How Limited-Time Offers Can Help Shake Shack’s Top Line

It’s quite a usual practice for restaurants to run limited-time offers (or LTOs) to attract customers. Usually, the limited-time availability of an item on the menu creates a sense of “must try before it’s gone” in the minds of loyal as well as prospective customers.

Shake Shack (SHAK) introduced the ShackMeister Burger and the Roadside Shack, both of which are LTOs. LTOs also create opportunities to shift customers to higher-priced items to generate a higher ticket per customer.

For example, the lowest-priced burger at SHAK’s Madison Square Park outlet, the ShackBurger, costs $5.19, whereas the Roadside Shack costs $6.19. The management stated that these LTOs have been “big drivers” for the company’s ticket and traffic growth. All of this leads to an increase in same-store sales growth, which drives the top line.

LTOs can have a huge impact on sales of a restaurant and can be the kicker to increase revenue for the company. Take for example the pumpkin spice latte, offered by Starbucks (SBUX), which has carved a new category in the beverage market.

According to the company, it has sold over 200 million Pumpkin Spice Lattes over a ten-year period since the product’s introduction in 2003. If we do the math, a price tag of around $4 per tall cup would mean $80 million in revenue in just one year.

You can access Starbucks through the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY’s portfolio consists of holdings of 4% in McDonald’s (MCD), 3% in Starbucks, and 1.5% in Yum! Brands (YUM).