Shake Shack Beat its Q1 Profit Expectations. The Key Was Technology, LTOs, and Efficient Operations.

 

Shake Shack’s Q1 performance has been nothing short of spectacular, showcasing a brand that understands its market and is not afraid to innovate. The fast-food giant has returned to pre-COVID numbers, proving its resilience in the face of adversity. What can the larger QSR industry learn from Shake Shack and its business model, use of technology, and maneuvering of the market?

Shake Shack kicked off 2023 with record first-quarter profits, attributing this success to increased prices, improved staffing, and a focus on first-party sales and self-order kiosks. This strategic approach not only doubled sales from kiosks but also contributed to a more than 20 percent year-over-year increase in in-store sales. Despite facing inflationary pressures, the company managed to reduce operational costs, driving up the average weekly sales per restaurant to $73,000, a 7.4% increase. With a vision of achieving profit margins of 19-20% percent in fiscal 2023, Shake Shack aims to exceed 20% in the future. To further its growth, the company plans to open 40 corporate and 30-35 licensed locations this year, bringing the total number of restaurants to well over 450, including 295 in the U.S.

Industry pros like Barbara Castiglia, Executive Editor of Modern Restaurant Management and host of The Main Course podcast, see one of the keys to Shake Shack’s success being its balanced approach, blending a delicious menu with forward-thinking operational strategies. Castiglia dives deeper into Shake Shack’s Q1 numbers and what other QSRs and restaurants can strategically take away from the franchise’s success.

 

Barbara’s Thoughts

“Shake Shack reported an impressive Q1 financial results ahead of expectations with sales grew close to 25% year over year, kind of back to pre-COVID numbers. So what can people learn from this? You know, Shake Shack has always been a brand that has the right blend. It has a right blend in its burgers and the right blend in its operations in many facets.

One key for this growth and moving forward is technology. They’ve always been very forward in the technology that they use, and this is really coming to the forefront with kiosks. They expect to roll out more kiosks nationwide in all their stores by the end of the year because they found that these are very successful and they have higher value than the cashier transaction. And, you know, many reasons for this. You know, people like to make sure that their burgers get all the toppings that they want. And you can kind of guarantee this at the kiosk. And it fits with where the guests want that kind of experience.

Now, you know, Shake Shack also is very strategic in their [limited time offers]. They had a really great LTO in the first quarter with truffle that raised a lot of people’s expectations and it brought people into the store. You can expect more from them in Q2 and the rest of the year. They recently introduced a vegan line at all U.S. stores. So their numbers will probably even increase as the year goes on.

You know, one thing people really can always learn from Shake Shack is how they think things strategically. And they are doing so in their growth. They’re growing fast, but they’re doing it in the right manner via licensing and opening their own stores. And it just is a good model, a good strategic business model that makes sense and really is one for people to look at.”

Article written by Daniel Litwin.

 

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