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Will Shake Shack raise prices on delivery orders?

The fast-casual burger brand, which far exceeded analyst estimates for Q1, is eyeing ways to make convenience pay off.
Photograph: Shutterstock

Today, a burger from Shake Shack costs the same whether it’s served in one of the chain’s 144 U.S. units or ordered direct to a consumer’s couch via third-party delivery.

But that might change as delivery becomes more popular among Shake Shack’s customers, CEO Randall Garutti told analysts during a call Thursday.

“Our menu pricing does not change on any channel,” Garutti said. “That said, we are wide open to considering those things. I think there seems to be a great willingness to pay on digital channels. … It’s not something we are going to jump on today. We are mostly concerned at continuing to grow traffic, grow the channels.”

Unlike some better-burger brands, Shake Shack has remained fairly steady on pricing—though that might change. The chain reported same-store sales growth of 3.6% for the quarter ended March 27. That growth was due to a 1.6% increase in traffic and 2% hike in prices. Revenue grew 34%, year over year, to $132.6 million.

“I like us to be considering around the core menu how we can tinker at both ends of the high and low pricing over time,” Garutti said. “Generally, I think you’ll probably see us go higher. … Not sure how many low-priced things we are looking for. We want to compete on quality and experience and not just on price.

The numbers represent Shake Shack’s strongest traffic in 11 quarters, which executives credited to warm weather, growth in digital orders and a favorable holiday calendar.

With the news, the company lifted its sales projections for 2019 from 0%-1% growth to 1%-2%.

Shake Shack executives say it’s too early to determine the impact of the chain’s new Chick’n Bites, which rolled out nationwide in February. Consumers appear to like the new addition to the menu, but the hand-breaded, never-frozen item has come at a cost, Garutti said.

“Over time, we ended up with a higher cost product than anticipated through the first quarter,” he said. “Now, in the second quarter, what’s been great is now we’ve got our arms around this item a little bit.”

 

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