What’s up guys! It’s Jason here and welcome back to my YouTube channel, Burger Insight. When you think
of fine dining, what do you think of? You might think of some Michelin Star restaurants or your
favorite chef like Gordan Ramsey. Probably not Shake Shack right? Well, by the end of this video,
I guarantee you’ll understand why hamburgers at Shake Shack can be considered fine dining
as well! Shake Shack is ubiquitous on the East Coast and is a fairly common site throughout the
United States generally. With “Shake” and “Shack” in all-caps, Futura-style font with the outline of
a burger wedged between the two words, it’s an easily recognizable logo and restaurant chain.
Though it sells many of the same items as McDonalds and Burger King, such as hamburgers,
cheeseburgers, fries, and milkshakes, Shake Shack does not aspire to offer extremely affordable
meals only. Rather, the brand positions itself as more upscale and more expensive than McDonalds,
but more approachable in terms of image and price-point than boutique burger joints.
Considering how common Shake Shack has become, it may be surprising to know that it only opened its
first location in 2004. In less than two decades, as of year end 2020, Shake Shack boasts more than
250 locations domestically and internationally. To put that in context, West Coast rival,
In-N-Out Burger, has 358 locations in total and it has been around since 1948. How has Shake Shack
managed to expand so quickly while being flush with cash, and remaining sought-after by foodies?
In this video, I’ll break it all down to understand their secrets to success so far
and why Shake Shack is taking over the world. So next time, tell your significant other you’ll be
taking him or her to an international fine dining establishment, and take them to a Shake Shack!
But first…you know where I’m going with this right? A small favor. If you wouldn’t mind just tapping
that LIKE button for the YouTube algorithm, I would really appreciate it. The more engagement
a video like this gets, the more likely the YouTube algorithm is to push it out to more people
to enjoy. And as this is a brand-new channel I started this year, it helps me out and it’s free to
do. If you like hamburgers, be sure to subscribe and hit that notification bell for new videos
each week. Thanks for doing that and now let us continue on with Why Shake Shack is so Popular.
How did Shake Shack Start By 2000, the Madison Square Park area had become
quite seedy and lacked the restaurants and shops that attracted legitimate business. As a result,
that year, the New York City government enlisted successful restaurateur Danny Meyer, to spearhead
the Madison Square Park Conservancy in an effort to clean-up its image and attract entrepreneurs.
One of Meyer’s employees, Randy Garutti, ended up opening and overseeing a hot dog cart from Eleven
Madison Park’s kitchen, also owned by Meyer. For all you fancy foodies out there, as a side-note,
Eleven Madison Park is one of the most acclaimed and expensive Michelin restaurants in the US!
Check out these picture, you’ll understand why. That’s posh!
The surprising success of that simple hot dog stand led to Meyer opening the first Shake Shack
location in a kiosk within Madison Square Park. Although the prior hot dog cart was successful,
Meyer did not open the initial Shake Shack location with the intention of
opening a franchise. Instead, it was meant to be a local restaurant catering to New
Yorkers and tourists to the Big Apple. As Donald Trump would say, “It was YUGE.�
Meyers saw an opportunity to open a second Shake Shack and perhaps franchise, with Garutti
continuing as the CEO, because of their success selling hot dogs. Garutti explained, “...what
happened was that we held the same standards of quality to our cart that we did in our
restaurants, and people loved it. All of a sudden, 50 people lined up, 100 people lined up and the
hot cart became this amazing crazy thing.” Early on, quality control became key to their ability
to scale and make Shake Shack as well-known as competitors like Five Guys and In-N-Out.
The Road Less Traveled Appearance
As anyone who has ever patronized an In-N-Out or Five Guys knows, 1950s retro interiors with its
mandatory red-and-white color scheme seems to be the gold standard for burger places.
However, Meyer, as Garutti describes, they wanted a “modern version of a roadside burger stand.�
They explicitly did not want “retro, not ‘50s music playing, but today’s version of what made that
place great. All we ever wanted to do at Shake Shack was to have good people serving fresh food,
and to sell a few hot dogs.” This more contemporary approach seems to be at odds
with conventional wisdom in regards to what’s tried and true in the burger business.
Fine Dining Quality Shake Shack has managed to expand globally in such
a short time with 235 restaurants in 15 countries, in major part because of the fine dining quality
of its simple offerings. The company is committed to using high-quality ingredients, including 100%
antibiotic-free Angus beef and toppings such as cherry peppers and applewood-smoked bacon.
Gone are the days of freeze-dried tasting beef and sloshy, smushed peppers. Their flat-top hot dogs
are also made of antibiotic-free beef that can be marketed as healthier because it’s 100% without
hormones. Since the chain aspires to appeal to the contemporary, rather than the nostalgic consumer,
it also has more than just “acceptable” vegetarian options, the most notable of which is the ‘Shroom
burger, made of portobello mushrooms stuffed with cheese. Have any of you tried that before?
Like many other chains, Shake Shack also has its literal “secret” sauce,
which is its signature sauce. It’s comparable to a dill, ketchup, and mustard blend with I
don’t know what else. It is tasty, though. In addition, Shake Shack has a certain luster
that say, McDonalds or Burger King lacks because of their collaborations with chefs. Most notably,
through their “Now Serving” series, Shake Shack offers one-day chef collaborations. Chefs as
famous as Junghyun Park of Atoboy and Atomix and and Dominique Credd of Atelier Crenn. The move
is an obvious nod to its start in the kitchen of fine dining hotspot Eleven Madison Park.
The message should have been loud and clear to the foodies who love watching cooking shows and
following chefs on social media: we’re respected in the industry, even though we serve burgers.
I love that message. It’s so cool! Appealing to Local Taste
As part of its effort to expand successfully internationally, Shake Shack adapts its decor
and menu to local sensibilities while maintaining the all-American image and appeal of the brand.
Michael Kark, Shake Shack’s global licensing offer, explained to CNN that, “What we learned
early on is that people don’t want us to be a local version of Shake Shack. They want us to be Shake
Shack.” Examples of their interest in local tastes include: a cherry blossom shake in Japan and a red
bean shake in South Korea.Yummy! The emphasis is on offering a core Shake Shack offering,
such as a shake or a burger, but with a slight twist that lets local consumers know that Shake
Shack understands the culture and loves local culture as well as that of the USA.
It doesn’t have to be one or the other. In fact, Shake Shack even offered cherry blossom shakes
for a limited time in the USA because of their outstanding popularity in Japan.
In its focus on expansion beyond the United States, Shake Shack is quite different from
competitors who want to focus on consolidating its brand power within its home country
and then going global. Kark noted that there’s a logic to the seeming madness --- if things
don’t go as planned overseas, at least “it was really far away from home.” In other words,
if something goes wrong in Dubai, for instance, it won’t be as scandalous as if it happened in
its core American market. On the bright side, if things go well, it helps to consolidate the
Shake Shack brand in markets that may have fewer American fast food competitors.
Financials Behind World Domination To expand globally undoubtedly takes
a lot of time, effort, and perhaps most importantly of all - money. Throughout 2014,
the rumor mill went wild about a Shake Shack IPO because of its possibly unprecedented growth.
At the time, it had gone from one from 63 locations in about 10 years. In 2014,
it recorded $83.8 million in revenue, quadrupling its sales. While you can’t always believe rumors,
this is one that turned out to be blissfully true for the chain - by 2015, Shake Shack had
gone public on the stock exchange, after expanding rapidly with locations in Delaware, California,
Washington, DC, Florida, Illinois, Maryland, Georgia, New Jersey, Pennsylvania, Texas,
and New Jersey. Shake Shack became known on the NYSE
as SHAK, according to its ticker symbol, at $47 per share. Just four months later in April,
it hit $72 and then climbed to about $90 a month later. Individuals who invested when
Shake Shack went public and stayed until May of that year almost doubled their money.
Shake Shack continued on its quest for world domination with much success post-IPO.
It began to diversify its types of locations, which shouldn’t be surprising considering that it
started with a hot dog stand. In 2016, it opened a mall location in Houston Texas, while in 2017,
it opened a location in a mixed-use complex called “The Summit at Fritz Farm” in Lexington, Kentucky.
2018 saw the chain begin to service Jewel Changi Airport in Singapore starting in 2019.
To understand just how important a move that was for Shake Shack - Changi Airport as of 2019 was
the world’s seventh busiest airport internationally with about 68 million passengers passing through
and potentially at least glimpsing the Shake Shack shop front, if nothing else. If you stop
by Singapore, you’ll have to try the special Pandan Shake at Shake Shack. It’s delicious!
That same year, Shake Shack opened up closer to home, in Mexico City. The opening was a
hit considering many people faced a two hour wait to get a taste of Americana.
COVID-19 As Shake Shack faced success after success,
it got a wrench thrown in its way in the form of COVID-19, much like most businesses in the
food and beverage industry, especially at the height of COVID lockdowns throughout the US and
internationally. Shake Shack CEO Garutti confirmed that 2020 sales have declined by about 17 percent
because of COVID. Nonetheless, because Shake Shack is not a full-service fine dining establishment in
the same vein as waitered restaurants like Eleven Madison, the chain has the opportunity to service
customers through pick-up windows, curbside, and drive-thru. “Shack Track” locations are part
of the company’s 2021 effort to make customers confident that picking up food from Shake Shack
is safe for their health. That “Shack Track” effort requires the company to add drive-thru lanes
and walk-up windows that also meet the six feet social distancing mandated by the government.
The investment in physical reconfigurations to stores is accompanied by the fact that
app and web-based sales have practically ensured that the company stays afloat.
As proof that digital may be here to stay, Shake Shack reported that online sales have stayed at
80% for the last weeks of May 2020. Demonstrating how drastically stay-at-home orders shifted buying
habits, with the end of April showing digital sales were 84% of total sales, a 18% increase
from early March when the COVID lockdown started in New York City. The company noted that compared
to 2019, web and app sales increased almost 3x. It’s a telling indicator of where the company
may choose to invest as they also plot their continued international and domestic growth.
The Rest of 2021
While Shake Shack weathers the storm, it also looks forward to its future with planned growth.
The company has outlined targeting between 35-40 store openings and an additional 45-50 through
2022. As many real estate agents like to say, it’s all about location, location, location...and
Shake Shack leadership seems to agree! Their focus is on opening in top-tier locations in
the center of urban populations and the suburban outskirts. COVID-19 seems to have only reinforced
their strategy of pursuing different types of formats in locations, such as drive-thrus,
curbside pick-up, and walk-up windows. If anyone thought that COVID would perhaps
make Shake Shack more apprehensive about its international presence, the company
is resilient in strengthening its foothold in key Asian and Central American markets.
More specifically, in 2021 Shake Shack aims to open 15-20 locations throughout mainland China
and Mexico. 2022 is projected to have 20-25 more locations. Kuwait and Dubai will also
get more Shake Shack locations to increase their brand identity in the Middle East.
Culture, as reflected in its food and in the workplace,
is essential to Shake Shack’s plans for 2021 and beyond. Culturally hip offerings that blend East
and West, such as Korean Gochujang Chicken Bites and Korean Gochujang French Fries are part of
Shake Shack’s proactive interest in being ahead of the curve and a cultural mover and shaker.
And that brings us to today. Shake Shack wants to invest in its workers too, in a vein similar
to In-N-Out Burger’s much admired treatment of its workers. In 2020, it noted that it promoted many
women and diverse minorities with more than 56% of internal promotions being women and 76% being
minorities. This could have been indicative of the success of its Shift Up Education Program,
intended to train employees in skills relevant to their personal and professional success,
such as financial and leadership skills. In the fast food or even fast casual world,
re-investment in employees is sometimes pushed aside for financial bottom-lines.
Shake Shack’s overall commitment to food quality and hospitality makes its future look bright.
I’m not a gambler, but if I were, I would bet on it becoming an even greater force to reckon with
in the competitive world of fast casual dining. So with that said, thank you so much for watching
my video. There was a significant amount of research, production and a ton of hamburger
eating that went into making this video possible. As this is a brand-new YouTube channel I just
started this year - if you enjoy videos like this, please click the subscribe button and hit
that notification bell! This is the last in the Burger Series at Company Insight. If you have any
other suggestions, let me know! If you haven’t seen already, check out my video on In-N-Out
and the other one on Five Guys Burgers. The In-N-Out one is my personal favorite. As always,
stay happy and healthy and stay tuned for another episode of Company Insight next week.