uploads/// Shake Shack Total Restaurant Units

Investing in Shake Shack: Why Unit Growth is So Important


Mar. 18 2015, Updated 11:05 a.m. ET

Unit growth

In our series titled Shake Shack Filed For An IPO—What Investors Need To Know, we discussed how unit growth will likely drive Shake Shack’s revenue. This is because the company’s same-store sales growth declined in the 39 weeks ended in 2014 compared to the 39 weeks ended in 2013.

Management also cited this growth as an important component for revenue growth going forward. In the fourth quarter alone, the company opened five company-operated restaurants in the US and ten in fiscal 2014. SHAK opened 12 new licensed stores during the year.

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Speaking of the future, the company maintained that it expects to open ten company-operated stores per year. Shake Shack stated that it will double its company-operated store count over the next three years and that that number will triple in the coming five years. There are 34 company-operated Shake Shack locations in the US and five licensed stores currently.

In 2015, SHAK plans to open in Texas and Maryland as well as the Midwest and East Coast.

Competing against the giants

In total, Shake Shack had 63 restaurants as of December 29, as you can see in the chart above. The Habit (HABT) went public in November 2014. It had 95 restaurants in its system.

Globally, McDonald’s (MCD) had a total of 35,000 restaurants in its system. KFC, under the umbrella of Yum! Brands (YUM), had more than 18,000 restaurants. Subway is a privately held restaurant. According to The Economist, it had more than 40,000 restaurants around the world. The Consumer Discretionary Select Sector SPDR ETF (XLY) holds about 4% of MCD.

SHAK is also making strides to grow internationally, which we’ll discuss in more detail in the next part of this series.


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