QSR April 2023

BRAND LEADERSHIP

cal restaurant to meet the needs of digital was so important to Shake Shack, Fogertey says, that all new restaurants the com pany opens now have some aspect of Shack Track. A resounding illustration is Shake Shack’s drive-thrus. There were 11 open to start 2023, nine of which arrived in 2022. Ten to 15 more are expected for 2023. Shake Shack is targeting drive-thru economics of $4 mil lion-plus average-unit volumes, $2.4–$3 million build costs, and store-level operating profit margin on par or better than company averages. The higher development cost of drive-thrus, coupled with inflationary pressures, drove Shake Shack’s 2022 class up about 15 percent, year-over-year. Last year, total Shack net build costs were an estimated $2.4 million, above the his torical $2–2.1 million. Garutti, however, wasn’t fazed. “Some of the best sites we’ve ever had will be there for decades to come because we chose to invest. That’s how we’re thinking about drive-thru,” he said in January. Shake Shack generally grows across three buckets: the stan dard that’s been erected hundreds of times at around $2 million; small-format units under 3,000 square feet that target dense urban environments, food courts, and higher traffic suburban locations (this is where the nontraditional business is unfold ing); and now, drive-thrus. What’s intriguing about the drive-thru is how it’s enabled Shake Shack to rethink its market density. Since 2021, the com pany opened two stores in Orlando less than a mile apart—a drive-thru in Vineland Pointe and a food court in Orlando Premium Outlets. The drive-thru served an audience where 45 percent of guests were local, living within 10 miles. It gen erated $86,000 in average weekly sales and $4.5 AUV. The location recorded about 20 percent store-level operating profit margin in Q4 as well. The food court spot, however, greeted less than 15 percent of guests who lived within that same radius. Still, the store turned in average-weekly sales of $75,000 and $3.9 million AUV. Oper ating profit margin was 35 percent. Simply, having a drive-thru format in the arsenal offered Shake Shack the chance to serve a new guest and increase the sales opportunity for a small target area. It’s representative, Fogertey says, of how the brand views ultimate market expan sion as it right-sizes formats to each location. The final calculation: Shake Shack pulled $8.5 million of sales in less than a mile. Fogertey adds the roadside angle is one that shouldn’t be slept on. They’ve given Shake Shack another chance to steam roll the status quo. “People are so excited when they’re going to the Jersey Shore, or wherever they’re going, and they stop and they say, ‘oh my gosh, I can eat at Shake Shack here?’” she says. “The lines at these places are really, really big, and we’re just providing them an elevated experience that they wouldn’t be able to get otherwise.” One of Fogertey’s first decisions as CFO was to set up a busi ness intelligence unit so Shake Shack could study and analyze factors driving success, not just in sales, but also in real estate. “That’s just an important element, baseline, for scale,” she says.

The result is what you’re seeing across all of these designs—a deliberate, data-driven approach to fitting Shake Shack where it wants to expand. And when the brand gets there, it’s going to deploy customer relationships and tools, like kiosks, to get the message across. “We’re going to be leaning on those kinds of things that make us truly differentiated and special,” she says, referencing the brand’s premium, no hormone, no antibiotic products and culinary spins, like white truffle, “because I think that’s the key to continuing to grow our sales. And make sure we stay relevant and that consumers keep us in their mindset.” BUILDING FROM WITHIN Shake Shack raised its starting wages more than 20 percent since 2019. The company earned a 100 percent score on Human Rights Campaign’s Corporate Equality Index (fourth straight year) and hosted a biannual leadership retreat in May to develop more than 1,000 employees. This past year, 52 percent of overall hires were women; 81 percent people of color. Fifty-five per cent of promotions were women and 77 percent people of color. Over the past couple of years, Shake Shack expanded its Shift Up platform, which is a leadership development initiative that provides shift managers with tools to advance to managers. The brand doubled the number of graduates from the ongoing cohort. Additionally, GMs are offered equity grants. There’s a lot going on behind the curtain, Fogertey says. On a granular level, the brand offers about $15 per hour as an average national starting wage and invests in diversity and inclusion in part through a formal program called, “All In,” which housed Shake Shack’s “Stand Together Series in June 2020.” The online platform enabled employees to share stories and included 36 independent speakers at all levels. More than 2,000 people participated as the company addressed social issues and broader themes, such as how to overcome dependen cies and racial issues. Shift Up is a pillar of All In. Employees asked for a more defined career ladder and the skills to climb it, so Shake Shack invented the 18-week paid development option with the goal of eventual promotion within Shake Shack’s cor porate structure. Shake Shack recently expanded benefits to include mental health resources and now provides access to an Employee Assis tance Program ( eap ) to the entire company upon hire. Shake Shack also continues to explore alternatives to a traditional workweek. Throughout 2018 and 2019, it launched and piloted a four-day setup in select stores. It’s currently testing with hourly employees and managers along the West Coast. All of these efforts, Fogertey said, are what struck her most coming over. “The thought of what Shake Shack was from the outside looking in, you think about this great growth oppor tunity, you think of amazing burgers, amazing shakes, and everything, but when you’re there, and you see the magic of how this company really supports its people,” she says, “that’s eye-opening.” q

Danny Klein is the editorial director of QSR and FSR . He can be reached at dklein@wtwhmedia.com .

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APRIL 2023 | QSR | www.qsrmagazine.com