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Urban Shake Shacks continue to struggle

The burger chain, which has never had a drive-thru, plans to open up to eight of them in the next two years to make order pickups more convenient amid the pandemic.
Shake Shack NYC
Photograph: Shutterstock

Shake Shack remains hampered by its urban-centric real estate portfolio, but the chain reported some improvement in sales on Thursday for its third quarter.

Shake Shack’s same-store sales fell 31.7% for the quarter ended September 23, with urban locations down 43% and suburban restaurants falling 16%. Same-store sales were down 49% in Q2. Systemwide traffic fell 42%.

The chain’s New York City locations have been especially battered, with same-store sales declining 49% in Q3 and 40% for fiscal October. Shake Shack’s Manhattan same-store sales fell 60% in the third quarter and were down 51% in October.

Also hard hit are the chain’s licensed airport and stadium locations. Just nine of the chain’s 22 licensed units in the U.S. are currently open and the company said it expects that to be the case for the “foreseeable future.”

“This will hold back recovery in this highly profitable piece of our business,” CEO Randy Garutti said during a call with analysts Thursday.

Nevertheless, Shake Shack expects to open five or six licensed units in Q4 and up to 20 new licensed stores next year.

The New York City-based fast casual opened 12 restaurants at the end of its third quarter, with plans to opened a total of 18 to 20 new stores by the end of the year.

Going forward, the chain is looking for real estate that will allow it to open drive-thru units. The chain is slated to open its first drive-thru late next year and it is plotting to open five to eight drive-thrus over the next two years.

Shake Shack said its drive-thrus will be “a modern version of the traditional” experience with tech-enabled hospitality and innovative design, though it is currently light on details. Pre-ordering, like what is offered in Chipotle Mexican Grill’s Chipotlanes, will be part of the Shake Shack model.

“We’re not going to make our KPI the fastest drive-thru in the world, right?” Garutti said. “We still cook things to order. We’re going to continue to do that. We’re not going for the fastest. We’re going for the highest quality, the most-premium burger that we’ve always done. So, we’ll likely have some really good digital technology involved in that.”

Shake Shack’s total revenue in Q3 fell 17.3% to $130.4 million. Systemwide sales decreased 18.4% to $195.1 million. The chain has 254 locations systemwide.

 

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