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    Shack Attack

  • How Shake Shack became the next great American brand.

    shake shack
    Shake Shack may participate in the crowded better-burger field, but its cult following and renowned leadership team have positioned it as a runaway success.

    A small sampling of the search results for tweets with the hashtag #ShakeShack on a Monday evening in early March include:

    It’s a Monday and I have work but nothing matters because #shakeshack is back in my life

    The BEST! #nyc #shakeshack @ Shake Shack Upper Westside

    #SHAKESHACK for the first time right now #cantwait

    Enthusiasm is the common theme—and there’s not a negative tweet in sight. In fact, there’s rarely a negative tweet, story, or rumor about Shake Shack, as the burger brand has garnered a cult following that is deeply passionate about the brand.

    The chain’s enormous social media popularity is just one piece of evidence suggesting Shake Shack has captured the same lightning in a bottle that Chipotle found in the last decade, securing a place among giants like Apple and Google as an American cultural phenomenon. The other piece of evidence? That would be its $100 million initial public offering (IPO) in January that valued the brand at $1.6 billion at the end of its first day on the market, when its stock price more than doubled.

    It’s worth noting that some experts are unconvinced Shake Shack will live up to all of the potential that investors are expecting from it. “The market is a very imperfect predictor of future cash flows,” says James Angel, an associate professor at the McDonough School of Business at Georgetown University. “We’ve seen plenty

    of instances in the last 20 years where the market was dead wrong. I tend to view events like this with a certain amount of bemusement and skepticism, but of course I’ve also missed out on things like Google and Apple and others.”

    Still, for a chain with, at press, just 63 locations—46 of which have opened since December 2013—enjoying one of the biggest restaurant IPOs in history is a tremendous vote of confidence in the brand. And while there is no scientific formula to explain Shake Shack’s incredible rise, experts say there are five things Shake Shack has done to create its successes thus far.

    1. It’s grown slowly

    Shake Shack’s backstory is legendary at this point: The chain started as a hot dog cart in 2001, launched by renowned restaurateur Danny Meyer’s Union Square Hospitality Group (USHG) to help support an art installation in New York City’s Madison Square Park. The hot dogs were so popular that lines at the food cart were nearly constant during the summer months. In 2004, Shake Shack opened a permanent kiosk (or shack, if you will) in the park—and the brand kept growing from there.

    But, just as the company took its time going from hot dog cart to burger stand, its expansion afterward was also anything but immediate.

    “We waited nearly five years to open our second Shack, and we are still in the very nascent stage of our story, with only 31 domestic company-operated and five domestic licensed Shacks in 10 states and Washington, D.C.,” the company wrote in the prospectus filed in conjunction with its IPO.

    “By today’s standards, [Shake Shack’s] growth has been slower and I think more strategic and more consistent and more cautious,” says Darren Tristano, executive vice president of Technomic. “It was a great concept to begin with, but they were able to take their time to refine the concept and make sure that the service, the quality of food, the operations, and certainly the culture were right.”

    Indeed, this is something Shake Shack said was key to its growth strategy back in 2010. “It’s like when you trace things from a pattern and cut them out on construction paper,” Randy Garutti, a USHG veteran and now CEO of Shake Shack, told QSR in 2010. “If you trace from the cut-outs you’ve made instead of from the original pattern, it starts looking sloppier and sloppier.”

    Moving forward, Shake Shack plans to open at least 10 domestic company-operated locations each year. To put that in context, BurgerFi, a West Palm Beach, Florida–based burger chain, opened 31 new locations in 2014.

    “That’s a good way to make sure you don’t cannibalize your own sales or oversaturate any market,” Tristano says of Shake Shack’s strategy.

    “Our goal is not to do hundreds a year,” Garutti told QSR in 2012. “That would dilute what we do.”

    2. It hasn’t been afraid to take risks

    Today, sourcing high-quality, sustainably sourced ingredients is practically required in the fast-casual space. But when Shake Shack started using its signature artisanal Angus beef, which is all-natural, vegetarian-fed, humanely raised, and source-verified—as well as hormone- and antibiotic-free—it was anything but.

    “Sourcing of their products and the quality of their products being more natural was at the time a little bit ahead of the curve, but today is starting to hit its stride with what younger consumers are looking for,” Tristano says. “The consumer demands have caught up and put them in a nice sweet spot for that.”

    And while the pace of the company’s expansion strategy has fallen on the cautious end of the spectrum, its international growth has been aggressive.

    “Many companies usually wait until later in the game to look at international opportunities,” Tristano says. “Shake Shack started to look at the Middle East as an opportunity for growth at a time when there was demand, … making the choice to move internationally early in the game.” The move has paid off handsomely; today, more than 40 percent of the chain’s locations are in international markets.

    3. It’s prioritized its employees

    “We believe that the culture of our team is the single most important factor in our success,” states Shake Shack’s prospectus. “We aim to recruit and develop a team with the innate ‘personality to please’ that cannot be taught. We look for people who are warm, friendly, motivated, caring, self-aware, and intellectually curious team members, or what we call ‘51 percenters.’”

    As anyone who’s ever patronized Shake Shack knows, this commitment to its employees—and, in turn, its customer service—shows.

    “In every interaction, if my team is talking to a guest or my managers are talking to a late employee, [it’s about,] how am I treating you?” Garutti told QSR in 2012. “It will feel a lot different than a lot of the other fast-casual or fast-food transactions that happen. They’re transactions; we’re creating relationships.”