QSR Back of House

When Shake Shack went public in 2015, it set the ambitious goal of reaching 450 company-owned units. Now, with roughly 330 company-owned U.S. locations, it aims to more than triple that count by reaching 1,500 units.

The chain is pursuing growth in suburban markets, an area of focus since it debuted its first drive-thru in 2021. Shake Shack is exploring small-format locations, as well. The company, which targeted $2.8 million to $3.2 million in average unit volumes in 2015, now boasts $4 million AUVs among company-operated restaurants open for two years. 

The once New York City-only chain is seeing vast opportunities all around the country and the world. 

“We’re able to have extremely strong unit economics and AUVs in urban markets, in suburban [markets], East Coast, West Coast, middle of country, in the South,” Katie Fogertey, Shake Shack’s CFO, said at the ICR Conference earlier this week. 

Restaurant Dive spoke with Fogertey at the event to discuss how the chain determined it could reach 1,500 units, how boosting operational efficiency will help it reach that goal and how the chain is thinking about small-format locations.

Editor’s note: This interview has been edited for brevity and clarity. 

RESTAURANT DIVE: How did you determine you could reach 1,500 company-owned units, up from your original goal of 450?

KATIE FOGERTY: That 450 target was given at a time when the company only had a handful of restaurants, and a lot of them were new restaurants. So we had 31 open at the time of the IPO. Less than half of that was actually in the comp base, meaning they were open two years or more, and had proven, stabilized financials. Many of those were in New York City. There was actually a big question at the time of whether this company could expand outside of core markets like New York City. The format was pretty standard across the board of these large flagship-type places that were in heavy tourist, heavy foot traffic areas. 

Over the past 10 years, we now have drive-thrus, we have small formats and are spread into suburban markets. This strengthened our ability to go outside of New York to California to Florida, to really a lot of pockets across the country, and have very strong returns.

We’ve also invested a lot in data and analytics to really understand our business, and we’ve built a great development engine that leverages all of the unique things about what makes Shake Shack work and what doesn’t. We’ve been able to leverage that on top of also all the profitability and improvement plans. We’ve expanded margins by 700 basis points over the past four years. All of that together has given us so much confidence and precision with where we think we can go.

How have you been working on drive-thru optimization to chase this big unit-count goal?

As we launched drive-thru, really a product of COVID and the need to have multiple access points for our guests, we’ve been learning and refining how Shake Shack operates, which is a unique concept in that we cook everything fresh to order, and how that can work through a drive-thru. 

At the digital menu board, when you come in and put in your order, that’s actually one of the largest bottlenecks in our drive-thru. Today, we have complicated menus. We basically took a lot of what worked within the in-Shack experience and put that at the drive-thru. What that ends up meaning is that the order time takes so long. That’s not even the time with payment or making the food or anything.

We’re in the process of refining that, and offering very easy-to-understand choices. Shaving minutes off of that process alone will be meaningful to the drive-thru wait time. We’re still cooking everything fresh to order, and we will provide a better guest experience because wait times are so critical at the drive-thru.

How are you thinking about real estate opportunities for small-format stores?

If we just looked at core drive-thru flagship, there were going to be some areas where we had to pass on building Shacks, because the sales pull from surrounding areas would be too big and the unit economics just wouldn’t work. 

What a smaller format allows us to do is really infill a market. We’re not going to go to a market first thing with this small format. A small format is really our way of being able to round out a market without pulling too much sales from existing Shacks, and really optimize the sales and profitability of that market. Those small formats are not going to cost the same amount as what a drive-thru would cost. 

The work that we have been doing in operations also helps us to improve the profitability of the small-format restaurant. You can’t run the flagship playbook in a small format. It just doesn't work. I'm really optimistic about what this as an infill strategy will let us capture in sales in the total addressable market. We do have some small format Shacks out there today, but we are taking a much more standardized approach to that and it will be part of market planning. 

How have you been optimizing back-of-house operations? 

Shake Shack has a little bit of a different labor need than your traditional QSR. We require more people. We have more tasks. It’s more labor intensive. Before last year, we had allocated hourly labor at our restaurants based on sales. 

If you’re a Shack and you’re doing $1,200 in sales an hour, you’re going to get the same labor across the board as stores of any size. But there are a lot of nuances to how labor is actually used at a Shack and we have a variety in labor usage based on menu items on channel format, and even just peak times. As an example, if you’re a drive-thru Shack, you might have a very high chicken mix. You might have a high shake mix — we hand spin and make all of our custards in-Shack every day that requires a lot of labor. You’d be getting the same hours as a food court that has no dining room and probably skews more to cold beverages and fries. 

We did a time and motion study across all of the components of our menu and channel to figure out how much the dining room allocates, how much of savings the kiosk is, and we then created bespoke labor models for each of our Shacks that really helps to allocate and properly distribute labor. We’ve also been working on scheduling tools as well.

We are allocating more labor to the places that need it. We are being much more disciplined about the labor deployment in areas that don’t need it, and that really does provide a better guest experience. 

Longer term, we’re thinking about kitchen design and construction, and how we can take more steps out of the process today, and that’s the work that Stephanie Sentell, our COO, and Andrew McCaughan, our chief development officer, have been partnering to figure out what is the prototype to standardized kitchen design that will unleash both productivity within our restaurants and make the job of our team members easier. This will also reduce wait times over the long term and provide a better guest experience.

How does the kiosk channel play into that optimization? 

Kiosks have been our fastest-growing order channel. It’s our most profitable channel and it is going to be critical to how we deploy guest recognition this year. We’re investing in guest recognition this year to tie our app- and web-known guests with the in-Shack experience with the kiosk. Together that will be a very powerful driver of frequency.

Also a kiosk order just requires less. You don't need as many cashiers in the front and we are counting for that, and also using some of that additional labor to redeploy to do a better hospitality experience. 

Kiosks also allow us to run food to the table. When you order at the kiosk, you input your table number, you get a table tent, and you sit down, and we bring the food to you. We would have never been able to do that before, and it is such a better guest experience. Even if the wait times haven’t changed, the perception of the wait time is lower because people are comfortable. Also, if we forgot something, we have the opportunity to correct that on the spot. 

Where are you on your future loyalty program? 

While you won’t see a revenue benefit from loyalty this year, but by the end of this year and into next year, you’ll be able to tie a guest who came in through the app and came into the Shack under kiosks; we’re going to be able to really connect the dots. This will give us the critical building blocks that will allow us to provide targeted offers to our guests and give that really important incremental driver for frequency over the long term. 

What excites you the most of all the things that you see in development?

Everything in that plan is absolutely critical and holds a very important weight to our ability to execute against our long-term targets. One of the things I get very excited about, and this was a key reason why I came to Shake Shack, was its commitment to its people and to developing leaders. Our general managers make six-figures and they receive equity within the company. 

When I think about our first pillar, which is really our commitment to our people and building leaders, we have to do that 100% in order to open excellent restaurants and lead our teams forward.

Traffic at U.S. Starbucks stores plummeted during the chain’s fourth quarter, continuing a run of disappointing earnings results. But new CEO Brian Niccol, whose tenure began less than three weeks before the end of the quarter on Sept. 29, has a plan to win consumers back.

Starbucks wants to go back to being a coffeehouse. 

That desire isn’t new. In a 2022 letter announcing a reinvention plan for the brand, then interim-CEO Howard Schultz called for the chain to make its stores into places that bring neighborhoods together. But Niccol announced during this week’s earnings call a series of concrete changes intended directly to make Starbucks more of a coffeehouse brand.

Condiments, ceramics and seats

To improve the feel of its stores, Starbucks will bring back ceramic mugs for in-store drinks, Niccol said. That change will eventually be accompanied by shifts in the design and aesthetics of stores to make them more welcoming and easier to spend time in.

“Our designers are talking about making sure we bring back the layers, the texture, the warmth,” Niccol said of the store interiors. “Those are the things that are really important.”

The brand will work to ensure its seats are more comfortable, and may revise some in-store policies. Niccol did not specify which policies might change.

“I want you to feel like you walked into a special place,” Niccol said. 

He noted it would be a positive sign if consumers shifted from mobile-order-and-pay options to enjoying their beverages in-store. Baristas, Niccol said, had made it clear in his early weeks as CEO that they wanted a greater emphasis on dining rooms and on a coffeehouse feeling.

At the same time, Starbucks will bring back its coffee condiments bar which it eliminated during the early months of the COVID-19 pandemic. The bars mean customers can modify their own drinks by adding sugar or cream. That process, which customers have been advocating for, will be complete in 2025, Niccol said. 

Speed of service is still an emphasis

The addition of condiment coffee bars may be part of a shift towards a coffeehouse vibe, but it has important practical implications. First, the condiment bar allows Starbucks to cut a task for its workers, with consumers able to add cream and sweeteners to their brewed coffees. 

That shift accompanies other changes Starbucks is making to speed up orders. For instance, the company is adding new Clover Vertica brewers to serve drip coffee across its stores by the end of 2025. Starbucks is also changing the handoff of its brewed coffees, which take much less time to prepare than espresso drinks or customized beverages. Cashiers now will hand the coffee directly to consumers, Niccol said, rather than sending the drinks “down the line and ending up down at the counter” where other drinks are picked up.

This handoff means consumers who only order a coffee may see a significant reduction in wait times. Overall, Starbucks is targeting four minute or less throughput for its orders, Niccol said.

Niccol said the brand is looking to separate its mobile-order-and-pay (MOP) experience from its in-store experience. MOP has been key for Starbucks. Sharon Zackfia, a William Blair analyst noted that more than 30% of Starbucks’ orders in the U.S. come through the channel.

“A new algorithm is being developed to improve mobile order sequencing and enable faster throughput for both mobile and in-store orders,” Zackfia wrote in a note emailed to Restaurant Dive. 

Niccol said he wants stores to create separate areas for drinks that are ready for customers to pick up.

“If you need to be quick, you can be quick, and we'll be on time with it,” he said.

Stores, Sirens and Staff

To support this ambitious plan, Starbucks is curtailing development to free up capital for renovations — even though what, exactly, its coffeehouse remodels will require is not yet certain, Niccol said.

But the chain hopes to speed up the deployment of its Siren System, a kitchen redesign intended to boost throughput that was first described by the company in 2022 and has hovered in a deployment limbo since. Alongside those equipment changes are shifts in labor employment and drinks building processes, called the Siren Craft System,

“We will continue to scale our investment in Siren equipment and Siren Craft processes to improve the in-store experience for our partners and customers,” Niccol said. Those two fronts will be key, Niccol said, to achieving that four-minute throughput.

However, as Chipotle discovered with adding expeditors to its food lines under Niccol, a key to improving throughput may not be renovations or new training programs but, simply, more labor. 

“We may find it's going to require some additional hours, because at the end of the day I want to make sure that the teams are staffed to win every transaction,” Niccol said.

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Chipotle is starting in-store testing for its avocado processing machine and automated makeline, the company said on Sept. 16.

The chain is testing the avocado processing machine, dubbed the Autocado and developed in conjunction with Vebu, at a Huntington Beach, California, location. It is also testing the automated makeline, which it developed with Hyphen, at a location in Corona Del Mar, California.

Chipotle has invested heavily in new technology, pouring $100 million into its Cultivate Next venture fund since 2022, which has backed Vebu and Hyphen. The scale of Chipotle’s investment in experimental restaurant equipment indicates the company sees significant upside in labor saving devices. 

The Autocado takes 26 seconds to peel, cut and core an avocado, while workers handle the final steps in guacamole preparation, the company said.

The makeline, meanwhile, is positioned underneath a separate space for workers to prepare burritos and other items and effectively adds a second makeline to Chipotle’s kitchen setup to handle bowl based digital orders, which account for nearly two-thirds of digital orders. 

These changes could mark a major step forward in labor savings and productivity for the company. Chipotle did not respond to a request for comment on the amount of time it takes a worker to peel, cut and core an avocado.

“These cobotic devices could help us build a stronger operational engine that delivers a great experience for our team members and our guests,” said Curt Garner, chief customer and technology officer at the brand. Garner said the next step in its testing process is to incorporate guest and worker feedback.

It’s not clear how much Chipotle has changed its devices after testing. The video for the makeline attached to the press release includes the same footage the company shared last year, in which blurry ingredients bounce out of the bowl and land in the guts of the machine. 

Earlier this year, then-CEO Brian Niccol said the company’s testing process accounted for safety, but also focused on accuracy and throughput speed. Chipotle did not immediately respond to a request to clarify how it was approaching food safety, cleaning and cross contamination issues with the makeline.

Chipotle has faced throughput problems this year as rising traffic has pressured the brand’s operations. So far, the chain has largely adapted by adding labor — about half of its stores now have a worker called an expeditor who is tasked solely with packaging orders and assisting with payment. 

But the chain is in the process of testing and deploying a dual-sided grill to speed up cooking chicken and steak. The testing process for the grill is further along than the Autocado and automated makeline tests, with 74 restaurants set to receive the new grills this year.

Portillo’s is testing computer vision AI to improve drive-thru times, executives said during an ICR presentation.

The company has already shaved 15 seconds from its average drive-thru time, but is working on speeding service by 45 more seconds, CEO Michael Osanloo said. Portillo’s is working to reduce its drive-thru times from roughly six minutes to five. 

Portillo’s has leaned heavily on technology of late to boost speed of service and customer engagement. It has completed its deployment of kiosks across its system of over 90 restaurants and will roll out a rewards program, Portillo’s Perks, at the end of the first quarter, Osanloo said.

Portillo’s has been working on improving drive-thru times since last year after lagging 2019 numbers. Computer vision technology is helping take some of the “cognitive load” off of managers by distilling relevant information in real time, Keith Correia, Portillo’s chief information officer, said at ICR. 

“It’s a simple thing, but it’s had amazing early results in our test program,” Osanloo said. 

The information has been most useful during busy times and allows managers to quickly glance at a dashboard to see where there is room for improvement. The system provides visual cues, like the screen flashing red, to management if it sees a car sitting for four minutes that no one has serviced. This allows managers to redeploy labor, Correia said.

“It's very simple for them to know exactly how they're performing during various shifts, and it's going to make a big difference for us as we scale this and deploy it in our business,” Correia said. 

The company also completed its deployment of kiosks across its system last year and immediately saw guest adoption and received positive feedback from customers, Correia noted.  

“These are easy to use,” Correia said. “It's a throughput alternative, in fact, to other ways for them to transact with us, to go up to the front cash area, to go through the drive-thru.” 

Customer adoption of kiosks has been about 25%, and this channel has resulted in a 15% higher check and roughly a 1% increase in restaurant comparables, Correia said. 

“It’s a great start for us, knowing that we're about two and a half months in,” he said. “We're expecting that comp benefit to continue for most of 2025 and we're not done yet. So there's more that we can do to drive that adoption rate up.”

That includes making sure that kiosks are highly visible to guests and working on adding more upselling software for kiosk updates.

The forthcoming Portillo’s Perks program will also further guest engagement. The program is compatible with Apple Wallet for easy access and can be scanned at any location. It is transaction-based, but will allow Portillo’s to get to know more about its guests and thus lead to more personalization, Correia said. As guests visit, they receive badges that can be personalized. The program can include special officers and invite guests to try a new limited-time officer or new product. People can also use badges to redeem Portillo’s swag, which is particularly popular among guests, Correia said. 

“We will use data over time to drive the timing and the relevance of these offers so they become more and more material to our guests and incentivize them to visit,” Correia said. “And that's where we get the incremental transactions and the value of the program for us.”

Osanloo said the company expects 1.5 million to 1.7 million members by mid-summer.

Serve Robotics will buy Vebu, the developer of Chipotle’s avocado processing machine, the Autocado, in an all-stock transaction, according to a press release emailed to Restaurant Dive.

The delivery robotics company anticipates the acquisition will strengthen it by broadening what it offers to restaurants. Currently, Serve’s business model centers on deploying sidewalk delivery bots in partnership with restaurants and delivery aggregators.

Vebu’s Autocado is currently being tested at a California Chipotle location as part of the fast casual giant’s extended process for developing and deploying in-store tech.

After the close of the deal, Vebu’s founder and CEO Buck Jordan will continue to head development of the Autocado as SVP of Kitchen Automation.

“This is an exciting opportunity to merge our efforts, experience, and expertise to bring groundbreaking automation to a wider audience,” Jordan said in the press release. “Together, we will strive to provide a suite of automation solutions that will change the future of restaurant operations.”

Given Serve’s work with firms like 7-Eleven and Shake Shack, Vebu may get the chance to address a broader variety of operational problems than peeling and coring avocados. Likewise, Vebu’s connections with Chipotle could prove advantageous to Serve as it looks to expand its geographic range.

“We will be uniquely positioned to utilize robotics and AI to solve the labor shortages plaguing the restaurant industry,” Ali Kashani, Serve’s CEO, said in a statement. “This acquisition underscores our commitment to helping our partners operate more efficiently and to expanding our partnerships with national chain restaurants.”

Chipotle previously backed Vebu through its Cultivate Next Venture fund, and is an example of the interest many chains have in developing devices that reduce their need for hourly workers. While some efforts, like Brinker’s tests of Rita the Robot server, have not proven successful, the industry’s continued interest in tech like drive-thru voice AI shows that the moderation in real wage growth since late 2022 has not ended the restaurant industry’s desire for automation.

Freddy's Frozen Custard & Steakburgers opened a training and innovation center in Wichita, Kansas, this week, the brand announced on Aug. 20.  

The 23,000-square-foot facility is intended to help the brand train its managers and franchisees to a uniform standard, and will serve as a product innovation and testing site, according to the announcement. 

Given the brand’s aggressive expansion plans — Freddy’s aims to eventually reach 1,000 units, up from its present 533 store total — the training of franchisees and managers will be an important part of ensuring the success of new stores as they open. 

Major chains often use test kitchens to support menu innovation. Chipotle and Taco Bell, for example, both have facilities for designing new dishes. McDonald’s famously has its Hamburger University training center. As Freddy’s grows, it makes sense for the chain to invest in the development of talent and dishes. 

Freddy’s training and innovation center possesses cutting-edge equipment and a simulated back of house, according to the press release, which means it can accommodate on-site testing and training, virtual training and customer focus groups. 

“We are investing in the continued success of our entire franchise system, and ensuring we maintain our commitment to quality and excellence in every location,” Freddy’s CEO Chris Dull said in the press release. 

The center will be used to record about 200 training videos and podcasts, according to the press release. Training will cover things like perfecting cooked-to-order steakburgers and churning frozen custard.

Freddy’s said the center would be used for in-person events as well, including up to 70 franchisee visits per year, four conferences for 130 multi-unit managers and annual training for around 120 managers.