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shake-shake-promo-fishers-indiana.jpg Courtesy of Shake Shack
A Shake Shack restaurant

Shake Shack benefits from improved kiosk operations

The restaurant chain saw same-store sales increase by 1.6% in the first quarter

Kiosks, now in place at nearly all Shake Shack locations, have become a significant driver of improved sales, resulting in increased average checks in the high teens percentage-wise compared to other channels, executives of the New York City-based fast-casual chain said Thursday as they announced first-quarter earnings.

Same-store sales were up by 1.6% year-over-year for the quarter ended March 27, 2024, on revenue of $290.5 million, a 14.7% increase over the first quarter of 2023.

Net income was $2.2 million, or 5 cents per share, compared to a net loss of $1.6 million or negative 4 cents per share, a year earlier.

Kiosks are now the chain’s largest order channel, enhancing throughput at restaurants and improving sales with new interfaces developed by the company’s marketing team “to help guide the guest through that order experience and focus more on the opportunity to trade up to a double, add bacon — really great ways that our guests can customize their menu items,” chief financial officer Katie Fogertey told investors, adding that more improvements are underway to help better promote limited-time offers and other menu additions.

Outgoing CEO Randy Garutti, who is retiring on May 20 and will be succeeded by former Papa John’s CEO Rob Lynch, said this was the 13th consecutive quarter of same-store sales growth for Shake Shack, which had been particularly hard hit during the pandemic due to the chain’s heavy concentration in urban areas.

Since then, the chain has been expanding into suburban markets, including drive-thru locations, two of which were opened in the first quarter — one in the Chicagoland area and one in the New York City suburb of North Brunswick, N.J.

The chain’s margins of 19.5% are the highest they have been since 2019, the company reported.

Garutti said the chain was also improving operations, including wait times, which were reduced by at least 15 seconds at more than half of the chain’s restaurants in the first quarter.

Guest satisfaction scores also were up, he said, without elaborating.

Traffic, which has been decreasing across the industry, was down by 2.1% during the quarter, which Fogertey attributed to inclement weather, especially in January, which caused a sales loss of around $3 million.

“Excluding weather, we estimate traffic would have been approximately flat,” she said.

And in fact Garutti said traffic did improve along with the weather, particularly in April, aided by a Chicken Sundays promotion in the month, in which the chain gave away a free chicken sandwich with a purchase of $10 or more, clearly a jab at chicken sandwich leader Chick-fil-A, which is closed on Sundays.

Garutti said such tactics and other marketing efforts would continue over the course of the year.

“We are materially stepping up our investments in marketing this year … to help drive brand awareness and frequency, and it’s working,” he said.

“These marketing initiatives have shown success in driving both new and existing guests to our omnichannel ecosystem through creative brand campaigns, timely offers, promotions, and focus on our best-in-class core menu as well as LTO launches.”

He said the current limited-time offers of a Korean Style Fried Chicken sandwich, Korean BBQ Burger, and Spicy Korean BBQ Fries were performing well and he was looking forward to summertime promotions.

Shake Shack raised prices a bit during the quarter, including a 5% increase in delivery charges while maintaining the 15% premium it charges via 3rd party channels.

In mid-March prices were raised by a total of around 3%, but that included a 7% menu price increase in California in response to that state raising the minimum wage for limited-service restaurant workers to $20 per hour.

 Elsewhere, prices were raised by 2% to 2.5%, which Fogertey said was in line with the chain’s historical pricing practices.

“We have no current plans to further increase price this year,” she said.

Fogertey offered a guidance for the second quarter and year, projecting $308.9 million to $314.3 million in revenue for the quarter and $1.22 billion to $1.25 billion for the year.

She said same-store sales would likely rise by the low single digits for the year.

Shake Shack opened four company-owned restaurants in the quarter and four licensed ones, and another 10 company restaurants and 8-9 licensed ones are anticipated for the 2nd quarter.

Garutti said a total of 40 company-owned and 40 licensed restaurants would likely open in 2024, with the bulk of them debuting in the 3rd and 4th quarters.

The CEO offered some parting thoughts as his retirement approaches later this month.

“What this group of people has achieved is a rare and special accomplishment, and it’s exceeded all of our wildest ambitions,” he said. “Through it all it's always been about our team. My greatest joy, and I hope our most significant impact, has been to create a place where our people could get a start, could develop, could grow, and give them a chance to do their life's best work while taking care of each other and our communities.”

He said Lynch had been getting to know the team and familiarizing himself with the company’s history.

“This company is built upon a strong foundation, and we're ready to benefit from the next generation of leadership,” he said. “I have no doubt Rob will work with this extraordinary team to build the next set of strategies to take us to even higher heights and continue to drive Shake Shack forward. Make no mistake, Shake Shack is something special and this company's future is bright. I want to thank our guests, our communities, our suppliers, and all of our shareholders through the years for having the confidence in me and our team along every step of this journey. And lastly, and most important, thank you to every single member of this team who's ever worked here, whose hard work, creativity and love for this company has made all the difference. It has been the honor of my career to lead you and to be led by you. Our people are the secret in the Shack sauce, and I trust that they always will be.”

Contact Bret Thorn at [email protected] 

Correction: May 09, 2024
This story has been edited to clarify the increase in average check when customers order from kiosks.
TAGS: Finance
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