Shake Shack has maneuvered obstacles through COVID and across its rebound, from urban lockdowns to rising costs and growth setbacks, such as equipment availability and landlord lead times. Yet there’s been a shift in guest behavior the brand believes sets it up long-term. “More of our guests are enjoying us through our omnichannel experience, finding us both digitally and in-Shack,” CFO Kate Fogertey said in November.
You could argue, even as a brand that embraced tech pre-2020, Shake Shack was among quick-service’s more social brands. It was designed, in many respects, as a gathering spot for a new generation of quick-service guests. The food took a bit longer to come out. The décor and builds were inventive and inviting, as you might expect from a brand founded by a Michelin-starred restaurateur.
Mostly due to its urban versus suburban drag and lack of drive-thrus, Shake Shack plunged deeper at COVID’s onset than much of the pack, with U.S. sales down as much as 90 percent at some U.S. venues in the early weeks (the average was 70 percent, or closer to full- than counter-service brands).
Shake Shack turned course by finding its customers again. In March of 2020, digital sales mixed 23 percent, but after mass dining closures in the spring, the business grew to 81 percent by May. In the final six months of 2020, it settled at 59–62 percent.
These days, much of the chain’s recent gains owe to in-store diners coming back. “People want to hang out of Shake Shack and want to come in there and hang out,” CEO Randy Garutti said in Q3. “With that you've got just a return to increased foot traffic and how things work in the Shacks on top of the digital channels that never existed a few years ago.”
Essentially, it’s a more dynamic business, which presents evolving challenges. In-store dining returned with high expectations from diners, but amid 40-year high inflation, labor shortages, and channels like digital pickup, aggregators, and other flow factors sticking well above past levels. “And so much of our focus has been on digital and will remain there, but as people return, it's another call to action for us to just get in our restaurant and be relentless about how we execute,” Garutti said.
There’s no question, though, the funnel has widened. In Q3, Shake Shack grew its digital app purchasers by 40 percent, year-over-year (more than a million app installs since the beginning of this year). Since March of 2020, the brand has gathered more than 4.5 million unique first-time digital app purchasers. Shake Shack has fed this base with offers like enabling digital users first access to a limited-time Hot Ones menus and other promotions that center on digital-only dayparts.
Shake Shack’s digital guests spent on average 25 percent more per visit than non-digital users in Q3, and digital mix was 36 percent of sales.
At a recent Barclays 8th Eat, Sleep, Play conference, Garutti added guests continue to pay up for delivery as well, despite awareness of how costly it is. It’s simply a convenience people don’t seem ready to forfeit, which makes profit and margin balance a delicate task given the fees.
In mid-November, Shake Shack renewed its contract with Uber Direct as the company’s exclusive nationwide delivery partner on the Shake Shack App. The brand launched direct delivery in March 2021—a move it said triggered a 70 percent increase in delivery order volume through its app in one year and helped create a profitable transaction. Shake Shack also noted investing in its own channels allows the company to “to deliver the best value and most personalized experience” to customers.
Shake Shack’s 6.3 percent same-store sales growth in Q3 featured 2.9 percent traffic growth and 3.4 price/mix. The brand held mid-single digit price in the quarter—6 percent inclusive of a March bump (3.5 percent) and different premiums across channels, like delivery—with in-store sales (and more single orders) expanding as the pandemic’s impact on routines ebbs.
Last February, the company shared with investors it was on the verge of raising third-party delivery figures from 10 to 15 percent higher than in-store.
Shack App users are also rewarded with special offerings including early access to limited-time-only menu items and local events and collaborations across the country.
Naturally, there are a host of factors taking Shake Shack in this first-party direction. QSR caught up with Steph So, head of digital experience at the fast casual, to learn more.
Tell us about Shake Shack’s decision to bet on its own app in today’s delivery wars. Not always the easiest call, but definitely one that presents a lot of upside if done correctly. Why did Shake Shack decide to hone in on this strategy?
We at Shake Shack are on an endless pursuit to create uplifting experiences for our guests and deliver enlightened hospitality at every touchpoint, including our digital channels. Our strategy in the delivery wars is to own the guest ordering, regardless of pickup or delivery mode, and ensure our guests have a uniquely Shake Shack experience, even if they order delivery and never walk into our Shack. The guest ordering experience is the best presentation of our full menu—we highlight imagery, descriptions and modifications in a way that provides the optimal guest experience. While third-party apps offer a wide range of restaurant choices and are a great way for guests to try Shake Shack the first time, they create a “sea of sameness” with the number of restaurants surfaced to a user, and our unique brand voice and interactions are not able to shine through. We also want to offer our guests the best value, which we can control most directly on our channels, and be transparent with fees.
Talk about the March 2021 launch with Uber Direct, and the response that followed.
Following a successful pilot in New York City and Miami, we rolled out our nationwide delivery service via the iOS Shake Shack app as part of an exclusive partnership with Uber Eats. Following the launch, we saw a 70 percent increase in delivery order volume in the Shack App in one year. As part of the investment, we built out our technology development team in collaboration with Uber Eats fulfillment, allowing for more direct contact with guests and ensuring the ultimate, frictionless experience. In addition to offering delivery, we furthered our digital transformation with a mobile-first web redesign and launched delivery in the Android Shack app and new payment options, including Apple Pay, Google Pay and contactless payment options.
How has this approach allowed Shake Shack to better control the guest experience than via third-party? Especially in regard to value.
When guests come directly to us via the Shack App, it allows us to create a personal relationship with them. We’re bringing them into our own ecosystem and are able to personalize the experience, including remembering previous orders, making reordering easy and streamlined. We know our guests are looking for speed and convenience when it comes to ordering, and we can provide that in our App. Our App menu is our lowest price menu compared to all nationwide delivery apps, and we don’t require subscription fees to access our low delivery fees. We’re not able to control the extra fees our guests may experience when ordering in a third-party delivery app.
What are some ways the direct experience differs than the typical aggregator route?
The biggest differences are that we never change our fees, implement surge pricing or mark up our menu, which are all benefits our app users experience. We also reward our guests for coming directly to our channels to order. Our ordering experience is also optimized on our own channels, so guests have better access to our upsells, modifications and menu descriptions. Shack App users have access to special offerings including early access to limited-time-only menu items and local events and collaborations across the country. The Shack App also allows for more personalization. We’ll regionalize their experience and target offers based on their behavior, which we cannot see if guests are ordering via third party.
How is this strategy leading to better personalization for the consumer, and more effective marketing for the brand?
We believe that knowing, understanding and ultimately personalizing the guest experience will drive loyalty, frequency and brand engagement across digital platforms and the in-Shack experience. If we’ve learned that a Shack guest is based in New York City, we can target that guest and share local events and relevant news with them—everything from chef collaborations, events, new Shack openings, Shack Track and Field and more.
In what ways is Shake Shack turning those 4.5 million first-time purchases into repeat and loyal users?
Guests who use the Shack App dine with us most frequently and have higher average order values, therefore spending more over time. We’re focused on providing these guests with a great experience and encouraging them to engage with our App for a frictionless ordering experience.
How do you see Shake Shack’s digital relationship with consumers evolving in the coming years?
As we look to the future, we’ll continue to further our digital transformation, meeting our guests where they are, on their terms, while staying committed to the values Shake Shack has always stood for including delivering a great guest experience, using premium ingredients to create high-quality food at a great value and supporting and investing in our people and communities.