Annual same-store sales increased by 1.3 percent in 2019. Because of the anticipated pressure from the Grubhub transition and store cannibalization, same-store sales for 2020 are projected to dip low single digits.
Average-unit volume at domestic company-operated stores decreased 6.8 percent to $4.1 million, primarily due to the addition of new stores in lower AUV markets. By the end of this year, AUV for all company-operated Shacks is expected to be between $3.7 million and $3.8 million. Revenue increased 29.4 percent to $594.5 million in 2019—due primarily to store openings and same-store sales growth—and increased 21.9 percent to 151.4 million in Q4.
Shake Shack hopes to offset negative traffic by increasing menu innovation and focusing on digital avenues.
So far this quarter, the brand brought back the ShackMeister Burger LTO—a Shack Burger topped with shallots, marinated in ShackMeister Ale beer, and crisp-fried. In Q2, the chain will bring back Hot Chick’n and expand the category with the addition of Hot Chick’n Bites.
“We believe Chick'n Bites have a variety of use cases and attach opportunities as an add-on for a group to share, trade up, or ordered on their own,” CEO Randy Garutti said. “We're seeing the transactions containing Bites generally carry a higher average check. And this, along with guest feedback and overall positive sales performance, encourage us to move them to the core menu while still monitoring ongoing performance.”
Shake Shack will soon feature various heat levels, including a fire level that is exclusive to digital channels. That rollout will be paired with a new ranch dressing. The company also plans to rotate more shake flavors, test a smaller shake size, and test a Veggie Shack Burger comprised of 13 vegetables, herbs, and grains.
As for the overall Shake Shack experience, the brand is piloting new kitchen flows and layouts, kiosk ordering, and separate pickup areas for web, app, and delivery. Shake Shack bolstered its tech and marketing talent and created a new op support team to lead digital growth.
“Our goal is to better engage with our guests across their preferred channel and add reasons to come to the Shack for the first time or to return more frequently,” Garutti said. “We're building more sophisticated front and back ends across our digital ecosystem. We're working to tie all our guest data together so we gain a better cross-channel view and deliver insights and opportunities to reengage with our guests more frequently. Our biggest goal is to continue to grow traffic to our own channels over time.”
In regard to labor, Shake Shack continues to test four-day work weeks for managers. It’s operational in about 33 percent of Shake Shacks, and Garutti said the format has drawn positive feedback thus far. It’s contributed to an increase in applicants, specifically female candidates.
Garutti said Shake Shack is still a young company, and will own the fact that it needs to continue to learn. He added that even though the brand has much work to do, the restaurant is getting better.
“While we expect 2020 to have its challenges, there's a lot going on in the business going through this much growth,” Garruti said. “We're thankful for the incredible teams and leaders fueling this company's growth and the tremendous runway we have ahead.”