October 16, 2024 • 32 mins
Shake Shack’s food speaks for itself, but marketing can help reinforce the qualities that make it special like brisket in the burgers and shakes made with custard, CEO Rob Lynch tells Bloomberg Intelligence. In this episode of the Choppin’ It Up podcast, Lynch sits down with BI’s senior restaurant and foodservice analyst Michael Halen to discuss how changes to the company’s marketing program -- including plans to highlight its premium ingredients, create a strategic calendar for limited-time offers and increase spending -- can boost customer frequency. He also comments on kitchen and operational improvements and his vision for Shake Shack’s loyalty program.
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Episode Transcript
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Speaker 1 (00:23):
Welcome to Chopping It Up. I'm your host, Mike Hanlon,
a senior restaurant and food service analyst at Bloomberg Intelligence.
Our research and that of bi's five hundred analysts around
the globe can be found exclusively on the Bloomberg terminal. Today,
we're joined by Rob Lynch, CEO of Shakeshack.
Speaker 2 (00:38):
Thanks for joining me, Rob, Hi, Mike, thanks for having
me today.
Speaker 1 (00:42):
All right, So in my prep I noticed you graduated
from the University of Rochester. Are you a New York guy?
Speaker 2 (00:47):
No, I'm actually from Pittsburgh, Pennsylvania. But I picked the
only place in the country that has tougher weather than
Pittsburgh to go to college, Rochester.
Speaker 1 (00:57):
New York.
Speaker 2 (00:58):
But man, it was beautiful three months of the year.
We just didn't happen to be at school those three months.
But it makes makes you tough going to school up there.
I loved every minute of it. Great people. Almost became
a Bills fan, but it couldn't do it give them
my Steelers lineage. So but yeah, I.
Speaker 3 (01:14):
Went up there for both my undergrad and my.
Speaker 2 (01:17):
MBA there awesome.
Speaker 1 (01:20):
Yeah, I was just on a charity bike ride around
Lake Michigan. I'm sure it's beautiful up there by the
Great Lakes, man. I'm sure it's gorgeous there in the summer.
Speaker 2 (01:29):
Yeah, and then you go down in the Finger Lakes
near Cornell. It's just an amazing part of the country.
Speaker 1 (01:34):
All right, good stuff, man, What attracted you to the
Shakeshack gig?
Speaker 2 (01:37):
You know, I just believe that that Shakeshack is one
of the great concepts in the restaurant industry right now.
I mean there's a handful of concepts that are kind
of a category of one, right. You know, I'd say
Chick fil A, Chipotle, Cava, Wingstop, and then I put
Shakeshack right there. And you know, I know, we make
(01:58):
burgers predominant, and there's a lot of burger offerings out there,
but there just aren't. There aren't burgers, fries and shakes
like Shakeshack makes them. And you know, the commitment to
doing right in every way in terms of the ingredient quality,
how they take care of their team members, how they
invest in the community.
Speaker 3 (02:19):
I mean, it's just.
Speaker 2 (02:20):
A really compelling place to be and a really inspirational place.
And you know, I've been in my career now for
twenty five years, and I really was excited about going
to a place that I could just feel so good
about being a part of, you know, starting all the
way back with the legacy of Danny Meyer and Randy
Grudy and Union Square Hospitality Group, and you know, this enlightened,
(02:44):
this mindset and this philosophy of enlightened hospitality. It's just
a really.
Speaker 3 (02:49):
Special place, and you know, with a.
Speaker 2 (02:53):
Commitment to really doing what restaurant companies are supposed to do,
and it's take care of people. And I just got
really inspired as I learned more about the story of
Danny and Randy and learn more about the commitment that
Shakesheck has to do everything to the best of their abilities.
And you know, then I started digging into the business
(03:15):
and I was like, wow, you know, four million AUVs.
Twenty plus margins, only five hundred and fifty of them globally,
Like there is a huge opportunity to scale this thing
and create a ton of value. So the ability to
do great work with great people in a way that
you can be proud of, with also a huge opportunity
(03:36):
to drive you know, financial returns for the team members,
for the investors. I mean, it's just an incredibly compelling
opportunity for sure.
Speaker 1 (03:47):
So you talked a little bit about the strong corporate
culture there. How do you plan on improving it?
Speaker 2 (03:52):
You know, I aspire to be, you know, to be
good enough for it if you will. I mean, I
want to make sure I tell everybody, you know, coming
into Shakeshack, I had to take the hippocratic oath right first,
do no harm, because there's so many great things about
this place. So, you know, I I want to live
(04:15):
the principles and values that have made this place great.
I also want to you know, bring my perspective from
my experiences and the places that I've been. You know,
my last role at Papa John's was really a big
cultural change. Was was some of the initial work that
we had to.
Speaker 3 (04:34):
Do, and I learned a lot from that.
Speaker 2 (04:37):
I learned that, you know, you don't impact culture by putting,
you know, words on a on a page or on
a sign that you hang on the wall. You impact
culture by the way you lead and by the way
you operate on a day to day basis and treating
people with respect and dignity and inspiring people to be,
(04:58):
you know, to be able to do more than they
think they can do. And so you know, That's how
I think about it. It's not some grandiose mixture of
some special philosophies or some patented technology. It's really just
showing up every day and trying to be the best
person you can be, and and and living up to
the commitments you make and living up to you know
what everyone you know takes pride in. So that's that's
(05:21):
really how I'm trying to impact Shakeshack in a positive way.
Speaker 1 (05:24):
Well said, you communicate on the first earnings call that
improving operations is a big priority. Right now, can you
talk a bit about your efforts to improve throughput in
the restaurants.
Speaker 2 (05:35):
Yeah, you know, shait Shack was built on a foundation
of fine dining. You know, it's all started with a
hot dog cart Madison Square Park in New York City,
and that hot dog cart was supplied out of eleven.
Speaker 3 (05:50):
Madison, right, So amazing, you know.
Speaker 2 (05:53):
So it's it's just grounded in this philosophy of in
this model of fine dining, and that's a little bit
different than than than you know, fast service food. And
so we are set up in a model that was
great when you were only had a few really big
(06:15):
restaurants with lines out the door and no drive throughs.
And you know, as we continue to scale, we're going
to continue to need to evolve and make sure that
we're building a model that's conducive to really every community
that we hope to serve, whether it's domestically or internationally,
and a lot you know, as we evolve from a
(06:36):
New York City model that was really dependent upon foot
traffic to a model that's going to show up in
the suburbs of Atlanta or Dallas, or Cincinnati, Ohio, or Pittsburgh, Pennsylvania,
where there's going to be a lot more car traffic.
We're going to have to be able to deliver, you know, through.
Speaker 3 (06:54):
A drive through.
Speaker 2 (06:55):
We're going to have to be able to deliver with
people who are not necessarily coming to sit in a
park and eat a great burger, but coming to you know,
get their food and get home on a Thursday night.
So with that comes different demands on the business. And
you know, we have a great operating model today. Our
operators do an amazing job taking care of our team members,
(07:17):
taking care of our guests, but there's definitely opportunities for
us to just get more productive and more efficient, and
that really is across a lot of different facets. One
is our restaurant format, so how we're how the kitchens
are actually structured today, we operate in the fine dining
model where most of our shacks are set up with
(07:38):
different stations and everything kind of culminates in an expo line,
almost like a symphony, and everything has to get there
at the right time, and then an you know, someone
who's running the expo takes it out and delivers it
to our guests. It's very different than a streamline model
that is more conducive to a drive through where you've
got an assembly line streamline, you know, linear flow where
(08:01):
things start at one end and end up next to
the drive through window and are dispersed there. So, you know,
we just have an opportunity to look at different formats
with linear flows and other opportunities that are more conducive
to that model. The other thing that is an opportunity
for us is really just an equipment technology and looking
(08:23):
at you know, how we deliver our food in the
best way possible today. You know, one of the great
things about shake Shack is everything's made fresh when you
order it, and it's just a fantastic, you know, experience.
But sometimes when things don't all time up. You know,
some of ourre either our shakes can sit too long
(08:43):
and not be as cold as they should be, or
our fries can sit too long and not be as
hot as they should be. So there's opportunities for us
to change that model a little bit. We're still always
going to make our burgers fresh to order, but we
would need to make sure that we're always delivering the
hottest and we're always delivering our fresh made shakes in
(09:03):
the best best way. So there's equipment technology and then
just process, you know, just reducing the number of steps
our team members take. It's it's a little bit more
complex in the back of a shake shack than a
lot of other places. So our operators are really looking
at ways, you know, whether it's streamlining the kitchen format,
you know, improving our equipment packages, or optimizing our processes
(09:27):
to just get faster to deliver while also delivering better products.
So that's really all the work that our new COO,
Stephanie Sentel, has focused on.
Speaker 1 (09:37):
All right, good stuff, What can you do to improve
water accuracy of the drive through?
Speaker 2 (09:42):
Well, you know, I think it's all it's very consistent
with what we just discussed, you know, making sure that
we have a model that is more consistent, more streamlined.
All of our original shacks were dining room only, and
so you know, if you get something wrong, yeah, you
(10:02):
never want to get something wrong for a customer, but
it's easy to make it right because they're right there.
If somebody goes through a drive through and gets home
and they've got the wrong order, that's a really dissatisfied guest.
So a lot of the things I just discussed are
going to help us with that. But the other way
to help it is, you know, we don't have combos
on our drive throughs today. You know, we're looking at
(10:22):
combos and and you know, combos to accomplish you know,
two of the big objectives, uh, you know, two of
the biggest things that people are looking for and the
drive through speed and accuracy. When you know, the biggest
challenge on speed and accuracy, whether you're talking dining room
or or drive through is customization. And combos kind of
(10:43):
mitigate the need for the customer the guests to customize
and streamline things people are used to making you know,
number one, two, three, or four a lot more than
I'll have a shack, burger, hold the cheese, add pickles,
you know, add all these things. So as we look
at optimizing our drive through menus and how we approach
drive through, that's going to definitely help our accuracy and
(11:06):
our speed.
Speaker 1 (11:07):
Driving frequency was also a big point of emphasis on
your first earnings call, which I thought was great. By
the way, how long will it take to get the
operations completely ironed out? Were ironed out enough so that
Shakeshack can start marketing more aggressively.
Speaker 2 (11:23):
Yeah, you know, part of our frequency challenge is that
we don't have the penetration that a lot of other
competitors have. You know, we have domestically less than three
hundred and fifty units, so believe it or not, you know,
a lot of our guests are tourists. A lot of
our guests are coming in from Omaha, Nebraska, coming to
(11:44):
New York and they're like, I want to get Shakeshack.
So that's part of the low frequency. And as we
build more shacks every year, we're going to we're going
to increase the access for customers and increase.
Speaker 3 (11:55):
Their ability to visit us more often.
Speaker 2 (11:58):
But in addition to that, we also need to you know,
the other two barriers to frequency our speed. People know
when they're coming to Shakeshack it's going to take a
little bit longer. And then value perception. And you know,
it's not necessarily value in the context of the product quality,
but it's just it's like a special occasion. Everybody who
(12:21):
comes wants to get burgers, fries, a drink and a shake,
and so our tickets are higher, and so we need
to find ways to meet the needs of all of
our customers and make sure that we are delivering, you know,
the unique needs of everyone in a way where they derive.
You know, they perceive our value to be kind of
(12:42):
worth the price point. And that's where the marketing comes in.
You know, like our food speaks for itself, but marketing
can definitely help us to to reinforce the things that
make us special, make us worth it. Frankly, I mean
a lot of folks don't know the quality of our ingredients.
You know, we don't buy regular beef. We buy our
(13:03):
beef in a special way. It costs more, it takes
more preparation, but it's the best. You know, we add
brisket to our beef to give it that crispy texture.
Then you know, that's more than just a normal burger
that you typically get at QSR. We use custard in
our shakes. We don't use ice cream. You know, almost
(13:25):
every ingredient, like avocados.
Speaker 3 (13:27):
Like a lot of places will.
Speaker 2 (13:28):
Have like avocado spreads right essentially like guacamole. Without all
this stuff, we literally are slicing avocados in the back
line when you order an avocado bac and cheeseburger. So, like,
all these things take time, all these things cost more,
and so we just need to do a little bit
of a better job helping people recognize that, helping people
(13:51):
understand all that it takes to deliver that experience at shakesheck,
and I think that'll be a big, big move towards
helping our value perception. And then the last thing we
already talked about just speed of service. You know, when
we get busy, you know, we get really busy. We
have long lines a lot of the time, and you
know it's going to take you, you know, six seven
(14:13):
minutes to get your order, whereas going to the QSR
guys it's going to take it two or three minutes.
And so I don't think we'll ever get to two
or three because it takes us over three minutes to
cook your burger.
Speaker 3 (14:25):
When you order it.
Speaker 2 (14:26):
But we can definitely improve the speed at which we
deliver and that all increase frequency as well.
Speaker 1 (14:32):
Shakesheak's always prided itself on product innovation. How do you
plan to improve on that?
Speaker 2 (14:37):
So, you know, I started my career in the restaurant
business at Taco Bell, and Taco Bell has an unbelievable model.
They are it just it still baffles me how they're
able to come up with so many amazing, craveable items
using you know, the same fourteen ingredients. It's just they
(14:57):
have some food geniuses over there. And you know, frankly,
I took that model and brought it to Arby's. And
when I went to Arby's, I kind of lifted that
and brought the product innovation model to Arby's. And that
was a big part of our turnaround at the Arby's
brand back in twenty and thirteen and fourteen and fifteen,
and even at Papa John's. You know, pizza pizza is
(15:18):
probably the toughest to innovate off of because everybody orders
pepperoni and cheese. But you know, we did. We brought
new things like Papa Dilla's and you know, which are
essentially like folded pizzas that you know, we're handheld. We
brought you know, some different recipes and such. But the
cool thing about shake Shack is it has this long
(15:39):
history of amazing product innovation, like a culinary you know,
prowess that's really unmatched in the industry. When I when
I got approached about this job, I went to shake
Shack and I saw the picture in the window of
a Korean barbecue chicken sandwich. I was like, where am
I Like, I thought I was coming for a shack
(16:00):
and they had this thing. And I went in and
I had it, and I said, this is literally like
the best chicken sandwich I've ever had. And you know,
we we have this history of amazing culinary proficiency.
Speaker 3 (16:13):
What we haven't necessarily done in the.
Speaker 2 (16:16):
Past is leveraged that culinary proficiency to drive like strategic innovation.
Speaker 3 (16:24):
And when I say that, what I mean is, you know.
Speaker 2 (16:27):
QSR, Every QSR worth its soul has you know, a
strategic calendar that is very carefully and planfully built to
meet the needs of a specific target audience in a
specific season with specific items, and through that they're going
(16:47):
to drive a level of you know, comp sales through
transactions and check growth. Right, Shakeshack is is like this
artistic place that all they cared about was great culinary,
And so there's a huge opportunity for us to leverage
that culinary in a strategic way that helps us build
our comp sales. That helps us like build the puzzle,
(17:11):
the jigsaw puzzle of Okay, what sandwich goes best with
what specialty iced tea with the greatest shake at this
time of year, and how do we promote it so
that we can achieve our comp sales goals through both
transaction growth and check growth by either you know, additional
(17:32):
items per check or some or trade up to a
more premium product. Like I'll give an example. You know,
one year, if you're running a promotion in Q one
and the price point on that sandwich is eight ninety nine, Like,
the next year, you don't want to run a seven
ninety nine sandwich. You're going to be you know, you're
(17:53):
giving up you know, fifteen percent and check right out
of the gate. So, like that type of insight has
never coupled with the amazing culinary that Shakeshack has always done.
In the past, and so for me, I'm not going
to be able to bring a lot of like, you know,
menu innovation ideas that these guys are that are going
(18:15):
to beat out what our culinary team does. I mean there,
this is like a fine dining culinary group here.
Speaker 3 (18:20):
They're going to have the best ideas.
Speaker 2 (18:22):
But I'm bringing some strategic thinking to how we launch
those those platforms, how they work together to help us
achieve our sales objectives.
Speaker 1 (18:33):
I'm sure it's exciting for you to work with that
culinary team that you have on board. That's pretty cool.
Speaker 3 (18:39):
Yeah, it's not as exciting.
Speaker 2 (18:40):
It's not as exciting for my wife because I'm eating
a lot of stuff and it is it is it
is good stuff. I mean, it is just fantastic. So yeah,
I am excited. I I head to New York and
go down in that kitchen with a smile on my
face every week.
Speaker 1 (18:58):
So were you at RB's the we have the meets?
Speaker 2 (19:02):
Yeah? Yeah, I was the CMO when we launched that.
A lot of you know, I get a lot of
credit for that, but there, you know, I was just
the guy that.
Speaker 3 (19:11):
Said, Okay, let's do it.
Speaker 2 (19:12):
You know, all these smart people come up with these
ideas and build all these plans, and you know, sometimes
you're just lucky and you get to be you get
to say, hey, okay, I'll sign off on that, and
when it works, you know, you get credit. And when
you don't, you get you know, you blame all the
smart people that came up with the ideas.
Speaker 3 (19:27):
But yeah, it was that was a ton of fun.
Speaker 2 (19:31):
We We had just had an amazing agency partner and
fallon on that business with amazing, amazing strategic planners.
Speaker 3 (19:38):
And I got to tell you that, you know.
Speaker 2 (19:40):
What what made us successful at RB's was we just
kind of had a fearlessness about doing what we thought
was best for our customers and for our team members.
And and you know, I think that's been a part
of what has helped me in my career. And I
I learned a long time ago from a great guy
(20:02):
named Greg Creed who was the CEO at Taco.
Speaker 3 (20:04):
Bell when I was there, and he said, you know.
Speaker 2 (20:08):
Rob, you just got to you just got to be
you like I got there. I was at Taco Bell
and I hadn't been in the restaurant industry before, and
I backfilled this one guy, and I was trying to.
Speaker 3 (20:20):
Do with it. I thought everybody, you know, thought I.
Speaker 2 (20:23):
Should be doing. And you know, Greg pulled me aside
and he's got this great Australian accent and he says, hey, mate,
you just.
Speaker 3 (20:30):
Need to be you.
Speaker 2 (20:31):
You need to do what you need to do.
Speaker 3 (20:33):
You know, we love you. And I was like, okay,
I'll lean into that.
Speaker 2 (20:37):
And you know, I got up on stage in front
of this franchise e conference in like month two and
I just told this story about moving from Pittsburgh, Pennsylvania,
to California and moving my family and my dog and
my mother in law came along and this whole thing
and everybody left and and it just set the tone.
Speaker 3 (20:55):
For you know, how it's going.
Speaker 2 (20:57):
To interact with our franchise ease. And Ever said, then,
you know, I've tried to be the most authentic, you know,
leader and person I can be, and it's not always
gonna you know, everybody doesn't always love me, but the
ones that do, you know, do And that was how
we have the meats came to be. It was look
(21:18):
like vegetarians aren't going to come to Arby's anyways, so
you know, like we don't have anything against them, but
like we need to speak to our people. We need
to speak to the people who are going to come
and sit down in our booth and eat like a
double roast beef, you know, roast beef and cheddar and
curly fries and a jamochah shake and and you know what,
(21:39):
Like that's what we're about, That's who we are. And
if people don't want that, then they're not going to
come anyways. But let's make sure that we are being
authentically us. And I've tried to you know, live that
throughout my restaurant career and at shape Shack. It's so
easy because it's such a great brand story and it's
such a great place that you don't have to make
(22:01):
up a lot and people are going to like it.
So that's, uh, that's the path forward.
Speaker 1 (22:06):
Great. Yeah, that was an iconic campaign, and you know,
to your point being you being authentic, that's everyone's real superpower,
right because nobody else can be you.
Speaker 2 (22:15):
Uh.
Speaker 1 (22:16):
And Greg Creed is awesome. I met him about a
month ago at a conference, oh yeah, restaurant conference, and
he he was mixing it up with everybody, you know.
I got to spend about an hour with him reminiscing
about some of the some of the projects he did
at Taco Bell. Just a real genuine nice guy.
Speaker 2 (22:35):
Well, he definitely had a big impact on my career.
Speaker 1 (22:39):
You know, a similar experience Marie Conway. When I first
started on the research side. Marie Conway was my it
was the head of research at Siddie and she, uh,
you know, I did my first presentation and uh I
practiced it with her and she's like, that sucked. I
was like, really spent so much time on it. She's like,
(23:00):
let's pretend you're talking to a buddy at a barbecue.
And I was like, okay, and she's like, oh, this
is much better, you know.
Speaker 2 (23:07):
And that was like, it's amazing how that works.
Speaker 1 (23:09):
Huh yeah, best advice ever got about presenting, you know. So,
if you're listening, Marie, thank you very much.
Speaker 2 (23:16):
Well, if Greg's listening, he's calling me a liar right
now because he didn't exactly use those words. He used
more words that are more more like the ones you
just use. I was trying to be polite on your show,
but you know, Greg, Greg didn't pull any punches. He
essentially said the same thing.
Speaker 1 (23:33):
That's awesome, all right, what percentage of sales should shakeshack
be spending on advertising, and what are the optimal channels
in your view?
Speaker 2 (23:44):
You know, given our footprint, we are not going to
be out there buying national media anytime soon. You know,
it just wouldn't be a productive and efficient use of
our resources. So we lean in on digital marketing and
and you know, we do it at a very in
a very surgical, localized way. You know, we're making sure
(24:05):
that we are buying our digital media, you know, pretty
much at the zip code level around our shacks in
the markets that we're in. So today that's that's probably
our biggest form of advertising. And frankly, that's only really
been about twelve months since the brand has really invested
in that platform, and it is it has really been
(24:29):
a driver of our outperformance. You know, I've been here
two quarters now and both quarters have have exceeded expectations
on the top line.
Speaker 3 (24:40):
And that's what I would say is one of.
Speaker 2 (24:41):
The key drivers. I mean, we're really just dipping our
toe in in the into the marketing you know foray
here and and just you know, you know, you think
about marketing, you think about it on a curve, right,
and you always want to invest until you at that
you know, that equilibrium where you're at the peak of
(25:03):
the marginal rate of return on marketing investment, and we
are literally, you know, all the way down on the
bottom left hand of that curve. We've just started. So
we have a huge amount of value creation to come
from continuing to increase the amount of marketing that we
put up against this business. So you know, historically the
(25:24):
percent of sales has been less than one percent. I
think right now we're we're floating in this year, we're
floating in between one and two percent. I think most
you know, best in class organizations that are really investing
in driving top line growth are investing in the four
to five percent range. You know, we're not going to
get there overnight. We're a company operated, company owned concepts,
(25:46):
So you know, I have to be responsible.
Speaker 3 (25:49):
You know, steward of our our g and A.
Speaker 2 (25:51):
And you know, I don't have a big franchise e
fund to go and spend like a lot of these guys.
So you know, we are we are making sure that
we are being in credibly analytical and evaluating the returns
that we're getting on our marketing investments. And as long
as those returns continue to deliver above a threshold that
we determine warrants continued investment. We will keep investing, but
(26:15):
it's going to be very thoughtful.
Speaker 3 (26:16):
It's going to be you know, on a.
Speaker 2 (26:18):
Very analytical strategic basis. We're not going to be out
there spending marketing just to get you know, just to
get to a percent of sales. We're going to continue
to grow as long as we're getting the returns that
we that we did that we need.
Speaker 1 (26:31):
To makes sense. And what kind of loyalty program do
you envision working best for Shakeshack?
Speaker 2 (26:36):
You know, we we are. It's a big investment where
we're making right now in our guest recognition capabilities. You know,
we want to be able to identify our guests regardless
of how they come into our franchise. You know, a
majority of our transactions at this point are digital transactions.
(26:59):
They're kind going through our kiosks, which we have now
put into all of our all of our shocks over
the last year and a half, our web, our app
and so and our and our third party delivery partners.
Speaker 3 (27:11):
So we really want to be able to identify.
Speaker 2 (27:15):
When and when and how our guests are ordering and
coming into our platform so.
Speaker 3 (27:22):
That we can make sure that we are.
Speaker 2 (27:25):
You know, this idea that Danny started with, this idea
of enlightened hospitality and his fine dining restaurants, the secret
to it. And I hope he doesn't get mad at
me for for disclosing this. I think I think you
might have written a book about it. But like the
secret Sauce is, they they are so adept at learning.
(27:47):
When their guests come in at the mayer d stand
or at the bar, or at.
Speaker 3 (27:52):
The table, wherever you are, they have.
Speaker 2 (27:54):
Their ears up all the time. They're trying to learn
more about you so that they can better meet your needs,
you know, without you having to say, hey it's our
anniversary or hey it's my birthday. And so they gather
this information about their guests and use it to make
their experiences so special and and like they they.
Speaker 3 (28:16):
Literally live for it, like they they.
Speaker 2 (28:18):
Live to like, Oh I did this, and you know
I I they didn't know that I knew it was
their birthday and I brought on a birthday cake, or
they didn't know I knew it was their anniversary and
I brought you know, flour with a with a piece
of pie or something, you know, like that's what they
live for and what we at Shakeshak, that's our heritage.
We are trying to figure out how to do that
in the digital age, like how do we deliver and
(28:40):
lightened hospitality through our digital footprint. And so when we
talk about guest recognition, it's not like big Brother, we're
trying to you know, get all your day. It's about
like how do we learn, like what what's special to you?
Like you you like a little extra avocado on your sandwich,
but you know you forgot to order at this time,
so we put it on there for you anyways, or
(29:01):
you know, things like that that are surprise and delight things.
I mean, that's my that's my vision for how you know,
loyalty should work. It's not just an you know and
earn and spend kind of points based model. It's really
about delivering enlightened hospitality, delivering experiences through our understanding of
our guests. And so that's what we're building through our
(29:23):
digital platforms. And you know, I'm not I'm not going
to say we're all the way to bright yet, but
that's that's the aspiration is for us to be able
to execute Danny's vision through our digital channels across you
know all of our shacks.
Speaker 1 (29:38):
All right, So we're gonna wrap this up with a
very very important question. What's your favorite order?
Speaker 2 (29:44):
Oh my gosh, I'm gonna have it's it's so so hard,
but I'm gonna have to go with our our smoke
Shack burger. I mean I had one on Saturday night
last Saturday, and I actually had it delivered. And you know,
I always worried when it when it's being delivered, if
it's going to be as good as it is when
it gets fresh. And you're right that, like our third
(30:06):
party partners have gotten so good at coming in and
timing it right, picking it up, managing that this thing
showed up. I was in a hotel room. I was
actually in Pittsburgh last weekend getting ready to go to
the Steelers game on Sunday, and and so I ordered
this this burger, you know, smoke Shack.
Speaker 3 (30:24):
And you know, we.
Speaker 2 (30:25):
Are the largest consumer of these chili peppers in the world.
And they didn't put on this shack. Yeah, And we
like slice them fresh every day and they so they
are super fresh. They have just the right amount a
little little crunch to them, and they have it like
the sweet heat that you. You know, it's just an
unbelievable experience that you can't believe you got on a
(30:47):
sandwich that costs you like less than ten bucks, and
because it's so special, and so when you get that,
and then I got our fries with our special lto
right now, I got truffle fries. So if you haven't
had our truffle burger or our truffle fries, like it's
made with legit black truffle. I mean, like it's you know,
(31:07):
you just don't. You don't find that anywhere else, and
that can be served in under ten minutes. So I
got the truffle fries and the smoke shack, and I
gotta tell you I was I almost didn't even care
if the Steelers won or lost because my experience was
so good that night.
Speaker 1 (31:26):
I'm with you, man. I love I love peppers. I
love like hot vinegar peppers.
Speaker 2 (31:32):
It's like, oh my god, have you had our smoke shack.
Speaker 1 (31:34):
I sure have. It's what I get every time I
make all right, you get a chicken sandwich on the
side too if I'm extra hungry. But I can't go
and not get the smoke shack. So I'm with you
on that I have to try the truffle fries. Though
you're starting to make.
Speaker 2 (31:46):
Me hungry, I'm not gonna lie.
Speaker 1 (31:50):
Listen, man, thank you very much for your time. You know,
I'm really looking forward to the chance to work with
you as I continue to cover this company. It's it's
definitely an exciting time for shake Shack.
Speaker 2 (32:00):
Well, Mike, I can't I can't tell you how much
I enjoyed talking with you.
Speaker 3 (32:04):
And I feel like the luckiest guy in.
Speaker 2 (32:07):
The world to be here at shake check with all
these amazing people and all this amazing future and all
this amazing opportunity. So thank you for giving me the
chance to tell our story. And you know, hopefully a
year from now we'll be here, you know, celebrating, you
know how great things have gone, you know, according to
what we just discussed. So thanks again.
Speaker 1 (32:29):
Yeah, that would be awesome. Your passion came across in
that first earnings call. It came across today. I'd love
to see it. I want to thank the audience for
tuning in. If you liked the episode, please subscribe and
leave us a review. Check back soon for an interview
with Andy Rebin, chief experience officer at Kava
Welcome to Chopping It Up. I'm your host, Mike Hanlon,
a senior restaurant and food service analyst at Bloomberg Intelligence.
Our research and that of bi's five hundred analysts around
the globe can be found exclusively on the Bloomberg terminal. Today,
we're joined by Rob Lynch, CEO of Shakeshack.
Speaker 2 (00:38):
Thanks for joining me, Rob, Hi, Mike, thanks for having
me today.
Speaker 1 (00:42):
All right, So in my prep I noticed you graduated
from the University of Rochester. Are you a New York guy?
Speaker 2 (00:47):
No, I'm actually from Pittsburgh, Pennsylvania. But I picked the
only place in the country that has tougher weather than
Pittsburgh to go to college, Rochester.
Speaker 1 (00:57):
New York.
Speaker 2 (00:58):
But man, it was beautiful three months of the year.
We just didn't happen to be at school those three months.
But it makes makes you tough going to school up there.
I loved every minute of it. Great people. Almost became
a Bills fan, but it couldn't do it give them
my Steelers lineage. So but yeah, I.
Speaker 3 (01:14):
Went up there for both my undergrad and my.
Speaker 2 (01:17):
MBA there awesome.
Speaker 1 (01:20):
Yeah, I was just on a charity bike ride around
Lake Michigan. I'm sure it's beautiful up there by the
Great Lakes, man. I'm sure it's gorgeous there in the summer.
Speaker 2 (01:29):
Yeah, and then you go down in the Finger Lakes
near Cornell. It's just an amazing part of the country.
Speaker 1 (01:34):
All right, good stuff, man, What attracted you to the
Shakeshack gig?
Speaker 2 (01:37):
You know, I just believe that that Shakeshack is one
of the great concepts in the restaurant industry right now.
I mean there's a handful of concepts that are kind
of a category of one, right. You know, I'd say
Chick fil A, Chipotle, Cava, Wingstop, and then I put
Shakeshack right there. And you know, I know, we make
(01:58):
burgers predominant, and there's a lot of burger offerings out there,
but there just aren't. There aren't burgers, fries and shakes
like Shakeshack makes them. And you know, the commitment to
doing right in every way in terms of the ingredient quality,
how they take care of their team members, how they
invest in the community.
Speaker 3 (02:19):
I mean, it's just.
Speaker 2 (02:20):
A really compelling place to be and a really inspirational place.
And you know, I've been in my career now for
twenty five years, and I really was excited about going
to a place that I could just feel so good
about being a part of, you know, starting all the
way back with the legacy of Danny Meyer and Randy
Grudy and Union Square Hospitality Group, and you know, this enlightened,
(02:44):
this mindset and this philosophy of enlightened hospitality. It's just
a really.
Speaker 3 (02:49):
Special place, and you know, with a.
Speaker 2 (02:53):
Commitment to really doing what restaurant companies are supposed to do,
and it's take care of people. And I just got
really inspired as I learned more about the story of
Danny and Randy and learn more about the commitment that
Shakesheck has to do everything to the best of their abilities.
And you know, then I started digging into the business
(03:15):
and I was like, wow, you know, four million AUVs.
Twenty plus margins, only five hundred and fifty of them globally,
Like there is a huge opportunity to scale this thing
and create a ton of value. So the ability to
do great work with great people in a way that
you can be proud of, with also a huge opportunity
(03:36):
to drive you know, financial returns for the team members,
for the investors. I mean, it's just an incredibly compelling
opportunity for sure.
Speaker 1 (03:47):
So you talked a little bit about the strong corporate
culture there. How do you plan on improving it?
Speaker 2 (03:52):
You know, I aspire to be, you know, to be
good enough for it if you will. I mean, I
want to make sure I tell everybody, you know, coming
into Shakeshack, I had to take the hippocratic oath right first,
do no harm, because there's so many great things about
this place. So, you know, I I want to live
(04:15):
the principles and values that have made this place great.
I also want to you know, bring my perspective from
my experiences and the places that I've been. You know,
my last role at Papa John's was really a big
cultural change. Was was some of the initial work that
we had to.
Speaker 3 (04:34):
Do, and I learned a lot from that.
Speaker 2 (04:37):
I learned that, you know, you don't impact culture by putting,
you know, words on a on a page or on
a sign that you hang on the wall. You impact
culture by the way you lead and by the way
you operate on a day to day basis and treating
people with respect and dignity and inspiring people to be,
(04:58):
you know, to be able to do more than they
think they can do. And so you know, That's how
I think about it. It's not some grandiose mixture of
some special philosophies or some patented technology. It's really just
showing up every day and trying to be the best
person you can be, and and and living up to
the commitments you make and living up to you know
what everyone you know takes pride in. So that's that's
(05:21):
really how I'm trying to impact Shakeshack in a positive way.
Speaker 1 (05:24):
Well said, you communicate on the first earnings call that
improving operations is a big priority. Right now, can you
talk a bit about your efforts to improve throughput in
the restaurants.
Speaker 2 (05:35):
Yeah, you know, shait Shack was built on a foundation
of fine dining. You know, it's all started with a
hot dog cart Madison Square Park in New York City,
and that hot dog cart was supplied out of eleven.
Speaker 3 (05:50):
Madison, right, So amazing, you know.
Speaker 2 (05:53):
So it's it's just grounded in this philosophy of in
this model of fine dining, and that's a little bit
different than than than you know, fast service food. And
so we are set up in a model that was
great when you were only had a few really big
(06:15):
restaurants with lines out the door and no drive throughs.
And you know, as we continue to scale, we're going
to continue to need to evolve and make sure that
we're building a model that's conducive to really every community
that we hope to serve, whether it's domestically or internationally,
and a lot you know, as we evolve from a
(06:36):
New York City model that was really dependent upon foot
traffic to a model that's going to show up in
the suburbs of Atlanta or Dallas, or Cincinnati, Ohio, or Pittsburgh, Pennsylvania,
where there's going to be a lot more car traffic.
We're going to have to be able to deliver, you know, through.
Speaker 3 (06:54):
A drive through.
Speaker 2 (06:55):
We're going to have to be able to deliver with
people who are not necessarily coming to sit in a
park and eat a great burger, but coming to you know,
get their food and get home on a Thursday night.
So with that comes different demands on the business. And
you know, we have a great operating model today. Our
operators do an amazing job taking care of our team members,
(07:17):
taking care of our guests, but there's definitely opportunities for
us to just get more productive and more efficient, and
that really is across a lot of different facets. One
is our restaurant format, so how we're how the kitchens
are actually structured today, we operate in the fine dining
model where most of our shacks are set up with
(07:38):
different stations and everything kind of culminates in an expo line,
almost like a symphony, and everything has to get there
at the right time, and then an you know, someone
who's running the expo takes it out and delivers it
to our guests. It's very different than a streamline model
that is more conducive to a drive through where you've
got an assembly line streamline, you know, linear flow where
(08:01):
things start at one end and end up next to
the drive through window and are dispersed there. So, you know,
we just have an opportunity to look at different formats
with linear flows and other opportunities that are more conducive
to that model. The other thing that is an opportunity
for us is really just an equipment technology and looking
(08:23):
at you know, how we deliver our food in the
best way possible today. You know, one of the great
things about shake Shack is everything's made fresh when you
order it, and it's just a fantastic, you know, experience.
But sometimes when things don't all time up. You know,
some of ourre either our shakes can sit too long
(08:43):
and not be as cold as they should be, or
our fries can sit too long and not be as
hot as they should be. So there's opportunities for us
to change that model a little bit. We're still always
going to make our burgers fresh to order, but we
would need to make sure that we're always delivering the
hottest and we're always delivering our fresh made shakes in
(09:03):
the best best way. So there's equipment technology and then
just process, you know, just reducing the number of steps
our team members take. It's it's a little bit more
complex in the back of a shake shack than a
lot of other places. So our operators are really looking
at ways, you know, whether it's streamlining the kitchen format,
you know, improving our equipment packages, or optimizing our processes
(09:27):
to just get faster to deliver while also delivering better products.
So that's really all the work that our new COO,
Stephanie Sentel, has focused on.
Speaker 1 (09:37):
All right, good stuff, What can you do to improve
water accuracy of the drive through?
Speaker 2 (09:42):
Well, you know, I think it's all it's very consistent
with what we just discussed, you know, making sure that
we have a model that is more consistent, more streamlined.
All of our original shacks were dining room only, and
so you know, if you get something wrong, yeah, you
(10:02):
never want to get something wrong for a customer, but
it's easy to make it right because they're right there.
If somebody goes through a drive through and gets home
and they've got the wrong order, that's a really dissatisfied guest.
So a lot of the things I just discussed are
going to help us with that. But the other way
to help it is, you know, we don't have combos
on our drive throughs today. You know, we're looking at
(10:22):
combos and and you know, combos to accomplish you know,
two of the big objectives, uh, you know, two of
the biggest things that people are looking for and the
drive through speed and accuracy. When you know, the biggest
challenge on speed and accuracy, whether you're talking dining room
or or drive through is customization. And combos kind of
(10:43):
mitigate the need for the customer the guests to customize
and streamline things people are used to making you know,
number one, two, three, or four a lot more than
I'll have a shack, burger, hold the cheese, add pickles,
you know, add all these things. So as we look
at optimizing our drive through menus and how we approach
drive through, that's going to definitely help our accuracy and
(11:06):
our speed.
Speaker 1 (11:07):
Driving frequency was also a big point of emphasis on
your first earnings call, which I thought was great. By
the way, how long will it take to get the
operations completely ironed out? Were ironed out enough so that
Shakeshack can start marketing more aggressively.
Speaker 2 (11:23):
Yeah, you know, part of our frequency challenge is that
we don't have the penetration that a lot of other
competitors have. You know, we have domestically less than three
hundred and fifty units, so believe it or not, you know,
a lot of our guests are tourists. A lot of
our guests are coming in from Omaha, Nebraska, coming to
(11:44):
New York and they're like, I want to get Shakeshack.
So that's part of the low frequency. And as we
build more shacks every year, we're going to we're going
to increase the access for customers and increase.
Speaker 3 (11:55):
Their ability to visit us more often.
Speaker 2 (11:58):
But in addition to that, we also need to you know,
the other two barriers to frequency our speed. People know
when they're coming to Shakeshack it's going to take a
little bit longer. And then value perception. And you know,
it's not necessarily value in the context of the product quality,
but it's just it's like a special occasion. Everybody who
(12:21):
comes wants to get burgers, fries, a drink and a shake,
and so our tickets are higher, and so we need
to find ways to meet the needs of all of
our customers and make sure that we are delivering, you know,
the unique needs of everyone in a way where they derive.
You know, they perceive our value to be kind of
(12:42):
worth the price point. And that's where the marketing comes in.
You know, like our food speaks for itself, but marketing
can definitely help us to to reinforce the things that
make us special, make us worth it. Frankly, I mean
a lot of folks don't know the quality of our ingredients.
You know, we don't buy regular beef. We buy our
(13:03):
beef in a special way. It costs more, it takes
more preparation, but it's the best. You know, we add
brisket to our beef to give it that crispy texture.
Then you know, that's more than just a normal burger
that you typically get at QSR. We use custard in
our shakes. We don't use ice cream. You know, almost
(13:25):
every ingredient, like avocados.
Speaker 3 (13:27):
Like a lot of places will.
Speaker 2 (13:28):
Have like avocado spreads right essentially like guacamole. Without all
this stuff, we literally are slicing avocados in the back
line when you order an avocado bac and cheeseburger. So, like,
all these things take time, all these things cost more,
and so we just need to do a little bit
of a better job helping people recognize that, helping people
(13:51):
understand all that it takes to deliver that experience at shakesheck,
and I think that'll be a big, big move towards
helping our value perception. And then the last thing we
already talked about just speed of service. You know, when
we get busy, you know, we get really busy. We
have long lines a lot of the time, and you
know it's going to take you, you know, six seven
(14:13):
minutes to get your order, whereas going to the QSR
guys it's going to take it two or three minutes.
And so I don't think we'll ever get to two
or three because it takes us over three minutes to
cook your burger.
Speaker 3 (14:25):
When you order it.
Speaker 2 (14:26):
But we can definitely improve the speed at which we
deliver and that all increase frequency as well.
Speaker 1 (14:32):
Shakesheak's always prided itself on product innovation. How do you
plan to improve on that?
Speaker 2 (14:37):
So, you know, I started my career in the restaurant
business at Taco Bell, and Taco Bell has an unbelievable model.
They are it just it still baffles me how they're
able to come up with so many amazing, craveable items
using you know, the same fourteen ingredients. It's just they
(14:57):
have some food geniuses over there. And you know, frankly,
I took that model and brought it to Arby's. And
when I went to Arby's, I kind of lifted that
and brought the product innovation model to Arby's. And that
was a big part of our turnaround at the Arby's
brand back in twenty and thirteen and fourteen and fifteen,
and even at Papa John's. You know, pizza pizza is
(15:18):
probably the toughest to innovate off of because everybody orders
pepperoni and cheese. But you know, we did. We brought
new things like Papa Dilla's and you know, which are
essentially like folded pizzas that you know, we're handheld. We
brought you know, some different recipes and such. But the
cool thing about shake Shack is it has this long
(15:39):
history of amazing product innovation, like a culinary you know,
prowess that's really unmatched in the industry. When I when
I got approached about this job, I went to shake
Shack and I saw the picture in the window of
a Korean barbecue chicken sandwich. I was like, where am
I Like, I thought I was coming for a shack
(16:00):
and they had this thing. And I went in and
I had it, and I said, this is literally like
the best chicken sandwich I've ever had. And you know,
we we have this history of amazing culinary proficiency.
Speaker 3 (16:13):
What we haven't necessarily done in the.
Speaker 2 (16:16):
Past is leveraged that culinary proficiency to drive like strategic innovation.
Speaker 3 (16:24):
And when I say that, what I mean is, you know.
Speaker 2 (16:27):
QSR, Every QSR worth its soul has you know, a
strategic calendar that is very carefully and planfully built to
meet the needs of a specific target audience in a
specific season with specific items, and through that they're going
(16:47):
to drive a level of you know, comp sales through
transactions and check growth. Right, Shakeshack is is like this
artistic place that all they cared about was great culinary,
And so there's a huge opportunity for us to leverage
that culinary in a strategic way that helps us build
our comp sales. That helps us like build the puzzle,
(17:11):
the jigsaw puzzle of Okay, what sandwich goes best with
what specialty iced tea with the greatest shake at this
time of year, and how do we promote it so
that we can achieve our comp sales goals through both
transaction growth and check growth by either you know, additional
(17:32):
items per check or some or trade up to a
more premium product. Like I'll give an example. You know,
one year, if you're running a promotion in Q one
and the price point on that sandwich is eight ninety nine, Like,
the next year, you don't want to run a seven
ninety nine sandwich. You're going to be you know, you're
(17:53):
giving up you know, fifteen percent and check right out
of the gate. So, like that type of insight has
never coupled with the amazing culinary that Shakeshack has always done.
In the past, and so for me, I'm not going
to be able to bring a lot of like, you know,
menu innovation ideas that these guys are that are going
(18:15):
to beat out what our culinary team does. I mean there,
this is like a fine dining culinary group here.
Speaker 3 (18:20):
They're going to have the best ideas.
Speaker 2 (18:22):
But I'm bringing some strategic thinking to how we launch
those those platforms, how they work together to help us
achieve our sales objectives.
Speaker 1 (18:33):
I'm sure it's exciting for you to work with that
culinary team that you have on board. That's pretty cool.
Speaker 3 (18:39):
Yeah, it's not as exciting.
Speaker 2 (18:40):
It's not as exciting for my wife because I'm eating
a lot of stuff and it is it is it
is good stuff. I mean, it is just fantastic. So yeah,
I am excited. I I head to New York and
go down in that kitchen with a smile on my
face every week.
Speaker 1 (18:58):
So were you at RB's the we have the meets?
Speaker 2 (19:02):
Yeah? Yeah, I was the CMO when we launched that.
A lot of you know, I get a lot of
credit for that, but there, you know, I was just
the guy that.
Speaker 3 (19:11):
Said, Okay, let's do it.
Speaker 2 (19:12):
You know, all these smart people come up with these
ideas and build all these plans, and you know, sometimes
you're just lucky and you get to be you get
to say, hey, okay, I'll sign off on that, and
when it works, you know, you get credit. And when
you don't, you get you know, you blame all the
smart people that came up with the ideas.
Speaker 3 (19:27):
But yeah, it was that was a ton of fun.
Speaker 2 (19:31):
We We had just had an amazing agency partner and
fallon on that business with amazing, amazing strategic planners.
Speaker 3 (19:38):
And I got to tell you that, you know.
Speaker 2 (19:40):
What what made us successful at RB's was we just
kind of had a fearlessness about doing what we thought
was best for our customers and for our team members.
And and you know, I think that's been a part
of what has helped me in my career. And I
I learned a long time ago from a great guy
(20:02):
named Greg Creed who was the CEO at Taco.
Speaker 3 (20:04):
Bell when I was there, and he said, you know.
Speaker 2 (20:08):
Rob, you just got to you just got to be
you like I got there. I was at Taco Bell
and I hadn't been in the restaurant industry before, and
I backfilled this one guy, and I was trying to.
Speaker 3 (20:20):
Do with it. I thought everybody, you know, thought I.
Speaker 2 (20:23):
Should be doing. And you know, Greg pulled me aside
and he's got this great Australian accent and he says, hey, mate,
you just.
Speaker 3 (20:30):
Need to be you.
Speaker 2 (20:31):
You need to do what you need to do.
Speaker 3 (20:33):
You know, we love you. And I was like, okay,
I'll lean into that.
Speaker 2 (20:37):
And you know, I got up on stage in front
of this franchise e conference in like month two and
I just told this story about moving from Pittsburgh, Pennsylvania,
to California and moving my family and my dog and
my mother in law came along and this whole thing
and everybody left and and it just set the tone.
Speaker 3 (20:55):
For you know, how it's going.
Speaker 2 (20:57):
To interact with our franchise ease. And Ever said, then,
you know, I've tried to be the most authentic, you know,
leader and person I can be, and it's not always
gonna you know, everybody doesn't always love me, but the
ones that do, you know, do And that was how
we have the meats came to be. It was look
(21:18):
like vegetarians aren't going to come to Arby's anyways, so
you know, like we don't have anything against them, but
like we need to speak to our people. We need
to speak to the people who are going to come
and sit down in our booth and eat like a
double roast beef, you know, roast beef and cheddar and
curly fries and a jamochah shake and and you know what,
(21:39):
Like that's what we're about, That's who we are. And
if people don't want that, then they're not going to
come anyways. But let's make sure that we are being
authentically us. And I've tried to you know, live that
throughout my restaurant career and at shape Shack. It's so
easy because it's such a great brand story and it's
such a great place that you don't have to make
(22:01):
up a lot and people are going to like it.
So that's, uh, that's the path forward.
Speaker 1 (22:06):
Great. Yeah, that was an iconic campaign, and you know,
to your point being you being authentic, that's everyone's real superpower,
right because nobody else can be you.
Speaker 2 (22:15):
Uh.
Speaker 1 (22:16):
And Greg Creed is awesome. I met him about a
month ago at a conference, oh yeah, restaurant conference, and
he he was mixing it up with everybody, you know.
I got to spend about an hour with him reminiscing
about some of the some of the projects he did
at Taco Bell. Just a real genuine nice guy.
Speaker 2 (22:35):
Well, he definitely had a big impact on my career.
Speaker 1 (22:39):
You know, a similar experience Marie Conway. When I first
started on the research side. Marie Conway was my it
was the head of research at Siddie and she, uh,
you know, I did my first presentation and uh I
practiced it with her and she's like, that sucked. I
was like, really spent so much time on it. She's like,
(23:00):
let's pretend you're talking to a buddy at a barbecue.
And I was like, okay, and she's like, oh, this
is much better, you know.
Speaker 2 (23:07):
And that was like, it's amazing how that works.
Speaker 1 (23:09):
Huh yeah, best advice ever got about presenting, you know. So,
if you're listening, Marie, thank you very much.
Speaker 2 (23:16):
Well, if Greg's listening, he's calling me a liar right
now because he didn't exactly use those words. He used
more words that are more more like the ones you
just use. I was trying to be polite on your show,
but you know, Greg, Greg didn't pull any punches. He
essentially said the same thing.
Speaker 1 (23:33):
That's awesome, all right, what percentage of sales should shakeshack
be spending on advertising, and what are the optimal channels
in your view?
Speaker 2 (23:44):
You know, given our footprint, we are not going to
be out there buying national media anytime soon. You know,
it just wouldn't be a productive and efficient use of
our resources. So we lean in on digital marketing and
and you know, we do it at a very in
a very surgical, localized way. You know, we're making sure
(24:05):
that we are buying our digital media, you know, pretty
much at the zip code level around our shacks in
the markets that we're in. So today that's that's probably
our biggest form of advertising. And frankly, that's only really
been about twelve months since the brand has really invested
in that platform, and it is it has really been
(24:29):
a driver of our outperformance. You know, I've been here
two quarters now and both quarters have have exceeded expectations
on the top line.
Speaker 3 (24:40):
And that's what I would say is one of.
Speaker 2 (24:41):
The key drivers. I mean, we're really just dipping our
toe in in the into the marketing you know foray
here and and just you know, you know, you think
about marketing, you think about it on a curve, right,
and you always want to invest until you at that
you know, that equilibrium where you're at the peak of
(25:03):
the marginal rate of return on marketing investment, and we
are literally, you know, all the way down on the
bottom left hand of that curve. We've just started. So
we have a huge amount of value creation to come
from continuing to increase the amount of marketing that we
put up against this business. So you know, historically the
(25:24):
percent of sales has been less than one percent. I
think right now we're we're floating in this year, we're
floating in between one and two percent. I think most
you know, best in class organizations that are really investing
in driving top line growth are investing in the four
to five percent range. You know, we're not going to
get there overnight. We're a company operated, company owned concepts,
(25:46):
So you know, I have to be responsible.
Speaker 3 (25:49):
You know, steward of our our g and A.
Speaker 2 (25:51):
And you know, I don't have a big franchise e
fund to go and spend like a lot of these guys.
So you know, we are we are making sure that
we are being in credibly analytical and evaluating the returns
that we're getting on our marketing investments. And as long
as those returns continue to deliver above a threshold that
we determine warrants continued investment. We will keep investing, but
(26:15):
it's going to be very thoughtful.
Speaker 3 (26:16):
It's going to be you know, on a.
Speaker 2 (26:18):
Very analytical strategic basis. We're not going to be out
there spending marketing just to get you know, just to
get to a percent of sales. We're going to continue
to grow as long as we're getting the returns that
we that we did that we need.
Speaker 1 (26:31):
To makes sense. And what kind of loyalty program do
you envision working best for Shakeshack?
Speaker 2 (26:36):
You know, we we are. It's a big investment where
we're making right now in our guest recognition capabilities. You know,
we want to be able to identify our guests regardless
of how they come into our franchise. You know, a
majority of our transactions at this point are digital transactions.
(26:59):
They're kind going through our kiosks, which we have now
put into all of our all of our shocks over
the last year and a half, our web, our app
and so and our and our third party delivery partners.
Speaker 3 (27:11):
So we really want to be able to identify.
Speaker 2 (27:15):
When and when and how our guests are ordering and
coming into our platform so.
Speaker 3 (27:22):
That we can make sure that we are.
Speaker 2 (27:25):
You know, this idea that Danny started with, this idea
of enlightened hospitality and his fine dining restaurants, the secret
to it. And I hope he doesn't get mad at
me for for disclosing this. I think I think you
might have written a book about it. But like the
secret Sauce is, they they are so adept at learning.
(27:47):
When their guests come in at the mayer d stand
or at the bar, or at.
Speaker 3 (27:52):
The table, wherever you are, they have.
Speaker 2 (27:54):
Their ears up all the time. They're trying to learn
more about you so that they can better meet your needs,
you know, without you having to say, hey it's our
anniversary or hey it's my birthday. And so they gather
this information about their guests and use it to make
their experiences so special and and like they they.
Speaker 3 (28:16):
Literally live for it, like they they.
Speaker 2 (28:18):
Live to like, Oh I did this, and you know
I I they didn't know that I knew it was
their birthday and I brought on a birthday cake, or
they didn't know I knew it was their anniversary and
I brought you know, flour with a with a piece
of pie or something, you know, like that's what they
live for and what we at Shakeshak, that's our heritage.
We are trying to figure out how to do that
in the digital age, like how do we deliver and
(28:40):
lightened hospitality through our digital footprint. And so when we
talk about guest recognition, it's not like big Brother, we're
trying to you know, get all your day. It's about
like how do we learn, like what what's special to you?
Like you you like a little extra avocado on your sandwich,
but you know you forgot to order at this time,
so we put it on there for you anyways, or
(29:01):
you know, things like that that are surprise and delight things.
I mean, that's my that's my vision for how you know,
loyalty should work. It's not just an you know and
earn and spend kind of points based model. It's really
about delivering enlightened hospitality, delivering experiences through our understanding of
our guests. And so that's what we're building through our
(29:23):
digital platforms. And you know, I'm not I'm not going
to say we're all the way to bright yet, but
that's that's the aspiration is for us to be able
to execute Danny's vision through our digital channels across you
know all of our shacks.
Speaker 1 (29:38):
All right, So we're gonna wrap this up with a
very very important question. What's your favorite order?
Speaker 2 (29:44):
Oh my gosh, I'm gonna have it's it's so so hard,
but I'm gonna have to go with our our smoke
Shack burger. I mean I had one on Saturday night
last Saturday, and I actually had it delivered. And you know,
I always worried when it when it's being delivered, if
it's going to be as good as it is when
it gets fresh. And you're right that, like our third
(30:06):
party partners have gotten so good at coming in and
timing it right, picking it up, managing that this thing
showed up. I was in a hotel room. I was
actually in Pittsburgh last weekend getting ready to go to
the Steelers game on Sunday, and and so I ordered
this this burger, you know, smoke Shack.
Speaker 3 (30:24):
And you know, we.
Speaker 2 (30:25):
Are the largest consumer of these chili peppers in the world.
And they didn't put on this shack. Yeah, And we
like slice them fresh every day and they so they
are super fresh. They have just the right amount a
little little crunch to them, and they have it like
the sweet heat that you. You know, it's just an
unbelievable experience that you can't believe you got on a
(30:47):
sandwich that costs you like less than ten bucks, and
because it's so special, and so when you get that,
and then I got our fries with our special lto
right now, I got truffle fries. So if you haven't
had our truffle burger or our truffle fries, like it's
made with legit black truffle. I mean, like it's you know,
(31:07):
you just don't. You don't find that anywhere else, and
that can be served in under ten minutes. So I
got the truffle fries and the smoke shack, and I
gotta tell you I was I almost didn't even care
if the Steelers won or lost because my experience was
so good that night.
Speaker 1 (31:26):
I'm with you, man. I love I love peppers. I
love like hot vinegar peppers.
Speaker 2 (31:32):
It's like, oh my god, have you had our smoke shack.
Speaker 1 (31:34):
I sure have. It's what I get every time I
make all right, you get a chicken sandwich on the
side too if I'm extra hungry. But I can't go
and not get the smoke shack. So I'm with you
on that I have to try the truffle fries. Though
you're starting to make.
Speaker 2 (31:46):
Me hungry, I'm not gonna lie.
Speaker 1 (31:50):
Listen, man, thank you very much for your time. You know,
I'm really looking forward to the chance to work with
you as I continue to cover this company. It's it's
definitely an exciting time for shake Shack.
Speaker 2 (32:00):
Well, Mike, I can't I can't tell you how much
I enjoyed talking with you.
Speaker 3 (32:04):
And I feel like the luckiest guy in.
Speaker 2 (32:07):
The world to be here at shake check with all
these amazing people and all this amazing future and all
this amazing opportunity. So thank you for giving me the
chance to tell our story. And you know, hopefully a
year from now we'll be here, you know, celebrating, you
know how great things have gone, you know, according to
what we just discussed. So thanks again.
Speaker 1 (32:29):
Yeah, that would be awesome. Your passion came across in
that first earnings call. It came across today. I'd love
to see it. I want to thank the audience for
tuning in. If you liked the episode, please subscribe and
leave us a review. Check back soon for an interview
with Andy Rebin, chief experience officer at Kava
Host
Michael Halen
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