SHAK - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to Shake Shack's Second Quarter 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Michael Oriolo, Vice President, FP&A and Investor Relations. Thank you.

begin. may You

Michael Oriolo

good and Thank morning, you, everyone.

for our is me conference call Rob Lynch; Shack's CEO, and Joining Shake CFO, Fogertey. Kate

can call, information additional today's considered which our we discuss The be substitute believe performance. non-GAAP evaluating useful as of should isolation not GAAP. accordance During for with presentation in results or financial in will in we this measures, a be prepared

letter. section our comparable earnings available release of GAAP our financial the to shareholder Reconciliations in details measures and are

statements forward-looking, including of report be statements obligation change. no results today, in February differ today's statements Any actual any of number if update Some our to XX, views annual a materially may forward-looking of on and represent risks may we and on XX-K our due forward-looking those filed our assume to XXXX. as Form views uncertainties, and discussed only

have By exhibit quarter. letter, found can be shareholder now, our section you as XXXX in Results should second for quarter the which our Quarterly X-K where investor.shakeshack.com access at to the to an

will to over Rob. turn now the I call

Robert Lynch

us all very you and new of I'm to to morning, Shack. everyone. you be the on CEO to today. Thank you, Thanks today Mike, as here joining good the for call excited Shake speaking of

absolutely CEO in I me thoughtfully the to he for role me. a accomplishments leading building Randy has a thank this to generous how to Shake also fast get counsel helped transitioned commitment His First, to want brand. him for moment for my many take great success [ off start. wise and Garutti Shack and ] to to recognize his since want inception I

month points sales Shake strong momentum growing up where that share is momentum second strongest quarterly with fast basis restaurant the XX%. margin to EBITDA sales. of happy Same-Shack starts, expanding had XX%, same-Shack the we into a has X.X% Speaking continued July XXXX business great since and X%, profit XXX XQ that adjusted the level finished Shack by in There growing quarter, you I'm by results by on to and

and XX to with was Shack's Shake that true first truly and in dream while fantastic, Diego Shack restaurant better. for script cut my antibiotic-free time day the happy can't Shacks premium perfectly the try the days, more of so our our It Houston hospitality a doing patient in me hand lot all there. is successful my training. Pittsburgh, great beloved I people would are all-natural enlightened shakes frozen to company's learning give and best embody spin Shacks is the first learning the PA. the to a written as the I to custard I'm In first our field come people My that I I've make burgers a is XXX% being San special in make to any chicken, out business, fires, wait while job this shout crinkle like Shake how and official it amazing. spent to have hometown couldn't that in hand-bread sauce. I the of report in many in opened open

our are that planet. Shacks development QX, DNA, in opening the And enlightened principles further restaurant initially members, ingredients. the we guests, are as the draw right the We team growth particularly commitment of They now, on what few. But uncompromising best about to engagement. opportunity name burger customer I across focused to team founding level growth strong and right into has unit was the so our globe love around the margins our use member same-Shack favorite experience me suppliers excited to expectations Shack great the and critical a now, brand's dug the to in be premium continuing things including facilitate investors. XX even new many sales and exceeding momentum simple this fact my lot profit Shacks to to that or will There company-operated the attracted growth. the hospitality, I improvements communities, Shake future more ensuring I a on and

truly few my how Danny greater as and Shack at is is Shake potential increased has and all nation companies operate. Shack that adjusted the perform I of for only to industry the should months units and brand. see digits, this unrivaled positioned Shake even can Bill has for standard the revenue and CEO, growing our restaurant X couple well EBITDA excitement strong conviction in incredibly My of Randy double first and and

As I've our executive I what team time of why spent fundamentals, the dug with into across the both all lots of business. learning aspects the and business

more which and early and sales forming still opening While globally where of for improving of some are: early in my I provide the us brand partners operations. long-range share our the productivity Shacks growth strategy, to improved corporate focused, returns our same-Shack do and affinity; stages at X great building our restaurants key healthy through driving and areas awareness and and want licensed I'm with profitability learnings

I of would little like each bit to a these important talk of areas focus. about

has sales. and XXth building macroeconomic this job past same-Shack report are and the in environment, brand. driving positive great with same-Shack quarter First, we Shack healthy straight especially a to proud Shake driving team of sales done the sales, quarter challenging current same-Shack The the

has industry has discussion to more and value-oriented positioning, premium while that needs products wars been and of continuing transactions. mindset started the paramount and Our the is ever-changing for premium customers our guests a fight meet to much a company. success about to of value to wage our the long-term to moving ability maintain our There

as that the it this In believe environment, that strengths. Shack's believe to But of premium truly positioning many Shake contrary, I is X a our liability.

that we've been margins. while our than been remarkable level nimble is team our able strategic this employ growing promotions restaurant fair earn to And Our to transactions. do to of profit begun it has share and also more

struck that moving leverage innovation, truly technology given balance in I is forward, and between going. momentum so the product regardless of mitigate inflation, a of have implementations And will teams the the the keep confidence strategic team's this we results to right macroeconomic far, have ability This environment. promotions. pricing to Our lot model

XXth Shack the Shake its is and the amazing anniversary second amount on horizon. growth quarter, innings celebrated an in early with the in company of still

unbelievable As worldwide XXX today. dog in you and has an serving hot Madison know, built brand has single food Shake Park beginning a strong as a signing Shacks more Shack fine quality card than Square and to flourishing story,

don't Shack which is. We across what to there brand Shake future. very has deal yet know domestic said, is for been many incredibly That it country potential eye-opening people me a optimistic untapped and believe great markets, makes the see this still global in for how this of

As for my Who with team effectively X building to based is understand opportunity, what their I how work is successful or target questions. the change going framework do marketing It strategy. on behavior like and to them. our reach to either this increase a share I'd answering and we is audience, efficiently

of team their has same-Shack in in as strong answering many to evidenced these ability marketing already tough good questions sales very deliver environment. job a by done Our a

investments in us our challenge be operate we to marketing. critical ever-changing further optimize to to it ourselves in increase this for as continue continue we consumer approach our As landscape, will to

and scales. will These media marketing drive trial awareness investments as the company greater in and

not It spending to be at However, clear. I more want expense the about is of dollars simply advertising profitability.

marketing expense that investments not of objectives profit ensure come to will sake that marketing. the the will returns generate our We do in significant the of they spending marketing continue same today. our for

cash-on-cash restaurants Our second area returns. of best-in-class is focus with opening

real the building know, team approximately a XXXX costs. focused of options I'm on to build will reduction while XXXX will and productivity improved our same costs and explore profitability. new out aiming XX% to build development, costs in teams afford our the operations to estate taking traditional committed builds pipeline format, an to with to in This opportunity the enter drive-through replaced will levels you been our be closely be As us for traffic. of which with unlock car very has in working have further where marketing traffic a us markets maintain our optimize with into foot new and also return

San Adjusted focus nearly of another done an driving last EBITDA XXXX, job Francisco foot XXX margins restaurant basis Shack people existing larger a The capture to incredible Shack built expanding opportunity become over profit has Chicago points expanded primarily see XXXX we expansion XXX XXX units traffic XXXX. Despite restaurant brand like XX of where on progress, our Shake traffic level focus efficient and built in to team I to areas points from the basis regions is been area even on expanded this City, profitability. to formats. from margins speak more York further New margins just in across third The generate has basis great have that and is by. XXXX. to expect XXXX few points I'll margin walking to years. From we to

our across we opportunity diversify and and leverage get operate there's third-party the and productivity. drive-thrus to channels formats, delivery build utmost including component how with model, a in As to we revenue continue out more as deliver of an efficient

driving the Having profitability, the teams done. to great Stephanie Stephanie our weeks for As a part and who have leading of see past, Chief seat vouch excited But proven this innovations. opportunity at work significant Centels can just Operations I'm enhance of as and I high-performance Shack for momentum track record ] now. operational hired [ in has effort, Shake the to is already evident I with been our Officer, her being spearheading in further few worked

related Our ROI, strategic working into of areas months. ultimately Shack extremely shareholder unit increasing more lead team future on and creation. our the sharing long-range focus in strong with coming a will executive directly forward the value the be economics long-term I'll Shake level to driving strong with X our shaping to further optimistic focus momentum which and on XXXX. to continuing about look plan I'm are

for over With that, second a the financial Katie detailed on results. call quarter more Katie? discussion turn I'll to

Katherine Fogertey

restaurant our Great. seen results, on Thank years, this positive in each Shack which XXXX. we generating quarter We're restaurant-level and margin highest sales you, and that of the adjusted total have and the quarter, proud profit Rob, past along continues And profit everyone. with adjusted and X highest since good of over level EBITDA quarter morning, trend we double-digit achieved the EBITDA EBITDA sales, restaurant-level second growth. the revenue, and same-Shack adjusted record, revenue,

by the XX.X% flow. margins In This grew year, that's to XX.X%, points, basis is $XX.X we by XXX cash basis quarter, we revenue level profit XX.X% revenue, EBITDA adjusted to million last the restaurant total of record. grew generated highest and expanded up relative XXX points, free total second in by on

basis. annual an path We are solid generating positive to cash on a again on once flow

On of strong Shake details opened to We by XX by $XXX.X million $XXX.X year-over-year system-wide Shacks We marking positive with million, and XX.X% quarter total same-Shack XXth the Shack. quarter sales achieved sales. results. system-wide our revenue achievements to to the and out X second the consecutive performance of gate of sales grew for XX.X% record

past nearly sales years, the Shack system-wide travel trailing new with sales Railway plazas. low $X.X and we licensed single-digit business, led ] we just our business, in X by and million, our growth XX billion. X.X% strong now foreign headwind In We year-over-year sales by have openings exchange. grew In from our to license airports domestic saw doubled a [ XX-month $XXX.X to

starting and opened Canada, aligned We Shack day. performance X:XX strong first a.m. at Toronto up on with Shack in our also outside opening the in very

locally like We [ menu the in pretzel entrance Maple ] are proud offering market inspired this salted and of shake. our items

Our was in matched strong the with well UAE as Japan. as performance the growth and in Philippines Mexico domestic

offset for in we was and somewhat pressures this to macro the Mainland pockets foreseeable EMEA expect continued However, persist of future. by that China will

and mid-single domestic resulted XX we low In that down a sales. $XXX.X sales strategies business same-Shack was in partially points marketing negative Shacks and offset to rose by Shack XX with openings XX.X% mix. X% planned digits year-over-year million as our single-digit basis year-over-year Traffic growth was in company-operated grew Shack pricing

kiosk stronger rates, driven beverages We add-ons. continue by especially higher from attach and custom mix see a to positive impact on

menu about we and all May X% the pricing approximate lapped X% across approximately pricing pricing quarter, a X% in the Shake During exited quarter mid channels. menu with and blended

the As we will a price X% reminder, October. in lap of additional

no operational and driving highlighting initiatives promotion our our we we sandwich. We X antibiotics our hit, time launched remain well on and saw our an sandwiches limited Then the through added quarter, brand as Chicken menu culinary a right sales strong April, exciting offering barbecue lift and incremental Shack sales Memorial no as as Day awareness. and Throughout marketing barbecue we summer in spice launched hormone innovation weekend improvement. In new ever highlighting focused fries.

barbecue with Barbecue also Our we a hope sandwich These broker, X a Crispy which barbecue burger, and Smoky tribe. to battered sauce smoky the LTO barbecue which includes order has offering we fried and our a and gives features to our barbecue sandwiches sauce hit hand Carolina Onion the then had our and Classic offerings have burgers fry made that pickles. and been everyone [indiscernible]

first Compared digits as regions. our in and approximately drove high to sales the in all menu We such D.C. negative California, In increase as we wages. to same-Shack same-Shack and to positive low offset mandated markets in we single sequentially sales trends help quarter, grew implemented and Florida our improvements mid-teens improved Washington, from in the digits Michigan. X% price same-Shack Arizona sales by single in

York profitability last unlock awareness to particularly profit New quarter delivery. year. points in continued than food We Shack grow basis $XX.X on price helping restaurant We did this that City, remain achieved showed a and of challenging third-party our strategies additional our us and brand Shacks are sales, info as marketing impacted industry the XXX and labor million cost against investments in greater or by and paper mostly for savings, better drive backdrop. XX% pressures, level in with in improvement we menu Finally,

efficiencies our down current are single-digit digits offset costs or inflationary $XX.X quarter a cost profitability. XXX have We as cost for us and mid-single XX strategic versus our strong points certain including and to price costs year of fries menu on savings XX.X% with underlying and our pressures, sight and and were in pleased basis opportunity Food to of execution the line to down Shack paper on head initiatives. sales, million a points chain last versus last added up and beef substantial related savings and helped low improvements sales-driving basis operations supply and

were excluding XXXX for expenses and through $XX.X charges to and do of Labor represent XXXX million $XX.X related expense related expense. fiscal labor related $XXX XXXX care and million, million California health that or fiscal not

benefited and expense, XX point we Excluding This California. in last inflation, year, of was points as sales, from XX.X% versus leverage mostly by basis XX price, strategies. impact basis this Shack was down operational a wage menu labor offset sales from

more or million as support year-over-year operating XX to Shack and sales expenses Other in other of points marketing Shack-level sales, $XX strategy. our expenses up were XX.X% basis we invested

very and last level expenses viral sales we Occupancy levels, continue is back long-term as the we were of to $XX.X X.X% in All quarter related million improvement Shack we of level. growth. which year's or approximately with the in our are build our profitability with margin in, to pleased delivered line

and brand was was as transition. strategic of sales investments and $XX.X our drive last XX our G&A marketing in million, in in onetime excluding was basis favorable $XX.X adjustment, XX.X% support to to as The awareness G&A growth to $X increase G&A higher in points or executive total significant million people driven growth million revenue, by year. well

the by last Preopening of were EBITDA of basis per preopening the progress down in and quarter, as points revenue. year million $XX.X about in, grew year. adjusted Shack record XX.X% margin XX% this EBITDA is second we XX% at to total This against strong least costs high from since a our showed year-over-year last year-over-year $X million second All reduce by to up quarter target XXXX. we XXX expenses quarter adjusted or XX%

$X.XX per Shake $X.X diluted share. $XX.X $XX.X pro per an income We was a million, or and million exchanged realized million or Shack, adjusted net attributable up net of reported diluted fully income share. We Inc. of forma XX.X% to Depreciation year-over-year. $X.XX

pro and tax tax of rate tax was adjusted $XX.X GAAP rate, Our was million. compensation excluding XX.X%, the our forma impact equity-based

we construction in our flow quarter in made the year-over-year and cash investments balance approximately cash and grew This as XX% the remains currently at marketable end cash million sheet Finally, today. approximately prior solid the up million of and the under operating opened that Shacks versus are $XXX.X with equivalents quarter. is XX and securities by $XX.X

degree guidance, our to which reflects macroeconomic on uncertainty around outlook. the Now a of

on We the in the profit positive are and level to with trends second many mid-teens sales the year we've of half expanding of same-Shack sales the margins that the planning of hold to half growth in seen first restaurant in year. Shack

openings. of X profit to price single-digit For revenue to XX.X%. XX% the sales of third $XXX and digits license openings a year-over-year quarter, licensing approximately with we X total guide low restaurant million million with to of $XX to be to level with up mix million low up and XX.X% $XXX.X year-over-year, X company-operated margins million to $XX.X Same-shack XX.X% revenue single

total year-over-year, For XX grow company-operated guidance, approximately $X.XX to of license single Shack we the by about approximately guide licensing $XX million fiscal year-over-year. openings, to low to billion, billion to revenue $XX XX year XX% to million. openings revenue sales growing Same-Shack XXXX approximately reach XX% expect $X.XX digits new and

This margins to of basis represents Restaurant of level expansion XX%. to year-over-year. XXX XX profit XX.X% points

G&A XXXX is are costs nonrecurring G&A $XXX not from Our compensation guidance $XXX $X.X million adjusted $XX expense million million. and excluded The EBITDA to in equity-based year-to-date. approximately guidance that include is million the does

compensation full guide $XXX million to the XX% depreciation million preopening forma $XX and XX%. adjusted be rate $XXX year tax pro to million, impact of that to of excludes of We equity-based

Our approximately at margin growth million total XX.X% a highest growth $XXX higher to margin and the adjusted prior points and nearly representing adjusted XX% the fiscal than XXXX representing year expected is our basis EBITDA $XXX XX.X%, revenue to since approximately least XXX XX% of year-over-year guidance million, double XXXX. rate to EBITDA

Robert Lynch

brand or make Shack great amazing our a people Shack. time team I'm I to our years for be of. we so can company with Shake the to working be they do to all third team guest a member to proud forward to It's come. all look strong that this our Shake to and start that quarter of continuing to Katie. Thank build you, to thankful investor, an for

open questions. And that, call for the operator, with please up

Operator

Our Brian [Operator is with Sandler. first from question Piper Instructions] Mullan

Brian Mullan

a the clue going ask years. this story broader about have elaborate for about There mind to how you're premium if company bigger? so in wanted Rob, advertising gives and just awareness letter sharing I the that differentiator, get talked continues the the brand to how a out and see as you line your just ingredient consumers that message what on opportunity. you a maybe was to coming in as would you evolving over time that that, there But love to get could key

Robert Lynch

Great question, a #X there's Brian. that, for and to comp And Obviously, growth priority huge opportunity believe in us. driving amount multiple of profitable I ways. is do it's

hospitality. is those of equity understanding drive what through we to that brand too. enlightened of ways there's greater premium and experience and of a offer ability highlighting our and One But our you premium levers other lot ingredients awareness are

for huge is as to well Product both innovation a opportunity drive as customers frequency. us new

trial into we there, out Shacks, But markets where When once I think opportunity going around currently don't get don't by of serve. we really lines we we we driving these we trial. these corner. the a open driving have a lot have new problem have

any bigger of couple than in of first seen sales weeks Our ever are concept. I've

Shake So Shack. people to really come try

often. building be product to frequency. how customers will Our that calendar helped back drive the brings it job marketing innovation help our will we also brand a strategically that, position And is by more and brand best

that people all. long the been of kind of days times were brand, still and have the we would is to wait throughput, -- in a a of we speed service where kind range York our at New biggest service actually One time. where marketing our of have we are and improving not drive that in early our comps levers is It's not of

We drive to get a We're on well. operations. comps that have light as on to faster. shedding That's going

through We've value-oriented was marks talked could lot big these about a value question that we think the times. And perception. around of persevere I X

And It's last And able I better think the at have fair the months I our about show offer your to can do price. I even you price. think get or just X that. a to X benefits value that. isn't we're shown comps about at that think that that we guests

at And building platform. the moving comps to that is, then opportunity Shake That's of a we're last marketing out piece forward drive here the part a big Shack. loyalty we're doing

to of positive great I think the on to a are part us, job big unable a platform. too. have the tech, execute implemented Shacks but that of big really our against one-to-one we going a team be has done all been model, for marketing kiosks still in that's

So positioning to sales of a untapped have X same-Shack of them. lot is forward. just drive moving different we brand opportunities levers,

Operator

question from Our is Lauren Silberman Deutsche next with Bank.

Lauren Silberman

Rob. again, Congrats

Can a number there's unlock potential which stale You of on key thus the IPO. optimizing obviously, are to as or working on you Do the drive-thru development mentioned the the assessment? XXX give your then time viewed initial format. out market just there, assessment at success team drive-thru a think given addressable with is of far? you initial the bit the the drive-thrus And any increasing that unit

Robert Lynch

-- I anybody biggest like at mean I know Lauren. I'm question, that Great this Shake in you'll building, pusher Shack. if you the Yes. drive-thru ask

to do moving deliver So drive business a framed a huge internally going from to think unlock. up I've traffic. walk-up is need against that it up used business to and to I traffic deliver that's a against externally it's

expertise. the company a and of the to drive-thrus everyone into model. try like to incorporate I they You a they did haven't that without We having obviously really to tough for talk And primarily Shack give this that credit Shake And things that had kind the drive-thru. of exclusively was delivery time pandemic and business the dine-in to third-party of a moved was and team quickly almost about hit. lot drive-thru involved, got that for success the yet. when mitigate and business

have drive-thru exactly process. too multiple a going our Today, that. today, and menu the of make don't menu dining of it's speed to really it's on on how can like scale boards and fix kitchens exceedingly improve And at the the So stress we're and combos the there's -- of in things long. things. And room. implemented the are other drive-thru looks as lack We that all ordering the there. the tools is of ordering the part facets times same the One they

we of standardized big across So part a lines have that's don't of drive-thrus. it. all our linear

to a And It's the drive-thru of window. to steps lot so people are get moving around.

are So lot drive-thru opportunity it there of a faster. and get to

execute making We a a drove on haven't think you haven't team I the seen expect evolve We're making right. a the and hesitancy an great help confidence to lot pretty and good we we We incremental we there's going Today, The I that unlock us to more more us And given all job a to of faster, is accuracy. food once of speed, they will. in yet get fresh going that throughput. does got drive-thrus. on and it That's it to where to get been because team Stephanie for current things the change. have drive-thrus the these focus lot solved, our building lot going drive-thru go. a markets. think TAM get to strategy, returns because be will unlock we'll

Operator

Brian Our next Raymond James. question from with is Vaccaro

Brian Vaccaro

for on side. follow-up realize is the Stephanie experience few a option only I on I And obviously Rob, but had weeks, margins. a just got in op

structural to and anticipate to couldn't meaningfully or equipment opportunities your AUVs, you anything months, efficiently store would the to just improve what understanding opportunities more the what your just demand, biggest optimize get last So tools fast might couple experience. Just peers? And your any as I'm question would curious your X to there order? margins side is great. the be on some any of reduce best-in-class there the To the coke on narrow you guest in at dug of on the cook house be that the that are million shakes degree be back second there times gap make reasons or casual take of better versus in to

Robert Lynch

is all So a digging that training. spending don't What of because in her visiting better. And is us time I over even X to learning. know that in questions. our probably I day mean texts Stephanie started almost she our is -- is you would is markets. I she's she doing I for every from Shacks. is Stephanie She about great major all opportunities She get about and get lot tell

and efficiencies change. won't focus in to the our going Stephanie's a There question we And to yes. focus we for line are then almost But measure do primary is every on, increasing operational burgers on the productivity if that we speed to all opportunities can is an and people processes, the on best food your in answer And food. and things secondary my can those focus is that's leverage is of been What primary this stand has compromise throughput. some impact the are -- can the So first if operational improve We if we that built have we leverage technology, willing way. are change to business of focus. equipment just making us -- quality labor of absolutely things going is to for. brand in not

food those great processes more in that, we labor. efficient really explore be our get allow for once with get that able And place we to how out and to got we So faster. can effective get we'll our

a that the level there's million that's first right rolls of And doing of industry question. X in AUVs, brands the kind that's second So -- of sales. handful the question. into

And think margins there's yes, aspirations continue the delivered And that with We're QX. more to great for I be deliver in get happy we really should able so to margins. to us we productive.

So the business. yes, there's upside for the sure operations of in

Operator

Oppenheimer Tamas from Company. & is Michael Our next with question

Michael Tamas

bigger just and to question. near-term I picture of wanted clarification sort a

in traffic is think had in traffic April called a also the I term, said investments. and bit On restaurants. better some and a the out nearer positive, you the turned to Then we're lot which flat marketing of negative than saw from that June July of turned little May, you slowing what you relative hearing

impact what particularly So on going you industry? in July, the us think is can for against you

achieve you next think how what months you I'd And those that the a the the XX mean, about require that? areas X maybe you And the unlock in think thoughts how can might and that on does love on I of then, to other or term, sales longer X be Or versus reductions handcuff this over that can side next most business? cost Rob, bit impactful drivers margins without like hear are you the some little thinking you years. you future mentioned? your

Robert Lynch

the and that's what the we Great continued is traffic team. hand months. July, right, over or of to got power last the happy I -- which kind model questions. this when really to it in it's marketing we've get really to representative We're with X X optimize our of And the brand of

brand activations business. For time, a unlocks a marketing. a long have for of And can in of drive didn't period time, figured of how of lot short this promotions we a they this and a real lot traffic incremental lot and out in have some

of we it's in And impact June, of that came from in push, when bit it really was little and bit traffic it did our commensurately of see a we saw encouraging so that. the a July, bounce steam, marketing back. back full we And kind little a falloff in

to fair half doing very going which standpoint calendar that we're product we a have term, going continue to to as to confident ties our plan garner more of from to point mean back continue I So the I as both strong able really that. near-term those capabilities feel marketing around traffic, those standpoint. leverage tools well in a and be to your sales, second a than we're short share

really those while half. positive that we've able still So we're delivering comps the that's to the and strong half back our that while that committing comfortable is back to for margins of we're why comps QX? to testament the has do fact balanced guide And the the delivering approach drive a in team reiterating employed margins, been strong strength that in in been

Operator

Cowen. Charles from is question next Our with Andrew TD

Andrew Charles

labor G&A the How early question, and the little just on to include the much understand in efficiencies tool. a learnings while for delivered tool had -- lower. follow-up stages, was would. follow-up a it as the this I'd Kate, I a little guidance nudged a stores the early then higher, love the was now better Kate. a scheduling many comp from hoping marketing, stock-based you're the And

to about there's an right, million investment in $X incremental So think marketing million XXXX? in G&A about $X this for we

Katherine Fogertey

on first labor. So all, of

everybody, for in all kind Shacks remind our menu the are our of really periods of to of allocation refining in just to of account channel, and our labor So process unique and peak we restaurants. mix the

So really have early -- test We've we started or with And -- rolling the that. last that we're this from we results about talked early out. pleased year. that

the by out and that are point investments roll to that. And on of this commitment also are a we track marketing. on end your additional making have G&A, year, for well then We in we around

about increase expenses. transition for there out take We have in a in expenses, advertising executive investments. still talked our and you room When we had around executive our transition increase and an also are on people in investments marketing path we excluding

last We are still that a on lever path to year. versus

Operator

Sachs. Cho [ Christine ] from next Goldman question with Our is

Unknown Analyst

same quarter. the great shareholders new the that you effectively a in on recent expectations. you're at later, congrats lowering It's your sales your time, exceeding units really cost. are see mentioned your build great But So to

markets So things done what the you've the cetera? success? the some right finding picking brand from benefiting you formats, are the this you has right that awareness, Or are driven et of are that

this do further you as also Shack this does while how going in And keeping expansion? into momentum the you equation as how forward And think the increased just drive-thrus fit plan returns also to about well. keep

Robert Lynch

we're focused returns the down. It's a the very forward. job. on certain cost I coming our materials to has Yes. and a that great going build-outs done of benefited on the am team just extent moving Shacks from been some Great of cash-on-cash garner The question. to

very that. from So use. team lot architects we that a Also, the our that the thoughtful taken we've has approach a from But benefited things the building Shacks to use, go into that we RFPing of contractors

taking we're new those putting across get RFPed. focused we've the they by facets There's all a Shack, done can that team in, has getting things really approach on themselves has of a challenged of equipment that building So a better. lot on the The team costs really how down.

that's to standardized those model. thing we kitchen moved going other to a is drive returns have more The

lot to it scale, unique estate a Shack teams hard long the made to model was we're time, a going more of out. of Shack had that of real standardized. ops to of kind a For We we we're of standardize, that -- going be we've every a kind figure to a to times, moved as pieces more into have

standardization So and those with us productive And make -- Shacks estate places have we in we're and rate is and our that formats to building for going on it run efficient go smaller and larger real build footprints. to where basis. standard operate formats for easier for a larger Shacks, more to with standard

Operator

is Morgan Harbour next Our with from question Brian Stanley.

Brian Harbour

then, was In kind of that you curious mean, just been think mention kind I in of having more letter, impactful of kind And continue what's of speed kind most inside of your lately. spent service. to I really Shacks What improvement improvements. could time do Rob, And wait drive there. of did time you

Robert Lynch

level open on and and results talk then trial and when strong Katie improvements. of always look, we delivers as demand AUVs, the restaurants at there's up. they and level, Shack, in of at all the high Shake macro I our been But I'll strong some Shacks So the can and know, mean, our macro weigh recent

maybe is think way I religion. and the It's but something we're we fallen And necessarily more of deliver we our of some innovations important. kind make of of to of can about hasn't speed reprioritizing. just a that is we kind secondarily kind the service of talk products been some always

brands up once the a area, Shack, are New Shacks waiting walking and kind again, where as Manhattan being in think, used in of move of lot City I and part that's we Georgia drive-thru start experience into you becomes the that, Ohio format. guest and places. of other other of in against move is something part compete in a and as markets overall to more other from York and folks big to line Shake and especially and get all you to your of these they're to all Shacks Texas the Speed

just change the about enlightened holistic accessibility order make guests of and that of feel it, up experience, we're the of So speed kind of guest and those quality, of we've prioritization. food like we part think that. ladder guest the as the putting is how experience, we and just way hospitality kind it's taste, part about really part that. also are in of convenience, the holistic

how So better that decisions speed. as the we move forward, some sure how use, we're on going making making to in we think regards we're we about equipment to delivering operate the kitchen we strategic start

big -- So the that's that's picture.

to QX. happened talk in specifically I'll let Katie what's

Katherine Fogertey

Great. Yes.

on of Rob So top did opportunity really benefit, we to sure speed for I starting through about we're lot more improvement needle and our the in KPI just a quarter, But that just identifying is this for transformational year, again -- a this shown really making is everybody's think operators. of we second reporting continuous it started the it. move We opportunities. talk hearing we've what is as service to on that that, and side. the of you're on from And

going forward. think so what we're I that's excited addressing about And really

Operator

Saleh with is from BTIG. Peter Our question next

Peter Saleh

to quarter. advertising. the strong on to did Great. another conversation I come Congrats the want and on marketing back

hoping some of and where ad you of a different give the have the year? I the regions these spent where into of of back this was sense some guys us you end dollars the been spending Over marketing country. on year, could the this ad quarter sprinkling you you past anticipate dollars in in

your what heard the in sales you sense doing now? hurdle, of were dollar investment? Can is on this advertising hurdle you for return us I every talk just past, marketing you then looking we've give of return the And about in $X invested. what brands spending are for a terms and of on for return the know guys that

Robert Lynch

Thanks, Pete.

located we're of area. New our the the near around So investment in get and the going most term. to we obviously still have on greater that's where return And a City in York system very big part our

are growth, how of a in effectively fastest-growing there. We it's drive we're the lot our other market these we exploring and can to most region. Southeast, building now regions Right Shacks

definitely And most structural conducive that. want are in margins, to and we want to likely highest that so win right? to with We to propagate drive the markets most economics are in go continue that

construction at estate an strong estate real costs, labor real affordable good costs, cost, strong market good growth. So strong

invest relative continue disclosed best where we put can the but I X So to don't to what and do we're marketing derive ready we're in to there don't see. X to markets know I going tell number that you our that I ROIs, low that, think to that out we've we is you returns. that,

Shake because So hasn't XX Danny's been been a Shack excitement, lot brand thereof a a The of the here the just in had things a have a potential driven of lack lot and around, and reputation on lot I these that marketing think there's a of products years market. there's lot trial. huge of brand has upside such the like heat, brands

these into enter we more to going than that. take markets, As new it's

And because growth. profitable investments some down I've and we best we returns are the the continue on to our seen that really excited in about drive of marketing to are that to believe the there we're double it's industry, we the going fact going see that

-- and we when a that Like earlier testing top we to want strong because line go planful discussion, we spending just we're get we at in marketing we're market, making going in very that's our going drive positive. As returns approach we profit not be taking sure costs. a all in to mentioned and to invest are it's

Operator

Our Jake next with question is Securities. Bartlett from Truist

Jake Bartlett

restaurant Mine the is that is the cadence. part And on of margins. first on level

implies guidance think I a bit maybe the down flat maybe quarter raised at the for but -- year. third the you little midpoint,

for quarter. looks So fourth it in bigger the like or increase acceleration another there's expectation

change? in sales going us from And another just momentum. of on question the third terms the about the had the then understand year-over-year what's fourth quarter So I to help maybe

Katherine Fogertey

margin year. really the margins implies in increase in Great. excited substantial Yes. we're some still on of that pretty guidance expansion We're half second And path the about here. the our

in points year. last just also highlight lapping of are We prior we the third to dynamics about substantial quarter versus the and had improvement guidance improvement the in a of very year. little third XX for are quarter Our year-over-year for full quarter points XXX bit unique year. There of versus in fourth XXX third of the basis the quarter the calls margin improvement basis

the for us. around half some and very with second is there's strong food year to up that we're to of awareness. be shaping investments making the paper inflation brand expansion and drive So But shift opportunity margin another some

Operator

is from Bank of Sara America. next Our Senatore with question

Sara Senatore

I guess a clarification a question, I and may. then if

there's more be a mean, said problem the guess spend the income given positive I actually we've one, some much positioning, questioning been would seen lower-income robustly about but that a as higher I would but Rob, premium think environment, I than first clarification. you consumers it current So the consumers. in

So and higher the perhaps the income perhaps Shack than that Shake assuming particularly clarification higher the is wrong fast food income hamburgers. traditional others in maybe customers than is, I am

me more a And I full-service question order understand, maybe always Shake everything as fast just is made can the a help restaurant Shack's you philosophical and in to is then a of traditional more But nature. sense less like the food like think Kitchen perhaps restaurant. of

assembly more think to to towards have to look So like more like, should as I service look I approach like margins should peers be level should about the throughput I line think restaurant the who casual about as tend production? fast comping margins what what it your or more an or full

Robert Lynch

can tell Great guests would Shake we an which of Shack think higher-income the have I us questions. I do current economic appeal from to said, overrepresentation think being environment. that, protects yes, everyone. you That I

more we I of Shack can ways productive some so that opportunities. deeply that have to penetrate Shake to the to efficient more income and get bring we into more find think lower

scale vision and to in to the to bring My Shake every we coming globe. have thing And this broadly that, here to order do appealing. across be really Shack is market

against be the up only what the to that have brand answer make to protection of for merely representation today, we're yes, seeing broaden kind lower exact income eaters. burger what working our to of said we're But against do an not highest challenge is, the to some segment. you the we income the -- your question is So

and that of the second a kitchen, symphony we've where It's dining almost right. got fine stuff, restaurant like lots it the stations. of we back not the And Shake together model. of Shack On different We've that in absolutely you're Expo line got not the people a doing comes customer, question, is all then the It fact We're of to the our at guests. is in I'm kind order a beautiful going to make that we take change. you We're saying change to going the Shack it to our them. an and us all change crescendo that We're make we but things Shake there's model, line to sitting a products different of our when going move to operations of have are necessarily to around assembly highest change burgers things use special, fact that we're quality going go not bit not the lot down. a ingredients. streamline for the that not going the to an because a opportunity more definitely and to in the going way quality of

like their able that to Missouri, City, a that to customers' drive-thru Park. for food is for just make waiting the expectations Madison up Kansas sure Square same not in are But to pulls meet appetite they're the we

to have things to and on holistically enlightened that the going do customers' are satisfaction hospitality. meet we needs guest So

there. much done, So that's And is upside Stephanie work to that now. so laser be right on focused but

Operator

Securities. next One from Daniel with is Our Capital question Guglielmo

Daniel Guglielmo

fast? in . What through you long-term up are think market. for take good line? you too do potential the if you percentage untapped the is a percentage mentioned you think And all some too what Rob, revenue risks global target licensing the that high,

Robert Lynch

what of I be And been businesses. what know the the focused excited that Yes. I growth and licensees franchisees tell it a business. on great lot or the spent going growth. don't rate on think we are will you in or business we're franchise is I is But percent getting has to my power disclosing that. background, licensing of the exactly about

grow have Our our fact international the by Kark take license to kind team, them ], and that off led energized by and business. business is license who I [ Michael challenge leads reins the that of

don't them. and space have access yet people lot lot and where have white a out internationally of go a open to them We Shacks want Shake of to

looking great my there's partners. you best has that a been this a way So tell partners of experience, I opportunity have the already model, foster looking in Shake worked that around and team us also we opportunity our franchise some new at just the where grow But potential partners at is markets internationally. I've this to market business for remaining in brand. we've would penetrated big lot Shack the of that has with

license revenue So of will forward. moving part plan be big a our

Operator

Our . is Haskett with from Gordon next question Jeff Farmer

Jeffrey Farmer

more opportunities the You've do a for bit of what term Shack business, can either or the color early sort provide in near noted of as on can kiosks? stages just sort I'm intermediate you of the you what that curious with little the is see term if kiosk

Robert Lynch

opportunities have as are experience, team think amazing always the upsell we to business. is I Yes. members, guarantee made, go to a that you're primary we but when as is One priority our line, not you've to kiosk mean when I think you sometimes sometimes in business, the through When kiosk got I can -- people get contributions that XX trying a about through it quick possible. about upsell.

out to how that. So And the piece to think, mix second how many we we per is taking to check think about strong then improvement. opportunity we we labor our think I is, a and execute about need continue be how model once the orders the there that and to dining way do kitchen. or drive and the execute people optimal that optimize items redistribute orders have enlightened in room, from to taking those folks team contributing our way, to care the in may labor way making of hospitality in kiosks the best We we how the and the right? taking proven that guests to are sure

the mix So long-term upsell, for benefit are and optimization benefits X labor business. kiosk

Operator

Baird. from Tarantino next with is question Our David

David Tarantino

service is might on points any up what this examples this up have few give has of think sales. an I to that frame wondering on of would points that been of was way I that the from you can of guess, speed be? question a do big the don't is have you is, sales, if throughput, you times XX sales And how opportunity that confidence know way maybe My I any there's if which just you call. frame mentioned opportunity several and you

there's curious, I'm simplification of second you whether this, Rob, then And to that. a accomplish think the part be of strategy could menu part

Robert Lynch

know what going thanks, what it to today which just XX we XX I be. needs So to throughput only and crystal don't you have I Shacks speed mean -- I'll our drive-thrus, tell ball would you what to the exactly are David. is of service is our Xx to in do. is But give a

lack in don't more season and And about throughput revenue another general. other so the for this brand that there's we -- -- so improvements can that negative than heard can on know on I has us much calls opportunity on on have upside of a impact opportunity to there drive do. have throughput that is there. during I comps mean, you've we some earnings

our that process have level you're items are Like on we same-Shack And was actually is so focused at don't throughput had on on of who we through menu different think that complexity. to mean I across XXX don't think of we're ordering don't a complex. to guy the I simplification, we that. about dynamics. overly you complexity the I I to We a the lot But confidence Taco hyper menu. have to going do tag of think to you're Bell, menu drive-thru. and opportunities of number sales talk going improving a a optimize that guide the talking have lot When

we we're lot on can the necessarily that a that the use going menu best in things don't have So we the the at menu to looking we're sure make to of we removing service know I are of but absolutely that of from channel. holistically, through explore speed optimizing drive-thru make what how

Operator

with from Barish Andy next Jefferies. Our question is

Andrew Barish

end the overlap Shack. mean, you Shake consumer? you meals terms Katie, $X I in X that sort of think was teased of is? just in, that clearly, the the wondering, on or want out you aspirational are ones. who guests and What Have kind of point do out lower competitive Rob, as Rob there. enjoy guests quick back there to value-seeking the some I to

Robert Lynch

I'm discussion frequency. Yes. drink mind maybe it back to I human buy, I'm would right best in I how once comes every wants literally the get. that's I I Shack. that's I or mean, feel. just again shake, trial you why fry, this the argue that because it's like mean can mean, and here but Shake around

problem again, we And driving a so do trial. not once have

I Shack we is opportunity speed day we challenge hard work really of Shake people a what think there. to try the value problem blue-collar that is The I or the when to be I to where of when line when X there's from, in the barriers lot and I'm opened was in Shack frequency. are opened is, able of us perception. Pittsburgh, barriers should and to some And it say, mitigate service for and the the that those

the of to working And menu value how a LTO strategy, degrade products. -- the we're our our our across We're we way our evolve drive revenue to on to of things us there are approach position quality evolve we're for -- experience. perception. going not opportunities once things. evolve menu And quality and of do better model our we strategy, to But think again, going the the both degrade our those not I

I going frequency. think -- are drive really those to are the us to help X things that

speed love those a a work I occasion. is but it our staple on I special in becomes way for Friday work things Shake is it more it's to frankly, to like, stop for that they that And work income try don't value be of something So do. want to Like don't a show And I on our be don't hey, occasion. got and up the happen, want special and perception. and to it, got order we've family customers they on Shack. the an service to home. night want They of think after we lower

our that's a So positioning is. brand from lot standpoint, effort where of a

Operator

question Our with Sharon Blair. from is next William Zackfia

Sharon Zackfia

going we're alphabetical order. I in see who

that want you I implement And emulate what to how tandem Is busy speed to speed attack a of service you about sequencing in loyalty. or how on for you to Shack? think would here. a the there happy manifest loyalty, before within question program? loyalty So a would service would do Shake peer where you be would a guess natural actually want with loyalty is of

Robert Lynch

thinking I am loyalty. I'll I believer, that a Great Yes. don't questions. as I of we're know speed -- big Sharon. versus service about mean, necessarily it

think I is the overarching point good a one.

be, our talked the those probably times those fact to ROI marketing a marketing longer it do we is wait that ROIs you're high If challenges, you Shacks on can experience getting those not dollars. really same ROI we the driving And of those dollars challenges and about going maybe best on dollars, we've to marketing with the investments. your encouraging spend in when and even do holistically get ton get that of on people some such the marketing of solve higher we're that is some a

So that's the first piece.

don't and in know I customers. as but because has from -- loyalty e-commerce there for can and that there piece terms think John's mean came XX I been loyalty, is second I point, between of are at here business Papa this The I John's haven't -- somewhere mean, million most I and an out everyone And that valuable I number knows, Papa I days, a those their XX customers throw customers. have know because I they million XX I

we power And of and that that. to from loyalty so saw I million, built probably program was close I to the as there million XX XX today,

our customers We aspire build has really allows platform with to. our awesome to that one-to-one able product aspire access us loyal that a to early swag really allows It's mean most delivers not It customers, we to I access program just more what a loyalty relationships just capability that's discounts. be value about than offerings that allows want. to discounts. build so that guests. And to

other and there's loyalty/frequency things build besides just to of So lot drive that a discounting. relationship

that's kind of here. we're So the model on building that working

Operator

Our with next Northcoast Research. Jim question is from Sanderson

James Sanderson

unit to growth. clarify wanted Just

XX as think concern? third just there issues? timing to softer is in on of far was Or a out as in quarter it getting fourth the to and I a quarter it's market for units going license. call of this company to little Anything the put pressure bit bit

Katherine Fogertey

Yes.

opening year. we approximately going second the X% little in targeting be XX full We about guidance That opened range. our in a on the we So side. the XX X% restaurants XX to quarter, to company-operated was opened We're for have quarter. of ahead the and are to third

So very just development, side. that a shift bit for business. operated solid little also of on a both for timing company We're on path license our on the and

Robert Lynch

easier Shacks Yes. to about it's these up get a are queue the openings just results in new strategy. openings are that building excited get operate, And being off I our great Shacks Shacks of start, with start really lot and these QX in really excellence. I from we good that sales indicative to how sure think to opening into a Shacks strong that we an making have opening. I'll off have been performance. number. layer We're team are members teams a planful the just operations mean managers in thoughtful that of QX We're and get the team, not to testament Shack to a the about the there that and open opening to these lined are development Shacks making And sure

on results really openings. store year-to-date So positive new

Operator

is Bernstein Jeffrey Our next question Barclays. with from

Pratik Patel

Jeff. high-level is discounting just question. for This for on a again. Pratik QSR Rob, Thanks question the on

not or traffic any the when in see price-sensitive you too Just against out those did respond days your perspective on prior casual? pizza helpful. category would side You bundling it it own? see pen long up fast value your can play ago. with role, guests? Or with were casual sitting for be went a share fast of of historically other you what really Did In QSR did greater its the

Robert Lynch

looking is that sense we across so work in. great are of There a and animal question. industry in interesting unique many looking shop all it, an they're kind pricing for multiple they nuances is It's cover I huge that this driven, e-commerce not Yes. at People pizza mean, it different like a of hyper retail, the and and shop options there's and amount value deals, right? power there.

QSR than is that. very different

purchase. there. the a to is on restaurant driving that special a Taco down occasion it's industry, an most would minute people, that the decision Most road. Shake its purchase. it's is preplanned I Shake life that people, RB, a a concept. middle They mean going at where of Shack still within make They're bit executing kind type of not transaction. X and in they're Shack impulse As Bell today little cycle say and I of destination, stop

to And there. are go so people planning

getting I'm is it okay, there. We like, so -- want go and and I'm for great. to what And and pay that's know going I'm I willing to

of bit being to going that are And little opportunity insulates like play that fronts. earlier, these value I both we some us think wars have said, I That on on in that from said the -- a QSR.

think QSR impulse be of we can industry, but I aperture up opportunity volume lot by special with have line in more the we our purchases. destination opening that to traditional to still more pick up of the some this be a in

be. size Shacks drive-thrus, build we highways as of to have with And on we

more strike really in the that's that appealing kind QSR, We're we're neighborhood X both the to also that feel. to build million be walk-up are able traditional we're feel X Shacks this be we like continue going right of the have going growth we're customer. to do QSR to So opportunity AUVs to have strategy to do of for and investing that Shacks balance. But to And going going us, and well. to kind million and

Operator

next Our Chris with question is O'Cull from Stifel.

Christopher O'Cull

the are offers how And Shack Rob, LTO the go and current do in you're as planning year? about that pricing need you promotional environment? limit through thinking you you growth this to believe

Robert Lynch

years we at & Walmart. top a that like Like last I the that to tell pricing whether hold of we've And or -- any inflation be Gamble very is wage scale. to kind Walton's inflation, ascribe the from margin. of take pricing Procter that up form believe philosophy. seen line, I at X other over working you, inflation against So come Sam I commodity or mitigate will tool I believe pricing inflation I you

that's all is on to to one-to-one promise product some a not type not an by delivering things Pricing innovation, drive need of drive great equity, building way we our about brand can sales. brand delivering outcome, throughput platform. and but We earlier, our sales Like and talked a strategy. delivering focused doing be can that the loyalty

We're to going what's that's to So drive pricing mitigate our going to top inflation. line. use

you mean, probably over looks well like upcoming the know I inflation what XX we as XX to months. so do as And

be Our leverage will plan mitigate to that. to pricing

that's I about pricing. So kind think of how

of of in from players of the In Shake the QSR and burger hyperinflation of in that QSR. bit absolute between benefited this span we've on what's actually traditional I QSR, value little going narrowed that I think likes Shack. kind customer point price terms and probably a of

think just sitting talking really you, mean, actually we a had not you positioned great we, I'd that to to here like be for. actually a be but credit X just can't $X weeks I'm the I -- we're well And all on experience So hang tell way this I this to team is got to we're in a I'll I -- find to able doing been competitive. any it. deals, say of really take work great meal thrive. during about They've that I

the way menu and middle And to We're is that we're potentially ability didn't. to strategic to income aperture worked we're in customers looking what us. in And only from going upside at think from opportunity open forward, for so I more then to environment. learning our lower get appealing a to what learning that. better impact our competing all up both our be And and

Operator

Rahul question with is final JPMorgan. Kro Our from

Rahul Krotthapalli

how view this Rob, good mean, do from philosophy at on over curious time. as moving standpoint your and an Shacks you some the you life grow cycle to on the you the meet investment core what plan you. marketing. an into the have if of on I'm can or growth to just G&A how this I relation with the focus both expense components you more stage in outside you are and of mid-teens double-digit buckets revenue line? growth can where runway dive And down core

Robert Lynch

Yes.

we from So were I equity private [ where owned. Arby's ], come

to steward P&L. And a so of be very good strong the desire I have a

I on very of everyone needs on me delivering the think I when return talked focused. investment But marketing. I about I love I'll hey, and guy, am guests. love marketing it. take joined, our a also as I

similar is tool those directly in like we Chipotle So And to a sense so unique us, bit a that or income our in G&A and when a right? of company-owned dollars it's Starbucks, invest we're a line. for come marketing, out the concept,

so that to in good justify we get order a And investment. better return

great that's think was earlier how investments. just like as our question, throughput, continue improve we're marketing and from I return more So to and more we our really going operations get to about a question it. our And

a and learn. we've overall G&A to continue the we're be our at more now I a we to at point enough to optimize leverage -- G&A. feel scale where starting we'll -- marketing should more test where point like continue now get So We'll investment. on we're on and got

So rate to -- above that our building at to basis. build on corporate level growing Shacks, double lever. the both at scale. a -- also we a year level, Like should -- restaurant we're we're units every but as we That more has digits on percent has get leverage,

there. get to have We leverage

because such to we increase our So question. I I actually efficient going getting while to investment get that moving we're think more marketing returns. productive more your forward, we're hope and continue great answers

Operator

to to over remarks. closing question-and-answer back end management would session. I like pass of the reached the our have conference We for

Robert Lynch

on they that the want and just thankful an time is that for just to story call today. me building this to be obviously great of I'm joining great I this exciting and started. Shack. brand everybody to So It's thank Shake be here and incredibly part allowed a humbled at come getting really

forward you working in on on quarter with what's to helping next speaking forward really and understand look So of all our you to I results. store look again

Operator

today's will you. Thank conference. conclude This

this your thank your time, disconnect for you may You lines and at participation.

Shake Shack (SHAK) 1 Aug 242024 Q2 Earnings call transcript