Dubai chocolate shakes, fried pickles and $1 drinks helped turn around Shake Shack’s traffic trends in the second quarter, and the fast-casual chain is investing in more advertising to draw attention to menu moves.
Shake Shack’s same-store sales grew 1.8% during the quarter, which was largely driven by price. Traffic declined 1%, but that was a marked improvement from the 4.6% traffic decline in the prior first quarter, indicating that the chain’s efforts to bring in new and repeat customers are working. The brand expects traffic for the full year to be flat or up 1%, which reflects expectations for positive traffic in the second half.
Katie Fogertey, Shake Shack’s chief financial officer, said traffic improved each month throughout the second quarter, and was up 3.2% in July, which she attributed largely to marketing efforts.
Wall Street, however, was disappointed by Shake Shack’s results. The company’s stock price plummeted about 12% in midday trading to $123.99 per share.
During the quarter, Shake Shack brought back a Summer BBQ promotion that this year featured chicken sandwiches for the first time, in addition to burgers, but also a side of fried pickles.
The chain also rolled out the hugely popular Dubai Chocolate Pistachio Shakes (at $10, the most expensive ever launched). And in another promotion, guests ordering through the app could get $1 sodas.
Earlier this month, Shake Shack began investing in more paid media to support the culinary innovation planned, said CEO Rob Lynch.
“This brand has never had a top-of-funnel paid media launched at scale,” he said. “It’s hard to believe, but all the marketing has always been word of mouth, earned media, and bottom-of-funnel kind of promo activations. So we leaned in on making some of these investments and we’re ecstatic with the results.”
In markets where the $1 sodas were advertised, for example, the chain saw more downloads of the app. And the discount did not harm check averages, Lynch said, “so people aren’t coming in and just buying a $1 drink.”
Shake Shack now has an 18-month culinary calendar “locked and loaded” that will be supported with more paid media to create awareness, he said.
With operations improving, Lynch said the focus on the menu will be key in driving traffic, no matter the macroeconomic environment.
“For the last year, all the commentary has been about, ‘We’ve got this value-oriented guest, this value-oriented market, can Shake Shack compete in that type of market?’ And we’re doing all the things and the heavy lifting to be able to compete in good times and bad,” he said.
Bundled meals have also helped boost consumer perceptions of value, said Lynch. The bundled meals are available in all 46 of the chain’s domestic drive-thrus.
The chain opened 13 domestic restaurants during the quarter, for a total of more than 390. Among them is a new unit across from the Braves baseball stadium in Atlanta, which is the first to offer a full bar with margaritas—or, in this case, Patron Shakaritas—as well as boozy shakes, beer and wine.
It's also where Shake Shack is able to test new equipment prototypes in a high-volume setting that could bring about future kitchen modernization efforts to boost throughput and speed. The unit opened right before the All-Star Game there.
“So we kind of put our feet into the fire and I was blown away by the amount of volume we were doing and the service times we were providing,” Lynch said. “It’s not a lot of rocket science. It’s really just bringing our kitchens into the 21st Century with equipment that currently exists. So we’re not inventing stuff. We’re just optimizing our processes.”
Shake Shack also added nine licensed units(for a total of 210), and the chain is expanding the offer of breakfast in China. Shake Shack also signed on to open 10 units in PENN Entertainment-operated casinos, and to open 12 units in Panama.
Also encouraging was a nearly 200 basis point improvement in restaurant-level margins to 23.9%, which was attributed in part to Shake Shack’s new operational scorecard system put in place in January.
Before Lynch’s arrival as CEO in May 2024, Shake Shack had no specific metrics for defining good operations. So the company created a scorecard that set goals for “people, performance and profits,” and that scorecard also helped managers know how to better staff units, said Fogertey.
“That has been incredibly helpful in driving efficiencies,” she said.
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