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Shake Shack launched a white truffle menu last week.

Shake Shack seeks to capture customers who are trading down by offering affordable luxury

Employees benefit as tipping is encouraged

Restaurant-goers have started to trade down in recent months, which has meant robust sales at quick-service chains and traffic declines at some fast-casual and casual-dining chains.

But fast-casual Shake Shack, with its strong urban presence and a customer base that skews more affluent, saw same-store sales grow by 5.1% in the fourth quarter of 2022 compared to the fourth quarter of 2021 as the chain, hard hit by pandemic-related lockdowns and slow returns to the offices in city centers that the chain serves, continued its recovery and is now promoting premium truffle burgers.

CEO Randy Garutti attributed the sales increase to a rise in traffic in restaurants as well as a price hike last October, which followed an earlier increase in March.

“This momentum has carried into January, with total revenue up nearly 35%, including a 17% comp and double-digit traffic growth as we lap last year’s heavy impact from omicron,” he said, referring to the highly contagious strain of the novel coronavirus that kept many customers away in the early part of 2022.

Comp sales for the year were up by 7.8%.

And last week the chain launched a white truffle menu, with burgers starting at $8.99.

“We want to capture that trade down … that person who says, ‘You know what? For $9.99 or less I can get a white truffle burger that I could never get at any fast-food type restaurant,’” he said, adding that he wants Shake Shack to maintain its position as a leader in providing affordable quality.

Shake Shack offered a black truffle menu nationwide in the fourth quarter of 2021, after testing it in select markets the year before.

Garutti said 2023 would be “a big year for plant-based innovation,” with plans to roll out non-dairy chocolate shakes that it tested last year and a new veggie ShackBurger that was developed in-house.

“It’s an elevated and delicious alternative to the highly processed meatless offerings in the market today,” he said, elaborating that the burger patty is made with mushrooms, farro, quinoa, sweet potato, carrots, and more. It’s topped with American cheese, pickles, crispy onions and Shack Sauce.

“We think we’ve landed on a vegetarian option that’s craveable, and we look forward to introducing it to a wider audience to get feedback this year,” he said.

Garutti said that other food & beverage offerings would be tested this year, including caffeinated lemonade, and miniature shakes that Shake Shack started testing last month.

Garutti also stressed the importance of staff recruitment and retention, and he said that hourly staff have benefited from the option to add tips to orders at the counter, at kiosks which are now in most restaurants, or on the chain’s app.

“It’s making a material impact on our team — in some cases $2, $3 more per hour,” he said.

For the quarter, Shake Shack reported a 17.4% increase in revenue to $238.5, but a net loss of $11.1 million, or 27 cents per share.

For the year, revenue was up 21.7% to $900.5 million and a loss of $26 million, or  61 cents per share.

It opened 22 domestic company-owned locations in the quarter, including 5 drive-thrus, and 13 licensed ones overseas. For the year it opened 36 domestic and 33 licensed units.

Garutti said he anticipated opening around 40 domestic restaurants this year, including six in the first quarter. He said 24 locations were currently under construction. He said the chain currently has 12 drive-thrus and plans to open another 10-15 this year.

He said he anticipated franchisees to open 25-30 locations overseas, including entry into Thailand, and the first resort hotel location at Atlantis in the Bahamas.

The first licensed drive-thru unit is planned for Dubai.

Contact Bret Thorn at [email protected] 

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