Speaker 1: Welcome to Chopping It Up. I'm your host, Mike Hanlon,
Speaker 1: a senior restaurant and food service analyst at Bloomberg Intelligence.
Speaker 1: Our research and that of bi's five hundred analysts around
Speaker 1: the globe can be found exclusively on the Bloomberg terminal. Today,
Speaker 1: we're joined by Rob Lynch, CEO of Shakeshack.
Speaker 2: Thanks for joining me, Rob, Hi, Mike, thanks for having
Speaker 2: me today.
Speaker 1: All right, So in my prep I noticed you graduated
Speaker 1: from the University of Rochester. Are you a New York guy?
Speaker 2: No, I'm actually from Pittsburgh, Pennsylvania. But I picked the
Speaker 2: only place in the country that has tougher weather than
Speaker 2: Pittsburgh to go to college, Rochester.
Speaker 1: New York.
Speaker 2: But man, it was beautiful three months of the year.
Speaker 2: We just didn't happen to be at school those three months.
Speaker 2: But it makes makes you tough going to school up there.
Speaker 2: I loved every minute of it. Great people. Almost became
Speaker 2: a Bills fan, but it couldn't do it give them
Speaker 2: my Steelers lineage. So but yeah, I.
Speaker 3: Went up there for both my undergrad and my.
Speaker 2: MBA there awesome.
Speaker 1: Yeah, I was just on a charity bike ride around
Speaker 1: Lake Michigan. I'm sure it's beautiful up there by the
Speaker 1: Great Lakes, man. I'm sure it's gorgeous there in the summer.
Speaker 2: Yeah, and then you go down in the Finger Lakes
Speaker 2: near Cornell. It's just an amazing part of the country.
Speaker 1: All right, good stuff, man, What attracted you to the
Speaker 1: Shakeshack gig?
Speaker 2: You know, I just believe that that Shakeshack is one
Speaker 2: of the great concepts in the restaurant industry right now.
Speaker 2: I mean there's a handful of concepts that are kind
Speaker 2: of a category of one, right. You know, I'd say
Speaker 2: Chick fil A, Chipotle, Cava, Wingstop, and then I put
Speaker 2: Shakeshack right there. And you know, I know, we make
Speaker 2: burgers predominant, and there's a lot of burger offerings out there,
Speaker 2: but there just aren't. There aren't burgers, fries and shakes
Speaker 2: like Shakeshack makes them. And you know, the commitment to
Speaker 2: doing right in every way in terms of the ingredient quality,
Speaker 2: how they take care of their team members, how they
Speaker 2: invest in the community.
Speaker 3: I mean, it's just.
Speaker 2: A really compelling place to be and a really inspirational place.
Speaker 2: And you know, I've been in my career now for
Speaker 2: twenty five years, and I really was excited about going
Speaker 2: to a place that I could just feel so good
Speaker 2: about being a part of, you know, starting all the
Speaker 2: way back with the legacy of Danny Meyer and Randy
Speaker 2: Grudy and Union Square Hospitality Group, and you know, this enlightened,
Speaker 2: this mindset and this philosophy of enlightened hospitality. It's just
Speaker 2: a really.
Speaker 3: Special place, and you know, with a.
Speaker 2: Commitment to really doing what restaurant companies are supposed to do,
Speaker 2: and it's take care of people. And I just got
Speaker 2: really inspired as I learned more about the story of
Speaker 2: Danny and Randy and learn more about the commitment that
Speaker 2: Shakesheck has to do everything to the best of their abilities.
Speaker 2: And you know, then I started digging into the business
Speaker 2: and I was like, wow, you know, four million AUVs.
Speaker 2: Twenty plus margins, only five hundred and fifty of them globally,
Speaker 2: Like there is a huge opportunity to scale this thing
Speaker 2: and create a ton of value. So the ability to
Speaker 2: do great work with great people in a way that
Speaker 2: you can be proud of, with also a huge opportunity
Speaker 2: to drive you know, financial returns for the team members,
Speaker 2: for the investors. I mean, it's just an incredibly compelling
Speaker 2: opportunity for sure.
Speaker 1: So you talked a little bit about the strong corporate
Speaker 1: culture there. How do you plan on improving it?
Speaker 2: You know, I aspire to be, you know, to be
Speaker 2: good enough for it if you will. I mean, I
Speaker 2: want to make sure I tell everybody, you know, coming
Speaker 2: into Shakeshack, I had to take the hippocratic oath right first,
Speaker 2: do no harm, because there's so many great things about
Speaker 2: this place. So, you know, I I want to live
Speaker 2: the principles and values that have made this place great.
Speaker 2: I also want to you know, bring my perspective from
Speaker 2: my experiences and the places that I've been. You know,
Speaker 2: my last role at Papa John's was really a big
Speaker 2: cultural change. Was was some of the initial work that
Speaker 2: we had to.
Speaker 3: Do, and I learned a lot from that.
Speaker 2: I learned that, you know, you don't impact culture by putting,
Speaker 2: you know, words on a on a page or on
Speaker 2: a sign that you hang on the wall. You impact
Speaker 2: culture by the way you lead and by the way
Speaker 2: you operate on a day to day basis and treating
Speaker 2: people with respect and dignity and inspiring people to be,
Speaker 2: you know, to be able to do more than they
Speaker 2: think they can do. And so you know, That's how
Speaker 2: I think about it. It's not some grandiose mixture of
Speaker 2: some special philosophies or some patented technology. It's really just
Speaker 2: showing up every day and trying to be the best
Speaker 2: person you can be, and and and living up to
Speaker 2: the commitments you make and living up to you know
Speaker 2: what everyone you know takes pride in. So that's that's
Speaker 2: really how I'm trying to impact Shakeshack in a positive way.
Speaker 1: Well said, you communicate on the first earnings call that
Speaker 1: improving operations is a big priority. Right now, can you
Speaker 1: talk a bit about your efforts to improve throughput in
Speaker 1: the restaurants.
Speaker 2: Yeah, you know, shait Shack was built on a foundation
Speaker 2: of fine dining. You know, it's all started with a
Speaker 2: hot dog cart Madison Square Park in New York City,
Speaker 2: and that hot dog cart was supplied out of eleven.
Speaker 3: Madison, right, So amazing, you know.
Speaker 2: So it's it's just grounded in this philosophy of in
Speaker 2: this model of fine dining, and that's a little bit
Speaker 2: different than than than you know, fast service food. And
Speaker 2: so we are set up in a model that was
Speaker 2: great when you were only had a few really big
Speaker 2: restaurants with lines out the door and no drive throughs.
Speaker 2: And you know, as we continue to scale, we're going
Speaker 2: to continue to need to evolve and make sure that
Speaker 2: we're building a model that's conducive to really every community
Speaker 2: that we hope to serve, whether it's domestically or internationally,
Speaker 2: and a lot you know, as we evolve from a
Speaker 2: New York City model that was really dependent upon foot
Speaker 2: traffic to a model that's going to show up in
Speaker 2: the suburbs of Atlanta or Dallas, or Cincinnati, Ohio, or Pittsburgh, Pennsylvania,
Speaker 2: where there's going to be a lot more car traffic.
Speaker 2: We're going to have to be able to deliver, you know, through.
Speaker 3: A drive through.
Speaker 2: We're going to have to be able to deliver with
Speaker 2: people who are not necessarily coming to sit in a
Speaker 2: park and eat a great burger, but coming to you know,
Speaker 2: get their food and get home on a Thursday night.
Speaker 2: So with that comes different demands on the business. And
Speaker 2: you know, we have a great operating model today. Our
Speaker 2: operators do an amazing job taking care of our team members,
Speaker 2: taking care of our guests, but there's definitely opportunities for
Speaker 2: us to just get more productive and more efficient, and
Speaker 2: that really is across a lot of different facets. One
Speaker 2: is our restaurant format, so how we're how the kitchens
Speaker 2: are actually structured today, we operate in the fine dining
Speaker 2: model where most of our shacks are set up with
Speaker 2: different stations and everything kind of culminates in an expo line,
Speaker 2: almost like a symphony, and everything has to get there
Speaker 2: at the right time, and then an you know, someone
Speaker 2: who's running the expo takes it out and delivers it
Speaker 2: to our guests. It's very different than a streamline model
Speaker 2: that is more conducive to a drive through where you've
Speaker 2: got an assembly line streamline, you know, linear flow where
Speaker 2: things start at one end and end up next to
Speaker 2: the drive through window and are dispersed there. So, you know,
Speaker 2: we just have an opportunity to look at different formats
Speaker 2: with linear flows and other opportunities that are more conducive
Speaker 2: to that model. The other thing that is an opportunity
Speaker 2: for us is really just an equipment technology and looking
Speaker 2: at you know, how we deliver our food in the
Speaker 2: best way possible today. You know, one of the great
Speaker 2: things about shake Shack is everything's made fresh when you
Speaker 2: order it, and it's just a fantastic, you know, experience.
Speaker 2: But sometimes when things don't all time up. You know,
Speaker 2: some of ourre either our shakes can sit too long
Speaker 2: and not be as cold as they should be, or
Speaker 2: our fries can sit too long and not be as
Speaker 2: hot as they should be. So there's opportunities for us
Speaker 2: to change that model a little bit. We're still always
Speaker 2: going to make our burgers fresh to order, but we
Speaker 2: would need to make sure that we're always delivering the
Speaker 2: hottest and we're always delivering our fresh made shakes in
Speaker 2: the best best way. So there's equipment technology and then
Speaker 2: just process, you know, just reducing the number of steps
Speaker 2: our team members take. It's it's a little bit more
Speaker 2: complex in the back of a shake shack than a
Speaker 2: lot of other places. So our operators are really looking
Speaker 2: at ways, you know, whether it's streamlining the kitchen format,
Speaker 2: you know, improving our equipment packages, or optimizing our processes
Speaker 2: to just get faster to deliver while also delivering better products.
Speaker 2: So that's really all the work that our new COO,
Speaker 2: Stephanie Sentel, has focused on.
Speaker 1: All right, good stuff, What can you do to improve
Speaker 1: water accuracy of the drive through?
Speaker 2: Well, you know, I think it's all it's very consistent
Speaker 2: with what we just discussed, you know, making sure that
Speaker 2: we have a model that is more consistent, more streamlined.
Speaker 2: All of our original shacks were dining room only, and
Speaker 2: so you know, if you get something wrong, yeah, you
Speaker 2: never want to get something wrong for a customer, but
Speaker 2: it's easy to make it right because they're right there.
Speaker 2: If somebody goes through a drive through and gets home
Speaker 2: and they've got the wrong order, that's a really dissatisfied guest.
Speaker 2: So a lot of the things I just discussed are
Speaker 2: going to help us with that. But the other way
Speaker 2: to help it is, you know, we don't have combos
Speaker 2: on our drive throughs today. You know, we're looking at
Speaker 2: combos and and you know, combos to accomplish you know,
Speaker 2: two of the big objectives, uh, you know, two of
Speaker 2: the biggest things that people are looking for and the
Speaker 2: drive through speed and accuracy. When you know, the biggest
Speaker 2: challenge on speed and accuracy, whether you're talking dining room
Speaker 2: or or drive through is customization. And combos kind of
Speaker 2: mitigate the need for the customer the guests to customize
Speaker 2: and streamline things people are used to making you know,
Speaker 2: number one, two, three, or four a lot more than
Speaker 2: I'll have a shack, burger, hold the cheese, add pickles,
Speaker 2: you know, add all these things. So as we look
Speaker 2: at optimizing our drive through menus and how we approach
Speaker 2: drive through, that's going to definitely help our accuracy and
Speaker 2: our speed.
Speaker 1: Driving frequency was also a big point of emphasis on
Speaker 1: your first earnings call, which I thought was great. By
Speaker 1: the way, how long will it take to get the
Speaker 1: operations completely ironed out? Were ironed out enough so that
Speaker 1: Shakeshack can start marketing more aggressively.
Speaker 2: Yeah, you know, part of our frequency challenge is that
Speaker 2: we don't have the penetration that a lot of other
Speaker 2: competitors have. You know, we have domestically less than three
Speaker 2: hundred and fifty units, so believe it or not, you know,
Speaker 2: a lot of our guests are tourists. A lot of
Speaker 2: our guests are coming in from Omaha, Nebraska, coming to
Speaker 2: New York and they're like, I want to get Shakeshack.
Speaker 2: So that's part of the low frequency. And as we
Speaker 2: build more shacks every year, we're going to we're going
Speaker 2: to increase the access for customers and increase.
Speaker 3: Their ability to visit us more often.
Speaker 2: But in addition to that, we also need to you know,
Speaker 2: the other two barriers to frequency our speed. People know
Speaker 2: when they're coming to Shakeshack it's going to take a
Speaker 2: little bit longer. And then value perception. And you know,
Speaker 2: it's not necessarily value in the context of the product quality,
Speaker 2: but it's just it's like a special occasion. Everybody who
Speaker 2: comes wants to get burgers, fries, a drink and a shake,
Speaker 2: and so our tickets are higher, and so we need
Speaker 2: to find ways to meet the needs of all of
Speaker 2: our customers and make sure that we are delivering, you know,
Speaker 2: the unique needs of everyone in a way where they derive.
Speaker 2: You know, they perceive our value to be kind of
Speaker 2: worth the price point. And that's where the marketing comes in.
Speaker 2: You know, like our food speaks for itself, but marketing
Speaker 2: can definitely help us to to reinforce the things that
Speaker 2: make us special, make us worth it. Frankly, I mean
Speaker 2: a lot of folks don't know the quality of our ingredients.
Speaker 2: You know, we don't buy regular beef. We buy our
Speaker 2: beef in a special way. It costs more, it takes
Speaker 2: more preparation, but it's the best. You know, we add
Speaker 2: brisket to our beef to give it that crispy texture.
Speaker 2: Then you know, that's more than just a normal burger
Speaker 2: that you typically get at QSR. We use custard in
Speaker 2: our shakes. We don't use ice cream. You know, almost
Speaker 2: every ingredient, like avocados.
Speaker 3: Like a lot of places will.
Speaker 2: Have like avocado spreads right essentially like guacamole. Without all
Speaker 2: this stuff, we literally are slicing avocados in the back
Speaker 2: line when you order an avocado bac and cheeseburger. So, like,
Speaker 2: all these things take time, all these things cost more,
Speaker 2: and so we just need to do a little bit
Speaker 2: of a better job helping people recognize that, helping people
Speaker 2: understand all that it takes to deliver that experience at shakesheck,
Speaker 2: and I think that'll be a big, big move towards
Speaker 2: helping our value perception. And then the last thing we
Speaker 2: already talked about just speed of service. You know, when
Speaker 2: we get busy, you know, we get really busy. We
Speaker 2: have long lines a lot of the time, and you
Speaker 2: know it's going to take you, you know, six seven
Speaker 2: minutes to get your order, whereas going to the QSR
Speaker 2: guys it's going to take it two or three minutes.
Speaker 2: And so I don't think we'll ever get to two
Speaker 2: or three because it takes us over three minutes to
Speaker 2: cook your burger.
Speaker 3: When you order it.
Speaker 2: But we can definitely improve the speed at which we
Speaker 2: deliver and that all increase frequency as well.
Speaker 1: Shakesheak's always prided itself on product innovation. How do you
Speaker 1: plan to improve on that?
Speaker 2: So, you know, I started my career in the restaurant
Speaker 2: business at Taco Bell, and Taco Bell has an unbelievable model.
Speaker 2: They are it just it still baffles me how they're
Speaker 2: able to come up with so many amazing, craveable items
Speaker 2: using you know, the same fourteen ingredients. It's just they
Speaker 2: have some food geniuses over there. And you know, frankly,
Speaker 2: I took that model and brought it to Arby's. And
Speaker 2: when I went to Arby's, I kind of lifted that
Speaker 2: and brought the product innovation model to Arby's. And that
Speaker 2: was a big part of our turnaround at the Arby's
Speaker 2: brand back in twenty and thirteen and fourteen and fifteen,
Speaker 2: and even at Papa John's. You know, pizza pizza is
Speaker 2: probably the toughest to innovate off of because everybody orders
Speaker 2: pepperoni and cheese. But you know, we did. We brought
Speaker 2: new things like Papa Dilla's and you know, which are
Speaker 2: essentially like folded pizzas that you know, we're handheld. We
Speaker 2: brought you know, some different recipes and such. But the
Speaker 2: cool thing about shake Shack is it has this long
Speaker 2: history of amazing product innovation, like a culinary you know,
Speaker 2: prowess that's really unmatched in the industry. When I when
Speaker 2: I got approached about this job, I went to shake
Speaker 2: Shack and I saw the picture in the window of
Speaker 2: a Korean barbecue chicken sandwich. I was like, where am
Speaker 2: I Like, I thought I was coming for a shack
Speaker 2: and they had this thing. And I went in and
Speaker 2: I had it, and I said, this is literally like
Speaker 2: the best chicken sandwich I've ever had. And you know,
Speaker 2: we we have this history of amazing culinary proficiency.
Speaker 3: What we haven't necessarily done in the.
Speaker 2: Past is leveraged that culinary proficiency to drive like strategic innovation.
Speaker 3: And when I say that, what I mean is, you know.
Speaker 2: QSR, Every QSR worth its soul has you know, a
Speaker 2: strategic calendar that is very carefully and planfully built to
Speaker 2: meet the needs of a specific target audience in a
Speaker 2: specific season with specific items, and through that they're going
Speaker 2: to drive a level of you know, comp sales through
Speaker 2: transactions and check growth. Right, Shakeshack is is like this
Speaker 2: artistic place that all they cared about was great culinary,
Speaker 2: And so there's a huge opportunity for us to leverage
Speaker 2: that culinary in a strategic way that helps us build
Speaker 2: our comp sales. That helps us like build the puzzle,
Speaker 2: the jigsaw puzzle of Okay, what sandwich goes best with
Speaker 2: what specialty iced tea with the greatest shake at this
Speaker 2: time of year, and how do we promote it so
Speaker 2: that we can achieve our comp sales goals through both
Speaker 2: transaction growth and check growth by either you know, additional
Speaker 2: items per check or some or trade up to a
Speaker 2: more premium product. Like I'll give an example. You know,
Speaker 2: one year, if you're running a promotion in Q one
Speaker 2: and the price point on that sandwich is eight ninety nine, Like,
Speaker 2: the next year, you don't want to run a seven
Speaker 2: ninety nine sandwich. You're going to be you know, you're
Speaker 2: giving up you know, fifteen percent and check right out
Speaker 2: of the gate. So, like that type of insight has
Speaker 2: never coupled with the amazing culinary that Shakeshack has always done.
Speaker 2: In the past, and so for me, I'm not going
Speaker 2: to be able to bring a lot of like, you know,
Speaker 2: menu innovation ideas that these guys are that are going
Speaker 2: to beat out what our culinary team does. I mean there,
Speaker 2: this is like a fine dining culinary group here.
Speaker 3: They're going to have the best ideas.
Speaker 2: But I'm bringing some strategic thinking to how we launch
Speaker 2: those those platforms, how they work together to help us
Speaker 2: achieve our sales objectives.
Speaker 1: I'm sure it's exciting for you to work with that
Speaker 1: culinary team that you have on board. That's pretty cool.
Speaker 3: Yeah, it's not as exciting.
Speaker 2: It's not as exciting for my wife because I'm eating
Speaker 2: a lot of stuff and it is it is it
Speaker 2: is good stuff. I mean, it is just fantastic. So yeah,
Speaker 2: I am excited. I I head to New York and
Speaker 2: go down in that kitchen with a smile on my
Speaker 2: face every week.
Speaker 1: So were you at RB's the we have the meets?
Speaker 2: Yeah? Yeah, I was the CMO when we launched that.
Speaker 2: A lot of you know, I get a lot of
Speaker 2: credit for that, but there, you know, I was just
Speaker 2: the guy that.
Speaker 3: Said, Okay, let's do it.
Speaker 2: You know, all these smart people come up with these
Speaker 2: ideas and build all these plans, and you know, sometimes
Speaker 2: you're just lucky and you get to be you get
Speaker 2: to say, hey, okay, I'll sign off on that, and
Speaker 2: when it works, you know, you get credit. And when
Speaker 2: you don't, you get you know, you blame all the
Speaker 2: smart people that came up with the ideas.
Speaker 3: But yeah, it was that was a ton of fun.
Speaker 2: We We had just had an amazing agency partner and
Speaker 2: fallon on that business with amazing, amazing strategic planners.
Speaker 3: And I got to tell you that, you know.
Speaker 2: What what made us successful at RB's was we just
Speaker 2: kind of had a fearlessness about doing what we thought
Speaker 2: was best for our customers and for our team members.
Speaker 2: And and you know, I think that's been a part
Speaker 2: of what has helped me in my career. And I
Speaker 2: I learned a long time ago from a great guy
Speaker 2: named Greg Creed who was the CEO at Taco.
Speaker 3: Bell when I was there, and he said, you know.
Speaker 2: Rob, you just got to you just got to be
Speaker 2: you like I got there. I was at Taco Bell
Speaker 2: and I hadn't been in the restaurant industry before, and
Speaker 2: I backfilled this one guy, and I was trying to.
Speaker 3: Do with it. I thought everybody, you know, thought I.
Speaker 2: Should be doing. And you know, Greg pulled me aside
Speaker 2: and he's got this great Australian accent and he says, hey, mate,
Speaker 2: you just.
Speaker 3: Need to be you.
Speaker 2: You need to do what you need to do.
Speaker 3: You know, we love you. And I was like, okay,
Speaker 3: I'll lean into that.
Speaker 2: And you know, I got up on stage in front
Speaker 2: of this franchise e conference in like month two and
Speaker 2: I just told this story about moving from Pittsburgh, Pennsylvania,
Speaker 2: to California and moving my family and my dog and
Speaker 2: my mother in law came along and this whole thing
Speaker 2: and everybody left and and it just set the tone.
Speaker 3: For you know, how it's going.
Speaker 2: To interact with our franchise ease. And Ever said, then,
Speaker 2: you know, I've tried to be the most authentic, you know,
Speaker 2: leader and person I can be, and it's not always
Speaker 2: gonna you know, everybody doesn't always love me, but the
Speaker 2: ones that do, you know, do And that was how
Speaker 2: we have the meats came to be. It was look
Speaker 2: like vegetarians aren't going to come to Arby's anyways, so
Speaker 2: you know, like we don't have anything against them, but
Speaker 2: like we need to speak to our people. We need
Speaker 2: to speak to the people who are going to come
Speaker 2: and sit down in our booth and eat like a
Speaker 2: double roast beef, you know, roast beef and cheddar and
Speaker 2: curly fries and a jamochah shake and and you know what,
Speaker 2: Like that's what we're about, That's who we are. And
Speaker 2: if people don't want that, then they're not going to
Speaker 2: come anyways. But let's make sure that we are being
Speaker 2: authentically us. And I've tried to you know, live that
Speaker 2: throughout my restaurant career and at shape Shack. It's so
Speaker 2: easy because it's such a great brand story and it's
Speaker 2: such a great place that you don't have to make
Speaker 2: up a lot and people are going to like it.
Speaker 2: So that's, uh, that's the path forward.
Speaker 1: Great. Yeah, that was an iconic campaign, and you know,
Speaker 1: to your point being you being authentic, that's everyone's real superpower,
Speaker 1: right because nobody else can be you.
Speaker 2: Uh.
Speaker 1: And Greg Creed is awesome. I met him about a
Speaker 1: month ago at a conference, oh yeah, restaurant conference, and
Speaker 1: he he was mixing it up with everybody, you know.
Speaker 1: I got to spend about an hour with him reminiscing
Speaker 1: about some of the some of the projects he did
Speaker 1: at Taco Bell. Just a real genuine nice guy.
Speaker 2: Well, he definitely had a big impact on my career.
Speaker 1: You know, a similar experience Marie Conway. When I first
Speaker 1: started on the research side. Marie Conway was my it
Speaker 1: was the head of research at Siddie and she, uh,
Speaker 1: you know, I did my first presentation and uh I
Speaker 1: practiced it with her and she's like, that sucked. I
Speaker 1: was like, really spent so much time on it. She's like,
Speaker 1: let's pretend you're talking to a buddy at a barbecue.
Speaker 1: And I was like, okay, and she's like, oh, this
Speaker 1: is much better, you know.
Speaker 2: And that was like, it's amazing how that works.
Speaker 1: Huh yeah, best advice ever got about presenting, you know. So,
Speaker 1: if you're listening, Marie, thank you very much.
Speaker 2: Well, if Greg's listening, he's calling me a liar right
Speaker 2: now because he didn't exactly use those words. He used
Speaker 2: more words that are more more like the ones you
Speaker 2: just use. I was trying to be polite on your show,
Speaker 2: but you know, Greg, Greg didn't pull any punches. He
Speaker 2: essentially said the same thing.
Speaker 1: That's awesome, all right, what percentage of sales should shakeshack
Speaker 1: be spending on advertising, and what are the optimal channels
Speaker 1: in your view?
Speaker 2: You know, given our footprint, we are not going to
Speaker 2: be out there buying national media anytime soon. You know,
Speaker 2: it just wouldn't be a productive and efficient use of
Speaker 2: our resources. So we lean in on digital marketing and
Speaker 2: and you know, we do it at a very in
Speaker 2: a very surgical, localized way. You know, we're making sure
Speaker 2: that we are buying our digital media, you know, pretty
Speaker 2: much at the zip code level around our shacks in
Speaker 2: the markets that we're in. So today that's that's probably
Speaker 2: our biggest form of advertising. And frankly, that's only really
Speaker 2: been about twelve months since the brand has really invested
Speaker 2: in that platform, and it is it has really been
Speaker 2: a driver of our outperformance. You know, I've been here
Speaker 2: two quarters now and both quarters have have exceeded expectations
Speaker 2: on the top line.
Speaker 3: And that's what I would say is one of.
Speaker 2: The key drivers. I mean, we're really just dipping our
Speaker 2: toe in in the into the marketing you know foray
Speaker 2: here and and just you know, you know, you think
Speaker 2: about marketing, you think about it on a curve, right,
Speaker 2: and you always want to invest until you at that
Speaker 2: you know, that equilibrium where you're at the peak of
Speaker 2: the marginal rate of return on marketing investment, and we
Speaker 2: are literally, you know, all the way down on the
Speaker 2: bottom left hand of that curve. We've just started. So
Speaker 2: we have a huge amount of value creation to come
Speaker 2: from continuing to increase the amount of marketing that we
Speaker 2: put up against this business. So you know, historically the
Speaker 2: percent of sales has been less than one percent. I
Speaker 2: think right now we're we're floating in this year, we're
Speaker 2: floating in between one and two percent. I think most
Speaker 2: you know, best in class organizations that are really investing
Speaker 2: in driving top line growth are investing in the four
Speaker 2: to five percent range. You know, we're not going to
Speaker 2: get there overnight. We're a company operated, company owned concepts,
Speaker 2: So you know, I have to be responsible.
Speaker 3: You know, steward of our our g and A.
Speaker 2: And you know, I don't have a big franchise e
Speaker 2: fund to go and spend like a lot of these guys.
Speaker 2: So you know, we are we are making sure that
Speaker 2: we are being in credibly analytical and evaluating the returns
Speaker 2: that we're getting on our marketing investments. And as long
Speaker 2: as those returns continue to deliver above a threshold that
Speaker 2: we determine warrants continued investment. We will keep investing, but
Speaker 2: it's going to be very thoughtful.
Speaker 3: It's going to be you know, on a.
Speaker 2: Very analytical strategic basis. We're not going to be out
Speaker 2: there spending marketing just to get you know, just to
Speaker 2: get to a percent of sales. We're going to continue
Speaker 2: to grow as long as we're getting the returns that
Speaker 2: we that we did that we need.
Speaker 1: To makes sense. And what kind of loyalty program do
Speaker 1: you envision working best for Shakeshack?
Speaker 2: You know, we we are. It's a big investment where
Speaker 2: we're making right now in our guest recognition capabilities. You know,
Speaker 2: we want to be able to identify our guests regardless
Speaker 2: of how they come into our franchise. You know, a
Speaker 2: majority of our transactions at this point are digital transactions.
Speaker 2: They're kind going through our kiosks, which we have now
Speaker 2: put into all of our all of our shocks over
Speaker 2: the last year and a half, our web, our app
Speaker 2: and so and our and our third party delivery partners.
Speaker 3: So we really want to be able to identify.
Speaker 2: When and when and how our guests are ordering and
Speaker 2: coming into our platform so.
Speaker 3: That we can make sure that we are.
Speaker 2: You know, this idea that Danny started with, this idea
Speaker 2: of enlightened hospitality and his fine dining restaurants, the secret
Speaker 2: to it. And I hope he doesn't get mad at
Speaker 2: me for for disclosing this. I think I think you
Speaker 2: might have written a book about it. But like the
Speaker 2: secret Sauce is, they they are so adept at learning.
Speaker 2: When their guests come in at the mayer d stand
Speaker 2: or at the bar, or at.
Speaker 3: The table, wherever you are, they have.
Speaker 2: Their ears up all the time. They're trying to learn
Speaker 2: more about you so that they can better meet your needs,
Speaker 2: you know, without you having to say, hey it's our
Speaker 2: anniversary or hey it's my birthday. And so they gather
Speaker 2: this information about their guests and use it to make
Speaker 2: their experiences so special and and like they they.
Speaker 3: Literally live for it, like they they.
Speaker 2: Live to like, Oh I did this, and you know
Speaker 2: I I they didn't know that I knew it was
Speaker 2: their birthday and I brought on a birthday cake, or
Speaker 2: they didn't know I knew it was their anniversary and
Speaker 2: I brought you know, flour with a with a piece
Speaker 2: of pie or something, you know, like that's what they
Speaker 2: live for and what we at Shakeshak, that's our heritage.
Speaker 2: We are trying to figure out how to do that
Speaker 2: in the digital age, like how do we deliver and
Speaker 2: lightened hospitality through our digital footprint. And so when we
Speaker 2: talk about guest recognition, it's not like big Brother, we're
Speaker 2: trying to you know, get all your day. It's about
Speaker 2: like how do we learn, like what what's special to you?
Speaker 2: Like you you like a little extra avocado on your sandwich,
Speaker 2: but you know you forgot to order at this time,
Speaker 2: so we put it on there for you anyways, or
Speaker 2: you know, things like that that are surprise and delight things.
Speaker 2: I mean, that's my that's my vision for how you know,
Speaker 2: loyalty should work. It's not just an you know and
Speaker 2: earn and spend kind of points based model. It's really
Speaker 2: about delivering enlightened hospitality, delivering experiences through our understanding of
Speaker 2: our guests. And so that's what we're building through our
Speaker 2: digital platforms. And you know, I'm not I'm not going
Speaker 2: to say we're all the way to bright yet, but
Speaker 2: that's that's the aspiration is for us to be able
Speaker 2: to execute Danny's vision through our digital channels across you
Speaker 2: know all of our shacks.
Speaker 1: All right, So we're gonna wrap this up with a
Speaker 1: very very important question. What's your favorite order?
Speaker 2: Oh my gosh, I'm gonna have it's it's so so hard,
Speaker 2: but I'm gonna have to go with our our smoke
Speaker 2: Shack burger. I mean I had one on Saturday night
Speaker 2: last Saturday, and I actually had it delivered. And you know,
Speaker 2: I always worried when it when it's being delivered, if
Speaker 2: it's going to be as good as it is when
Speaker 2: it gets fresh. And you're right that, like our third
Speaker 2: party partners have gotten so good at coming in and
Speaker 2: timing it right, picking it up, managing that this thing
Speaker 2: showed up. I was in a hotel room. I was
Speaker 2: actually in Pittsburgh last weekend getting ready to go to
Speaker 2: the Steelers game on Sunday, and and so I ordered
Speaker 2: this this burger, you know, smoke Shack.
Speaker 3: And you know, we.
Speaker 2: Are the largest consumer of these chili peppers in the world.
Speaker 2: And they didn't put on this shack. Yeah, And we
Speaker 2: like slice them fresh every day and they so they
Speaker 2: are super fresh. They have just the right amount a
Speaker 2: little little crunch to them, and they have it like
Speaker 2: the sweet heat that you. You know, it's just an
Speaker 2: unbelievable experience that you can't believe you got on a
Speaker 2: sandwich that costs you like less than ten bucks, and
Speaker 2: because it's so special, and so when you get that,
Speaker 2: and then I got our fries with our special lto
Speaker 2: right now, I got truffle fries. So if you haven't
Speaker 2: had our truffle burger or our truffle fries, like it's
Speaker 2: made with legit black truffle. I mean, like it's you know,
Speaker 2: you just don't. You don't find that anywhere else, and
Speaker 2: that can be served in under ten minutes. So I
Speaker 2: got the truffle fries and the smoke shack, and I
Speaker 2: gotta tell you I was I almost didn't even care
Speaker 2: if the Steelers won or lost because my experience was
Speaker 2: so good that night.
Speaker 1: I'm with you, man. I love I love peppers. I
Speaker 1: love like hot vinegar peppers.
Speaker 2: It's like, oh my god, have you had our smoke shack.
Speaker 1: I sure have. It's what I get every time I
Speaker 1: make all right, you get a chicken sandwich on the
Speaker 1: side too if I'm extra hungry. But I can't go
Speaker 1: and not get the smoke shack. So I'm with you
Speaker 1: on that I have to try the truffle fries. Though
Speaker 1: you're starting to make.
Speaker 2: Me hungry, I'm not gonna lie.
Speaker 1: Listen, man, thank you very much for your time. You know,
Speaker 1: I'm really looking forward to the chance to work with
Speaker 1: you as I continue to cover this company. It's it's
Speaker 1: definitely an exciting time for shake Shack.
Speaker 2: Well, Mike, I can't I can't tell you how much
Speaker 2: I enjoyed talking with you.
Speaker 3: And I feel like the luckiest guy in.
Speaker 2: The world to be here at shake check with all
Speaker 2: these amazing people and all this amazing future and all
Speaker 2: this amazing opportunity. So thank you for giving me the
Speaker 2: chance to tell our story. And you know, hopefully a
Speaker 2: year from now we'll be here, you know, celebrating, you
Speaker 2: know how great things have gone, you know, according to
Speaker 2: what we just discussed. So thanks again.
Speaker 1: Yeah, that would be awesome. Your passion came across in
Speaker 1: that first earnings call. It came across today. I'd love
Speaker 1: to see it. I want to thank the audience for
Speaker 1: tuning in. If you liked the episode, please subscribe and
Speaker 1: leave us a review. Check back soon for an interview
Speaker 1: with Andy Rebin, chief experience officer at Kava