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In its third-quarter earnings call, Shake Shack’s leaders emphasized a focus on labor, retention, and recruiting.

Shake Shack stays focused on labor and guest experience going into Q4

Kiosks prove to be a solid investment for the fast-casual restaurant chain

Shake Shack executives on Thursday shared an update on 2023 strategic priorities and gave a glimpse into Q4 and beyond.

In its third-quarter earnings call, the fast-casual restaurant company’s leaders emphasized a focus on labor, retention, and recruiting. Shake Shack has seen improvements in those areas with changes to forecasting and implementation of dynamic scheduling. The company continues to develop new labor models.

“It’s the right time to refine and evolve our labor model,” said CFO Katherine Fogertey on the company’s third-quarter earnings call.

Kiosk adoption, which cuts down on the number of workers needed in-store, has also been key. Kiosks are now driving over half of in-store orders.

Another area of focus for Shake Shack is guest experience, specifically core menu items and LTOs. Q3’s Bourbon Bacon Burger sold out quickly, so the brand pivoted to promoting its avocado items. Other current successful menu items include spicy fries and a line of lemonades.

CEO Randy Garutti did call out that Q3 lapped 2022’s partnership with Hot Ones, which was wildly successful for Shake Shack, and has yet to be replicated. Executives are optimistic about holiday shakes, as well as the partnership currently rolling out with the upcoming film Trolls Band Together, opening in theaters Nov. 17.

In the third quarter Shake Shack also put more emphasis on value, with a free-fries promotion and BOGO shakes during happy hour.

Operational development is another priority for Shake Shack, especially units with drive-thrus, four of which opened in Q3, bringing the company-owned total up to 21. The company is working to reduce the cost of opening new builds by about 10%.

“We know that in drive-thru and in Shacks generally, some of our biggest areas of improvement remain consistency, speed, and throughput,” Garutti said. “And this is going to be a big focus for our designs and operational improvements through 2024,” especially in coastal markets, he added.

Shake Shack executives are also looking into ways to make its kitchen designs more efficient.

The company is also still strongly focused on developing new licensed restaurants, having opened its first resort unit at Atlantis Bahamas in July. Garutti did, however, say he anticipated a “more challenging environment” in the immediate future, given “a fair amount of global macro and geopolitical headwinds.”

As far as menu prices go, the company rolled out an increase of about 1% in October, as it faces inflationary pressures on beef. Garutti conceded prices may need to go up again, but also acknowledged consumers’ cautious tendencies around spending.

In the third quarter, same-shack sales grew 2.3% over the previous year, which the company said was up to 3.5% for October. Fogertey said sales were impacted by weather to the tune of about $500,000 throughout the quarter, specifically rain on the east coast and the hurricane in Southern California.

Traffic was down 4.2% in Q3, and approximately flat in October. Shake Shack opened 10 new domestic company units, and 15 new franchised units globally. Executives are targeting 40 new unit openings in 2024; just last week, the 500th Shake Shack opened its doors.

Other third-quarter year-over-year numbers: Revenue was up 21.2%; systemwide sales were up 24.3%; adjusted EBITDA was up 80.7%.

Contact Leigh Anne Zinsmeister at [email protected]

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