Special Report | June 2010 | By Robin Van Tan

5 Tips from Shake Shack

Wanting to expand but worried your concept will take on a corporate feel? Find out how the booming Shake Shack chain is combating quick-service growing pains.

Though expansion can be tough in the quick-serve restaurant market, the end resu
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One of the most important rules of expansion might not be something operators learn on the job or in any kind of training. It might just be something most of them picked up long ago—usually in grade school during arts and crafts.

“It’s like when you trace things from a pattern and cut them out on construction paper,” says Randy Garutti, COO of New York City’s Shake Shack. “If you trace from the cut-outs you’ve made instead of from the original pattern, it starts looking sloppier and sloppier.” Soon the design gets distorted, and the reproduction starts to resemble the original less and less.

“All too often, restaurants start thinking they must improve their business model, their restaurant’s design, and their menu to be able to expand,” says David Scott Peters, founder of TheRestaurantExpert.com. “While change and improvement is critical to any business, the problem usually lies in changing so much that you change who you are.”

The lesson is especially true for small chains that want to maintain the concept’s culture as it expands to new locations. It’s also one that Shake Shack has taken to heart as it opens new units across the nation and world.

‘The Anti-Chain Chain’

Shake Shack didn't set out to become “the anti-chain,” but that's exactly how many people first got to know it when The New York Times dubbed it that in December 2009.

“We didn’t even set out to be a concept,” Garutti says.

When Shake Shack opened, it wasn’t even Shake Shack at all. It was just a hot dog stand that was part of a public art project designed to rejuvenate Madison Square Park.

“We set out to be a community magnet, and then, being who we are, we said, ‘What can we add to the dialogue on classic roadside stands from the 1950s and 1960s?’” Garutti says.

The stand disposed of the notion that fast food had to be precooked or even prepared quickly in favor of quality ingredients and customer experience. The lines for the hot dogs soon became so long that the city and Union Square Hospitality Group, which had operated the stand, decided to open a bigger facility in the same location in 2004.

“We keep looking at ways we can continue to do three main things: consistently deliver the highest quality, most delicious food; create a place where people love to come together in the neighborhood; and offer great value,” says David Swinghamer, Shake Shack’s CEO.

The concept resonated with the local community so much that long lines with more than an hour wait became standard (an online Shack Cam lets customers view the line before coming to the store). In 2008, the Union Square Hospitality Group opened another location on New York’s Upper West Side near the American Museum of Natural History, and then in 2009 it became one of the highlights for foodies watching a game at the New York Mets’ new stadium, Citi Field.

New openings planned in Miami and Kuwait, along with two in the concept's home base of New York City that are scheduled to open this summer, threaten Shake Shack's status as a community—not a corporate—enterprise. But everything from the concept’s site-selection strategy to its hiring practices is designed to help it maintain its original vision. And the brand’s guidelines can help just about any small brand maintain its identity during expansion.

Tip #1: Go Slow

The Union Square Hospitality Group waited six years before deciding to expand Shake Shack extensively.

“While change and improvement is critical to any business, the problem usually lies in changing so much that you change who you are.”

“Part of it was simply just finding the right next location,” Garutti says. “Any time we grow, we’re not going to just find an average site. We’re going to find an iconic location.”

According to industry analysts, slow and deliberate growth is almost always a smart move.

“Shake Shack’s commitment to expand only where and when they can do it well is a sign of an organization that truly understands what it takes to make restaurants work,” Peterson says.

Shake Shack’s Garutti likes to think of it another way: The bigger you get, the smaller you need to act. “It’s really easy to make bad decisions as you grow because they’re generally more efficient,” he says.

Instead, Swinghamer says Shake Shack will continue to take its time before opening new locations.

“We feel the rewards far exceed the time and expense to do so,” he says.

Darren Tristano, executive vice president of Technomic, agrees. “They’re looking at this as much more of a slow progression, and I think that always makes more sense,” he says. “It’s better to learn from your mistakes as you’re making them instead of after you’ve made them and you’re closing down units as a result.”

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