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Three Things We Learned From Shake Shack's Fourth-Quarter Earnings Call

Wages are up, and everyone's excited about the Chick'n Shack

The Chick'n Shack.
The Chick'n Shack.
Monica Schipper/Getty Images

Shake Shack announced fourth-quarter earnings for the 2015 fiscal year on Monday, revealing a 46.8 percent increase in total revenue and an 11 percent jump in same-store sales. Following the announcement, chief executive officer Randy Garutti and chief financial officer Jeff Uttz conducted an earnings call to discuss the numbers and take questions from investors. Here's what we learned.

1. In true Danny Meyer fashion, Shake Shack has bumped up wages

In an effort to stay ahead of rising minimum wages throughout the country, Shake Shack raised hourly pay in January. Team members now start at $10.50 to $12 an hour, while leaders and trainers start between $12 and $15.

In the past, hourly employees started between $9.50 and $11. Garutti said the higher pay will increase labor costs, but added that "paying our team well will help us drive more sales." Uttz said the company is already witnessing a positive impact thanks to the change.

"We have seen early progress on retention and turnover and even stronger people," Uttz said. "[Increased pay], to us, is the commitment we want to make to our team and to our culture. We have no question it will pay off in the long term." As Eater reported earlier this year, hourly Shake Shack pay trends higher for cities with higher minimums; workers in New York earn no less than $12 an hour.

2. It's too early to tell the Chick'n Shack's impact

Over the summer, Shake Shack joined a national movement with the Chick'n Shack, its own take on the fried chicken sandwich, at three Brooklyn outposts. After a successful trial run, the sandwich was added to menus nationwide in January, and it's now available at locations in Turkey and the United Arab Emirates. The Chick'n Shack is such a big deal, Garutti said it's "the most important menu addition we've made since Shake Shack began."

While there's plenty of excitement surrounding the sandwich, it's too early to tell exactly how it will affect the company's sales. But, Uttz said "it's been a top-five selling item at nearly all shacks that launched it." Garutti noted it requires slightly more labor, but "we are hopeful it will prove accretive to sales, average food costs." The Chick'n Shack costs $6.29, a dollar more than the ShackBurger.

3. Shake Shack isn't hurting from competitors' discounting

No matter what other fast-casual and fast-food chains are doing, Garutti and Uttz don't believe they make any difference to Shake Shack. When asked if sales were affected by Chipotle's struggles, Uttz said it's "hard to say" if there's been any meaningful impact. One investor questioned the duo on other chains offering deep discounts and promotions. The CFO said they haven't put a dent in the company and answered by pointing to Shack fans' devotion to the chain.

"We firmly believe people are willing to pay a little bit more for the experience that is Shake Shack," Uttz said. "We have no intentions to enter that fray."

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