The fast-casual restaurant chain plans to accelerate growth with around 80 openings per year
Shake Shack, the fast-casual burger chain founded by hospitality guru Danny Meyer, does not have a loyalty program, something chief executive officer Rob Lynch is working to rectify.
“I can't help but find that a bit ironic, given that Shake Shack was built on the principles and culture of Enlightened Hospitality, where understanding the wants and needs of our guest is paramount,” Lynch said, referring to Meyer’s service philosophy, as he discussed the chain’s third-quarter earnings Wednesday morning.
“I truly believe that, given this heritage, we have an outsized opportunity to deliver Enlightened Hospitality in a world that increasingly craves it, but across a digital footprint,” he said. “We will be making investments in 2025 to develop the right platform to realize this potential over the long term.”
The chain reported growth in same-store sales for the 15th consecutive quarter — they were up by 4.4% for the quarter ended Sept. 28 compared to the equivalent quarter a year ago, on systemwide sales of $495.1 million, up by 12.8% year-over-year. Traffic was up by 0.3%.
Lynch credited operational efficiencies and menu innovation for the strong quarter. Shake Shack launched two barbecue burgers with two different sauces in May, along with fries in a choice of those sauces, and in September it reprised its truffle menu. It also brought back its Chicken Sundays, which it ran for four weeks during the second quarter, offering a free Chicken Shack sandwich with any $10 purchase on the day that the country’s largest chicken chain, Chick-fil-A, is closed.
“Chicken Sundays have been a solid sales contributor in the short term, but even more importantly, we have seen promising results in our overall chicken awareness, which we expect to drive chicken sales at Shake Shack long after the promotion ends,” Lynch said.
The chain also ran other campaigns, including Free Shake Fridays and Dog Days of Summer that gave away shakes and hot dogs, respectively, with a $10 purchase.
“Our marketing continues to attract new and repeat guests and we will continue to make these strategic investments moving forward,” he said.
The chain opened 17 restaurants in the quarter, eight of which were company-owned and nine of which were licensed, although, as it had said it would do in August, it closed nine underperforming restaurants, the cost of which resulted in a net loss for the quarter of $10.2 million, or 26 cents per share.
Meanwhile, operational efficiencies drove higher margins, which improved by 60 basis points, as “working on the blocking and tackling of operational excellence, including speed of service initiatives, process improvements, and world-class training of our people,” decreased wait times and improved guest satisfaction metrics, Lynch said.
Those improvements are driving accelerated growth: The chain plans to open around 75 restaurants this year, meaning unit growth in the mid-teens, and 80 to 85 restaurants next year, of which around 45 will be company-owned.
With that pace of openings, Lynch said, “We really need to develop … our restaurant leadership talent pool. So we’re spending and investing and focused on the training and development necessary to really create a pipeline of leaders, not just at the [general manager] level, but below the GM level, and I think that level of leadership and management is only going to benefit us from a speed and service standpoint.”
Chief financial officer Katie Fogertey said Shake Shack’s strong sales performance continued into October, with same-store sales up by 4.5%, although traffic was flat for the month.
For the full fourth quarter, she provided guidance of revenue of $322.6-$327 million, up 12.7%-14.2% year-over-year, same-store-sales up by 3%-4%, around 16 company-owned restaurant openings and 11 licensed openings, and margins of around 22%.
For the full year she guided for revenue of around $1.25 billion, up 15%, same-store sales up 3.3%-3.6%, around 40 company-owned and 35 licensed openings, and margins of around 21%, up by 110 basis points year-over-year.
Revenue: $316.9 million, up 14.7% from Q3 of 2023
Systemwide sales: $495.1 million, up 12.8%
Same-store sales: up 4.4%
Net Loss: $10.2 million, or 26 cents per share, including $29.1 million for impairments, loss on disposal of assets, and closure of nine company-owned restaurants
Restaurant-level profit: 21% of sales
New restaurants: 17 openings, of which 8 were licensed
Traffic: up 0.3%
Contact Bret Thorn at [email protected]
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