(whimsical music)
(grill sizzling) - [Narrator] Shake Shack
has always made it clear it isn't fast food. Everything is made to order, and that customization means
customers have to wait. But as Shake Shack expands, it seems to be taking a lot
of ideas from fast food. It's building drive-thrus,
adding rest stop locations, and installing ordering kiosks. As Shake Shack tries to compete in spaces traditionally dominated by fast food, it's got to speed up operations because many customers expect
to get their food quickly. But this is a major
challenge for a company built on a guarantee of fresh
cooked meals every time. This is The Economics of Shake Shack. Long lines have been
part of Shake Shack's DNA from the beginning. - When they first started this popup, roadside hotdog and restaurant
stand in Madison Square Park, there was lines, so it really had this kind
of cult vibe around it in New York. - [Narrator] But as Shake
Shack continues to expand, it has to speed up. - We want it to be a
little more convenient. We wanna be a little more
consistent on our speed and our execution. - [Narrator] A big part of
this initiative is drive-thru. That's been a major
priority for Shake Shack since the pandemic
dampened walk-in business in some of its main markets. Shake Shack has opened more
than 30 drive-thru locations in the past few years, and it's planning to build
about a dozen more this year. - Have a good one, all right? Take care. - [Narrator] Drive-thrus
can be significantly more profitable than dine-in service because customers cycle
through the restaurant faster and they do big business. McDonald's, for instance, does about 70% of its multi-billion dollar
US business from drive-thru. - They can be very efficient. You can do a lot of sales quickly. There's not the expense of
maintaining a dining room in the same way, so you
really save in certain ways, particularly if you can
get the volumes of people who are able to go through
your drive-thru at peak. - [Narrator] This has
led lots of companies to get into the drive-thru business, and they compete fiercely over wait times. Taco Bell, for instance,
has a four-lane drive-thru outside Minneapolis with
dedicated pickup points for mobile orders and delivery drivers. Chick-fil-A has used so-called
upstream ordering for years, where staff come out with tablets
and take orders in person. That avoids a bottleneck of customers waiting to reach the menu board, all to save precious seconds. According to Mystery Shopper Data, Taco Bell and McDonald's drive-thrus had total wait times of
about four to seven minutes, which includes the time
you're waiting to order, ordering, paying, and
then receiving the food. Shake Shack doesn't disclose
wait times for its drive-thrus, but it said on past earning
calls that just filling orders typically takes it around
six to eight minutes. Decreasing wait time has
been a major initiative for the company. - We do a couple of things
a little bit differently in our drive-thrus than
we do in our restaurants. It's not compromising the cook fresh, but it is really on the technology side. - [Narrator] They start cooking orders as soon as customers place them, rather than waiting until they pay. - Hello, how are we doing today? - [Narrator] Similar to Chick-fil-A, they sometimes send staff to bus orders. Maintaining a premium feel is important to justifying its prices. Shake Shack is middle of the road for a fast casual restaurant, but much more expensive than fast food. - It is a tension that we battle every day between speed and cook to order food. We can't compete on speed because we wanna cook our
food in a certain way, but we can certainly
emphasize our hospitality and certainly delivering on the
high quality of the product. - [Narrator] We've also
done time motion studies to maximize efficiency in their kitchens. - We've been working on
a bunch of different ways of how we're flowing food
throughout the kitchen to really optimize and
reduce the number of steps that our team members have to take. For example, we used to wash and cut all of our lettuce in house. We've then transitioned
to pre-cut lettuce, so now our team members
focus on, you know, making sandwiches and
not having to sit there in the back of the house and cutting up and washing lettuce all day long. - [Narrator] Shake Shack operates most of its own restaurants, but it's increasingly
relying on licensed locations as it expands internationally, and to rest stops, stadiums, and airports. That means it selects outside
companies to partner with and those companies pay
fees to Shake Shack. That's been a major driver in
Shake Shack's rapid expansion. Shake Shack opened its first
permanent location in 2004. Its sales pitch to customers
emphasized fresh ground antibiotic-free beef, and it was founded by fine
dining leader Danny Meyer, known for its restaurants
like Eleven Madison Park, which gave it cachet. It's now a $4 billion company with over 500 locations around the world. The company says its
international locations have also helped it develop new products, particularly limited time offerings. - We learn a lot from
our licensed locations. Even our Chicken Shack
Sandwich was actually born out of the international licensed business for Shacks that did not serve beef. We also had locations that had kind of more of a regional flavor profile, like the Korean fried chicken sandwich that we brought over here. - [Narrator] But operating at this scale with fresh ingredients in a premium experience has challenges. - It's important for
them still to be premium and have that vibe. I mean, people are paying
more for Shake Shack than they would at Burger King, and so you have to believe
that the food's better and the brand's better. - [Narrator] Shake Shack
had to invest significantly in data operations so it doesn't order too
much or too little food. - The ability to get a sales
forecast very, very tight really sets the tone for
how the profitability can be at that location and
across your entire fleet. It means that your waste is within control and that you're not selling out of items and you're able to meet guest demand. We're not having to make decisions on a particular menu item, which might have a negative impact, we're literally just getting
smarter at our operations. - [Narrator] Shake Shack has
ambitious expansion plans led by its new CEO who brings experience growing major chains in the quick service restaurant industry. Over Rob Lynch's time at Arby's, first as CMO and then as president, sales grew over 20%. At Papa Johns, he helped the company recover
from a significant slump and opened hundreds of new restaurants, Though the chain has
been lagging recently. - It's challenging to take a
homespun New York City brand or any brand that's, you know, grew up in a certain geography
and push it out nationally. I mean, the company is really working now to try to be more efficient, to try to make restaurants run better and they are having some success. But I think the real
focus on Shake Shack now is can they keep running
these restaurants profitably and continue to grow? (gentle music)