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Shake Shack shifted its focus to suburban locations, upgraded its technology to interface better with customers, and developed new restaurant formats, including drive-thrus.

Digital innovation brings Shake Shack back from the brink

CFO Katie Fogertey said hard lessons early in the pandemic spurred the restaurant chain to innovate

On paper, Shake Shack didn’t look like it would recover well after it was slammed by the pandemic. The fast-casual burger chain is based in New York City, the epicenter of the pandemic during the first months, and has traditionally relied on foot traffic in central business districts of large cities, the areas across the country that were hardest hit by restrictions and by the decline in foot traffic as office workers stayed home. Nonetheless, the chain shifted its focus to suburban locations, upgraded its technology to interface better with customers, and developed new restaurant formats, including drive-thrus, that helped it open 36 new locations in 2021 and increase domestic sales by 41.5% to $739.9 million.

Shake Shack’s chief financial officer, Katie Fogertey, said the chain had to adapt quickly as the pandemic hit.

“Many people, especially our loyal guests, sometimes forget that Shake Shack’s digital channels are still very new,” she said in an email. “We started to lay the groundwork for a digital channel in 2017 with the launch of our Shake Shack mobile app. But really, digital was a small part of our sales. When 2020 came around and demand for Shake Shack through digital channels surged, we doubled down on our support and growth of our digital transformation so that we could deliver our guests an uplifting experience through these new channels.”

Now, as customers are increasingly returning to the restaurants, digital sales remain robust; in the first quarter of 2022 they accounted for 43% of sales, including the app, website and delivery.  

Fogertey said digital sales peaked in January of 2021, but are still at 80% of that level, even as on-premises ordering is up by 400%.

“It really is amazing when you think that just since March 2020 we have welcomed nearly 4 million total purchases on our company-owned app and web channels,” she said.

Usage of the app didn’t just come naturally. When Shake Shack launched delivery via its app in March of 2021, it offered free delivery for orders of more than $35 and 99-cent delivery on other orders, Fogertey said. Prices were also lower than if ordered via third-party apps.

The chain also promoted the app by offering limited-time offers, such as the Black Truffle Burger and Parmesan Garlic Fries with Black Truffle Sauce introduced in October, to app users a few days before making them available to everyone else.

Shake Shack’s digital infrastructure, which includes setting up the restaurants to respond to the rapid demands of remote customers, is termed the “Shack Track” and includes everything from ordering to delivery.

“It aims to tackle many challenges that have arisen from building a rapidly growing digital business while maintaining our commitment to the traditional dine-in business,” Fogertey said. That has include implementing curbside pickup and shelves dedicated to mobile orders, as well as partnering with multiple third-party delivery companies. The chain has also introduced walk-up windows and dedicated entrances for pick-up orders in urban markets. It’s also started to open drive-thru windows in the suburbs.

Although Shake Shack’s first drive-thru opened in December of 2021 and therefore didn’t have much of an impact on sales for the year, five of them are now open, and at least another five are planned by the end of 2021, Fogertey said.

“We are really excited about early guest feedback on our drive-thru as we have strived to infuse hospitality in this channel and bring something new to the guest experience,” she said. “Drive-thru is a major area of innovation for the business, not only how you traditionally view the drive-thru experience in America, but now through the lens of digital integration throughout the entirety of our operations and guest experience.

“We want to make it seamless for our guests, while still delivering on everything that we stand for today,” she added. “Even with drive-thru, we stand committed to using premium ingredients and cooking techniques, so our guests will have the same eating experience as those dining in-Shack, just in their cars.”

Shake Shack has also introduced more ordering kiosks both in urban and suburban restaurants, and customers have responded with enthusiasm: Fogertey said that more than 75% of sales at restaurants with the option to order from kiosks come from them and digital channels.

“Kiosks also help our team members be more efficient, and over the long term our investments will allow us to expand our digital and omnichannel system,” she said.

Contact Bret Thorn at [email protected]

Follow him on Twitter: @foodwriterdiary


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