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. 

Shake Shack Stuck in the Middle

 

Restaurant brands continually strive to create a point of differentiation that consumers consider an attribute and a reason for them to come back.  Cravability with a differentiated point of food quality, service, or value drives widespread adoption according to Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.

Many chain restaurants have reduced the size of there menu to increase speed of service. The menus become bloated as marketers added new items to help avoid the ‘veto’ one person in a group not wanting beef, chicken, or insisting on vegan. That veto vote comes in play as consumers want fresh food fast and want to simply preorder, and pick up via a drive-thru on the way home.

Shake Shack announced that it is offering $225 million of convertible senior notes, due in 2028, to private investors. Why? Simple, avoid the veto vote by adding drive-thru’s to all units it can, and according to Johnson that makes sense. One problem that will mitigate their long standing fast casual mindset and place them messaging a drive-thru fast food messaging mode? Our question is will Shake Shack’s marketing team be willing to make that move? Will they simply continue fast casual messaging placing themselves ‘stuck-in-the-middle’ in the consumers mindset?

So, “Shake Shack expects to use the net proceeds from the offering to support its growth and development plans,” the company said in the filing. “Investments may include, but not be limited to, the opening of new Shacks, Shack format evolution, such as drive-thru, Shack Track, the digital guest experience and continued investment in talent. Other uses of proceeds include working capital and general corporate purposes.”

Shake Shack has previously said it plans to open a drive-thru, in Orlando, by the middle to latter half of the year. The New York City-based chain has also announced plans to operate five to eight drive-thru locations around the country by the end of 2022.

Marketing messaging is important when adding drive-thru’s, Shake Shack has added pickup windows, curbside capabilities, app-based delivery and more reinforcing the value of service. That are doing that for good reason as same-store sales were down 17.4% systemwide in Q4, with suburban units roughly flat and urban same-store sales declining 31%. Does your marketing messaging look more like yesterdays than tomorrow’s?

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 that 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.

Shake Shack Grubhub Delivery Conundrum

Consumers are dynamic not static according to Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.  All successful restaurant operators will tell you the customer come first.  At Shake Shack someone missed that assignment or simply forgot rule number one the customer comes first.

When Shake Shack entered a new exclusive delivery partnership with Grubhub consumers did not like it, were unaware, and clearly disappointed that the delivery options they were using in the past had been removed from service.

While delivery Grubhub was available at nearly all 151 company operated Shake Shacks. Shake Shack CEO Randy Garutti stated that “customers are used to finding the brand on DoorDash, Caviar and Postmates.” The result was clear according to Garutti  “Average weekly sales for domestic company stores declined to $80,000, down from $86,000 for the same quarter last year.” How could this have happened?

Just to stay relevant our Grocerant Guru® stated it was a simple ‘Quid pro quo’. Shake Shack new deal with Grubhub deal was sealed by sharing of consumer data.  Thus, making the delivery relationship more about big data than the current customer base.  

Garutti has some simple justification for over-looking consumers stating “the company went with Grubhub for a variety of reasons. It is less complicated on stores to work with one delivery operator; the long-term economics tied to commission fees are projected to be better; and, most importantly, Grubhub has agreed to share customer data, which delivery companies often hold hostage.”

Garutti over looked the consumer and his sales fell.  That is the simple truth of it. Had he started with an exclusive agreement with on delivery company there would have not been a problem or consumer blow-back. Garutti was caught in within the consumers paradox of choice.  Brands need to empower consumers not confine them. 

Are you ready for some fresh ideations? Do your food marketing tactics look more like yesterday that tomorrow?  Visit www.FoodserviceSolutions.us 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.

Can Shake Shack Customized Marketing Cut It

Sure, Shake Shack sales volume per store are impressive today averaging $4.6 Million per unit in Q4 2018.  They did that by offering a ‘better burger’ and you can get anywhere else.  Ok, so now what as Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.

The problem is Shake Shack is now running into the same problem Whole Foods, Pappadeaux Seafood Kitchen, and all other specialty food retailers find after several years of successful growth. Shake Shack caters to an urban lifestyle consumers with more disposal income and consumers with more exposure to fresh food fare according to Johnson; the problem is those consumers are limited in numbers. 

So, when Shake Shack announced that will be rolling out two food trucks—one in the greater tri-state area (NY, NJ, CT + PA) and one in the Atlanta metro area we ask Why? Do they think they can sustain growth in the suburbs?  That is highly unlikely unless they reduce the average check size substantially.

Sure, fans of Shake Shack can book the truck at www.shakeshack.com/truck by simply filling out the form with their name, email address and event details. The Food Truck menu is customizable based on the event, and can include Shack classics like the ShackBurger, Chick’n Shack, ‘Shroom Burger, fries and shakes. Pricing is based on the duration of the event and the number of estimated people in attendance. 

We ask will that drive sales, build buzz, or simply put Shake Shack in the same league as Red Robin and Burger King?  What is Shake Shack’s goal? Drive Growth, Drive Profits, Drive Brand Buzz and at what cost?

The truth is the next 15 years growth in urban communities will outpace that of the suburbs for most branded food growth according to Johnson.  Who, continued saying urban brands growth needs to be focused on urban customers.  

Foodservice Solutions® specializes in outsourced business development. We can help you identify, quantify and qualify additional food retail segment opportunities or a new menu product segment and brand and menu integration strategy.  Foodservice Solutions® of Tacoma WA is the global leader in the Grocerant niche visit Facebook.com/Steven Johnson, www.Linkedin.com/in/grocerant/ or www.twitter.com/grocerant/

Foodservice Marketing Partnerships Drive Success at Sprite, Shake Shack, McDonald’s

Foodservice Solutions® Grocerant Guru® Steven Johnson in January 2018 announced that strategic partnerships would be the undercurrent of a new electricity driving foodservice top line growth and bottom-line profits moving forward.   Well here is another example McDonalds and Shake Shack partner with Joe Freshgoods and Allbirds to release limited edition mashup merchandise.

According to Johnson, “Brand relevance is in part driven with innovation in new food products in combination with new avenues of distribution all of which are the platform for the new electricity.”

Johnson stated “that in my minds-eye the new electricity must be very efficient for the supply and includes such things as fresh foods, urban clothing, grocerant consultants, urban farming (produce, seafood, etc.), autonomous delivery, cashier-less retail, cash-less payments, digital hand held marketing. This program has all of that.

Foodservice retailers to survive the next generation of retail must embrace the artificial intelligence revolution while simultaneously embracing fresh food that is portable, fresh, with differentiation that is familiar not different.  That will require brands to embrace new fresh food partnerships more now than ever before according to Johnson.

Retailers understand that as brands release new products, one of the lessons they are learning is that partnering with another popular brand can help build the excitement. Two recent promotions featured seemingly odd partnerships in which fast food met fashion. In the first of these brand collabs, the popular burger chain Shake Shack teamed up with San Francisco shoe maker Allbirds.

The new electricity Allbirds provided was an exclusive shoe in white wool with green laces, featuring the Shake Shack logo on the tongue. The shoe is only available for purchase at Shake Shack’s original Madison Square Park location in Manhattan. Shake Shack will also be serving its new Hokey Pokey Shake to celebrate the collaboration.

The new electricity  Sprite and McDonald’s created was partnering with streetwear designer Joe Freshgoods to promote the fast food chain’s new exclusive Sprite flavor, the Mix. The fashionable clothing line will be available only at a select few McDonald’s locations. Spotify is also getting in on the fun with an exclusive track by rapper KYLE.

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 that tomorrow?  Visit www.FoodserviceSolutions.us 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.