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Shake_Shack_burger__drink_promoG.jpg Shake Shack
Shake Shack plans to add new stores in Portland and California.

Shake Shack plans to build up to 8 stores with drive-thru lanes

Traffic declined 42% in latest quarter as locations in urban markets like Manhattan continue to be clobbered; the company plans to add more units in California and on the East Coast

Though Shake Shack is not out of the woods, CEO Randy Garutti said the New York City-based fast-casual burger chain is ramping up menu innovation and unit growth with plans to open 35 to 40 new stores in 2021.

Over the next 24 months, the company plans to build five to eight Shacks with drive-thru lanes, a new format store developed during the pandemic.

“We are ramping up the opening of new locations,” Garutti told investors during the company’s third-quarter conference call.

The company is targeting growth in new cities such as Portland and Indianapolis, while also “going deeper in California, the Midwest” and strong East Coast markets, Garutti said.

The bullish approach to growth comes as Shake Shack is seeing sequential sales improvement through October with suburban markets outperforming the normally higher-performing urban locations. 

New York City remains the company’s hardest-hit sector, with top-performing Manhattan locations showing lackluster results. Overall, traffic declined 42% in the quarter.

Same-store sales were down 31.7%.  A bulk of that downturn occured at urban stores, where comps were down 43%. Suburban locations were down 16%.

Garutti said “every single region has gotten better,” with October being the brand’s best month since the pandemic hit in March. Restaurant level operating profit improved to 14.8% for the quarter or the quarter ended Sept. 23, compared to 2.2% in the second quarter. 

“We believe we are uniquely positioned to exit this challenging period stronger, and with greater opportunity than when we entered, as we double down on multi-format expansion and accelerate our strategic digital investments,” Garutti said in prepared remarks released Thursday.

Still, he cautioned that the company could face more challenges in the winter, especially as parts of the country experience a second wave of positive cases. That’s prompted the brand to move swiftly with its digital and new format strategies.

The company currently has curbside pickup in about 70 locations. Next year, the brand plans to open its first drive-thru. Other formats will open with walk-up windows.

“The Shake Shack drive-thru will be a modern version of the traditional drive lane experience supported by technology-enabled hospitality and innovative design, all while maintaining our core tradition of building community gathering places,” Garutti said. “We view this model for us as an important step towards increasing our addressable market opportunity and we're making a big commitment to this learning.”

The company’s digital business accounted for 60% of sales in the quarter. 

Total revenue decreased 17.3% to $130.4 million. The company reported a net loss of $6.1 million, compared to net income of $11.4 million for the same quarter last year.

Contact Nancy Luna at [email protected] 

Follow her on Twitter: @fastfoodmaven

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