When Shake Shack CEO Rob Lynch joined the brand in May, the first question was whether he was concerned about the push to value. Was he worried about Shake Shack’s premium positioning in the market place? Was it a risk?
Lynch admitted he had concerns about Shake Shack’s higher prices amid the overly promotional QSR environment. He soon learned that no such risk existed. The fast casual is typically in markets “at the corner of Main and Main” with high-quality real estate and assets, attracting higher-income consumers who are less price sensitive.
The CEO said this dynamic will evolve as Shake Shack accelerates toward its goal of 1,500 company-operated stores (it currently has approximately 330). But as of right now, the company is “seeing a lot of strength with our guests.” For instance, the Truffle Burger—an LTO that’s been in the market for over four months—has performed better than almost any other LTO in history.
“Those data points imply that there’s still a lot of demand for high-quality food that people still determine as a great value,” Lynch said during Shake Shack’s Q4 earnings call. “I’ve talked also about our price points relative to mainstream, QSR competition, the gap has actually narrowed a bit on our core offerings, particularly our Shack Burger and our Double Shack Burger. So we feel really good about our value equation and our guests have shown up and shown us that we can continue to win with this premium strategy.”
The brand is also rejecting promotional trends it’s seen from peers. Lynch wants Shake Shack to deliver incentives to fuel incremental purchases, including understanding historical purchase behavior and the customers’ needs.
But discounting is off the table.
“We are right now trying to stay away from a pure points discounting loyalty program,” Lynch said. “We don’t feel like that is necessary for us. We feel like we can do it in an enlightened hospitality way, which is about understanding our guests and being able to deliver on their unmet needs.”
In Q4, same-store sales rose 4.3 percent, extending the positive streak to 16 straight quarters. The comps were fueled by 4.8 percent pricing, offset by slightly negative traffic due to weather and opening of new stores near existing ones. Shake Shack also expanded restaurant-level profit margins for the 10th quarter in a row, coming in at 22.7 percent in the fourth quarter. The brand generated $79,000 in average weekly sales per store, or $4.1 million in annualized AUV. That’s up 4 percent from $76,000 ($3.95 million in annualized AUV) in the third quarter.
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In fiscal 2024, comps lifted 3.6 percent, and restaurant-level profit margins grew 150 basis points to 21.4 percent. Restaurant-level profit increased 24 percent to a new record of $257.9 million. Adjusted EBITDA soared 33 percent to a record $175.6 million. Companywide AUV was $3.9 million.
In terms of unit growth, In 2024, Shake Shack opened 43 company-operated Shacks, the highest number it’s ever opened in one year, alongside 33 licensed locations. The chain ended the year with 579 restaurants systemwide, 373 of which were in the U.S. The plan is to open approximately 45 corporate units and 35-40 licensed restaurants in 2025.
Shake Shack faced a choppy January because of weather pressures and the Los Angeles wildfires, but still managed to grow comps by 3.7 percent. The fast casual began the year with 6 percent pricing but that’s since leveled off to 5 percent.
“When you take those together, we just think that it signifies a very strong performance in our underlying business—the fact that our marketing and operational strategies are helping us to deliver strong performance and helping us to offset some of these weather and wildfire pressures,” said CFO Katie Fogertey.
The brand’s first priority in 2025 is ensuring the right people are in place to grow the company. Shake Shack is developing a training program to identify, prepare, and promote top candidates into leadership roles. The fast casual wants to support an infrastructure that allows it to promote internally instead of hiring externally; it hopes to increase internal promotions by 10 percent in 2025. Two programs specifically are Shift Up and Lead to Succeed. The former nominates high-performing hourly workers for an 18-week development program designed to provide tools and business knowledge needed to run a $4 million AUV restaurant. In 2024, Shake Shack retained all of the graduates, with nearly one-third promoted to manager roles. The Lead to Succeed program teaches newly promoted managers how to be a leader. Both initiatives helped Shake Shack achieve the best retention levels on record in 2024.
The second priority is optimizing restaurant operations. Last year, Shake Shack began testing a standard scorecard to measure performance across all locations. The tool focuses on improving staffing and retention, speed of service, and profit. The scorecard officially rolled out nationwide in January.
It should boost what’s already working for Shake Shack. In 2024, average wait times dropped by one minute year-over-year and order accuracy reached its best levels on record. The brand drove labor productivity through better hourly and manager scheduling and introduced a new model that uses time motion studies to improve staffing and deployment schedules. The updated labor model fully launched in Q4 and fueled 80 basis points of leverage in Q4.
Up next, Shake Shack will open a kitchen innovation lab near its Atlanta Support Center, helping the company accelerate the testing of new equipment, kitchen designs, menu strategies, and drive-thru optimization.
The third priority is boosting guest frequency. The brand felt positive comps in 2024 because of increased investment in marketing and advertising, like its Chicken Sundays campaign that ran in April and again in Q4, and the Worth It campaign in New York and Miami that highlighted the chain’s Shack Burger and Chicken Shack products and ingredients. Additionally, Shake Shack grew sales via LTOs, like the Summer BBQ and Korean BBQ, along with the revamped Black Truffle menu.
Another part of this strategy is connecting app and web accounts with kiosks inside stores.
“We expect this to be a huge unlock for Shake Shack and allows us to connect the dots to provide targeted offers to our guests and give that really important incremental driver for frequency over time,” Lynch said.
The fourth and fifth priorities relate to growth. In 2024, Shake Shack reduced its net build costs to $2.4 million and committed to decrease it even further to $2.2 million in 2025. The brand also plans to condense build times by nearly two months and construct new drive-thru prototypes that are less costly, more accurate, and faster. In addition to that growth, Shake Shack is confident in boosting its license business worldwide; in 2024, it expanded into three new markets—Canada, Israel, and Malaysia.
The sixth and final priority is investing in long-term strategic capabilities, such as a new transformation office to drive cross-functional collaboration and investments in the tech platform. Shake Shack believes it can spend money on these initiatives while continuing to grow adjusted EBITDA.
“Shake Shack was born at a public park, which meant that we brought this elevated food to all, making our food and hospitality accessible to everyone in the Madison Square Park in New York City community,” Lynch said. “That’s really what Shake Shack is all about, delivering the highest quality food and hospitality to communities around the world, and in doing so improving the world in which we live, work and play. We’ve made significant strides towards this mission in my first eight months, but the real potential lies ahead.”
