Danny Meyer on laying off 2,000 employees during a crisis

Executive overview

When COVID-19 eliminated revenue overnight, Danny Meyer faced a paradox: his "employees first" philosophy demanded he lay off 2,000 people to save their jobs. The restaurant industry's economics — razor-thin margins, fixed costs that don't pause, no ability to defer lost revenue — left no other path.

Meyer's enlightened hospitality framework (employees, customers, community, suppliers, investors) guided every decision, but the crisis forced him to adapt it in real time: acting fast, making exceptions for individuals, and building new infrastructure — a 501c3 employee relief fund — almost overnight.

Laying people off to protect their jobs is bitter medicine — but only works if the company survives to rehire them.

The decision to close and lay off

• Closed a handful of restaurants days before the city mandate, after a single employee showed flu symptoms
• Revenues vanished; retained only 147 of ~2,200 employees
• The framework question: how do you put employees first by putting them out of work?
• Four-part answer: remote work makes presence dangerous; there is no work; survival requires a solvent company; unemployment insurance and health coverage exist as a bridge
• Paid staff through the following work week; preserved all PTO balances for returning employees
• Covered the company's share of health premiums through April 11th

The employee relief fund

• A 501c3 they had been contemplating for two to three years, fast-tracked within days of the layoffs
• Seeded with Meyer's full compensation; 100% of gift card revenues directed to the fund
• Designed for speed and simplicity — a board composed largely of employees, not Meyer himself
• Spawned by a single email: a pregnant employee whose due date coincided with the end of her health coverage
• The exception became a principle: group policy shouldn't override doing the right thing for an individual

Communicating at scale

• Had never laid off more than three or four people at once before this
• Conducting 2,000 layoffs remotely, via Zoom, with no ability to speak one-on-one
• Tension between authentic compassion and the logistics of mass communication
• Honoring yesterday's decisions while looking for improvements every single day

The economics of the restaurant industry

• 660,000 restaurants in the US — more employees than the airline industry, feeding more people daily
• A restaurant is a manufacturing company (kitchen) with a sales room (dining room) in expensive real estate
• Typical margins: 3–10% on a good day; fixed costs (rent, utilities, loans) don't pause when revenue stops
• Lost revenue is gone permanently — unlike a car purchase, a missed Tuesday dinner is never made up
• Even full layoffs don't eliminate fixed costs; the math still doesn't work without relief

Planning for recovery

• Modelling revenue scenarios from June through October, assuming no government help
• Government asks: reimburse payroll for retained staff; freeze fixed costs in exchange for a rehire commitment
• Opportunity ahead: historically low unemployment made recruiting hard; a recovery could flip that
• Not ruling out failure — his father's business bankruptcies are a constant reference point
• Goal: emerge with the workforce intact and use the reset to build a more efficient operation

Values under pressure

• Stakeholder framework (employees → customers → community → suppliers → investors) holds in a crisis, especially in a crisis
• Leaders should act decisively, stay nimble, and never lose sight of core values
• The question to ask: when this is over, will you look back and say you were true to yourself?
• Outpouring of community support — employees receiving job offers, companies offering resources — as a source of optimism