilities, loan payments — did not
• Framed layoffs as "business chemotherapy": nearly killing the company to save it
• Laid off 2,000 people in a single action; had never previously laid off more than 3–4 at once
• Remote-only communication made one-on-one conversations impossible at scale

What they gave employees on the way out

• Paid through the following work week after layoff date
• Issued a PTO day to each employee
• Guaranteed all benefits and accrued PTO would be restored upon rehire
• Covered the company's share of health insurance premiums through April 11th

The employee relief fund

• A 501(c)(3) fund the company had been planning for 2–3 years but had not launched
• Crisis accelerated the launch; Meyer contributed his full compensation
• Funded by selling gift cards — 100% of gift card revenue directed to the fund
• Employee-run board (Meyer excluded) decides distributions
• Created after a pregnant employee's due date coincided with the end of her health coverage — a one-size-fits-all policy required an individual solution
• Designed for fast, simple applications at scale across 2,000 claimants

Why the restaurant industry is uniquely exposed

• 660,000 restaurants employ more people than the entire US airline industry
• Restaurants are manufacturing businesses (kitchen) with a sales room (dining room) attached — located in expensive real estate
• Labor and real estate costs make the margin razor-thin: 10% is a good day, 3–5% is common
• Zero revenue means zero ability to cover fixed costs, regardless of company size or reputation
• Even large chains with strong balance sheets face the same structural economics

Leading through the crisis

• Use a consistent values framework to make decisions under uncertainty — it prevents ad hoc improvisation
• Go into meetings with a strong point of view, not the answer; bring in diverse external information
• Honour yesterday's decisions while actively looking for what you could do better today
• Be decisive, nimble, and open to course corrections — without abandoning core values
• A company that survives with its values intact will be better positioned to hire and grow on the other side
• Employees writing to say "I'm concerned about you, Danny" reinforced that culture was holding

Lessons from his father's failures

• Meyer's father was a hospitality entrepreneur who went through bankruptcy
• Key mistake: scaling with the wrong team
• Watching that as a son shaped Meyer's resolve to avoid the same path
• Does not dismiss the possibility his own company could fail — uses it as motivation to be rigorous