8/6/22

Shake Shack had a great second quarter. YoY revenue growth was a whopping 23.1%, with average weekly sales growth of 12%. All of this, of course, happened amid record high inflation and continued supply chain problems.  However, fast-casual and quick-service restaurants have not been the businesses hurt by the public’s need to trade down.

Case in point, 1 million new users have downloaded the Shake Shack app since the beginning of the year, with quarterly sales rising 13.8%. Although, it must be noted that while traffic numbers have improved 7.8% YoY, the company has raised prices moderately, which may be the more helpful tactic when seeking to offset costs and raise revenue.

Not to be overlooked is the growth the restaurant has seen in number of locations. Just this quarter, 13 new sites were added to the family, eight of which are international: Mexico, Turkey, Hong Kong, and South Korea. The most notable new location, however, was the first-ever Guangzhou, China Shake Shack. The five domestic additions included spots in Castle Rock, Colorado and Chesterfield, Missouri, bit of which are drive-thru shops. The total number of new restaurants expected by year’s end is between 25 and 30.

Unfortunately for customers, the aforementioned inflation and higher costs of paper and food ingredients will require a further price increase of 5%-7% to offset them. Fortunately for Shake Shack, brand loyalty gives them copious amounts of pricing power, and so business is unlikely to be negatively affected.