Dive Brief:
- Shake Shack expects to open 65 to 70 restaurants this year, Shake Shack CFO Katie Fogertey said Tuesday during the ICR Conference. Forty of those locations would be domestic units, and 25 to 30 will be licensed.
- The burger chain opened 69 stores in 2022, growing its base by 19% to 436 units, she said. Of these new restaurants, 36 were company-operated and 33 were licensed.
- Shake Shack continues to open mix of store formats, including drive-thrus and nontraditional locations in food courts, airports and travel centers.
Dive Insight:
Shake Shack’s biggest growth push of late has centered on drive-thrus, the first of which opened in 2021. The company has since opened 11 drive-thru units, nine of which opened during the fourth quarter of 2022, Shake Shack CEO Randy Garutti said at ICR. The company plans to open 10 to 15 drive-thrus this year, and these projections are in line with the company’s original expectation of opening 25 drive-thrus by the end of 2023.
Shake Shack is targeting average unit volumes of $4 million. Company-owned AUVs averaged about $3.8 million in 2022, according to Shake Shack’s presentation materials.
“There are many of the drive-thrus that are run-rating higher than that and some that are below,” Garutti said. “We’re learning what is it about that site, about the layout, about that type of drive-thru that’s going to drive that [AUV].”
Drive-thru units are more expensive to build, however, ranging from $2.4 to $3 million in build-out costs, he said.
“There will also be some built-to-suit opportunities where we can spend less than this and trade a bit of a higher occupancy for lower build-out costs to overall balance our CapEx,” he said.
Shake Shack is also opening drive-thrus close to smaller format stores to capture different diner demographics. For example, a drive-thru in Orlando, Florida, built in March 2022 is capturing about $86,000 in average weekly sales, which Garutti said means it’s nearing $4.5 million to $5 million AUVs and a 20% restaurant-level profit. Less than a mile away, Shake Shack operates a smaller footprint store at the Orlando Premium Outlets, which opened in August 2021. That location is posting $4 million in AUVs.
“We’re getting $8 million in Shack-level sales in less than one mile,” he said. “We think there’s a lot of places around this country and this world that we can do this. This is why you’re going to see different formats coming out of Shake Shack.”
Drive-thrus are able to capture diners that may have previously been out of reach, he said. At the Orlando drive-thru, about half of the guests are local, but at the small restaurant near the shopping outlets, only 15% of guests are local, he said.
Shake Shack has also been opening in airports and travel centers, and has 23 restaurants in airports to date, Garutti said. Airports are proving to be a good testing ground for the chain. The restaurant opened its first Shake Shack with a bar serving margaritas at Denver International Airport. The popularity of that offering has encouraged management to consider bringing alcohol to more company-owned and licensed stores, Garutti said.
As of early 2023, the restaurant has four locations in roadside trave center locations and plans to open three to five more such locations this year, Garutti said. Shake Shack is also testing out different license opportunities and will open a site at the Atlantis Resort in the Bahamas later this year, which could open up opportunities to develop sites in resort locations where there is a captive audience.
