The COVID-prompted evolution of quick service, and particularly fast casual, has been difficult to miss. It’s visible in consumers’ hands just as it is in the stores they drive by or walk into. And perhaps no chain embodies that transformation more than Shake Shack.

From NYC venues to an airport bar to a drive-thru in Maple Grove, Minnesota, the burger brand embraced pandemic shifts with models of every size, format, and design structure. Long known as a social-driven chain, there’s a unit with limited to no seating headed to Hasbrouck Heights, New Jersey. Pickup shelves are flooding urban units, and the brand is even plotting roadside growth as it looks to expand along the New York Thruway with C-store developer Applegreen.

Shake Shack faced a rockier climb back from COVID depths due to many of its calling cards. Namely, urban development and a need to open more access points. Not only has the chain done so in recent months, but the reimagining of its experience fueled what the fast casual expects to be its largest corporate growth year on record—45 to 50 new company-owned restaurants in 2022. The Shake Shack that emerges on the other side promises to be more connected and diversified than ever.

CFO Katie Fogertey spoke with QSR about Shake Shack’s COVID response and how it’s become a stronger brand because of it.

It’s fair to say fast casual has had to adjust more to COVID disruptions than quick service, simply due to more urban, dine-in focused footprints in general. And Shake Shack fits that bill. Talk about some of the changes the brand made early on to open accessibility and channels to serve guests when the pandemic first arrived, and how those efforts have continued.

We at Shake Shack are on an endless pursuit to create uplifting experiences for our guests. Our digital strategy fits squarely with this mission as it allows us to reach our guests in new and exciting ways and provide the best guest experience at more touchpoints. A great example of this was we wanted to give our guests an even better digital ordering experience than our website allowed so we invested in and launched our Shake Shack mobile app in 2017.

Even with web and app, our digital business was nascent before the pandemic. Our Shake Shack app base, web usage and digital sales were a fraction of what we have built today. More than 85 percent of our sales were generated from guests coming into our restaurants and ordering at the cashier. However, these earlier investments in app and web allowed us to leverage digital to quickly navigate and scale this business. By the second quarter of 2020, our digital sales surged from 15 percent of sales just a few months prior to 75 percent of sales and grew more than threefold year over year. 

Many of the fast pivots in the early days of the pandemic soon became permanent functions, including implementing multi-channel delivery, enhancing digital pre-ordering and expanding our fulfillment capabilities. As our digital business was growing so fast, we knew that simply having the functionality to order digitally wasn’t enough, and we identified other opportunities to improve the omnichannel guest experience through Shack Track. This included adding pick-up shelves, curbside, pickup windows, and more. The need to enhance and alter the physical restaurant to meet the needs of digital is so important to Shake Shack that today, nearly all new restaurants we open have some aspect of Shack Track.

We are encouraged by our digital business that continues to grow even as our dine-in business is recovering. Yet, we see opportunity to invest and grow our digital offerings to build the digital business of our future. We are a young company with just over 200 company-owned restaurants in the U.S. today, however, we know our guests expect our digital experience to be at parity or even better than other restaurant brands with more units and more resources. We have had to be and will continue to be strategic with our investments, but most importantly, we will continue to invest in digital initiatives to help welcome more guests into our omnichannel.

We do not know how long our business will be impacted by COVID, but our ability to meet our guests where they want, whether it be digitally, in person, or a mix of both, has given us more flexibility to navigate the multitude of challenges that the restaurant industry has faced since 2020. 

[image source_ID=”131312″]Sonic Drive In Slush

Because of these, did Shake Shack introduce itself to a wave of new guests over the past 22 months? If so, how have you kept them coming back, either through digital, rewards, or offering them omnichannel opportunities to access Shake Shack as they want, such as curbside?

The continued growth we are seeing in our digital business, even with more guests coming back to our dining rooms, is telling. Between March 2020 and November 2021, we have welcomed more than 3.2 million total purchasers on our company-owned app and web channels, and in the third quarter of 2021, we grew this base by 14 percent quarter over quarter at the same time that our dine-in (non-digital) sales grew double digits quarter over quarter and more than doubled from 2020’s levels. 

There are likely a number of reasons why digital has been and continues to remain such an important part of our business. We have been able to retain approximately 80 percent of the digital sales that we saw in the peak of the pandemic (June 2020), and digital business represented 42 percent of our sales in the third quarter of 2021. With digital order ahead, curbside, delivery and drive up windows, we are offering even more accessibility to our guests and a more personalized experience.

We have also made a large commitment to initiatives which incentivize our guests to use our digital channels, with a particular focus on our Shake Shack app. Just in 2021, we introduced delivery through our Shack App and web channels, offering 99-cent delivery and free delivery on orders over $35, at menu prices below third-party delivery. Additionally, we have offered some of our recent LTOs, including the Black Truffle Burger and Parmesan Truffle fries currently on the menu, exclusively to our app users first for a limited number of days before offering on all channels. You will see our ongoing investments and strategy focus on more opportunities to surprise and delight our guests in our digital channels, and in our app in particular.

And with previously loyal guests, has this made Shake Shack an even stronger and more guest-centric brand than ever before?

We are always going to be focused on gathering communities, enriching our neighborhoods, launching great products and driving our brand in new and innovative ways. Our digital channels allow us to do this and help convey what makes Shake Shack special and how we stand apart from traditional fast food. We at Shake Shack are known for our hospitality, and we have pushed beyond our physical walls over the past two years to connect with our guests in ways we haven’t had the opportunity to do before. 

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From an asset standpoint, talk about the Shack Track initiative and future drive-thrus. How will these transform the brand?

We do not believe we would be as successful in digital if we did not provide our restaurants and team members with the tools to best handle the increase in digital sales. For this reason, we have been hard at work over the past 19 months to identify opportunities to improve the overall omnichannel guest journey as well as the work of our team members. Shack Track is our digital pre-ordering and fulfillment experience, and it aims to tackle many challenges that have arisen from building a rapidly growing digital business while maintaining our commitment to the traditional dine-in business. This has taken the form of enhanced convenience options such as curbside, mobile order pick-up shelves, multi-carrier delivery, and walk up and drive up windows.

We were very excited to open our first drive-thru, allowing us a new opportunity to expand upon convenience and enhanced guest experience. This came at a pivotal time for the company as we look to build and open 45 to 50 new company-owned restaurants in 2022, the most in a single year in our company’s history. We also expect to open 10 drive-thrus by the end of the year. 

While we continue to evolve our format and digital capabilities to enhance the guest experience, Shake Shack will always be a place of community gathering, and the evolution of our format should enhance it. We will continue to provide our guests with an amazing guest experience for the times they want to order ahead and skip the line, take their order to go or use delivery, and in the near future, drive-thru.

Are urban stores changing as well to capitalize on convenience?

With Shack Track, there are aspects and learnings that we can leverage across all of our restaurants, regardless of the market or format. In urban markets, we have installed walk up windows and dedicated entrances with pick up shelves for to-go and delivery orders that have helped streamline the omnichannel guest experience. Another example is kiosks, which we have in a growing number of our urban and suburban restaurants. Our digital team has developed a kiosk experience that helps guests navigate our menu and premium add-ons more easily for some than the traditional menu board. In the Shacks where we offer a kiosk order mode, 75 percent of our sales come through that channel as well as our digital channels. Kiosks also help our team members be more efficient, and over the long term, our investments will allow us to expand our digital and omnichannel ecosystem.

Popeyes Chicken Nuggets

But in all these changes, how important will it be for Shake Shack to differentiate on the same things it has since day one—an experiential and community-based chain that encourages people to be social? Essentially, the things that have made fast casual so different than fast food in the past two decades and Shake Shack a category disruptor from the outset.

Our formats are evolving and we are offering more convenience for our guests because hospitality is at the center of everything we do at Shake Shack. We want to make it as seamless for our guests, while still delivering on everything that we stand for today. Even with drive-thru, we stand committed to using premium ingredients and cooking techniques, so our guests will have the same eating experience as those dining in-Shack, just in their cars. While we will always build and welcome guests to our signature community gathering places, we also strive to offer guests new ways to get their Shake Shack however and whenever they want it.

Speaking more broadly about the category, what do you think will define the fast casuals of the future? How has COVID ushered in a new era, and how will Shake Shack continue to lead the charge?

Even before the pandemic, we were seeing that digital had the potential to unlock new ways for our ability to provide a great guest experience. We still believe this to be the case and see more opportunities ahead to grow and develop our digital offerings and provide our guests with an improved level of access, convenience and connection. We will do all of this with a strong priority on welcoming more guests into our own channels

Emerging Concepts, Fast Casual, Finance, Web Exclusives, Shake Shack