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Pandemic Had Delayed Rollout of Restaurant Chain’s Aggressive Growth Plans

By Jennifer Waters
CoStar News

shake shack drive thru

January 19, 2021 | 4:10 P.M.
Shake Shack is back in the growth business. The fast-casual chain said it plans to expand its store numbers by as much as 45% in the next two years.

The New York-based “better burger” maker said it will open as many as 80 to 90 company-operated stores by 2022, with 2021’s expansion set for the back half of the year. Expect 35 to 40 to open this year and 45 to 50 next, CEO Randy Garruti said in a business update.

At the same time, 15 to 20 new licensed Shacks, as the company likes to call them, could open this year, with a target of 20 to 25 in 2022. For the sake of comparison, that’s a grand total of 445 stores nationwide, up from 310 at the end of last year. Shake Shack also operates 120 international stores, mostly in Asia.

But don’t expect the kind of high-profile openings Shake Shack became famous for when it first opened stores in New York and other East Coast cities.

“We’re not doing the same kind of huge openings that we’re doing in terms of press,” Garutti said in discussing the company’s earnings on a conference call. “We actually barely market them at all by strategy. We really try to open pretty quietly right now.”

“We’re excited about how we’ve been performing,” he said. “The class … is continuing to perform above the company average, which is exciting. And I think we hope there will be a different kind of growth without the kind of usual craziness that we allow.”

Shake Shack is looking to move out of more dense urban areas into suburban locations, following the direction that many eating establishments and retailers are taking since the onset of the pandemic. With so many people stuck in their homes, housing sales in suburban locations with more open space have jumped as people leave urban areas.

Shake Shack has a large number of restaurants in New York City and other large metropolitan areas that still have restrictions on indoor dining, which was attributed to the company’s 27.8% drop in same-store sales for the fiscal year, according to its preliminary report.

Shake Shack had planned to open as many as 67 locations in 2020 as part of an aggressive growth strategy throughout the country. The pandemic, of course, put the brakes on that as the company had to shift gears to quickly adapt by stepping up its digital innovation with off-premise ordering and delivery.

Improvements planned for a building on West Burnside Street to accommodate a Shake Shack restaurant will be addressed via Type II design review. (Aria Group, via city of Portland)

Unlike fast-food restaurants such as McDonald’s and Taco Bell, Shake Shack has not had drive-thru restaurants. But since implementing off-premise ordering in March, it said it has logged 1.8 million first-time app or online customer orders. And 150,000 customers have used curbside pickup since its July rollout; of those, 30% were new to the burger concept.

And Shake Shack opened its first drive-up window last month in Vernon Hills, Illinois, a Chicago suburb. Unlike a drive-thru window, the “Shack Track” drive-up is only for online food orders. The company plans to open at least five more this year, according to the recent presentation at the ICR Conference, an annual large investment gathering.

All the new stores are in line to incorporate the new Shack Tracks, and the first drive-thru Shack is expected to open later in 2021.

“So 2020 was the foundation year for us in terms of building and bringing some of these capabilities to markets,” Chief Financial Officer Tara Comonte said at the conference. “We transformed the business to a high level of digital mix.”

“Now we’re going to build upon it,” she added. “We’re only getting started here.”

Michael Salafia

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