WEBVTT - Shake Shack CFO Katie Fogertey Talks Inflationary Pressures

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>Joining us now at the conference on site is Katie Fogerty,

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<v Speaker 2>chief financial officer of Shakeshack. Katie, thanks so much for

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<v Speaker 2>joining us here. Love to get a sense of everybody's

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<v Speaker 2>talking about Harris and what it might do to economic growth,

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<v Speaker 2>what it might do to the consumer. Who is the

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<v Speaker 2>consumer shakescheck, and what is that consumer telling you these days?

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<v Speaker 1>Great? So you know who we think of as our consumer.

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<v Speaker 1>We have you know, went out there and we have

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<v Speaker 1>this amazing real estate strategy, real estate strategy, and what

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<v Speaker 1>we've done is we've put these great community gathering places

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<v Speaker 1>in a lot of these you know, great communities, and

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<v Speaker 1>where we have attracted is just really kind of more

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<v Speaker 1>of a I would say, you know, more a middle

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<v Speaker 1>income to higher income guests. And we've seen that guest

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<v Speaker 1>be able to weather a lot more of the economic

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<v Speaker 1>headwinds than other you know, then the low income consumer

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<v Speaker 1>has been facing. And you know what we continue to

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<v Speaker 1>see is by leaning into our strength, which is delivering

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<v Speaker 1>a fine casual experience. So we think about kind of

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<v Speaker 1>bringing all those great guts of fine dining, elevated food,

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<v Speaker 1>premium ingredients, doing the things that you know, other you know,

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<v Speaker 1>Fast casual and QSR just are not willing to do.

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<v Speaker 1>Putting that in an amazing hospital or hospitable environment and getting

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<v Speaker 1>great guest service. That together has been a winning formula

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<v Speaker 1>to help us outpunch what has been you know, some

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<v Speaker 1>consumer headwinds that has been facing the industry, and we

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<v Speaker 1>are going to continue to lean into that. It's it's

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<v Speaker 1>helping us to differentiate and kind of pull apart from

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<v Speaker 1>the pack. And it's it's been our strength. Where are

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<v Speaker 1>our samples? I know, I mean what is this about?

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<v Speaker 3>You know, who doesn't want to burger at ten am

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<v Speaker 3>on a Wednesday close to open? So who are your

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<v Speaker 3>competitors then? So if you're a middle and high end consumer,

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<v Speaker 3>who would you.

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<v Speaker 1>Say as a competitor, Yeah, I mean we sell burgers, shakes, fries,

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<v Speaker 1>I think the best chicken sandwich out there in the business.

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<v Speaker 1>We view our competitors as being you know, anybody who

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<v Speaker 1>you know you might consider having lunch at or dinner at.

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<v Speaker 1>So that is a pretty wide array, and it also

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<v Speaker 1>can be you know, food at home. I mean that

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<v Speaker 1>can also be in you know, in an area where

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<v Speaker 1>you would have some share of stomach. So you know,

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<v Speaker 1>for the vast amount of you know, of our restaurants

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<v Speaker 1>out there, we are competing with a lot of people.

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<v Speaker 1>Now we are differentiated and we are kind of in

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<v Speaker 1>that category of one in the fine casual sector. But

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<v Speaker 1>at the same time we know that, you know, people

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<v Speaker 1>have lots of different options where they can go out

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<v Speaker 1>to eat, Katy.

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<v Speaker 2>There's a lot of concern out there about inflation. If

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<v Speaker 2>inflation were to come into your business, where would you

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<v Speaker 2>see it and how do you plan for that?

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<v Speaker 1>So we actually have been navigating through inflationary pressures for

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<v Speaker 1>a number of years here and doing so quite successfully.

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<v Speaker 1>I'll say, you know, we've had wage inflationary pressures in COVID.

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<v Speaker 1>It was actually very hard to get restaurant talent in

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<v Speaker 1>our restaurants to staff and to deliver our food. It

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<v Speaker 1>was not a desirable job at the time. And we

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<v Speaker 1>had we raised wages and had a very competitive and

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<v Speaker 1>compelling opportunity for our team members. We also introduced tips

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<v Speaker 1>as a way to compensate our team members as well

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<v Speaker 1>and give them added benefit. And then last year with

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<v Speaker 1>you know, with California Fast Food Wage Act, you know,

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<v Speaker 1>we faced through that as well. We've also had on

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<v Speaker 1>the food side, you know, inflationary pressures that have been

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<v Speaker 1>we've been navigating for a number of years as well.

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<v Speaker 1>But through all of this, through leaning in on our strength,

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<v Speaker 1>which is you know, again delivering that elevated you know,

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<v Speaker 1>experience to guests, giving them that you know, twenty five dollars, uh,

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<v Speaker 1>you know black truffle burger that we were actually selling

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<v Speaker 1>for ten dollars and giving them that great value. On

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<v Speaker 1>that side, we've been able to both grow sales and

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<v Speaker 1>grow margins at a faster pace. Just even last year,

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<v Speaker 1>we expanded our margins in the fourth quarter by three

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<v Speaker 1>hundred basis points.

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<v Speaker 3>So I've never had Shakeshack, but it looked I know,

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<v Speaker 3>I know, but it looks like I may be able

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<v Speaker 3>to now in Delta.

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<v Speaker 1>Yeah.

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<v Speaker 3>So, and this really also goes to your expansion plans.

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<v Speaker 3>Delta's to offer Shakeshack Burgers on additional domestic roots this year,

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<v Speaker 3>and that could expand international flights next year. Talk about

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<v Speaker 3>these expansion kind of plans.

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<v Speaker 1>Yeah, I mean, if you look at Delta at its

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<v Speaker 1>core and what this does, you know, this is an

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<v Speaker 1>opportunity where we're able to surprise and delight our guests,

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<v Speaker 1>give them that thing that they weren't really expecting. You know,

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<v Speaker 1>you have your expectation for what airline food is like,

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<v Speaker 1>and you know, this this opportunity to get a shake

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<v Speaker 1>Shack Burger and are great. We have a special brownie

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<v Speaker 1>that we've made for for Delta as well through this program.

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<v Speaker 1>People are just absolutely elated at the opportunity to have

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<v Speaker 1>that on their flights, and so much so that it's

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<v Speaker 1>exceeded our internal expectations. We're rolling it out to more airports.

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<v Speaker 1>You're gonna be able to get it, you know, New York, Atlanta,

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<v Speaker 1>a number of airports, and that will just you know,

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<v Speaker 1>probably continue to grow. And you know, if you look

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<v Speaker 1>at that opportunity and I can make so many different

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<v Speaker 1>parallels to how we've gone into an area where the

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<v Speaker 1>consumer had a certain expt actation and we just really

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<v Speaker 1>raised the bar on it and out punched above our

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<v Speaker 1>weight and transformed what people were expecting from you know,

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<v Speaker 1>it's airline food, if it's roadside food, and across the board, Katie,

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<v Speaker 1>in terms of growth, how many locations do you have

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<v Speaker 1>today and what's your outlook for the next year or two. Yeah,

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<v Speaker 1>we have you know, across both our company operated and

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<v Speaker 1>our license business, we're you know, about five hundred and

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<v Speaker 1>fifty five hundred and seventy locations, but we are growing

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<v Speaker 1>very fast. We're going to add another forty five domestic

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<v Speaker 1>company operated shacks this year, and we're going to open

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<v Speaker 1>about thirty five to forty licensed shacks as well. Those

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<v Speaker 1>license shacks are ones that we operate, that our partners operate.

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<v Speaker 1>We have locations in the US, but most of that

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<v Speaker 1>is kind of outside of the US and Asia, and

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<v Speaker 1>we have UK, the Middle East, Mexico, and most recently

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<v Speaker 1>we opened up in Canada.

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<v Speaker 3>Well, great stuff. We really appreciate it. We know you

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<v Speaker 3>got to run, Katie. Thank you very much. Next time snacks.

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<v Speaker 3>Katie Boogerty, chief financial Officer at Shake Shack.