Executive Insights | April 2012 | By Blair Chancey

You Can’t Stop Shake Shack

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Randy Garutti works with the team at Shake Shack in Brooklyn.
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In addition to lowering turnover, the company’s “enlightened hospitality” has attracted top talent from other “It” brands in the industry. Among the brands managers have left for Shake Shack are fro-yo darling Pinkberry and culinary leader Chipotle. In a role the latter two companies are surely unaccustomed to playing, Garutti references them as if they’re part of the quick-serve establishment, a nod to how distinct Shake Shack perceives itself within the restaurant landscape.

“The right kind of manager for us gets to a point and wants to be a little more entrepreneurial and not as slotted into a system,” he says diplomatically. “We’re still figuring stuff out, and that’s fun for managers. Every Shake Shack is different, so it’s not just ‘add water.’”

Apart from the managers, crewmembers are enticed by the brand’s financial incentives. For example, the company practices profit sharing up to 1 percent with employees. There are also $50 bonuses for earning food safety certifications, arriving to work on time for a month, and recruiting friends. “It’s just fun, and it makes you want to be busy,” Garutti says. “If I’m an hourly employee, I want the restaurant to be busy and drive sales, because it means something to my paycheck.”

Despite the company’s efforts, however, Shack Shake still suffers the fate shared by many of today’s restaurant companies. Young people and many educators see the restaurant industry as a career of last resort, epitomizing dead-end job prospects with the image of a burger flipper.

“We believe this could be a real career choice,” Garutti says passionately. “If you look around the store, there are a lot of employees that started off making $9 an hour and now are managers supporting their families.”

Like many in the restaurant industry, Shake Shack supports the practice of hiring through recommendations and promoting from within. What Garutti’s company does differently is that it offers opportunities outside the burger brand as well. So a good job at Shake Shack does not necessarily mean a promotion within the same brand. Instead, line cooks from the burger concept can be promoted to chefs at Gramercy Tavern, one of the most highly acclaimed restaurants in New York City. “We have the ability to show them a larger context, beyond just this Shake Shack,” he says.

Those opportunities do more than extend across the Hudson. With Shake Shack’s meteoric success, opportunities also lie in exotic places like Kuwait City. The company expanded there in 2011 and has experienced instant popularity in the region, vowing to grow even more this year through its licensed partner, the Alshaya Group.

The Alshaya Group is one of the world’s premier retailers, operating such brands as Starbucks, Williams-Sonoma, and Cheesecake Factory throughout the Middle East. While it’s not surprising the two retail powerhouses have teamed up, the expansion deal started when Shake Shack had just “two and a half stores,” Garutti says.

“Mohammed Alshaya is an incredible visionary who found us when we just opened the second Shake Shack in 2008,” he says. “He came to us and said, ‘This is going to work in the Middle East.’ We, at the time, were curious but couldn’t have imagined it.”

What can only be described as “Alshaya’s proclamation” came to fruition with a tweet storm that surprised even Shake Shack originals. The company’s license agreement with Alshaya brought it not only onto a new continent, but also into an entirely new setting—the mall.

“The mall is the piazza,” says Garutti, who spent five weeks overseas preparing the store and training crew before the stores there and in Dubai opened. “We learned that the mall is the gathering place. In the Middle East, a place where the culture is evolving every day, people want to go out and be where they can congregate, and we’ve created that kind of place.”

For a newly iconic New York brand, the move abroad and inevitable international growth might seem risky or even overly confident, but Shake Shack strikes a calculated balance between neighborhood burger joint and world domination. What guides most decision-making is a simple mantra Garutti repeats several times during the interview: “The bigger we get, the smaller we act.”

“It’s really easy as you get big to make big decisions,” he says. “Some big decisions are great, and you need them. Some big decisions dilute what you’re about, and we will never dilute who we are just to grow. We’d rather slow down.”

For company leaders, the hardest part is ignoring distractions such as menu developments that would lead them away from the original vision Danny Meyer had for the company and sketched on a napkin years ago. During difficult decisions, Garutti says he references that piece of cocktail wisdom, which is framed in his office. “We say ‘no’ more than we say ‘yes,’” he says.