SHAK - Earnings call transcript Q3 2024

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Operator

Greetings. Welcome to Shake Shack's Third Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to hand the conference over to Michael Oriolo, Vice President of 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. Katie

GAAP and can call, information additional today's considered release which our our Reconciliations we discuss The be substitute believe performance. non-GAAP evaluating in useful details as comparable of financial earnings should isolation not GAAP. accordance During shareholder for with presentation measures in results or available financial in section letter. the will in are of we this measures, a be to prepared our

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

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

will the now to over I call Rob. turn

Robert Lynch

footprint our morning, Mike, third We openings, quarter new over drive-thrus a and to company-operated world We X new XXX a the expansion, our EBITDA been X Thank million. and the during licensed Shacks adjusted XX% XX and around quarter total X Shacks. quarter. opening straight positive $XX.X growth, everyone. of of restaurant XXth great grew consecutive comprised to including new domestic Shacks our sales of margin level you, delivered Same-Shack ninth good of It's quarter we grew

system-wide XX to open unit representing We are on mid-teens approximately this Shacks year, path a growth.

Shack. to reduction are approximate tracking efficiencies, team returns costs. are we The and deliver XXXX preopening units bring continues on per costs strong in continue an XX% target cash-on-cash company build cost find to to costs new ways and down build we as Our for

sales initial level expectations to outperforming margins continue also are Shacks expand. profit restaurant and new Our company

and XX as unit approximately XX company-operated expect improvements We including deliver we'll new further XX Shacks. to result, to next a metrics in licensed to year, XX Shacks and accelerate XXXX XX to our across these openings

the were our Same-Shack macro with on result to existing of has strong Shacks us consistent traffic. we positioning, sales-driving in outperform our an X.X% which also A uncertain allowed quarter positive sales delivered as even in third our differentiated growth strategies and continue to premium Sales environment. direct

innovation. is of smoky in an a quarter continuous Shack's big culinary menu, our weekend, each options, we which fries. bigger launched summer our Shake success third spice the Memorial and our of soft, along either even with X barbecue A with Day future part part tangy burger featured or barbecue

a ability great Stack Parmesan in is example Black Shroom environment. Burger, LTO and value today's Shack the our elevated the which differentiated Fries Shake Then of value guests Truffle and Black Shack's program particularly as out perfect wars experiences at to in Truffle stand offer culinary culinary brought our with as including Truffle Black Garlic well mid-September, favorite we back options, Sauce. The

more promotion drive in ran with long brought we and sales to expect culinary in to back continue ends. awareness, which promotions the our stays promising by In importantly, balance In after we marketing contributor addition for originally term, to the popular Chicken innovation, drive quarter. right and chicken we solid which we the Sundays, sales strike Chicken demand, at overall been awareness in campaigns X September, conversion. short results have have the Sundays even Shake second weeks seen chicken but Shack we strategic

Free spotlight to summer. our other menu ran Shake highlights and as also of such Friday dog We campaigns value-added days

I pipeline, as on our X I these make implement. new to continues by sales attract the stand we forward. and initiatives to platforms strategic and of build will to guests, And multiple and initiatives still continue am we driving and fact out. that ahead, in the have marketing look Among investments encouraged repeat sales-driving number Our moving significant

development a The the strategic product first innovation of is calendar.

Shack development the is and second that launch throughput. additional of satisfaction, the least, certainly The a not but And times operational and platform. loyalty improve Shake enhancements increase guest will is service last, decrease

briefly on I'll touch here each.

already and As potential Shack's of Shake lost we innovation upside me culinary not strategic innovation work the it's to calendar, DNA. product highlight is of a a that build on part

have an ensure outpaced our that menu strategic drive with more a comp new way to growth. works we opportunity and However, core complementary to innovation become in

XXXX working the capability to We benefits the leverage are build and in moving this of actively to first half forward.

team As needs of where hospitality Shake Shack currently was the paramount. members our does understanding find wants our bit hospitality loyalty each of and exclude program. not a can't the help that beyond Shack ironic Shake you on a but recognition, culture have I and guest principles guests given that and enlightened systematized is the day, know, built

that I outsized that truly in it, given enlightened heritage, a we a believe hospitality craves but an to increasingly world deliver across have this opportunity digital footprint.

be XXXX realize right platform the making develop in this investments potential term. over long to We to the will

a lead as metrics that margins. and Lastly, on operational third drove times the sales. and sales and quarter, optimization satisfaction we In improved result, decreased higher drive further guest

improvement, initiatives, the of However, world-class term, we of our training short service process term. both people. a and tackling opportunity of including speed for and the excellence, still blocking operational long and of In working short lot improvements are we have on

term, models. longer the flows, optimize to Over guest service our kitchen and working we're equipment packages

to expected frequency sales. overall increase of All and of these will builders are repeat which be long-term visits, initiatives

investments significant as sales. and line improvement Speaking in marketing grow great to margin top even a promotions we driving we're make operations, of additional

XXXX we exceeding levels on and and Third margins with first quarter basis level margins fourth as restaurant level high grew note the quarter basis to XXX for well time. fourth margins end quarter points XXX expect XX expanded And adjusted a basis points. expanding restaurant points EBITDA

quarter to great labor improving to the chain continue efficiencies, margin of increasing both was a costs. utilization which adjusted successful utilizing quarter third restaurant doing supply fourth staffing quarter. other find is more another into the disciplined EBITDA expect across being scheduling team and we and The level All job and growth, scale our at sales, in, among

to expect unit ahead, XXXX Looking this as into we we accelerate extend momentum growth.

that, for turn I'll financial the the call With quarter year. on over for rest Katie detailed to discussion outlook more of and third our a results the

Katherine Fogertey

and Rob, you, morning. Thank good

that the past have and grew Shake proud X and quarter, This EBITDA over continues XX.X% to revenue, grew total profit years, by by really trend profit are double quarter margins generated restaurant-level as adjusted last for each of positive Same-Shack by points of by We total expanded we revenue results restaurant revenue, and we year, EBITDA basis XX% third versus XX.X% up XX strong Shack's XXX sales basis points. total digits. adjusted our grown level

as restaurant system-wide This quarter, as third revenue margin total well adjusted record the we highest quarter in sales since also EBITDA XXXX. and achieved high

And in against next a our fourth and the quarter exceed quarter I'll restaurant EBITDA our share more will continue XXXX little margins our guidance strategic performance on bit adjusted to execute but priorities. we for as

million. and consecutive and XX.X% grew third quarter by of year-over-year to We Shacks of the XXth quarter $XXX.X sales positive opened $XXX.X achieved the total by revenue We in system-wide details XX system-wide for sales. the our quarter to XX.X% million results. Now Same-Shack

new by revenue million airports million. that Sales classes. and strong Shack X our X.X% by in X.X% year-over-year domestic business led $XX we year-over-year grew In our by was roadway $XXX.X travel to with business, grew openings licensed trends license and to

approximately and was openings the X grew year-over-year Shack Traffic at the our driven slightly single to price. positive In and X.X% in Items rose approximately Shack million lending $XXX.X sales domestic quarter. Shack negative X%, basis with by company-operated points same-Shack sales. Mix Shack was XX in business, sequentially XX.X% marketing levels year-over-year X% growth we planned strategies. per with digits flat low with grew

initiatives focused the we through driving operational across culinary as These we Throughout and that regions. encouraged our as trends are driven well marketing by have our outperformance, remain the improvements. quarter, saw efforts innovation in sales on we our

and this D.C., and double digits Same-Shack our Arizona, in to Maryland. In in Ohio, sales grew improved maintained as region Washington, by sales markets fact, Same-Shack we Georgia every relative single high digits by or last such quarter strong and Virginia quarter, in and trends Florida,

continued strong a traffic positive approximately with into for sales X.X% October flat the Same-Shack performance sales and month. We our

about continued an the implemented momentum we excited to X.X% allow increase inflation, us approximate approximately for year. the continued remainder offset are help start of October We the this To across off the to in X% fourth This price price will quarter. menu maintain menu. our

drop digits the for into year. to low and pricing the single will XXXX, approximately quarter first in Heading full X.X%

restaurant year-over-year line, the means and addition operational driving that on ninth our focus In sales, margin the momentum we expansion. and to flow-through was this bottom quarter improvement consecutive are of bringing this to

better We highest XX since level Shack pressures continued restaurant $X.XX than and P&L. last XXXX generated across margins third inflationary the year profit of or restaurant points our million $XX.X sales, quarter despite in profit restaurant basis

Our total strategy on profitably increase to and investing while more operational to has efficiencies to drive to and marketing the brand of in grow cost reduce sales executing identifying allowed us serve awareness. strategies

strategic year $XX.X down menu costs and sales total paper cost million offset serve. and savings our Food continued points helped pressures us to or versus price inflationary basis in our chain were as supply cost XX last and Shack XX.X% of

sales, down versus million of points expenses Labor Shack $XX.X year. related and were or XX% XX last basis

late model feedback the transitioning at progress wait an excellent hourly and improvements least in time real-time did while with staffing allowed provided improved metrics, same perception guest the labor on quarter hourly to operational time, which delivering in to since lowest teams XXXX. Our at and having us including us show significant job our the

new for and and we're in And many will guests importantly, optimize performance strategies scheduling to members. to And continue additional test Shacks. for have and allow we of excited way our underway this team our what

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

very sales, momentum upon of Occupancy the improvement the this fourth and levels. million in are Shack or the with All $XX.X year's with quarter. to expenses X.X% of we in, we level in expect into and were delivered related line margin quarter pleased last build

transition. third executive from $XX.X was G&A sales of in than benefit excluding The was the drive in $XX.X into The year. as quarter timing onetime million, million increase $XXX,XXX driven to marketing spend or well XX quarter a higher XX% planned was G&A for G&A increase last as and significant revenue, now fourth spend a some by points quarter. we initially a awareness marketing saw basis shift adjusted, that also in with moving lower brand the total

well quarter, least at by to XX% target costs were track Reopening million down $X.X we year. and per reduce this in XX% continue Shack expenses year-over-year, our against the to preopening We points basis and grew adjusted XX% adjusted the $XX.X million third about to prior since best year-over-year XX.X% XXX year of by margin quarter total EBITDA XXXX. up from or EBITDA revenue, the

These was Shacks million, to the XX.X% decision X over a XX. focus In resources. closure total in sales months we up to their prior generated August better million year-over-year. quarter, $XX XX to the our Depreciation Shacks in $XX.X made on difficult close

Shacks they these financial incurred While minimal $XX.X was charge. negative had on We profit. performance total million corporate related to the $XX.X our restaurant-level million a of in these closures average, including our impairment below impact expense of

at all Shack. these similar nearby position in locations managers Our a a offered were

and $X.XX the Inc. of income loss forma per reported a of We or to diluted share. loss exchanged Shack, or $XX.X net million $X.XX of we Including pro million charge, per fully net a adjusted Shake share. an realized diluted attributable $XX.X

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

marketable $XX that, increased last this decrease. securities relative year and balance million this securities $XX a cash and nearly lowering marking strategies substantial quarter, time marketable focus the is cash our in our Year-to-date, and end on improvement at prior million million, million the costs, growth cash $X.X and we remains profitable with a versus have and and solid, cash relative at $XX to million $XXX.X finally, year sheet decrease equivalents the to quarter. a prior And by equivalents build our the balance up with to of our

will we fiscal closures, revenue. fourth which XXXX, year reflects and our Now financial for quarter from recent the of the discuss from including impact impact the outlook store the loss

total for million calls guidance million, $XXX XX.X% quarter fourth to XX.X% $XXX.X to of up year-over-year. revenue Our

margin with with Same-Shack restaurant X% license mix, approximately to Licensing XX% up $XX.X profit as X% sticking surpass of first quarterly $XX sales to million expect XX price company-operated to million XXXX approximately of approximately openings. low approximately single-digit openings, margins the for level time. revenue we

X.X%, Same-Shack $X.XX Our full approximately calls X.X% openings. XX% year revenue approximately openings growing grow and XX total to year-over-year. about about guidance of company-operated license XX XXXX sales Shack for approximately to billion, new

level XX%, million the reach of does profit representing our million, revenue million. $XXX XXX margins million We from points basis not $XXX approximately are Restaurant expansion expect excluded nonrecurring that approximately that million year-to-date. to year-over-year. guidance of of to to in G&A adjusted $XX costs licensing include $X.X EBITDA $XX.X

$XX is be impact approximately depreciation of $XXX pro rate, to compensation expense excluding approximately preopening million, forma $XX Equity-based of million, tax compensation of equity-based XX.X%. the adjusted million,

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

deliver develop and and my and improve these to end enhance experience, business work I we want Shake just and to opportunities continuing teams to that results, test the our strong guest are Shack profitability. are that proud the grow doing sharing the to additional also remarks today our how

I'll that, with it Rob. pass to And back

Robert Lynch

It's you, be great you and your everyone the a part interest our of Shack. Katie. company. a Thank to call for time Thank to in on Shake today

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

Operator

from with & Tamas Oppenheimer Michael Company. Our first question Instructions] [Operator is

Michael Tamas

of trend have? know XXXX the You these marketing you of could to specific have program, loyalty which in term I you us, guidance talked sustain you you to for your near in believe and greatest out positive impact you're sort the forward But that just to yet. initiatives couple. a provide flat can investments allow building can going to name XXXX not the this going momentum about impact And that into

how and the that then related to some of drive through directionally, finding the sales? going we And Are that? P&L cost stepped-up same-store offsets you're just think then should offset about margins leverage you to additional some investment to

Robert Lynch

question, model able moving sales fact the continuing excited line forward. Michael. drive we've disproportionate increase growth the margins, been to for the while our restaurant about to really Thanks I'm top that that's

to team has a surgical we engine customers marketing them most -- So back often our that's more increase come to basket valuable our have us allowing really to their encouraging built reach and size. and

we're Shack they're though marketing our the items And we and that our increased have we that featuring buying in. saw higher-margin the adding even quarter. They're coming so in growth and promotions, to

and the loyalty Shack enhancing mentioned top And platform will may be it I currently to may our last regards sales and year a In next the guest line recognition, which may growth, platform. I in how are we like does that not or outcome Shake investing a loyalty it. platform, call, think look traditional loyalty be

not probably XXXX. the we're year. investments significant that but during So making to have course is a that going next of are Those technology impact the in

to the comps going on in to. So guiding X% we we deliver to X% used are drivers the rely that we're to that XXXX key

Operator

Our Vaccaro Brian next James. Raymond question is from with

Brian Vaccaro

on I'm the as I South could guess curious, improvements You the in you're And think on those noted Or of in of elaborate around value can traction in the you an on maybe any provide color would what digital Mid-Atlantic, on seeing of I Any also seeing Midwest more strong either of some you're and that some the awareness from quantification a be well. Any promotions? handful states, sort standpoint? you color helpful. that?

Robert Lynch

Sure. Shack just are grow new awareness for through going our to growth. We brand the obviously,

that's great and to to open really we're have opening. these to Shacks ability communities to out and to ton knows, ability white more have in deliver a this our of as go which our know excitement our And marketing and in everyone team's these sales. of far you space a and We so we results year, great opening the Shacks seen testament generate

brand the results we do to be did results York better heading scale invest. in QX. we driving and QX a their in the where on continue and launch those New continue able to results drive and On markets seen the looking macro understand we'll And And strong analytics to we to campaign impact awareness that. we're City have awareness. sales of ideally, And in as nationally those into outcome to front, an

general and market awareness the grow. we're the really markets as excited we in growth and penetration we're that in continued our about So in

Operator

with question Bank. is from Lauren Our next Silberman Deutsche

Lauren Silberman

quarter. for ask the move you of thinking we to traffic I be seeing that as that component? can balancing continued. are Same-store improve an offset mix want we piece anything that XXXX, expand of sort And comp about not on how may Congrats obviously momentum you over at marketing, the you're seeing mix, traffic how in Should that time? strong negative expect on value? mix composition the we sales, face into to thinking really strong negative

Robert Lynch

would I the promotions. the called just mix is function of we a as in in I Yes. investments that I really say, script continued just mean think out our

strong seen performance have our We premium and on items. our on LTOs

be forward. those our So make to of investments. we're That's to a going continue going to moving sort model

that's investments Those by. all helping is an to come flat traffic where, us marketing right? really positive we that, in keep Traffic, know, hard environment the flip side as and and are traffic of promotions to

are So excited drive continue and mitigate we that the -- going been continue that seen right pricing. positive our really to ability balance. traffic to traffic strike pricing We've despite about some to inflation to with we've of

we what moving balance situation to forward strike of So to have that the ability that regardless looks we the continue macroeconomic like. think

Operator

Cho Christine Our next Goldman question Sachs. with is from

Hyun Jin Cho

inflationary if kind sensitivity. taking performance Congrats on of strategy a a of kind a the Truffle subdued really the of support. elaborate are how pressure direct been forward in what little pricing can impacted price/mix can well has ways mix mix increased the good as quarter. But I Black bit given you about your hikes? that the kind specifically to I a consumer be and the price of price of quarter it's just going support of forward, would the as also great. . wanted kiosk kiosk And kind some great going know you talk without on help more

Robert Lynch

Yes. the inflation. is restaurant industries let and But pricing obviously, I'll to of Katie inflation. as growth pricing part a tell been, last unprecedented has mitigating talk you that in years we what faced I specifically can the few big

pricing ahead, to same we only fact extent us. that benefit look to take have don't we going is to As the the

new culinary investments can in through we that with investments our So value mix to strategic a through equation calendar the drive attachment in calendar. to product marketing, our and we're innovation making continue drive the increased improve making we're product

I'm forward to So much can also excited shown the year is unforecasted about growth confident take moving if do really But see I'm over still through as drive having we've with line we traffic marketing investments. without take inflationary management in we pricing. last pricing and top what environment, our that sales

Katherine Fogertey

yes, that. add And I'll Great. just on

a Just year, we as implemented this early X pricing reminder, strategies.

competition So was on first remain to relative we channels lifting a that was price pressure that in of digital digital the for great and us to help that cost all, step the underpriced mitigate channel. this extra

implemented then This help to took just March with we're that next the that forward us price is in in about were October, year. the another seeing and here was of pressures the that October, but a little rolling price primarily the bit X.X% to California beef inclusive price increase, we really in also we offset inflationary in seeing X.X% basically offset And then risk recently here, looking really into help late we're off that that we of price X% increase. starts. matched we And fast X.X%

amazing Shake is continued at supplier here I strategies, at what on opportunities a business. is our doing at job identifying to base, really increasing will that us is Shack that say supply the help navigate inflationary what pressures our freight team chain looking But

of our but down and or making to that operations facing in bit we've helpful The we our help that or we're been in of but guest-facing total time, opportunities we've we what allows other same on hourly cost about at that a talked the to to reduces also strategic more enhances other then labor doing been to focused And also there's serve our experience us total take in a either cost little to have labor. slew initiatives refinance activities, underway the test guest we serve. that time dedicate think are

also of well. help leaning across still doing the things channels, various we're there's We us So pressures. strategic lot to have think as inflationary are organically that alternatives we power continued but do on a that pricing address we

Operator

Our Brian from Piper with next Mullan question . is Sandler.

Brian Mullan

on question a development. Just

As Rob, to for? XXXX it just just to Stephanie how would drive-thrus many to And incorporate or had company any be you any the Any class incorporated speak planning new will have relates the how that, or to learnings related drive-thru speak that will you maybe insights great. might the new could forward? thoughts the into already the you're -- brought can pipeline, has going to you table units be

Robert Lynch

process is Brian. really tell necessarily Yes, part going forward. our increase of I service. don't drive-thrus. of highlighted, And we're Katie is is on improve operationally on flows then delivery our food mix as business, and And zone we're also think big the be disproportionately how that. working it menu and and continuing all both What menu optimizations just our us we you and to in the speed disclosing that's execute static how and can a impactful moving our to to to drive-thru drive-thru and brand our to I #X that strategy priority order boards long and the of customer digital to takes zone how the and the the bring on test we represent we're our our

the going to service, speed a our through lot we optimize to of there's #X need which on thing So the is of drive-thru. work improve significantly

and part that of deliver estate to the in I able As productivity and operating format for to even types are and markets of be succeed and things us build. beyond and formats different and the kitchen real to into go look we improved exploring future, different the succeed we're all margins optimizations great XXXX, flows restaurant of regardless

strategy moving is a big our part that forward. So of

Operator

TD with from Charles Andrew Our Cowen. next question is

Andrew Charles

X-part worthed launched Encouraging question month, Great. a we had I this that. saw about and that campaign

in do So as to in same-store outperformance curious then the reported? And and to out you see well? you New other you before what you first, were to sales October Miami roll what that need I'm Rob, campaign . versus markets able within markets see York secondly,

Robert Lynch

Great question.

on purchase. decision made of And ad. level drive are of not to put we we marketplace short-term any some So and this still life Most of really infancy terms in price the that in where marketing customers promo incentive industry in we're a the in ads our our a type brand in defining strategic or type promotion point to cycle, of minds the our at country. target the across hearts and has

Shack even out long-term in Shack key the awareness that really where huge to And differentiated York, to New other from of of defining Shake value have going proposition a offer our is Shake really to we're our customers. how competitors and we amount stands is

positive So from score. equity marketing both as an I mentioned, consideration we are awareness, movement metrics, seeing and on our

back sales we're a we the are what forward. of indicators be as show working. we moving I will tie we process how us an to doing for optimize, how there strong drive scale this and campaign markets kind of that is And so will would that lot up in ongoing

Operator

Harbour from Brian next with Our Morgan question Stanley. is

Brian Harbour

then staff still kind lot of my sense anything to process kitchen or up times such talked like from you'd freeing else that? The on lower a And maybe Rob, attribute with or comments, I was your your stuff you come. it's know, would call don't that kiosks out that of wait you about, drove to and whatnot is just that

targets should And you kind so expect and continue see to for of do how that? much to when time wait have we improve should

Robert Lynch

I all of this our still of labor the that or you use sure stages on and hours. operations utilization focused Katie about making we're things. tell our an we're the early But productive X from labor mean what most I we're Yes. of that getting is in optimizing work. talked standpoint, X will

leaders, develop big Another a that on need we restaurants our XX leadership focused talent opening to really Shacks year, with because to XXX our XX pool. restaurant thing company we're

the a that to -- spending us And we're think is development leadership speed on the and investing but really service not only I company going so benefit and to focused pipeline and leaders, below of necessary the create and at level and level. And just of management GM level standpoint. that training GM

And new staying on is and create really bit blocking a tackling, performance to accountability just to measure we we're then to organization focused how lastly, and going we're but what it's which is culture our what going a and little measure. really around

that so culture of and performance is through a down permeate going mindset is to And organization. the a that

are continue think are just today. in we're term short-term the and other helping continue is process of flow where optimization drive to to to really some that times training I that and beyond and And alone seeing equipment longer improvements development us some going momentum improve service to we improvements, and kitchen of the really even that and allow

Operator

is Blair. Zackfia with William next Sharon from Our question

Sharon Zackfia

strategic where part in the are think in. to kind you're gaps Shack back hung be and a if And towards? for that dynamic to to you wanted dial sorry of looking call looking I answered that more you back product up there to this, I of come you're address accidentally the But the could had menu relevant? I innovation Shake I'm

And then did secondarily, and with that improvement, in the like you the channels delivery wait time quarter, meaning see across drive-thru? walk in

Robert Lynch

gaps wouldn't our I core there menu. say So that in are

menu opportunities that our for still strategic And core our and about we're to what product kind through core optimize. are core and make our calendar complementing to have core LTOs our work that drive mix the with the is both menu that that's sure that developing there LTOs harmoniously talk we something -- the here innovation. think our with our of menu to -- product I -- comp our to but how benefit QSRs the and strategically menu innovation drive I more

work So moving that's that's the forward.

tell On to seeing we're times, for into channels. make be to would going impact. the different able overall you, us a improvement. think don't just we're I big But get I the wait of to each

service business. we part improve across our We becomes dine-in from drive-thru it have of bigger growing -- how the our we our deliver a channels to both business, as how channels,

our And obviously, well. transactions, -- are third-party those with big of a delivery even part our delivery business becoming as also

we're So make customer those that to we of channels. delivering service sure the guests expect need that across our each

Operator

question next with from is BTIG. Saleh Our Peter

Peter Saleh

restaurant-level working a Great. of to of about guys a for modeling. you on than looking ask point quarter. have and Yes. that us benefits -- the out? give more I outlook you congrats of And does price? on us how I'm the all higher Or quarter a is that margin and think it's just wanted we you roll reflect then XXXX throughput been the XX%, to and this place labor can fourth And were about the you what substantially sense, the great initiatives margins XXXX guys that on want do given in have at model to also, initiative? new

Katherine Fogertey

you. Thank Yes.

year, restaurant higher just year have guidance this So caveat to last it's There would inflationary higher beef we XQ the XXX see about kind with time, expansion margin at progress. it's -- last we of pressures. showing I and that basis started than also for points significant were

of we step bit this be So in also it's up, inflationary that Shack later year, a have little continued number while quarter. new more openings we expect pressure a happening kind the incremental muted. And these to of

here little here the focus line, and top also business, and a seeing cause if momentum of efficiencies the bottom year. noise. we look in to let but chain you particularly We're what puts can line will bring of course that takes There's us, operations, really still pressures in in be. know you more what always inflationary on not we've that of being all, due line. driving that will for with guidance at of at through had down beef giving guidance able a really But top around So bit the supply next first you're is that lot to -- and

Operator

Our next is question with Truist Jake Securities. from Bartlett

Jake Bartlett

you're -- their involved one follow the one really level when margin a years was to talking were really Reminding my about back big on the impression a opportunity as and that Rob, margin up ago, expansion is to restaurant activists opportunity Shake for focus significant X.X the that seemed And was be margins. big opportunity. Shack. well, on really

really trying you margin you end more So opportunity I'm understand is at which line, obviously the like drive you view as very the what Shake just the margins? to far, So of the kind do Shack? my much with does question at the top sounds large as it of day. on meaningful focus margins opportunity is, view

identified And more that far, then on you've for there from you Is maybe kind much come? within longer-term supply of benefiting vision that a are already? little and what just is so could that, you of on detail plan chain more in If margins? -- the inning the you're to give instance, kind the what for

Robert Lynch

So as just for Katie said, next guiding year. not we're

and is much to the mean, just growth that's about But there's is. in could short-term we So a compromise ways come in growth focused tell compromise productivity And growth. labor and we're in in we and to necessarily significantly restaurants. our model. lot guest of not development, and our there the service margin cut in the team the how there I margin not long-term will potential margin how member that and easy going our are I talk draw -- much on you delivering come

in term. us expansion to plan kind not our come and through the we margin deliver So doing big is things not that of are in bang a -- impact long

really continue on and continue enhancement. improve We've evidenced for all improvements last it's process X.X driving our for driving and quarter. fourth a as of development training think margin is accountability XXX% in it focus to drive we going culture, and the years, performance to And of guide those teams. our I sustained to the seen Our and things

I'm those top So line. on about -- the know talked you focused I are

is to But hour marketing COO, making is need the building we're orcas where an not in through we're get new talking ever down see of such and there's our are that's that hardly this sure Stephanie, big part results. that mindset this -- culture that the a our strategy. I in And about the levels why is We restaurant and productivity. field goes by this not seeing this so Shacks, great to permeating much, performance to all

on because quality quality our the the Shake our then is food. of of what And ingredients last chain. of is Look, supply and Shack it the piece

to impact that. never are We going

through fast focused are dining being restaurant, We a a casual food fine delivering fine on casual format.

chain the about ingredients our so any And degrading supply changing or food. quality efficiency optimizations are productivity, of our not the and of about

I'm to with more maintain productive, us team's despite food. inflation help be margins our ability our so And to very impacting pleased ways find or grow without negatively our

Operator

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

Sara Senatore

of clarifying couple questions. a Just

The first closures. is just the on store

revenues said tailwind Could trailing would couldn't know million that. that of but to just like sounds means I is quantify -- a in it it just rates X but they to XX I in average. you level margin think below like quarter what terms points, trailing maybe I $XX profit. because it how numbers operating immaterial are precise mentioned, you -- XX be were, basis the something probably restaurant -- You don't

count just that license I there's the So there? could think. came of talk don't anything international, be you That noting I the and might wanted little that if I then a it affecting to question know or just quantify business. on And maybe some bit, that. worth geopolitical down store if tunnel about

Katherine Fogertey

sure. Yes,

they So on not the What closed, that. in in past X the restaurants, total we average -- those cost about below say that we're were X quarters. Shacks Shacks of the over loss-making. $XX that that, actually company disclosing But not is generated million actual impact sales that were disclosed they I'd these profitability, was we only

it's is line profit in profitability, that part up restaurant it total, benefit overall to not it roll you a margin are a of our material our but closed. When now they

Do you the to take want license?

Robert Lynch

Yes.

markets going some open to some had couple where are now issues side, that license pushed had Shacks QX timing on QX. to we've we of the up expected we've to On in a

in the markets. we've are there already but macroeconomic are challenges headwinds fastest Middle some our call that disclosed China I think those we in still they're growing seeing, on last the and markets, international given and geopolitical East, the

of challenges build those to we who despite partners So are in continuing got seeing. confidence that partners they're We've lot licensee our amazing there. a have because of results the

So license and business. a bigger part our to bigger continue going be is to of

ton current a partners to to format while white We space, through with new have and up ton and partners go a with productive menu opportunity continuing our innovation. innovation get grow and new of markets of more open

on bullish our really So business forward. license moving

Operator

from Tarantino is David Baird. Our with next question

David Tarantino

strategic about product maybe that innovation. I being provide and dense maybe but to And life? you're little exactly brings ask example thinking Rob, here, wanted what that to explain I'm a the it with an could you maybe strategy

Robert Lynch

I'm I now, but give can Truffle of to an the David, innovation, right Black makes with of going about Korean one. Chicken talk say another the Fries that going special. Burger executed and Yes, The you is also get you're innovation sandwich would example. I to And the not kinds and at anywhere that Shack Truffle probably all look innovation. representative I'm to kind team just not Sandwich I mean, things excellence. And future else of challenging are Black the burger Shake

some of proteins. And could that be

Some that be kinds of opportunities. got could now, of items. French there's we've Right side all innovation, that could flavor, of and culinary-driven some be also fries

any place. of next. that I've teams product opened about to kind have might up talk what be pulled And guardrails been kind could innovation, off in of I've aperture I for the when So the explore

So I'm excited. really

long of my here got and And an amount been prowess. I time. think culinary that a part for of great has team a food amazing we've has product innovation amazing DNA a

shakes, across across whether platforms or it's our And beverages menu, different looking kind so the all to I'm of side sandwiches, side. unlock that

Operator

is question with Jefferies. next Barish Andy from Our

Andrew Barish

to that Or the if do the transfer, you side out sort Just being will? and coastal things, to noted on as in there the we see markets. awareness able big of you've 'XX pressures infill anything on markets Is of those sales a we development? look think of you brand changing couple should some of expect the of kind I marketing in offset front that development some

Robert Lynch

Yes, that I'm about more innovation format historical excited really the because markets penetrated actually at. of of some looking the of some we're

white kind without lot markets that lot we've have great these be of build of of performance where we still a Shacks we're of go way the Just a in strategic out big of flagship cannibalization. and our able purview greenfield to deliver bit definitely core changed going growth and a to little space kind

infill in the that. But drive-thrus our formats that opportunity. And will I us think help think other highly penetrated a I lot looking that at more markets, there's we're and the facilitate of

bit different So we historically. margins, great drive way have a in are than really of in that allows California. York, we're different to still building but New but we're doing little restaurant in We're a already in New maybe still little penetrated, that it a building Jersey. us We're might of bit building in way markets still a

Operator

Our Sanderson next Northcoast question with Research. is from Jim

James Sanderson

I just wanted to go to growth. unit

forward, of or of a company-operated how your growth. forward? unit implies slight the Wondering percentage to should total the 'XX at units going Shack guidance if most that's imagine I growth it's U.S. look the as think Shake rate size as trying we in that number a . relevant for in the pickup actual run going we're

Robert Lynch

the Jim. for Thanks question,

And performance. see have that that the Our in the their today. of forward XXXX it's of really we has of doing in sales increases margins given we productivity things of the implemented, Shacks terms with well but moving class talked some of terms about also we've in done also well really some

a us gives that lot confidence. So of

build lastly, then costs. the And

the year, of beyond. improve build work productivity to to looking into this continuing continue We opportunities and forward next a XX% cost, on decrease year

bullish the are we to Shacks. really we that on returns, the cash-on-cash continuing Shacks, returns company-operated see new build from So new can

that a the in in making going and the continue And to we're resources in can changes get G&A, to them find so opened we double development. resources SMB so to something down increase have on continue And we resources infrastructure we're and our where are dramatically, unless we're to of to the lot the that internally, the XXXX sites going continue to to real construction building investments estate is development and up.

need talk operations. -- that talked piece. new that I'll be last thing continue say critical leaders up I'll the about the Shacks We most in is we and to and Shacks our to able with excellence. open to lastly, That's development then probably the And the training

that as we're on definitely So well. focused

Operator

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

Daniel Guglielmo

that in were side, the And and know all also in internal expecting came then trends on came robust vantage consumer pretty Were U.S., have modeling? have there regions or you pretty good I any were process. you any the there that a or softer? modeling than You stronger flip all on states in a

Katherine Fogertey

Yes.

comp held had So where we trends we parts I in the in overall, that region, areas would sequentially, we're either And with growth the of the them the outlined sequentially. number remarks, have double-digit Florida, of in say, -- Southeast. increased we that our same, we of saw and pleased includes every prepared most really Southwest but

also medium well. by in improvement and as cohort, and then sequential low we income saw income And high

that board, driving just help operations testament say, to and a the sales success doing guests. are at are on better that across a teams quarter, the the really really strong through serve having our let's teams our to initiatives So marketing work our

Robert Lynch

last the comment on year. cohort, pricing we're And one I will of just taken few income despite Katie's brands is we've on one thing share data build that to the shows over that our the the

value improve over One to of the actually last brands the few equation our year.

that So we around driving both deliver to that it to great continue feel service and allowing is is in at continue stronger the the with team of coupled cohorts. a speed, perception, which the the us to does the have and put place grow, top initiatives value like income all food bottom

Operator

Jeffrey from Bernstein with is question Barclays. next Our

Jeffrey Bernstein

Actually, follow-ups. Great. just X

asking give Katie, one, you're you just at relative and and to lot maybe the that performance where about or markets I'm sitting across quartiles the first as some of to guiding, of just stores restaurant a demonstrate I whether are of otherwise, an system you're today, your opportunity, the know wondering opportunity? better it's I or range seeing been not maybe know people can the alternative, margin but have a The if

I'm more just that and deep competition, seeing much but improving other will that just would value of kind not you mentioned quick-service my value. you oriented. discounting discounted one terms at the you I'm just and just wondering chance about more a communicate prices, with the how trends. of messaging whether there's -- cohorts value is then And category, Rob, mentioned doing aggressive wondering presumably income just to you think just, in be bundle lower-end

Katherine Fogertey

question. the for Thanks

to been been our more So in efficient restaurant past that we've our our -- strategies be over order X.X working years on years, sharing margin we've grow line, pretty X on in to the the consistently restaurants.

been to continued our to as and focused ways whether of we've certainly on suppliers that's scale optimizing and have freight inflationary So sold, market more identifying allows deliver on of us additional cost denser benefits well. as on goods pressures, line in and despite sure. getting And value, well adding open we And that cost we get savings we'll as up organically. just will more as that continue develop to that work side restaurants of have opportunities and for be markets, able more denser

shown we've side, labor on couple over this substantial also the past In the progress of side quarters.

is certainly, really that place, when labor we we've work our with late tackling it's model, done that today and more us place with this put to very weeds new we'll here the But is Shacks of members And just the with And quarter. then Stephanie, I'm profitability you closer with aligned sure And basic in into time. COO Some and our being continue blocking our with to teams the very all identifying in then which operations. doing in share and team are right working drive help of additional in confident it's across restaurants. the in of scheduling the third working been making our that opportunities.

around uncertainties. then done macro So and inflationary the overarching line is we're the work just beef, today. pressures just unknowns also But really out call broadly, there out excited with does being and proud will of top that specifically be

Robert Lynch

loop dynamic right the don't QSR now. national Yes. the obviously have value advertising. to close on just We And

bundles to are and by sure targeted ads able not $X we're there digital $XX sending very technology recognition footprint. But guest promoting promotions we're delivering people. with So right codes way in or the targeted it We do across to to that out and capabilities make we bundles. surgical a our our ZIP be

we're our it better customers deliver, delivering food experience improving of targeted numerator, our is the prop the faster value like through and have. the focused experience, customer improving the So the a better where the the hotter really service quality we But is, is, it are improving channels. great that we

really but targeted surgical we income some serve. delivering also of we're for focused price we lower address want promos So that on that do digital the cohorts numerator, are that to gaps the

Operator

Krotthapalli from Our Rahul final with question JPMorgan. is

Rahul Krotthapalli

as estate delivery a think to issue infill have discuss after new real the this New set before a stores City Can an and approach have store we trade question areas? channel I on was the time? how about recent existing over there on the change to you any the delivery strategy sales you or closures transfer. Is follow-up. in opening York

Robert Lynch

we're continue Shacks cannibalization efficiencies, efficient we would how only we we these where get efficiencies. to currently get just chain say I going about even mean efficiencies, and I to Yes. to open have get more marketing penetrate smarter supply we operational we operating minimize markets get penetration markets. optimize efficiencies. as that we We in new get

And actually lines restaurant So penetrating scale, margin we see markets. in these to markets these as only to a larger degree, a isn't going negative. the benefit It's we're a continued positive. to

Operator

conclude This will conference. today's

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

Shake Shack (SHAK) 30 Oct 242024 Q3 Earnings call transcript