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Despite a pandemic battering, Shake Shack isn’t giving up on urban restaurants

The 186-unit fast casual said it plans to expand its total number of units by 45% in the next two years.
Photograph: Shutterstock

Hammered by the pandemic and, most recently, by extreme weather, Shake Shack remains bullish on its new unit growth strategy, with plans to expand its total number of restaurants by 45% in the next two years.

About 10% of those new locations will be in new geographic markets for the fast-casual chain, with the rest in existing trade areas, CEO Randy Garutti said during a call with analysts late Thursday while announcing the company’s Q4 earnings.

“Despite COVID, we see opportunity in urban markets,” Garutti said.

But, he added, urban recovery is going to take some more time.

“We’ve got to see urban markets come back,” he said. “We need to see travel happen. We need to see a regular operating environment and we’re some time away from that. We’re a long way away from Times Square being full of people.”

Shake Shack’s urban restaurants have particularly struggled during this pandemic year. And the chain’s Q4 results, while an improvement over past quarters, still displayed that urban-suburban divide.

Systemwide, same-store sales were down 17.4% during Q4, with suburban locations approximately flat and urban restaurants down 31% during Q4. Shake Shacks in Manhattan saw same-store sales decline 49% during the quarter ended Dec. 30.

Extreme cold and snow earlier this month caused more than 130 full or partial lost operating days from Shake Shack closures.

Total revenue was up 4% to $157.5 million over the same period last year, though Q4 had an extra week in 2020. Take away that 53rd week and Shake Shack’s total Q4 revenue was actually down 3.3%. Systemwide sales, minus the extra week, were down 6.2% in Q4.

The chain reported a Q4 operating loss of $12.2 million, which it blamed on the ramp-up of general and administrative expenses to support sped-up growth during the remainder of 2021.

Shake Shack said it intends to open up to 40 new locations this year and up to 50 new restaurants in 2022.

Garutti said he’s been walking around New York City, saying, “Wow. That’s a great spot. Maybe we should look at that.”

“There’s going to be some level of less restaurants for a while and we will probably benefit from that,” he said. “Great entrepreneurs are going to come back swinging. In the meantime, what it creates for us is a real estate opportunity and we’re capturing that.”

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