Industry News | August 1, 2012 | QSR Exclusive Brief

Shake Shack's Growth: One Burger at a Time

Shake Shake CEO Randy Garutti will speak at this year's Dine America conference in Atlanta, September 12-14.
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Shake Shack may be young, but it knows a lot about growth. Just eight short years ago, the better-burger concept earned its stripes as a simple hot dog stand in New York’s Madison Square Park, where its mission to raise money in support of the Flatiron District attraction far exceeded its expectations. The brand’s initial success and subsequent expansion turned out to be what CEO Randy Garutti calls a “happy accident.”

“We never had aspirations of having a global brand,” he says, “and that’s the beauty of what happened. The greatest part is that it wasn’t designed to just be anywhere.”

But today, thanks to the brand’s loyal army of hungry fans—diners whose love for the tasty, high-quality, and hormone-free classic menu of fries, shakes, burgers, and, of course, hot dogs gives them reason to stand in line for hours on end just for a taste—the company operates in 14 locations around the world, including two stores in the Middle East. And though the number of better-burger concepts has exploded in the last few years, Shake Shack is holding its own. In fact, according to an August 2011 report from Technomic, the chain was the fastest-growing limited-service burger brand in 2010, with 133.3 percent unit change.

Since the company doesn’t seem to be short on customers, one of its biggest growth challenges isn’t a lack of consumer demand; rather, it’s narrowing down which markets to tap into. “We’re fortunate that there’s a lot of people around the world who have noticed Shake Shack, and that affords us a unique opportunity,” says Garutti, who’s been part of the Danny Meyer-led Union Square Hospitality Group for more than a decade.

Another challenge that goes hand-in-hand with the company’s global expansion is scoring the perfect partner to lead the brand into new frontiers. Luckily, Shake Shack struck gold with its Middle Eastern partnership with The Alshaya Group, which also operates superstar brands like Starbucks and P.F. Chang’s in the region. Its experience with the firm taught Garutti and the Shake Shake team exactly what to look for when it comes to overseas growth. “We will go to a country where opportunity meets strategy,” he says. “That means that we have to have the single best partner in that country who understands our culture and the brand and can help us bring it to the community in the right way.”

Though the chain is opening five additional stateside locations this year—in Philadelphia; Coral Gables, Florida; New York’s Grand Central Terminal; New Haven, Connecticut; and Westbury, Long Island—and a store in Qatar this fall, Garutti says the focus will stick to what the brand is all about: providing an experience—not just a meal—to customers.

For Shake Shack, this experience starts with its employees. “We feel that if we’re not taking care of our team, why would they take care of our guests?” Garutti says. To ensure that workers are providing top-notch quality to diners, Shake Shake offers a bonus program, in which it pays up to 1 percent of revenue every month to employees—a practice that encourages workers to appreciate the never-ending lines that come through (and line up outside of) its doors. “They want to be busy, because they want to make more money,” Garutti says.

He also notes that the perfect customer experience isn’t only about friendly employees. It’s about retaining the mindset and mission Shake Shake had when it planted roots in Madison Square Park in 2004: bringing people together to enjoy great food. Garutti sums it up with the motto hanging on his office door: “The bigger we get, the smaller we need to act.”

“It’s easy to make big decisions, but we want to continue to [live by] what made the original Shake Shack great: the basics. That’s what I want the story of Shake Shack to always be about,” he says. “The whole is so much great than the sum of the parts. We do a lot of simple things really well every day with a lot of great people, and we’re amazed where that’s gotten us. We’re doing it day by day, burger by burger.”

This topic will be covered in depth at this year’s Dine America, the executive conference hosted by QSR September 12–14, in Atlanta. To register, go to http://dineamerica.us/registration.

By Mary Avant