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Restauranteur Danny Meyer on minimum wage: we’re ‘way behind’ on a national level

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Union Square Hospitality Group CEO Danny Meyer and USHG Acquisition Group CEO Adam Sokoloff join Yahoo Finance Live to discuss their new SPAC.

Video Transcript

BRIAN CHEUNG: Now, blank check companies-- or SPACs, as they're also known-- are, of course, all the rage this year. The latest is USHG Acquisition Corporation. It began trading on the New York Stock Exchange yesterday. And it's got a connection with the company that you might be familiar with.

Shake Shack founder Danny Meyer, who's also the CEO of Union Square Hospitality Group is behind that. He's also the chairman of the SPAC. We also have the CEO of that SPAC, Adam Sokoloff alongside us. In addition, rounding this a panel out today we've got Brian Sozzi here at Yahoo Finance.

But I just want to ask about the trends in the SPAC space. And I want to direct this question over to you, Danny. What's interesting about USHG is it's not going to be specifically restaurant focused. It could be maybe in retail or other types of industries. What sparked your interest in starting up USHG, and what do you hope to accomplish with this company?

DANNY MEYER: What started my interest was actually many, many years ago. Believe it or not, I was on a competitive station, CNBC, 2010 with Jim Cramer. And he wheeled out a cart with the food from about eight different public company restaurant companies. And he said, Danny Meyer, taste all of this food and tell us which public company to invest in.

And I look at this food, which had probably been on the cart for at least two hours-- none of it looked very good at that point. And I said, I don't need to taste any of the food. I can tell you right now, I would invest in that burrito from Chipotle, because of the way that they take care of the people who work there and their commitment to the community and their customers to do better food.

And whenever this was, the stock happened to have a big, big run-- its first run-- right after that point. And Cramer invited me back and he said, let's take that same stakeholder approach. I want you to create a market basket-- we'll call it the Meyer Hospitality Index. And I did it for him. Only one of the 15 restaurants in that market basket was a restaurant company. And sure enough, it outperformed the Standard and Poors by about 300%.

So this idea was actually germinated many, many years ago. Stakeholder economics-- what we call enlightened hospitality-- is as potent of a business principle today, maybe even more so than it was in 2010. And now we're excited to try our hand at it. And Adam has just been exceptional as the CEO of USHG Acquisition Corp.

BRIAN SOZZI: Adam, how do you spot-- how do you think you will be able to spot enlightened hospitality in the targets that you are looking at?

ADAM SOKOLOFF: Well, I think one thing you should remember, we've got a great group involved with us. We've got a tremendous board of directors, as well as an advisory council. And these are folks who've been around Danny and us, for the most part, for many years. So they get what enlightened hospitality is, and many of them are big fans and proponents of the business philosophy that Danny was describing.

So we've got-- we've had a lot of practice at this in terms of looking at companies. Many of these people-- Randy Garutti, CEO of Shake Shack, obviously understands what that is. Walter Robb, former CEO of Whole Foods-- also a company that practices enlightened hospitality, conscious capitalism. So our team really knows what to look for, how to analyze businesses, not only from a financial standpoint-- which, obviously, we want to buy great companies-- but also from a culture standpoint. And we're going to tap those resources, as well as the resources within USHG itself in order to be able to help us do that.

BRIAN SOZZI: You know, Danny, you pioneered the concept of enlightened hospitality in your 2006 book "Setting the Table." How do you think-- what's enlightened hospitality 2.0 for life after the pandemic?

DANNY MEYER: More important than it ever has been, Brian. I think that we're at a time when people are going to be really, really choosy about where they spend their dollars. And they're going to want to align their commercial choices, whether it's a B2B business or a B2C business, they're going to want to align their dollars with a company whose principles feel really, really resonant with them.

But I think maybe even more important than that, Brian, is that we are at a point where who you hire, who's on your team is the defining factor in how successful you'll be. And I think that employees more than ever look at the company they work for as part of their tribe, and they want to be part of that. So companies that get this, who understand that the best way to have great outcomes for your shareholder is to have great input with respect to who you hire and how you treat the people you do business with.

AKIKO FUJITA: Danny, I'd love to get your thoughts on a larger issue that's being debated over in Washington right now about raising the federal minimum wage. We just had the Maryland senator on talking about the setback that the Senate, or at least those in favor of that, faced because they can't include that in the larger stimulus bill. You've heard the debates back and forth about how it's likely to hurt some of the businesses. What's the conversation that's happening within the hospitality, the restaurant sector about the impact, especially these individually owned, independently owned restaurants are likely to feel?

DANNY MEYER: Well, I think you asked a self-answering question. I think that the restaurant industry has been through probably the toughest year that I hope it will ever have again. And people are quite naturally afraid of anything.

On the other hand, there's another way to look at this. And that is that when you have a law that is national that applies to every business-- that applies to every business everywhere-- then what you have to look at is consumers are going to be willing to spend up a couple of extra bucks if they have to for a fine dining experience at an independent restaurant.

And you also have to look at the millions and millions and millions of restaurant employees-- I'm speaking about our industry alone-- who would have more spending power that they've ever had before. And so personally, I'm a proponent of this, because I believe that it's good for the economy as a whole. I think that we're way, way behind minimum wage hikes on a national level. We're years behind that.

So I'm not concerned. I would be concerned if it were meted out on a state-by-state basis. That could be very dangerous.

BRIAN CHEUNG: Adam, I've got a Wall Street question for you. It does seem like with the amount of SPACs, especially with its popularity over the last 12 months or so, has it increased the competition for capital? You have a big name like Danny Meyer, obviously, behind this. But when it comes to hunting for companies, do you expect maybe bids to get even a little bit more competitive because of the amount of proliferation in the SPAC space?

ADAM SOKOLOFF: Well, there's no question that there are many, many SPACs out there, and more are being raised every day. We feel very fortunate to have been given this pool of capital by our investors to go out and find a company. But yes, it's competitive everywhere. And prices are high.

We're not saying that we're going to go out there and find something really cheap to buy. We want to buy a great company that is culture driven, that has demonstrated a track record of growth and sustainable growth. But we're not kidding ourselves. We know we're going to be competing with perhaps other SPACs at times, other sources of capital. We're really looking for a company, though, that wants to partner with us as much as we want to partner with [INAUDIBLE] bring to the table.

And I do think as you look across the list of suspects out there, I do think we are a little unique. We may not be completely unique. But we certainly are in the sense that we bring incredible operational experience, investment experience, and just experience working with and being inside and on the boards of public companies.

Being a public company is not for everybody, and it's not an easy road to take to get there. And we think by partnering with us, we can help smooth that a little bit. And ultimately, one plus one equals five. So that's what we're looking to do. We're going to focus on what we can affect, and we're not going to worry so much about what we can't.

BRIAN SOZZI: Danny, this is the first time we've spoken since the return of indoor dining in New York City. How are your restaurants doing?

DANNY MEYER: Well, we've, Brian, opted not to return to indoor dining just yet. 35% is allowable as of today, as a matter of fact. And we're going to wait until it gets just a little bit safer out there, till more and more of our team members have been vaccinated. And I think also, till the weather gets a little bit warmer so that we can add outdoor dining to the equation.

This is not-- it's just not a great recipe at this moment. But soon it will be, and we're really excited about where it's going to go.

AKIKO FUJITA: Yeah, no, certainly, a lot of people in the city looking forward to your restaurants reopening again for indoor dining. Danny Meyer and Adam Sokoloff, it's great to talk to you today. And our thanks to Brian Sozzi as well for joining in on the conversation.