Not Looking a Customer Ahead Shake Shack Navigates a Challenging Landscape

Shake Shack, the popular burger chain known for its high-quality ingredients and premium experience, faces a number of potential risks in 2024 that could impact its revenue, profitability, and growth according to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions®. Here's a breakdown of the key challenges for Shake Shack:

Revenue Recovery and Profitability:

·         Lingering COVID-19 Impact: Locations in areas heavily affected by the pandemic might experience slower revenue recovery, especially with the possibility of renewed restrictions.

·         Delivery and Takeout Costs: Increased reliance on takeout and delivery options, while convenient for customers, can squeeze profit margins due to higher associated costs.

·         Missed Earnings Expectations: Even with positive revenue, non-recurring costs and expansion investments could lead to EPS falling short of analyst expectations.

Expansion and Operational Hurdles:

·         Balancing Expansion with Profitability: Aggressive expansion plans in a competitive fast-casual market can strain resources and potentially hinder profitability.

·         Maintaining Same-Shack Sales Growth: The modest 1.6% growth in Same-Shack sales requires continued momentum to avoid stagnation.

·         Operational Efficiency: Any setbacks in maintaining operational efficiency across the growing number of locations could negatively impact the brand's reputation.

Market Volatility and Marketing Concerns:

·         Market Uncertainty: High market volatility poses a risk to Shake Shack's share price, potentially impacting investor confidence.

While Shake Shack's marketing strategy has generally been successful, there are areas where it might be falling short:

·         High Price Point: The brand's focus on premium ingredients and a superior dining experience justifies its higher prices, but it could limit its appeal to budget-conscious consumers.

·         Consistency Issues: Rapid expansion can lead to inconsistencies in quality and service across different locations, potentially damaging the brand's image.

·         Value Messaging: The planned increase in marketing spend needs to be accompanied by clear and effective value messaging that resonates with the target audience.

·         Adaptability: The marketing strategy needs to remain dynamic and adapt to evolving market trends and consumer preferences.

It's important to remember that these are potential risks and areas of improvement. Shake Shack's success hinges on its ability to navigate these challenges, optimize its marketing approach, and maintain its position in a competitive market.

Foodservice Solutions® team is here to help you drive top line sales and bottom-line profits. Are you looking a customer ahead? Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may the clue you need to propel your continued success. 

Super-Premium Fast Food vs. Legacy Fast Food: A Tale of Two Business Models

 

The fast-food landscape is evolving, with new players emerging: specifically super-premium fast-food restaurants. These high-end eateries offer a unique experience compared to the established legacy brands we've known for decades. Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® thinks it’s time to delve into the key differences and potential factors influencing their success:

Super-Premium Fast Food:

·         Higher Revenue per Store: Due to their premium pricing and focus on quality ingredients, super-premium fast-food restaurants often generate more revenue per location.

o    For instance, STK Steakhouse, a popular high-end chain, boasts an average revenue of $14.28 million per store (based on 14 locations and $200 million total revenue in 2021).

·         Limited Market Reach: However, their smaller number of locations restricts their overall market penetration.

o    This is evident in STK's case, with only 14 locations compared to the vast networks of legacy brands.

Legacy Fast Food:

·         Dominating Market Share: Legacy brands like McDonald's and Starbucks have built extensive networks, leading to significantly higher total revenue.

o    In 2021, McDonald's reigned supreme with a staggering $45.96 billion revenue, followed by Starbucks ($24.56 billion), Chick-fil-A ($16.67 billion), Taco Bell ($12.62 billion), and Wendy's ($11.11 billion).

·         Potential Revenue Dilution: The sheer number of locations can sometimes dilute revenue per store.

o    While McDonald's boasts the highest total revenue, its average revenue per store is significantly lower compared to super-premium chains.

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Beyond Revenue: Factors Influencing Success

It's crucial to recognize that success can be measured beyond just revenue. Here are additional factors that play a significant role:

·         Location: Strategic placement in high-traffic areas with the right target demographic can significantly impact success.

·         Menu Offerings: Catering to evolving consumer preferences and dietary needs is crucial for attracting and retaining customers.

·         Customer Service: Providing a positive and efficient dining experience is vital for building brand loyalty.

·         Adaptation: Legacy brands have demonstrated remarkable adaptability, constantly evolving their menus, technology integration, and marketing strategies to stay relevant.

Profitability Challenges:

It's important to note that the restaurant industry operates with a razor-thin average profit margin of just 6.2%. This emphasizes the inherent challenges associated with achieving profitability, regardless of the business model.

Now consider this, while super-premium fast-food restaurants excel in revenue per store, legacy brands dominate with their vast scale and total revenue. Both categories face unique challenges and opportunities, and their success hinges on various factors beyond just financial metrics. Ultimately, the ability to adapt, innovate, and cater to evolving consumer preferences will likely determine the long-term success of any restaurant chain, regardless of its premium or legacy status. That said, are you looking for consumer focused relevance for your base customer?

Are you looking for a new partnership to drive sales? Are you ready for some fresh ideations? Do your food marketing tactics look more like yesterday than tomorrow?  Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may have the clue you need to propel your continued success.

Wingstop Benefits from Consumer Migration to Handheld Food

 

In a never-ending battle for more time during the day, to do more ‘stuff’ according to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® consumers are simply time starved. Our lives are getting faster, and our eating habits are adapting accordingly. The rise of handheld food for immediate consumption is a clear reflection of this trend, driven by several key factors:

Convenience is King: In today's busy world, people crave convenience. Handheld options like sandwiches, wraps, and tacos offer a quick and mess-free way to refuel, fitting seamlessly into hectic schedules. Whether it's a morning breakfast burrito or a post-workout protein bar, the ease of portability makes handheld food a winner.

Variety and Customization: Gone are the days of limited choices. Handheld food boasts a diverse range of options, catering to individual preferences and dietary needs. From gluten-free wraps to vegetarian sushi rolls, there's something for everyone. This level of customization allows people to enjoy their favorite flavors and ingredients on the go.

Urbanization and the Mobile Lifestyle: As populations shift towards urban centers, the demand for portable food increases. City dwellers often have shorter commutes and less time for sit-down meals, making handheld options the perfect solution for a quick bite between errands or meetings.

Innovation Fuels the Trend: The food industry is constantly innovating, introducing exciting new handheld items. From gourmet food trucks offering fusion cuisine to global flavors like bao buns and empanadas, the constant evolution keeps things interesting and fuels the popularity of this trend.

Social Media's Culinary Influence: Food trends are heavily influenced by social media platforms like Instagram and YouTube. When influencers showcase delicious handheld meals, it sparks curiosity and encourages others to try these convenient and flavorful options.

These factors, working together, have created a perfect storm for the widespread adoption of handheld food. As our lives become increasingly fast-paced and mobile, the convenience, variety, and constant innovation offered by handheld options will undoubtedly continue to drive this trend forward.

 

At its core Wingstop is experiencing a boom, due in large part to Hand-Held food, seemingly defying the current quick-service industry struggles by skyrocketing their sales and acquiring a record number of new customers. Here's the breakdown:

·         Explosive Growth: Same-store sales soared 21.6% in Q1, driven almost entirely by transaction growth, not just increased ticket prices.

·         New Guest Mania: Wingstop attracted the highest number of new customers in their history, a group largely consisting of Gen Z and Millennials with higher incomes who prefer digital engagement.

·         Digital Savvy: Digital ordering reached a record 68% mix, fueled by the launch of their new proprietary tech stack, MyWingstop. This paves the way for hyper-personalization and increased customer loyalty.

·         Global Expansion: Wingstop is aggressively expanding, with a record-breaking 275-295 new restaurants planned for 2024, exceeding their initial target. International markets like Canada, Puerto Rico, and South Korea are exceeding expectations.

Key Insights for all food retailers:

·         The Power of New Customers: Focusing on attracting a new generation of customers with higher disposable income and digital preferences is a winning strategy.

·         Embrace Digital: Investing in a strong digital platform like MyWingstop is crucial for driving sales, retention, and frequency.

·         Data-Driven Personalization: Leveraging customer data to personalize marketing and promotions can significantly boost engagement and sales.

·         Asset-Light Advantage: Wingstop's low overhead model allows for rapid expansion and makes them an attractive franchise opportunity.

Why This Matters: Wingstop's success story is a blueprint for other fast-food chains struggling in the current climate. Their focus on new customer acquisition, digital innovation, and global expansion positions them for exceptional long-term growth, making them a valuable player in the booming Hand Held Food category.

Strong Outlook: Despite a potentially challenging economic environment, Wingstop is confident in their ability to maintain double-digit same-store sales growth. Their Q1 results, driven almost entirely by transaction growth, demonstrate the brand's underlying health and the effectiveness of their strategy.

The Grocerant Guru's Verdict: Wingstop is a clear leader in the booming Hand-Held Food category, demonstrating impressive customer acquisition, digital adoption, and global expansion potential. Their focus on brand awareness, operational efficiency, and technological advancements positions them for continued success in the years to come.

Are you looking for a new partnership to drive sales? Are you ready for some fresh ideations? Do your food marketing tactics look more like yesterday than tomorrow?  Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may have the clue you need to propel your continued success.

What value can be garnered by Food Retailers focusing on digital natives Gen Z and Millennials

 

Today, food digital gift cards are gaining popularity among Gen Z and Millennials, and there are several reasons why they matter to these younger consumers according to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.  Remember differentiation does not mean different. It means familiar but with a relevant focused twist.  Let’s take a look at some ideas:

1.       Convenience and Accessibility: Digital gift cards can be easily purchased online or through mobile apps. They eliminate the need for physical cards, making them more convenient for tech-savvy Gen Z and Millennials who prefer digital experiences.

2.       Reduced Risk of Loss: Millennials are more than twice as likely to lose traditional plastic gift cards compared to older adults. With digital gift cards, there’s no risk of misplacing or losing a physical card.

3.       Mobile Shopping Experience: Younger consumers, especially Gen Z, browse products quickly and convert more on mobile devices. Retailers that optimize their digital gift card solutions can engage these consumers effectively by providing the digital experience they crave.

That said, food digital gift cards offer convenience, reduce the risk of loss, and align with the preferences of Gen Z and Millennials who are comfortable with digital transactions. So, if you’re a restaurant or food retailer, offering digital gift cards can be a smart strategy to attract and retain these tech-savvy customers!

Once again there is more to Generation Z (Gen Z) and Millennials as they represent a significant consumer base, and restaurants can unlock value by catering to their preferences. Here are some additional insights on how to appeal to these digital natives:

Social Media Virality and Customization:

a.       Social media is where Gen Z often discovers new products and brands. Restaurants should leverage this by maintaining a strong digital presence.

b.       Brands that continuously update their menus can capture sales from viral moments. For instance, TikTok has been influential in driving sales for certain food items.

c.       Consider adding unique and shareable menu items that resonate with Gen Z’s desire for novel experiences.

Engaging Relevant Messaging:

a.       Gen Z values authenticity and purpose. Restaurants should communicate their brand story, values, and commitment to sustainability or social causes.

b.       Engage with Gen Z through relevant messaging on social media, emphasizing transparency and ethical practices. Showcasing your restaurant’s mission and impact can resonate with this audience.

Value Beyond Price:

a.       While affordability matters, Gen Z also seeks value beyond just cost. Highlight quality, freshness, and uniqueness in your offerings.

b.       Consider loyalty programs, personalized promotions, and exclusive experiences to create additional value for Gen Z customers.

Interactive Dining Experiences:

a.       Gen Z wants more than just a meal; they want a memorable story. Pop-up restaurants, themed nights, or interactive dining events can captivate this audience.

b.       Create immersive experiences that go beyond the plate, allowing Gen Z to engage with your brand in meaningful ways.

Creative Spins on Classic Foods:

a.        Gen Z appreciates creativity. Restaurants can differentiate themselves by offering inventive twists on familiar dishes. Think about fusion cuisine, unexpected flavor combinations, or playful presentations.

b.        Highlighting these creative spins can attract Gen Z diners who seek novelty and excitement in their dining experiences.

According to Johnson, restaurants can tap into Gen Z and Millennials’ spending power by embracing social media, creativity, relevant messaging, and experiences that resonate with their preferences. 

Don’t over reach. Are you ready for some fresh ideations? Do your food marketing ideations look more like yesterday than tomorrow? Interested in learning how Foodservice Solutions® can edify your retail food brand while creating a platform for consumer convenient meal participation, differentiation and individualization?  Email us at: Steve@FoodserviceSolutions.us or visit us on our social media sites by clicking the following links: Facebook,  LinkedIn, or Twitter