facebook pixal
Financing

Shake Shack to raise prices again after omicron takes its toll

The fast-casual burger brand said there is too much uncertainty to predict when it might return to pre-pandemic sales trends.
Shake Shack
Photo courtesy Shake Shack

The recent COVID surge hit Shake Shack hard in January, forcing the fast-casual burger chain to close restaurants, cut hours and throttle digital sales, the company reported Thursday.

Shake Shack said it intends to raise prices 3% to 3.5% percent in March, on top of the 3.5% price increase taken in October. The chain is putting a 15% premium on third-party delivery orders, up from 10%. Typically, Shake Shack raises prices 2% per year.

“Q1, in January, was really tough,” CEO Randy Garutti said. “And yet the last three weeks in February have been better every week. Shake Shack is more impacted by these waves given our real estate position. February is still improving every week from January, but it’s still impacted by omicron.”

CFO Katherine Fogertey said the chain is careful to pay attention to consumers’ willingness to absorb price increases, by market.

“We raised prices in October and we saw a pretty good reception to that price increase,” Fogertey said. “But it is a risk.”

New York City-based Shake Shack has a portfolio of locations heavily weighted toward urban areas, where same-store sales during the fourth quarter remained down 4% over 2019 levels. Suburban locations, meanwhile, saw same-store sales 9% above pre-COVID levels.

Systemwide same-store sales for the quarter ended Dec. 29 were up 2.2% over 2019 levels, the first time the chain has surpassed pre-pandemic sales.

Inflation and a higher delivery mix, as well as increased operating expenses, contributed to the chain’s 16.4% margin for the quarter.

Shake Shack has raised its average hourly pay 13% since the end of 2020, the chain said.

For 2021, Shake Shack reported total revenue of $203.3 million, up 29% from the same period in 2020.

Given the uncertainty surrounding the pandemic, Shake Shack said it could not provide guidance for full-year 2022.

“The timing of a return to pre-COVID sales levels is highly dependent upon the return of the high traffic areas that contributed to many of the strongest Shak sales, including those most reliant on travel, schools, offices and major gatherings,” the chain said in a statement. “The timing of that recovery remains unknown today.”

Shake Shack ended 2021 with 369 locations, opening 36 company-operated stores and 26 licensed locations during the year.

The chain has said it intends to open 45 to 50 new restaurants in 2022. But Garutti on Thursday told investors those openings will be “heavily weighted” to the end of the year because of supply chain disruptions and other slowdowns.

Shake Shack is slated to open seven new stores during the first quarter, five to seven locations in the second quarter and the remainder in the back half of the year. Build-out costs are currently 10% to 15% higher than historic levels.

So far, the company has opened three drive-thrus. Chain executives said it was too early to provide any metrics for that new operational channel.

“We have a lot of good growth in front of us,” Garutti said. “We are not at dismayed by a higher cost-to-build environment.”

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.

Trending

More from our partners