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Shake Shack Targets Chicken Sandwiches, Delivery for Growth

Three dozen more stores are coming to the U.S. next year

The Chick-n-Shack
Nick Solares

Shake Shack continues to expand at breakneck speed: The Danny Meyer-founded burger chain says it will open an additional 24 to 26 locations before the end of the year. 2018 is poised to be its biggest year of growth yet, with 32 to 35 new Shacks opening in the U.S. alone — and about 20 percent of those stores will be in new markets, including Seattle, St. Louis, Denver, and Cleveland.

Yesterday evening on the company’s quarterly earnings call, VP of finance Josh Omin said Shake Shack is eyeing delivery as an area of opportunity for growth: The chain trialed delivery with DoorDash and Caviar in September and October, testing out new packaging and individual locations’ ability to handle delivery orders at peak times. “When we choose to do delivery, we want to do it really well,” Omin stated.

Omin also mentioned that Shake Shack will continue to innovate with new menu items, pointing to the recent introduction of limited-time-only chili dogs, chili burgers, and chili cheese fries. Based on the success of the Chick’n Shack, executives see chicken as a natural avenue for further menu expansion (could chicken tenders be on the way?).

Executives also discussed the impact of Hurricanes Irma and Harvey, estimating that the two storms cost Shake Shack around $300,000. Nine Shacks were temporarily shuttered, and the company paid its staff for estimated hours they’d have normally worked.

Shake Shack’s same-store sales declined for the second quarter in a row (by 1.6 percent, compared to 1.8 percent last quarter), but executives reiterated several times on the call that the continued decline in same-store sales is not a sign of trouble for the chain; rather, it’s an expected symptom of Shake Shack’s rapid growth.

As the company expands with additional locations in the same markets (it now has two stores in the Dallas area with a third on the way, for instance), store overlap means a bit of cannibalization is inevitable — and revenue is up considerably, to $94.6 million for this past quarter (versus $74.6 million for the same quarter last year).

Wall Street seemed to agree that the slight decline in same-store sales isn’t a major concern, as SHAK’s stock price surged by nearly 10 percent in after-hours trading.

Shake Shack Experiments With Cashless Kiosk Ordering System [E]
Shake Shack’s Falling Stock Price Is a Sign of Growing Pains [E]

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