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How Is Shake Shack Expanding Its Business?

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Aug. 18 2020, Updated 4:17 a.m. ET

Current operations

By the end of 3Q16, Shake Shack (SHAK) operated 105 restaurants, which includes 58 company-owned restaurants, 41 international franchised restaurants, and six international franchised restaurants.

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Unit growth and outlook

In the past 12 months, SHAK has added 17 company-owned restaurants and 13 franchised restaurants. In 3Q16, the company opened seven new company-owned restaurants on the East Coast and in Arizona, Texas, and Los Angeles. Internationally, the company opened three franchised restaurants.

After the quarter, the company opened a new restaurant in Downtown Hollywood, Los Angeles, and California. The company’s management has raised its new company-owned restaurant openings to 19 (up from 18) for 2016.

Favorable conditions

Meanwhile, favorable real estate and developmental conditions have led to the advancement of the opening of the new restaurant at Penn Station, New York. Expected growth in the Middle East, the UK, and Korea has prompted the company’s management to increase its guidance for new franchised restaurants openings to ten (up from seven) for 2016.

Favorable real estate conditions also prompted the company to raise its 2017 guidance for company-owned restaurant openings to the range of 21–22 (up from 19) in 2016. The company also expects to add ten new franchised restaurants in 2017.

By comparison, in 3Q16, Chipotle Mexican Grill (CMG) and Panera Bread (PNRA) have added 54 and 17 restaurants, respectively.

Next, we’ll look at SHAK’s EBIT margins.

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