Shake Shack is reaping the benefits of recent operational improvements, including a new AI-powered labor deployment model that has streamlined service times across locations. The company is also holding firm on its premium positioning, bolstered by a steady cadence of menu innovation and increased marketing investments.
Together, these efforts are helping the fast casual “continue to outperform, even in an uncertain macro environment,” CEO Rob Lynch said during the chain’s Q3 earnings call on Wednesday.
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Comps climbed 4.4 percent in Q3, supported by a 6 percent increase in menu pricing. Despite higher prices, customer traffic remained slightly positive, up 0.3 percent. To help offset inflation, the company raised prices again this month by 1.5 percent, though Lynch expects the pricing to level off early next year.
“Those investments in promotions and marketing are helping us keep flat to positive traffic in an environment where, as we all know, traffic is really hard to come by,” Lynch said. “So, we are going to continue to strike that right balance.”
Shake Shack’s total revenue for the quarter jumped 14.7 percent year-over-year to reach $316.9 million, with systemwide sales of $495.1 million up 12.8 percent versus 2023. The company also posted its highest Q3 restaurant and adjusted EBITDA margins since 2019. It ended the quarter with an operating loss of $18 million, inclusive of a $29.1 million charge for impairments, loss on disposal of assets, and closures, versus operating income of $5.7 million in 2023.
Product innovation played a major role in Shake Shack’s third-quarter success. Over Memorial Day weekend, the company launched a summer barbecue menu with two unique burger options featuring smoky and tangy sauces and barbecue spice fries. Then, in mid-September, it brought back a guest favorite, the Black Truffle Burger, along with Parmesan Garlic Fries topped with Black Truffle Sauce.
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“The Black Truffle LTO is a perfect example of Shake Shack’s elevated culinary program and our ability to offer differentiated culinary experiences at great value, which particularly stand out in today’s value wars environment,” Lynch said.
Beyond menu innovation, Shake Shack has leaned on targeted marketing and promotions to drive traffic and conversions. In September, the brand reintroduced Chicken Sundays, initially a four-week promotion, which generated strong short-term sales and improved long-term awareness for the chain’s chicken offerings. Other campaigns, such as Free Shake Friday and dog-themed summer promos, aimed to attract both new and repeat guests.
Looking ahead, Lynch is optimistic about Shake Shack’s potential to continue building on several sales-driving platforms and initiatives. Three in particular stand out, starting with the development of a strategic product innovation calendar.
“It’s not lost on me that culinary innovation is already a part of Shake Shack’s DNA,” he said. “However, we have an opportunity to become more strategic and ensure that new innovation works in a complementary way with our core menu to drive outpaced comp growth.”
He didn’t call out any specific whitespace on the menu but noted the company is actively working on building this capability in the first half of 2025 to better leverage its potential over time.
“I wouldn’t say that there are gaps in our core menu,” Lynch said, adding that there are opportunities for the core menu to work “more harmoniously” with LTOs and product innovation to drive mix through increased attachment.
Another opportunity on the radar is developing a loyalty program. That’s something the 20-year-old company doesn’t currently offer.
“I can’t help but find that a bit ironic given that Shake Shack was built on the principles and culture of enlightened hospitality, where understanding the wants and needs of our guests is paramount,” Lynch said. “I truly believe that given this heritage, we have an outsized opportunity to deliver enlightened hospitality in a world that increasingly craves it, but across a digital footprint. We will be making investments in 2025 to develop the right platform to realize this potential over the long term.”
The third sales-driving initiative underway at Shake Shack centers around ongoing operational improvements. Shorter lead times and improved guest satisfaction metrics helped drive higher sales and margins in Q3, but there’s plenty of room for more improvement. In the short term, the company is working on the “blocking and tackling” of operational excellence, including speed of service initiatives, process improvements, and the training of its people. Over the longer term, it is working to optimize its kitchen flows, equipment packages, and guest service models.
“All of these initiatives are expected to be long-term builders of repeat visits, which will increase frequency and overall sales,” Lynch said.
He noted that Shake Shack is in the early stages of refining its operations, starting with a focus on labor utilization to ensure the company is making the most efficient use of every labor hour.
“We really need to develop our restaurant leadership talent pool, so we’re spending and investing and focused on the training and development necessary to really create a pipeline of leaders—not just at the GM level, but below the GM level,” Lynch said. ”That level of leadership and management is only going to benefit us speed and service standpoint.”
The company is also working to build a “performance and accountability culture” through a sharper focus on what it measures, he added.
“That is a mindset and a culture of performance that is going to permeate down through the organization,” Lynch said. “I think just that alone is really helping to drive some of the short-term improvements we’re seeing in service times and other process improvements. Training and development—and even longer term, kitchen flow and equipment optimization—will keep building on that momentum, pushing us to improve beyond where we are today.”
On the topic of those operational improvements, Lynch noted that the company is achieving significant margin gains even as it ramps up marketing and promotions to fuel top-line growth. In Q3, restaurant-level margin expanded by 60 basis points to 21 percent, and adjusted EBITDA rose by 28 percent to 14.4 percent of total revenue, up 140 basis points. This continued a trend that has seen Shake Shack generate growth in comps, total revenue, restaurant-level profit, and adjusted EBITDA every quarter over the past three years. The company expects Q4 to end on a high note with restaurant-level margins expanding 220 basis points and exceeding 2019 levels for the first time.
In Q3, Shake Shack expanded its global footprint to over 550 locations, opening 17 new units—eight of which were domestic company-operated restaurants, including three with drive-thru capabilities, along with nine licensed units. By year’s end, the company expects to open approximately 74 stores systemwide, representing mid-teens unit growth.
Lynch also reported strong results from new company-operated units, which are delivering healthy cash-on-cash returns as Shake Shack successfully reduces build and pre-opening costs. The brand is targeting a 10 percent reduction in build costs in 2024. With these cost reductions in place, Shake Shack plans to accelerate new unit growth in the coming year, projecting 80 to 85 openings, including approximately 45 company-operated locations and 35 to 40 licensed units.