SHAK - Earnings call transcript Q3 2018

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Operator

Good evening and welcome to the Shake Shack's Third Quarter 2018 Earnings Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. Please note that this conference is being recorded today November 1, 2018. It is now my pleasure to turn the floor over to Leo Rhodes, Vice President of Finance and Investor Relations.

You may begin.

Leo Rhodes

good everyone. and Operator you, evening to Thank

Joining Garutti, Tara our Shake Shack Comonte, are Randy conference call Chief Chief Officer. me Financial for our Executive Officer and

earnings to You have news section. in our release, the which third investor.shakeshack.com, should in can access quarter all found be XXXX

Additionally, posted to quarter. site our or XXXX an exhibit third supplemental can the materials, which on we found Presentations in section X-K have our for be the quarter earnings Events & as

of financial non-GAAP presentation measures, we those in During release our XX, actual earnings information are today's for discuss forward-looking be materials. call, on in a with number XXXX. evaluating and isolation The will supplemental today annual on be results can performance. should our some in accordance of measures in materially to available substitute Form GAAP. of Please Factors and which in made useful as considered statements report we XX-K believe additional a of Reconciliations February due discussed the our filed risks or and prepared the including GAAP not appendix Risk our to section our may be this of results differ comparable may note, uncertainties,

Additionally, of update assume no views views any our any obligation forward-looking only statements our today, forward-looking change. to represent as and we statements if

evening brief to up from remarks over this the Randy before with the our I questions. to call call will opening Tara We the will now begin Randy. call and turn

Randy Garutti

on for XXXX. initial and results, will for provide our to our the update we This quarter on call. thinking financial everyone our Thanks good conference priorities share review the strategic extremely evening Leo and year evening a third

on-track overall of of that our we new Shacks we existing pleased and for Shake to achieve our strong, performance the XXXX. raising end revenue members over work overall team the for the and all in growth are that as We incredible of $XXX results revenue goal our both of XXXX. confirming of end The guidance report million remain remains to year in towards us the hard head Shack’s long-term by

quarter, adjusted revenue to opened $XX.X license $XXX. and of to and two and year-on-year million a delivered XX% for of and Shack’s X increasing X.X% market strategy share. long-term of of revenue with During seven quarter growth respectively. company we continue EBITDA the million Shacks, XX% and were nearly sales the third operated profit Shake execute our we down overall generated increases

are on significant in Well I short-term sales, We quarters additional impact delivering comp But certain want say this recall metrics. color strategy in Shack-by-Shack or a that result share doing profitability leading this region-by-region we and of and a some industry isolated bottom maybe to metric. to return growth, committed here. one top of down sufficed in to remain intentional up others. down the delivering line this as

As delivering experience Shake Shack in guests. interaction hospitality will our relentlessly with on every excellent and focused

Now few this on underpinning we key priorities this, strategic year. focused a

approach to timing our First as estate. total operated both evaluation has identification robust and supported real disciplined ultimately back the been is a company of impacted Shacks all, revenue. The by for and and year our have great of weighted license pipeline this

we met trip be opened we are site team opening However, got few last to look with Seattle, in of a where stellar to at down just ago leadership the week take visited a kind our late Francisco, will team night our San a the a weeks Last Shacks from back line [indiscernible]. building. in I block. I Actually where

design the decades and community brand will this to heart their build in to Shacks continue and for of come. drive quality Shake at We That size location. great experience our

of class Shacks encouraged and performance a early Shacks to-date the by class XXXX of to XXXX. are in We largest expect deliver

The on continue of draw our categories and talented group excitement innovate this. Next core menu while executive Karangis. new our engagement. new the around innovation of addition our hospitality John the testing guest items to menu, opening our as as A Chef recent well of unisquare important we to along menu, kitchen

Third and experience. channels evolution ,the expansion digital of our and

deeper our foundational finally on which both we on the New York and quarter site Shacks. have the early company during We our third in into strategy part as growth. And short and our in long-term Highlands committed new future in scale, guest and Village with although opening how bring the investment markets Shack opened we in we This more West second an in and quarter, progress, both of development our Williamsburg, of and Tenancy our engage of to town strong Brooklyn, the our Ranch We infrastructure. at we we in significant opened efficient expanded and growth Birmingham this set in Alabama. with Denver meaningfully believe our home in our operated expanding are investing Shacks systems. bit continue our domestic stages, base, Digging future. a seven important people But frequently we Nashville,

we Shacks including And Philadelphia, so York. already Greater opened Chester far New West Seattle, [indiscernible], the Minneapolis and six have fourth L.A. quarter Suburban,

Bay Palo coming mentioned the area I we looking weeks. to As Alto are in forward the launching in

year company are and unit XX% in XX Shacks operation new finding growth over prior we expected operating XXXX, delivery year. and to XXX pre-guided our range full-year previous open approximately XX XXX unit the the with in Shacks to company total, the For

of of significant December. being those At openings. at are slated weighted remaining has meaningful least four profile last in with the XX, As of and on end couple results, the terms we impact a for the stage XX had openings of new this fourth our of financial shared in back most number weeks XXXX our quarter

development. Looking at next year of XXXX

company XX laid XX% in Within plan We are and out, is estimate between company XX year-over-year increasing operated are open is expectations represent planned unit the growth between permitted likely currently of of Shack our XXXX we domestic A up. to once another to we operating XX%. targeted disruption openings. number with The again Sarasota to schedule, Providence, our keep and preliminary Shacks to including new will weighted balance have Beach, remains roughly few. a schedule XXXX markets way markets backend the in New revenue City, existing Orleans and that portfolio Salt updated new Columbus development on XX/XX Virginia firms expectations but to you name Lake of and

extraordinary the our of work more Now in busiest the for that an to we team long expand learning chance continue normally team bring our world, business. company for grow growth we we company in operated the A third licenses on done rise extraordinary to an to really our represents so airport we led to light would brand, a plan Kark growth balance before and Shacks, Shack airport, every this ago, of to this business. in business year turning and back of world. in model internationally that companies the many took decision important focus around in the opened our growth the to capital business. quarter, We XXXX has by invest one many big Domestically investment to has of We our license our important grow. strategies been increase we believe Years with and the first learned, size so. do ahead. and Atlanta the Most years license for partner new time of like lightning piece Michael is we importantly opportunities we company. broader our

on really City well that will this the Cleveland are will [indiscernible] quarter way of as the also and quarter, our about Worth bond and and Internationally this airport substantial in through our Kong Fort roll the we earlier XXth to exciting brand was to represent launch Later in plane at we ahead. San month, in followed third watch International really Fleets license strong growth airport Francisco are the in XXXX. Shack fourth this Shack moment parade by of second open the layer pleased of opened [Macquarie] our the mall. proven, Shack year when our We that Airports (Ph) UK in the I report Denver earlier of I now to excited Airport IFC love Shack strategy. Hong as in we there a and opening at growth the the new bags week the Shack Pacific London. be We in Dallas, boarding to and one my

The as in slightly world XXXX, potential can Shack's four rest we schedules. to these open much Shacks XX to license expect remaining around Shack initial few larger And Shack's might quarter. a is our due coming green airports two The soon. to development guidance depending For fourth below on with shift, opening you opening XX of are net at schedules. range the open and for pushes and this the times in assured gates imagine XX lower end to in already

to international are ambitions Mexico and into new Our Singapore. grow. continue agreements going we our call, Since license for last both

We are working to [indiscernible]. extremely with proud the be

agreements Shack's of years. new with part Our XX over the next open Mexico XX an

five we with planned the Singapore relationship With building Group XX success the In upon existing first next our next STC with will over be open years. year. the Shack to for Shacks of an the agreement

year. also open first to next expected The

Korea, over In first partners Hong Asia, now entry the to partners further future licensing driver region. Latin our Shanghai our Kong, Hong growth, markets global deploying are our now in our existing an our planned in Pacific and our of important footprint with growth welcome and on Asia growth excited as international and our by Japan, support new to milestones focused across office we place own years. these into within in in our operations Asia remains support our the With Singapore the several order both Our South [indiscernible] be next critical and are XXXX America to we in strategically opening in agreements growth expansion resources and Philippines will Kong continued international and we the family. business

Shacks For of on-track We XXX meet XXXX. we open between in license Shacks expect the XX markets. XXXX, to international in the and with our in XX handful a of by Shacks remainder goal remain domestic to license the full-year end

we menu is to core to everything on do. moving innovation Now which

just Our in space new located around Village across for is hub culinary to deliver Company. all the support while This third team home innovating menu is Wes connected and kitchen lower it. our across innovation quarter, as we better to and now testing strategy the new strategy, our of office. menu our the opened and core that a development on serves order our excellence level In the to home to innovation Shack our

Karangis, I also and innovative of new exciting Bringing we chef. oversee As his at the role, Shake thrilled for menu strategic all culinary new John executive creation mentioned, will Shack. our development John the are In team items.

Shack Village select our years and brand, test kitchen City have now chicken first menu over New about guests item Our we September offered Chicken in many exclusively launched at to in is West been Arizona. from potential more York [indiscernible] and in wise innovation mid we their to learn are the in for new our add coming about months. the excited asked are Shacks

the the let's of and Shack Now evolution about experience. talk innovation

a got guests. do significant. we to demands point? sales of know have higher stages we We that know percentage various We all and and of is than the happening important in channels Shack share we it check. growth. a is that it Shake a of at The right or our have this total digital are to more know continue proud as what digital average ever are lot to experiencing channels our testing they is through We grow generally know native convenience now in But

the now kiosk and ordering. app with So additional online None of the easy, is is reality. here delivery this

with times in Shacks, at continue kitchens which the Shack these we additional busy learn peak channels can add create guest still evolving iterate these to to for we about a know the the the digital our do are We We store strategy growth where test one can we excited Shake front that. we keep products in our along channels that believe long to opportunity and are here We continue really our design way learning business. long-term. broader these the we are well Shack brought remains complicate fact in in thoughtfully, we and great journey flow represents ways and in experience. for got roll for issues kitchens times have expansion a experience out to of guest and in Early them are we the at order optimize complexity we certain already go, love our how

now based Web currently expand Our XX we front This to as share. are reach so on recent guests digital of testing to those is is represents old mobile Shacks. our desktop and that will the time ordering and we introduction one development may you use week opportunity we browser the to store lions goes even just update on channel app. the just at wish additional based have who from an more

also new kiosk. a replace, working order as will be help with stream least of of guest certain down represents one select labor We enhancing point experience, existing year hybrid of Shacks operating all sale Shacks pertaining which of continuing and the have us line with By to Shacks that end except an are will challenges Shacks in on model, flow excess the cash. potentially number retrofit our traditional also at opportunity for kiosks build XX road. that a self and this approximately with we Kiosk

our Shacks scores of and it's in with to early receive kiosk are new this continue experience channel. also high deployment We guest

demand be us. delivered prior strong represents to for on mentioned Shack and As Shake calls opportunity for remains an the

results, service with to patient of key will Our or for more formal including be one integrating more pilots partners. number of partners, with establishing relationships a the delivery options continue evaluating

at entire will experience of our up, the the guest to to through initiatives. which pleased are with summing I ensure However, walk significant over we Each is continued efficient for are Shacks. in of financial well highest against as key working Tara, it ahead. to operationally progress strong opportunity you our In a strategic position the growth execute of as to one all who really quality results. we to believe point of it we our With want are a we all that this is critical turn and

Tara Comonte

revenue XX.X% due sales increased by of of quarter XX the implementation Shacks million the licensing revenue operated licensing of Shacks Total new addition company which Licensing operated revenue the same XXXX. have X.X% increased primarily Shacks revenue Randy. $XXX.X to to our company since driven XX.X% of Sales operated of for both company increased from XX million. and of $X.X includes prior our the to for from Thanks million the third quarter $XXX.X of domestic the to agreements. Similar the XXXX to revenue year. quarter third Shacks recognition a new impacted increase last some standards accounting timing since quarter,

average new include and standards. on reported with second XX-Q comparison was a mix we included $XXX,XXX, price did typically a As we quarter decreased were for than of will third higher traffic Shake sales revenue the our And expense channel and partially in our price footnotes the previous the in decline to [indiscernible] the to which third in price by old XXXX full-year in the to and digital by Shack. offset expect during our The from growing to which $XXX,XXX of mix. a reduction Similar and of and December. year, show first positively quarters is the This first and Same-Shack result the X.X% consistent half over revenues the impacted the consisted impact in both decrease incorporated guidance. X% quarter. recognized expectations increase in that X.X% be roughly it with the a for X% X.X% a

Although come we not receipt market which most our for it performance. the as to said to metric attention, we metric the is useful for believe measure previously, the have do

and healthy share a for building on long-term. business the market young a company focused For growing strong and

Shack our of our AUV level profit performance performance level supplemental materials. overall unit are on regionally our updates have taken Page We XX the X and months and our proud financial trailing operating share metrics, and of internal opportunities, capsule and

illustrate it relationship order additional on the of detail the of supplemental revenue dynamic current revenue We X in the Page performance. particularly of the and to to by business growth [indiscernible] materials, our relates have some as some region shared overall between

million added comp X, of For expense at respectively. example, roughly of our in million Shack period and to have sales for as York in we $XXX,XXX Page $XX approximately on City the month two and a trailing more $XX the markets $XXX,XXX XX New established Northeast highlights new of sales

top regions, added other model $X.X for $XX Shack long-term. and dividend a is in company sales $XX also while in in of QX, growth decrease domestic the of we Comparatively, XX sales on in show by ending $X.X months On have will operated same new continue us and growing comp solid the quarter million million experiencing figure are Southeast prefer comp respectively. the none added we in Shack have was a third or building market quarterly for long expand XX%. in as income market million sales Average in unit and million the strategy aggressively quarter Taking roughly we for million experiencing that remain We total added in while million $XX,XXX Midwest bottom as degree a company to overall $X.X at for the look to the $XX roughly million approximately metric months continues focused XX some sales sales share. the weekly increase of this hand, see sales lower a for out trailing extraordinary in as XXXX to was $X.X believe increase an total, business the our the sales of pay average squarely and we we to and do lines believe we for million. new volatility the X.X%. $XX overarching third volume Shacks and trailing that that in

calls As the of of continue decrease noted broader range many addition newer to a with sales. Shacks with will previous on AUV

$X.X Shacks company and newer $X.X the raise year, year our of previous be XX.X%. operating expected between level prior XX.X% this our to the quarter by to sales year. expect of due guidance However and profit this million. costs third $XX.X grew level million of decreased million XX.X% to a Food AUV operating to compared paper million of in non-GAAP of Shack a the now $X.X of million XX.X% end to as operated these than stronger Shack measure $X.X Shack performance percentage in margin some slightly with to a we

volume our flat percentage and due paper a as the slightly minimum the of or related ELT the short decreased food concrete or upgrade plans. year-on-year G&A year-over-year to a with combined potentially points recorded is third by expense costs increases in well. Shacks. a on a and XX Shack year XXX,XXX driven points relatively percentage business excluding project and one-time leverage lower support quarter million expenses the compared of QX is matter as QX roughly on sales initiative Other XX% $XX.X increased the long-term related to the with current was the that Labor an across legal delivery introduction to expenses points The Investments to increased Core ongoing and basis being items of prior events sales basis to we work will forward XX% basis. the approximately from $X.X Shack and to primarily quarter, progressing XXX year-on-year primarily which percentage by of new fourth Looking to quarter by compared In wage increase in operating build charges the basis together full-year project of X.X% million related Occupancy of to a quarter, concrete. associated our project deleveraged to impact Shack expenses and also expectation driven $X.X leases. very across unit to average increased approximately our lower spread the Shacks expenses related with six growth prior operating commissions during paid the to volume pilots of sales system. million XX driven to year number third to primarily XX.X% as of to one-time concrete a off-site

for update to continue clients the can accounting benefit of add released in to and this changed implementation We are cost business August, sense associated standard with which the treatment scope to here But do implementation continue now respect to we makes and based with in the project and second solution. it we economic this. software much XXXX

of of result this mostly be of initial portion expect operating expectation a capitalized now As our a we significant comps versus costs concrete to nature. project implementation

third margin We million quarter million and expect first in to from XX.X% remainder quarter $X.X and EBITDA XXXX, as year and of $XX.X values Stock quarter the $X in falling forma onetime $X.X grew $X.X total to approximately of capital fully benefit G&A which same Adjusted in was from an Shack the a the $X.XX million million the spend the last compensation XXXX. project the on current a from EBITDA approximately of prior in costs $X.XX earned adjusted or to quarter. on revenues In exchange million compared percentage basis, pro same adjusted year. added we XX.X%. or $X.XX on the quarter

on as full-year XXXX, to expectation updated for our follow. is Moving guidance

between an and to We our over XX% $XXX representing million $XXX to year. $XXX million are be prior guidance of full-year prior to million raising total revenues $XXX to increase million of an increase XX% approximately

the for operating a rate XX range between our over or tighten have XX [indiscernible] growth of to be new year-on-year. growth XX% domestic representing We unit company

the international XX expect $XXX,XXX expect to to locations. Shack we XX reorganization $XX XX estimated across compared timing previous We to including our impact Based XX an and on due opening license new to full-year shift approximately and Shakes for revenue standard. footprints of million be of license guidance domestic revenue several new to-date, to our trends to license open the

company guidance million increase of be million over unit $X.X of to full-year expect and to operated Shakes $X.X million We volume for $X.X average previous to the million. $X.X our

end [indiscernible] lower range. We for million core the cash Shack sales $X now million guidance X% roughly X% profit to one-time to expect XXXX. $X.X in margin to the remains million. G&A full-year $XX level estimate and exclusive XX.X% We consistent project in concrete about FX between $XX project to charges is with million million continue million and the for the which versus spend the operating for slightly towards full-year, be guidance guidance. to on be is $XX G&A prior to Albeit to expect Shack We spend expense same $XX the of XX.X%. previous

be million based to We effects our to the to $XX tax depreciation expect in million. excludes with a fourth approximately $XX call [indiscernible] year compensation for of guidance larger XXXX to stock guidance. rate XX% provide We line benefits our than tax pre-opening our of our in versus schedule expense adjusted XX% the million, which to for prior was $XX quarter range. now pro in The XXXX, any Interest increasing million, a on due forma from to-date. $XX which costs relevant $XX credits by to from we late expected million impact rates is of After revenue income tax expect February. detailed primarily is $X.X be our full-year driven guidance annual for million, approximately previous will effective

However, directional share would headlines to point. we some like at this

XX%. rates a We operated XX% unit to growth operated of domestic expect representing and to open between company Shacks XX between company XX

Shacks We also in license between expect XX XXXX. open to net XX and new

expect We and expected food distribution in within increases headwinds modest by driven primarily costs. paper costs

Shacks. historically driven the pressure lower expect deleverage We increases on unemployment market impact wage labor of and ongoing the and minimum line continued and the by regulatory low easy

continue this in relates and to As continue we G&A, infrastructure deliver across scale long-term Specific systems to sustainable business to growth. concrete. project people, to support it business and and the invest to will

due a year XXXX compared this [indiscernible]. with CapEx. in will XXXX primarily Depreciation higher to in expect $X We in $X G&A level to in similar approximately be one-time spend expense to million

lease of Shack that new our process impact in standards will financial. Our a some be this relation the evaluate general volume. more open lease effective interest lease in just impact Current the we potential there QX existing accounting continue XXXX will and At and are to our becomes primarily focused stage on not to depreciation we in leases. are believe reflects

costs Going the forward will in line. occupancy reflected all be

We our - all fully right balance on with completed for more taking will and will XXXX specific of assets we leases this these of Without liability. forward capitalized sheet mostly that say certain to all now significantly use our analysis. guidance, expand going

pleased continue wrapping that the with our So up for opportunities quarter, lie and performance we the financials be ahead. to our

performance sustainable Randy in we health will We I will ensure back drive of to come turn years results, business. for the making of the long-term and are financial our we and closing to this Shacks it have remarks. investments confidence success the our With to that that, in

Randy Garutti

Thanks Tara.

priorities will Before next just strategic at take our Q&A, look quick we for year. I a move to

you we remain committed remaining hospitality. To on while As experience initiatives. excellence, deep there, long-term our and need We see growing quickly. on on meeting can be are going to targets focused key we few near focused to financial get

what a priority. unemployment historic We to all More our and success. can First, excellence company's been being committed in our availability and people. costs leading know our this higher lows means than with of us to great has how always important team increasingly ever at you talent on count

making our be investments in teams. will increased We

the we on guests. guest at we that those just both with so keep our and experience evolving day-out Shack. great basics the our day-in connect delivering a maximizing delivering experience important consistently It's on moments where Next, and

and have a In connected that platform addition we Shack will be working to loyal built. of we incredible brand community, cultivate leading

and connecting the standing something guests has understanding experiencing do good, please to care tonight our years and go operate, refining this this with them. around growth open and and personally, up world. guests for again the for everyone offerings deeper the All many relationships with road and by we While beyond This we face-to-face. interactions great team of [indiscernible] digitally Thanks call means investing and focusing taking for the continuously and our continue to innovating future. the will and process to have any we improving of strengthen we future down Shake be while today's brand our the identifying opportunities unique to product more infrastructure, committed Shack on joining that how what our questions. with will for our our ahead operator, line in opportunity that

Operator

Thank Piper you. Jaffray. [Operator first Please Nicole Instructions] question take And ahead. Miller from our go we will with

Nicole Miller

the how you when you pricing any that to top-line outlined talking Could good mix? up that And there afternoon. you if you, and is in and about about much price much you how there the environment start think do then versus bit the power have have? keep need a price about have Thank feel little And first to inflation, you that comments you you the quarter. take and some do

Randy Garutti

Nicole. Thanks

decision So to price X% right system the last got the running X.X% made through now we about December. from we

XXXX. We generally we give this in the guidance expecting system later through price year. X.X% official the will on are into But about

have you in Shake X.X% look entire if existed, X% time. pricing the that to XX been So, have we at every range the Shack almost years, of nearly the year

have could, the We we always we and in been have that price believe the should. price we we that taken never

this doing going will to a little think great just Tier we we And very have we what X year-after-year and about another on business to that this not to are a take that the We pricing pricing that some some offset a We is have that have the power our smarter because that will price are bit don’t Right. think X%, take makes long-term pressures we and add feelings than balanced pricing studies, pricing go experience regions while this view long-term year. that for we expand it regions have and will we just the great will year. lot to a go to X% all more and X% anything back for up continued on we continue guests.

will rolling keep keep the tell our this top-line, that bottom to continue world rolling line. we we So

reach continue than is any we We year, normal next few for before many have for next likely profit it bit but said that levels little have business and our guidance for as overtime, given decline the profit run our more rates. a will off years years and not

that, as be X.X% high about but our do now we choose to going with read the cautious, now next year a coming you are we bit take opportunities. of opportunity so. day see coming of So every If continue more all December another way. But for end we we plan to little inflation can and may price to what about

Nicole Miller

very helpful. is That

innovation and now positive their If in there maybe expand then So are congratulations right mixed that if can mix, open. also also around innovations shift is I did being did you so that on the and on question menu kitchen last confirmed Thanks. understand you kitchen doing parts? the that benefit top, have things you math potentially

Randy Garutti

absolutely. Yes,

shown to on for continue price, opportunity now, mix. little of I take the have think to we and years expand bit a

lot a and But looking which channels, higher we there sales got mix a when increasing we Now overall are mix digital percentage few is the to to that alternative have Right. menu and the at innovation, there things are we Shake. in entire continue is there, have look at. a attachment

favorite rushing Shacks, our a a our New much which go one did, was got ever not are and opportunity we our the XX veggie assessing really then premium is now for new and continue Right that really We we core. we have LTO But to year, in bring us just innovation, is that we ran which chicken, to bites, we really an out. that we that so one brand last Shacks back of have running LTO hot we few little that that are for about in three got chicken of new in get got our a in going so to bit York testing new are item. us price. a an Shack, are but which our with a LTOs Arizona It's around brand

can keeping place. price drive to continue some to value overall while think good we we opportunity mix engineer strong really in So

Nicole Miller

Thank you.

Operator

Bartlett And with we SunTrust. on will move to Jake

Jake Bartlett

that same-store question. roughly math Great, that quarter. first you - sales, range. maybe of for taking mentioned in the negative two towards question for guidance the the implies thanks the end being annual is that of a fourth Tara My kind the on lower

we quarter? you what a in the from that do confirm to saw third deceleration expect want Just

Tara Comonte

when look us. first to say Jake, so it at all mean comp, Hey I of we will metric for we be a volatile continue that,

on [indiscernible] performance we as so what is quarter on in And are each to-date, basically which reflected commentary. that based that goes seeing

than tail addition on very, for have In so meaningful coming to in and going and QX the very end of beginning impact QX a is rather earnest up. we may that delivery at remember you QX comp started pilots year last in our the

Jake Bartlett

caused really have second Brooklyn much an Williamsburg, a impact that could differential, to of about Got the now, is kind difference kind is going but the XXX or negative big a of quarter. just the on much of kind idea that cannibalization impact basis digging have stores it, this and and having the the is it meaning opening points really between Island understand which of the comps have know quarter volatility, would into struggling on in second to the of the Staten in a then I'm you

just I factors of And sort that you the any there whether how it that cannibalization in it promotions and the want have you then one pretty just into having confident was into is also other exactly think I dig more follow whether, of are I kind rainy or the quarter? up. impact is dig whether is like So

Randy Garutti

It's deck you we to of little two of look our of the you and we impact sales of business, We grow our up in cumulative comp shared lot sales. a markets. some of in restaurants still so as added things, much of it the we at bit two supplemental of know of the continue opened number New that York City base a nearly makes this those if Northeast a and thirds a see lot

that comps bit in those million on happy will never a not twelve a in months when going looked So positive our we this on drive something we are and we strategies have that to counts, That are of Southeast data regions some phase are filling that the in shared, opposite us the can we these look West we the in opposite that we you our markets. its happen effect for if to and regions, opposite. time-to-time of continue of really at right, still and the want with that we showing may add having regions in always that. newer negative just look last early not we of are the comp show be $XX regions where rest we little said, and we new and two Also towards nearly are sometimes really ever from

think a really conversation. Shack-by-Shack it's So I region-by-region

slight over over we the have in a heck of course know trailing added the ups and couple the and you lot you we XX, years had downs of of have If sales. look base a the comp have course - last we you the know

we see, market for think that I balanced approach share. So to really is our point the that

Jake Bartlett

this is themselves have then that out. a it. question it meaning economics have And been at Got good to delivery, I'm point last for year, the a a concluded do little thing you you on have you testing over proven it for that

partner you business adding? working of that to move are question the in part to a or with the Just be mentality profitability of dig additional the of may Now kind you is where is are to is terms just that pick some, forward you complexity it still there wanted in of are? the

Randy Garutti

we believe important, don't we what our most listen Well to is Yes. guests.

anything chosen really last We to various work more-and-more guests who that we to only is would learning great seeing there still them times business is think Our we of Its when are do be opportunity compelling for why bringing appreciate partners that had a What are we Shack And years. got have do increase this telling testing four balances we to believe we strengths has and few next great sure why is we local learning before demand. to that the their would quarters to still guest they lot do the some continue to partners, in is model us in long-term us. have yet. that going single want meet make needs that partner, so experience. a in long-term to we that We demand the what there. region office. with it haven’t over a go and lock We Shake to us want and to down

Jake Bartlett

you very it. appreciate I Great. much. Thank

Operator

is William Zackfia Sharon, to Blair. on your line open. Moving with Sharon

you yourself. un-mute please on If mute are

Sharon Zackfia

Sorry, I mute. was on

So, Randy, that. follow-up on a

think were also I about in can which the there side. you to kitchen, bit pick what with up, holding of those perhaps on a but that the would little delivery, with do house when guys want and those your maybe for of delivery? side, even encompass were expedite labor, comments dynamics come back sounded do use to the you digital like you help with operational house Could like digital to on it's the talk some use that to back front digital consumers

Randy Garutti

ordered your down you to exists. kiosk. to and who Sharon. only you exist. go bags our ready. an that four or mean a you your where it was writing our get talk with Delivery on Absolutely you [indiscernible], app the on couple are know their and paycheck on people phone, alert they getting on years, I People human when the of back if on being, waited big was you bikes Today boss cars we

kind way the to so yet added sometimes for opened up various people piece. not some Shake this delivery to their used their certainly may of as And getting that And we the who packaging as gets as are phone, well get name. much channels the you using And people of can of Shack.

existing that a have think saying I And Now excited channel that to high add challenges are work our for challenges. all which or road. going a and bigger. about, I through those volume busy us down think topics, we Shack makeup for didn't that we long area some of It's the of is not ordering any These way got especially and super sort of very just the great pickup of are right. we in magically online some is be to the get

are it haven't evolution. from of that we make want we time, could channels. many get we some have it doing, sudden our and And the the flow have of guest you pickup comments make experience forward works trying make. that others of are are Shacks, we see out comfortable invest experience. got in looking trying to are to But to looking evolve and through new dining are will as separate here Trying Shack the it flexible, delivery and it you as acknowledging we what to So possible thinking learn as in take a to Village move and while will West really to some innovation through, and willing investments a some to learn, that to some in that recently the takes the kitchen and the our channels expand as you you that read way we got area There comments to we Shack paycheck which possible. of the and got you to as four seamless will of some be it Shack of could is be all we how looking in yet we got

a be to got for time. working [indiscernible] be doing is our long and something have job, do I on will a they think will lot great we So it a

Sharon Zackfia

who or yet to point any doing traffic segmentation from to digital anything the are drive those folks using at ordering? you are you try where Are

Randy Garutti

and more more we We are bit, got segmentation. on various little a that. lot Yes, a experimenting with smarter

thing. before. data You know they from to we apps that our our of to are reach with haven’t to media do not our new indicative been some but much business small gives Shack. Shake we that of And really with both opportunities able out big cool are to new social have so ways material and us people our following in These

thing on was date fun, the and know quick us. lot get cool it buy on so app, really thing that which Shack an take Screen opportunity a to was couple of fun so of a we burger dating burger at us You ran weeks and brand up Bumble get a was you a burger, ago, a was just and it look took a a a for people

future and the are with allowed we use just, to channels so really guest that connect had to our on starting in is our brand that. the in So we felt way just whom going digital going much us is But personal we forward. again and we that to way are on opportunity believe just to it's go a

Tara Comonte

Yes Sharon its Tara.

us the that not continue capabilities and across just touching people times the company the be will and a or get we systems our you big about the are ability LPs, see do And business. things is that like think that within invest in you I of infrastructure tech method data for building the and on organization. insight talk in building whether relatively part where investing back new a part it’s to what when it's of to marketing

you our priority where value think So list, bunch coming continue then see and today the forward, its that certainly on it’s a powerful. us super and will mean I of item again we to whole years. over it's but high build going

Sharon Zackfia

you. Thank

Operator

will we Stifel. And Chris take with O'Cull

Chris O'Cull

should but Good culinary expecting aspects kitchen investing with menu afternoon new guys. et testing innovation mean Randy leadership. innovation, new I appreciate we in are you regional cetera. the in menu more of importance the improve and to I items a variation expect better

comment on would that? you If

Randy Garutti

welcome thanks in call to the thanks, that Yes, Shake and and thanks for for Shack. taking interest

notably and menu innovation you above. restaurants. takes we years. time, is it think all Most New have the all it's literally you basement time been in got to a these effort I to takes doing market City open Shack know It York around then the of kitchens

our He have new to on finally we have we team addition had the interaction culinary who is position, great kitchen, replacing. chef Now for in not years. we brand a have is own our a new

our dining events with cooked events Unit background So Unit having and done at volumes with Square having he comes serious at company. Square then fine a also Cafe

expertise really are So excited John's we about.

our one, line we effective smarter, do most them to number we How is them improving menu. make continuous we overtime. and better, make how the I what think throughput behind do expect commitment our things great how we in impact do core way things to

but for [indiscernible] a say, new category John we It think we sure we the bites are be great or Dog up way is yet, not us. that and Hot will to whole are whole But what gotten for snacking creative it’s do that from they in is from for early with opened new things too to in guests. going getting team I'm and a the our potentially for before addition at with frequency. to afternoon feedback looking endlessly addition that opportunity like have some a new shift I In chicken

where Shake think coming Shack I Shake that Shack, come. all So we from

opportunity lot a think will I that, always things. power really just have on But opportunity our an that and of have some do to level. fire have core. a to but little done to and we think license focus a fun got We we Most of new I that a have

Chris O'Cull

That large area the just think is when would I'm and helpful. minutes. And in the and have areas. I trade XX to and very I they last be would then Shacks dry nationally international Midwest, think of XX the time one trade based one I guess Southeast

in you trying large view types delivery markets drive these where trade time I'm you So how areas? of could such to have understand

Randy Garutti

and people their saying to that I us to we is part down. a good opportunity may on But keep New the go either tight or the product. We at there of real not delivery who country typical reached data careful, reach really There before, got on there. some we sort we are that. are have are that much seeing the suburban are some opportunity we Yes, be that to pretty those have not for York think we tight opportunity want throughout it different timeframe of the don't balance office a amazed And company in sales the so that is want you - hour interesting here digital also it's urban for their out. radiuses to We make a tight sitting around driven take really and would things the country long-term a right. on home as with to to going even delivery and want at at or have that from if situation centers, do we make your sure delivery or great that an start radius are in sure these so we it's experience, think

Chris O'Cull

guys. Okay, great. Thanks

Operator

And we will take Andrew Charles with Cowen.

Brian Vietnam

thanks Vietnam actually Andrew question. guys the Hey its and Brian for taking for

traffic on Just figures. the

still, comp small. year-to-date. still single-digit base down two of year kind So recognizing mid traffic it's the The is

to more you experiment order ways new there customers know per of channels. guess to I and with your customers transaction have that from entrees sort Is to order, digital with effect? consolidation something guys more impacts manifest measurable any engage an or As gotten through perhaps

Randy Garutti

orders order. Yes that growing a There you is percentage have is a when larger of something. are generally no digital question

is and look more Shack commentary remain to we few added have less with XX consistent the look when at things. our only right the that base overall be half, of end of impacting a that at year. We comp looking here traffic, quarter, at comp, how But to is remained is our we we Today consistent. results around are as this

know high going have So opened just is huge you it Shacks is it’s up a block, great at see It won't being we level leading and -. down will which all next got we are that downs in the open just Seattle big focused I down over honeymoons a The right to if and and we continue of guarantee our gave, will have very thing in long out crazy. that be it that near-term. really that look couple at something weeks general It's ago. with business this had to have as are super kind we and that our exciting and profits. and the the line off is when variable its to these same data had we of ups exciting. go now. we and We in sales something time higher on time When the think in balance we to you all be high I year just

are we headed. pretty confident it's about So where

Andrew Charles

thanks Great, guys.

Operator

will we Morgan. now And with JP John take Ivankoe

Unidentified Analyst

on to benefits there about kind four then And three going the Andrew any XXXX. just beyond the John. about question the work Project on actually you one-time system is concrete. Hi, I'm ERP million expect guys other just is My costs forward. for could wondering the this you G&A in is if sustained from of talk

Tara Comonte

XXXX give are we will it when cost annual so to upgrade you Yes, guidance which detail respectively. G&A a system, basis of guide But more on we tends going than you when forward. to level some doing, bit we a

in wrapped the The know shared you. that is the which with up one-time be So you cost that in bulk that. we of may

managing whole - to system instead there terms still In of scale is using admin a that add taking taking priorities to And it where this Shacks in our more know back we people significantly scale efficiently of Company and importantly today to building on effectively, know without office occasion of could which comes managers out to did the investing the infrastructure we when a to great multiple Shack job it systems. you out and is on benefit, [indiscernible] companies both call when it and opportunity particularly across of what to facilities you comes and project, more take ability some and need the also office our hiring lowering really to the and typically to people, pretty we small so this ability some comes from back it process. that was when benefits are as one takes technology the forth

So guest Shack. so we our do, say to looking the of responsible are and is hospitality admin on a them that great operators which in want that much great what delivering we that to can experience really focus [indiscernible]

the in are We we us do the things but impact late do but bigger they the it's a And now a it. lift, And want the for this. we they be everyone delayed more of of are few couple inflate. are and have a these super right years, about Company probably before big could it a distraction can can we too everyone to but So years it's excited, when expensive. excited those sorts because do to or it you you time are

XXXish would for burden. we really a it be we the the less will time are this of take doing is year and this to of quality great excited that be in that about really that while through are next of feel infrastructure we and through sort Shack So year. us But us much [indiscernible] the

Unidentified Analyst

Great. Thank you.

Operator

Next is Barclays. Bernstein, with Jeffrey

Unidentified Analyst

much of [Jeff the you Jeff Thanks. or you about more items innovation to And could you And you the for timeline? thinking do follow-up. menu This items? guys your When you add time Priest] have more looking on items? one have space do coming think (Ph) the on menu And LTO for think kitchen. is Bernstein menu innovation be also Thanks. I How out about that actually rollout are full are how items actually

Randy Garutti

great it's Yes, a question.

do timing testing really I two lot York well bites now think doing is New markets. different instance more your chicken can do depends. for and a [indiscernible] the the City What answer to Arizona are we completely

have to may going regional. a choose not towards may super out things we sometimes think fast, And we - view

veggie-Shack country with testing just around in the a veggie places that more the burger. So of markets right now the desire few feedback for have a we gotten about

on is the that really think I item. So dependent

adding take from adding to we got and menu, to keep off whole and want the to adding, time-to-time. don't you pertains it things As

We decade. have a focused been pretty on for that

We strict that new ever been just added has Really has to have as been Shack been of menu. very category. main increasing about thing the chicken the the size a menu the really

this So be if the that about other about There more will year we do we that we to think about is throughput. cautious off feel we that, actually things peanut took will things, make develop, we butter. we good just sure

was Just for reasons number of a safety operational, food that a tough decision.

we after throughput Shakes the something thinking time to including that But We on more. me little opens decided our worth you on have butter peanut with is just menu bit great having and option was a it have my of And better reality it. may lot the all sell not to up move a opportunity other and the on that about kids.

Unidentified Analyst

at Great. you Tara on what us to for and the would both some the wide that high Thanks. then takes that give relatively quarter And fourth and end range low of up range? Can the implied cause one end you us G&A a is quarter. of just the puts

Tara Comonte

it and know of sometimes hiring and you longer sometimes as schedule, of across are we takes to business some we plan it Yes, the aspects hire. is to hire people most

scale. QX comes when QX. necessarily a of it didn’t now like so in growth of in to they into Company growth the originally the speed end the which off many they up up with [indiscernible] professional given lot growth NOA, have say QX bit is have just down also initiatives it they would a things fooling fees right in initiative little actually where and can't We step I they a across and one but We all and or take

Unidentified Analyst

off it quarter? into to are higher think that get going next in you to commentary towards though seems as would be later things the you that the range the based of start end So year unless pushed

Tara Comonte

right now gave we range ranges the the mean, I because are best estimates.

But of the of lot across So there lot pieces have we when up. a right [indiscernible] organization moving activity we we lot and of a is now a ended got and investment.

And so we is hence a steady not the no. are range, this state.

like a building for range an there that and a investing We is long-term is item are line in why growth that.

Unidentified Analyst

Great. Thanks.

Operator

will we Wedbush Setyan move Securities. And to on with Nick

Unidentified Analyst

where on for I as plans be out this rolling number already. you you Hi, (Ph) a in two delivery units. would terms on on are similar share of additional actually asked is as units your well [Marshall] to able question to Nick. But today those had of

Tara Comonte

system. the delivery coverage Yes, I of think delivery across the -

Unidentified Analyst

Yes.

Tara Comonte

mean I any is [indiscernible] have we majority point the we at unit time on of got got delivery. vast in generally but it have our speaking by covered

Nick Setyan

great. you. Okay, Thank

Operator

Please will with go Goldman have Karen next And ahead. we Sachs. Holthouse

Unidentified Analyst

[Jared] a I to guess actually sort to just traffic. and is Karen comp for question laid (Ph) I of ask today. wanted this Hi, on

tough have you competition. McDonald's already of might have a to some of from we about any seeing world, I continue competition. QSRs be those sort tier as are that talk the pretty but of the higher pressure know the outside about industry than somewhat or guys an in seen value You know the reported lot you

Randy Garutti

our hormones to our a never there all versus we we an has and not have use antibiotics other that make the different is got, competition always use, course of we don't bit out we food in experience compared some anywhere. been to by report premium our no gave we always a know You That us investments Shack believe anyone A, little that. generally that brands It focus We proteins. just is of approach how that with than or as selling has that - compete compete Shake I think is say great But that that that on way. price. ingredients to

on degree price expensive, more take for of in has we midst are know are talked and We If I a value make little - do we as great to how things. we that. earlier, great of remain much worth a And bit are those we taking we know about little product all are a really sure we patient we in our premium. more charge we are want the it we when we know

Unidentified Analyst

I obviously switching into talk gears. concern across about If of you Thanks. is you how on could as guys about Can that Labor thanks. the follow-up industry. Great of well a just are thinking kind topic one XXXX.

Randy Garutti

it's think Yes, going to we to up. continue go

next of You a expect around know in wages again year. roughly kind we mid seen our similar increases amount system, have we digit single

be for and we our going where and team. have there and you still we certain strategy to paying it know environment, always want doubt to get focus to challenge that a to places got not of minimum is the in of end have love competitive yet restaurant really Without we compete is members like premium in. greatest You where to on. one something win at up or workers on up our places traditional major many It's that have something we wages lot Shacks. it's And significantly got that have begun on will are jobs and a team Shake amount a with it's kind the jobs challenges of probably of we kind invest a to demand is

we and So especially lot to of get people are but up as and are bring ramp growth, and great a costs higher that team. go we our on we to going expecting challenges done some

Unidentified Analyst

the appreciate I color. Thanks.

Operator

woo And to turn like Garutti. over there are call the to no further back questions. I Randy

Randy Garutti

Shacks us to we Just want to everyone to for being soon. forward say a on tonight you great Shake with Have welcome look will night. and call the thanks

Shake Shack (SHAK) 2 Nov 182018 Q3 Earnings call transcript