Shake Shack at Baird Conference: Strategic Growth and Innovation

On Thursday, 05 June 2025, Shake Shack Inc. (NYSE:SHAK) presented at the Baird Global Consumer, Technology & Services Conference 2025. CEO Rob Lynch and CFO Katie Bogarty outlined the company’s ambitious growth plans and strategic initiatives. While Shake Shack has faced some recent challenges, management remains optimistic about its long-term trajectory, focusing on operational efficiencies and culinary innovation.

Key Takeaways

• Shake Shack plans to expand to 1,500 locations, emphasizing diverse store formats.
• The company aims for low single-digit comp growth, driven by pricing, mix, and traffic strategies.
• Operational improvements have led to margin accretion despite revenue challenges.
• A focus on culinary innovation includes a robust pipeline of new menu items.
• Promotions are designed to be margin accretive, enhancing profitability.

Financial Results

Shake Shack reiterated its guidance for Q2 and the full year 2025, aiming for low teens percentage revenue growth. The company plans to build 13-15% new units annually, all company-owned. Despite a slight revenue shortfall in Q1, Shake Shack delivered margin accretion due to operational efficiencies. The company aims to expand restaurant margins by 50 basis points annually and targets adjusted EBITDA growth in the low to high teens percentage range.

Operational Updates

Shake Shack has significantly improved operations across key performance indicators, focusing on productivity in the supply chain. The company has implemented an innovation stage gate development process to enhance operational efficiency. Management is targeting 1,500 locations with various formats, including small, core, drive-through, and flagship stores. Addressing supply chain issues is a priority, with the team now under Stephanie Sintel’s leadership.

Future Outlook

Looking ahead, Shake Shack is targeting 13-15% new unit growth annually. The company is optimizing its distribution network and supply chain to support this expansion. Shake Shack is also investing in a guest-centric marketing strategy and loyalty programs to improve traffic and brand engagement. Culinary innovation remains a key focus, with plans to expand into new menu categories and drive guest satisfaction.

Q&A Highlights

During the Q&A session, management addressed consumer trends, noting unusual behavior this year. Pricing has driven comps in recent years, but Shake Shack is now accelerating comps with less reliance on pricing. The company clarified its promotional strategy, emphasizing that promotions are designed to be margin accretive by increasing attachment rates on low food cost items.

In conclusion, Shake Shack’s management remains committed to its strategic growth plan, focusing on operational efficiencies and culinary innovation. For more details, please refer to the full transcript below.

Full transcript - Baird Global Consumer, Technology & Services Conference 2025:

David Tarantino, Restaurants Analyst, Baird: Okay. Good morning, everybody. Welcome to the session for Shake Shack. I’m David Tarantino, restaurants analyst at Baird. And as many of you know, Shake Shack is a leader in the fast casual premium burger segment, a concept that’s been very popular and generated really good returns on capital and has a lot of room to grow in our opinion.

Pleased to welcome two members of the management team here today, CEO Rob Lynch and CFO Katie Bogarty. And I think we’ll kick it off by having Katie give us a few remarks. So Katie, take it away.

Katie Bogarty, CFO, Shake Shack: Great. Thank you. So I just want to start off our presentation today. We are reiterating our guidance that we gave on earnings last quarter for the second quarter, for the full year 2025, and our three year targets. That all can be found on our investor relations website.

So with that, back to you.

David Tarantino, Restaurants Analyst, Baird: That update. You’re welcome. So Rob, I think a a good place to start. You’ve been at the company a little more than a year. And so I thought I’d ask you to maybe share some of your observations about Shake Shack.

You maybe surprised you to the upside, maybe what’s been more challenging than you envisioned. Just talk a little bit about your path there.

Rob Lynch, CEO, Shake Shack: Yeah, well thank you David. What I would say and one of the reasons why I came here is the positive surprises are the challenges, right? I mean that’s where the value creation happens when we can find opportunities to take a company and a concept and a brand like Shake Shack and identify where there’s opportunities. And I’m very fortunate to have a chairman like Danny Meyer and he always says like, hey, we had the perfect model to get us from one to 300, but we’re definitely going to need to advance and evolve and change that model to get us to 1,500, right? And so he and the board have been very supportive and we have now turned over a fair amount of the management team and we have the right people in the right places doing the right jobs.

And we found opportunity literally across every facet of our business. So whether you’re talking about, you know, we started with operations and we have significantly improved our operations across every operating KPI. We are looking at productivity in the supply chain, very there’s huge amounts of opportunity in the supply chain that we’re exploring right now. And then on the brand, culinary, marketing side, you know, the reality is is that Shake Shack has never really done marketing. I mean, it’s amazing because it’s the only concept, I believe, pretty much the only concept in fast food or fast casual that when when you tell somebody you work at Shake Shack, they I get the same response every time.

Oh my gosh, I love Shake Shack. You just don’t get that about every other brand in the space, and yet we’ve never really had a true brand positioning distilled down and communicated across all of our channels. So that’s work that we’re doing right now that should reinforce even more how differentiated we are in this space. So all of those things we’ve kind of uncovered and tapped into over the last twelve months, and all of those things are active work streams that are the reason why we have so much confidence in reiterating both our short term and long term guidance.

David Tarantino, Restaurants Analyst, Baird: Maybe for those that aren’t familiar, stated a really ambitious long term growth target, just over 1,500 locations. So can you maybe share how you arrived at that number? And when do you think it’s going to require different formats or how do you think about kind of the long term vision of the

Rob Lynch, CEO, Shake Shack: I mean, the first requirement to get to 1,500 is confidence in the cash on cash returns generated by the boxes that we build. And despite all the noise on tariffs and inflation, we are committed, Last year, we decreased our cost to build by 10%. We committed to doing it again this year. So in the face of tariffs, we’re going to decrease our cost by 10%. At the same time, we’re maintaining our AUVs and we’re growing our margins.

So our cash on cash returns are not just holding, they’re actually improving. And our 2024 class and our twenty twenty five so far this year are the best performing classes we’ve had in recent memory. So really excited about the financial returns. That’s first and foremost. Then it becomes, okay, well how do we get to the, you know, is there enough real estate?

You know, when Shake Shack started and then for the first, call it, hundred shacks, it was all about these big shacks in urban, tourist, foot traffic driven areas. Over the last, call it, since the pandemic, where we’ve had to move into different formats like drive through, and we started penetrating other markets like Cincinnati, Ohio, and Pittsburgh, Pennsylvania, the model shifts. And I think when the company went public in 2014, there was this ambitious goal to get to four fifty Shacks. And that was with an idea that, I think Danny Meyer said, we’ll never have a drive thru. So that was the mindset.

They were all going to look like they do in New York, and there was room for four fifty of them. Well, today we have four different core We have a small format, we have our core, we have drive through, and we have our flagship. And so there’s room for all of those formats across all the white space that we have in The United States. And it’s both in markets that we’ve already penetrated, but not to the degree that we can. But there’s also a lot of markets, great markets, that we’re not even participating in today.

And the reality is is we kind of have baked in brand recognition, even in markets that we don’t currently compete in. I people travel to New York, people travel to Chicago, people travel to LA, and they see Shake Shack. And it’s a special thing for them. One thing I would say, a lot of our industry, and I’m as guilty as anybody because I’ve been around for a while, is about utility. It’s about, you know, I’m driving down the road, I have to eat, I’m hungry, what are my options?

And I’m choosing a lot of times the best of the worst. And it becomes like a commoditized experience and just something to get some food at the lowest cost. When people come to Shake Shack, they want to be there. It’s not just another option. It’s actually a destination.

So as we’ve talked about that, people travel to these cities to go to Shake Shack, and when they’re there, I have to go to Shake Shack. I get that all the time. I’m in New York, I’m going to Madison Square Park. We’re going to bring that special, unique, differentiated experience to everybody across The United States. And that gets me super fired up.

I mean, our company’s mission is to bring our fine casual experience to as many team members, communities, and people as possible. Like, that’s the more Shake Shacks we can open, the more we can bring it to the world, the better we’re making the world.

David Tarantino, Restaurants Analyst, Baird: Great.

Katie Bogarty, CFO, Shake Shack: Sure. So the three year targets that we’ve laid out and which we are you know, our 2025 guidance has us coming in above that. But we’re, you know, aiming to grow total revenue by a low teens percent, expand our restaurant margins by 50 basis points a year, and grow our adjusted EBITDA anywhere between low to high single or high teens low teens to high teens percentage. To get there, you know, have talked about having kind of a low single digit type comp and growing units as well.

Rob Lynch, CEO, Shake Shack: Yeah. I mean, we’re going to grow at the rate that can deliver continued improvement across all of our KPIs. So we’re not going to start opening Shacks for the sake of opening shacks that don’t deliver on a cash on cash returns or AUVs that we have set as our internal criteria. And the really exciting thing is that almost every shack that we’re opening is beating our pro form a and the metrics are getting better. So as we grow, we’re getting better.

It’s not like this idea of hey, we’re gonna cannibalize business or it’s gonna be less efficient or less productive. It’s actually improving And it’s going to improve our growth in our restaurants improves our core restaurant profitability as well because we get synergy and productivity in our supply chain, in our above restaurant operations, and in our marketing investments. So it’s not just about, hey, each individual Shack has to return this. I mean, that’s the baseline. It’s about how can we build a pipeline, and we have the largest pipeline in the company’s history right now in terms of projects, deals that we’ve signed.

How can we build a pipeline that’s going to optimize our distribution network, our supply chain, how we manage our above restaurant operations? So it’s just continuing to add to the productivity of

David Tarantino, Restaurants Analyst, Baird: our

Rob Lynch, CEO, Shake Shack: base while we build these shacks.

David Tarantino, Restaurants Analyst, Baird: I wanted to shift to a couple of near term themes. At this conference, we’ve had a lot of consumer companies comment on the state of the consumer. And I wanted to get your views on that. I guess we’ve had a kind of unusual pattern across the years so far.

Rob Lynch, CEO, Shake Shack: Say the least.

David Tarantino, Restaurants Analyst, Baird: What is your thought on kind of the health of your core consumer?

Rob Lynch, CEO, Shake Shack: We came into this year with a lot of momentum, or at least we thought we did. But I will tell you, and I just kind of want to address some of the narratives that are out in the space about our brand. I will fully recognize that last year we did 3.6% comps carrying 6% pricing. And that has been a little bit of the model for the last few years for this brand that pricing has kind of driven the comps. And in the world of hyperinflation and the pandemic that we were living in, it worked.

And I recognize that people and investors have had concerns about, well, that’s not a sustainable model in an environment where there isn’t that type of inflation and there isn’t an amount of disposable and discretionary spend disposable income and discretionary spending. So when we got into January and February and March, you know, we actually had a really great start to January. And then at the inauguration, something just clicked in this industry for us, and we had a really tough February and a little bit of a better March, but then a soft April. We’ve already disclosed April as down 1%. And we took that opportunity to really dig into our business model and really look at what is the model, the sustainable model moving forward?

And we effectively put a hold on a price increase that was in the plan for March or April?

Katie Bogarty, CFO, Shake Shack: March, yeah.

Rob Lynch, CEO, Shake Shack: March. And so our model moving forward, the data, already data we have this year substantiates that we have confidence in this model. So in Q1 we delivered point 2% comp, which was 8,000,000 below kind of like the revenue targets that we had. So our revenue was down from what we thought, point 2% comp, and we delivered margin accretion. And that’s because we have done so much unbelievable work in our operations.

But even in Q1 we carried about 6% pricing too. Q2, we’ve dropped a 2% year over year price benefit. And we just guided to low single digits after delivering minus one in April. So when you do that math, it shows that we are growing our comps, we’re accelerating our comps with 400 basis point less pricing baked in. So the only way that you do that is to improve your traffic and improve your mix.

And that is where all of our focus is in. And now that we have an operating engine that we have 100% confidence in, we are doubling down on our culinary innovation, on our marketing, and in our loyalty and guest relationship platforms. So when I got here twelve months ago, despite the culinary history and legacy of Shake Shack, there really wasn’t a pipeline. And that’s why we ran Truffle for six months, and that’s why we ran out of gas in the last couple months of of Q one. That will never happen again.

You know, we I brought in somebody that has worked with me for a long time, about six months ago, and she has built an innovation stage gate development process. We have an unbelievable pipeline for the next eighteen months built out. We’ve got redundancy in that. We’ve got alternatives. So we will never have a scenario where we don’t have amazing culinary innovation that we believe in and that we’ve tested.

This brand never did any consumer testing. It was a chef driven, culinary driven, founder driven decision on here’s what we’re going go out with. We’ve built a whole model around giving the guests what they want, but still pushing the envelope on culinary. We are different than QSR. Like, we are not QSR.

We compete with them, but we are not. We have the ability to push the envelope on culinary unlike anyone else. And when you have solid operations, it opens up the aperture of what you can do. When your core operations are tough, you can’t throw wrenches into the operation because it just explodes. Our operations are better than they’ve ever been, so now we can push the envelope.

So we are looking at everything on innovation that doesn’t negatively impact our supply chain or our operations, right? So the beautiful thing I think about One of the beautiful things about our brand is we’re not you know, Habit Burger, we’re not In N Out Burger, we’re not Burger. We’re Shake Shack. We don’t have to be tied to burgers. We’re going to innovate on burgers.

We’re going to always have the best burgers in the world. That’s why I came here. I fundamentally believe that we do. In fact, we’re actually working to make our burgers even better right now, our core burgers. But we can innovate on sandwiches, on side items, on beverages.

I mean, it’s Shake Shack. Like, we should be a beverage destination. So we can do all of that and that and we have the culinary chops and capability to do it. We just didn’t we just didn’t used to have the funnel. We didn’t have the process.

And it was dependent upon a few key people. And if those few key people weren’t hitting on all cylinders or somebody left the company, things broke down. It’s not the model anymore. So we are going to deliver traffic improvement. We are going to deliver mix improvement.

We are going to bring innovation that trades customers up to premium innovation so we don’t have to charge them more for the same stuff like we had to in the past. Like, our building blocks, we’re going to take between 12% pricing a year. That’s the historical run rate that got a little crazy during the pandemic. We’re going to do that because costs continue to go up, but we’re not going to take the 6% unless some inflationary situation arises. And at one to 2% pricing, we shouldn’t see any transactional impact.

And then you bake in one to 2% improvement in mix through our innovation and our, you know, the work that we’re doing on all of our sides. We just launched fried pickles. I mean, pickles, that’s not like crazy. It’s not like, you know, we invented and ate new AI something or whatever. It’s fried pickles.

Katie Bogarty, CFO, Shake Shack: It’s a pretty big Dell.

Rob Lynch, CEO, Shake Shack: They’re killing it. They’re driving traffic. Like a fried pickle side that we’re not even really advertising. That is like that shows us that if we invest in innovation, we can drive one to 2% mix improvement. And then we’re going to you know, our focus is driving positive traffic.

So you do the math, 2% pricing, one to 2% mix, call it zero to 1% traffic, although we aspire to do better than that.

Katie Bogarty, CFO, Shake Shack: That’s your low single digit comp.

Rob Lynch, CEO, Shake Shack: That’s your low single digit comp. And then if we keep doing the work we’re doing on the margins, which I hope we’re building credibility because every quarter gets better and better and better, that’s an amazing glide path. And when you’re building 13 to 15% new units that are company owned every year, and you’re fixing the supply chain, where we derive all the benefit from the supply chain benefits improvements. Right? A franchise concept, if you go and do work on a franchise concept supply chain, the benefit goes to the franchisees.

Company owned, we get all that. Yeah, there’s downside to being company owned, that’s one of the biggest benefits. When we get more productive in our supply chain, we benefit from it. So I just laid out everything, so we got ten minutes left we can call today.

David Tarantino, Restaurants Analyst, Baird: You preempted a lot of my questions. I have a question, related to the promotional environment and your strategy to respond to that. So I think you’ve been running some offers pretty consistently. So can you just describe your thoughts on why that’s important? What some of the implications are to the brand?

Is this kind of

Rob Lynch, CEO, Shake Shack: I hope that this message goes out to every investor in the world right now. I mean, you make that happen, David? Okay. So we don’t run like $5 meal deal, right? I mean, 5 meal deal is a traffic driver.

It’s going be margin dilutive. We run promotions that bring guests in. Typically, our promotions have some type of purchase threshold. And when people come to Shake Shack, our frequency is lower than the industry, but our items per check and our checks are higher than the industry. When people come to Shake Shack, they buy everything.

They buy a burger, they buy a drink, they buy fries, they buy a shake. Like, that’s just how it works. When we ran our Dubai chocolate shake last quarter and we only put it in 30 shacks because we couldn’t build a supply chain to support more, And we only gave each shack of those thirty twenty five shakes per shack. We sold out in almost in most of our shacks we sold out by noon. So people were showing up wanting a Dubai shake at Shacks that weren’t offering it or the Shacks that were offering it that had already run out, and we didn’t have it.

What did they do? They came in and bought burgers, fries, and a shake. Like, nobody comes to Shake Shack and just gets like a soda and then leaves. It’s not a utility experience. It is a destination which is so rare in our business right now.

We have that. So, you know, we are working to make sure that our promotions bring people in, and when they do, they’re buying a bunch of stuff. So I can’t say this enough. Our promotions are margin accretive. I know that’s hard to wrap your head around, but we build them that way.

We build them that way. We give the discounts our high food cost items, they come in and our attachment rate on our low food cost items goes up. So it’s actually margin accretive. And the other thing is QSR, I mean, 50% sold on deal or promotion. If you actually throw combos in there, it’s like 90% of QSR is on promotion.

We sell less than 10% of our food on promotion. So this idea of, well, they’re going to have to do these promotions to drive value because their prices are too high, so that’s going to be margin dilutive. Just keep watching our margins and recognize that while our margins continue to grow, we continue to run promotions and it’s not margin dilutive. Like, if everyone could take that away, like, every time I read about this concern about us having to invest more in marketing or do promotions that are going to be dilutive, that’s just not the model. That’s not the model that we’ve leveraged over the last twelve months.

That’s not the model that we’ve built in moving forward. We’ve committed to improving our store level margins for the next three

Katie Bogarty, CFO, Shake Shack: And

Rob Lynch, CEO, Shake Shack: we’re well on our way.

David Tarantino, Restaurants Analyst, Baird: Thank you for that. So on marketing and loyalty, maybe you can tie those two together, you’re making investments there and your background is a really great marketer. So I guess talk to us a little bit about your vision on how you use advertising, how you use loyalty to drive engagement.

Rob Lynch, CEO, Shake Shack: So, you know, I’m like a dinosaur of marketing, right? I mean, you and I both came from Procter and Gamble, right? Like, I started before the millennium, you know, 1999 I started at Procter and Gamble. And one of the things that you learn there as a brand marketer is that execution without strategy delivers terrible returns. I know it sounds obvious, but that is like the whole world of marketing right now.

Everyone talks about the execution. They teach us about a marketing framework. It’s three questions. Who, what, and how. All anyone talks about is how.

Oh, AI is going to transform this. You know, when I started in this industry, oh, it’s all about social media. Like, those are all hows. And I get it because that’s where the money gets spent. Right?

You’re going and buying eyeballs and all the tech is around the how. So that’s all anyone wants to talk about. You shouldn’t even talk about the how until you understand truly who your target customer is and what you need to say to them to either increase or change their behavior. That’s the strategy. And so we’ve spent twelve months working on marketing strategy.

Yeah, we’ve done somehow because that was in place before I got here, and we’re continuing to keep the lights on on the loyalty, guest recognition, promotion stuff to a smaller extent. But in terms of what I call marketing, we’ve never done it. We’ve never done it, and we are going to. But before we do that, we are going to develop a guest centric strategy. We’re going to absolutely define who our target guests are, the highest value guests.

And then we’re going to deliver communication that differentiates our brand versus our competition in the most profound way with that target audience. And until you have that, you shouldn’t be spending a bunch of money on buying media. And so we are working on that right now. I’ve brought in new people that are working on it that have done it with excellence. I think maybe a lot of you know this, this is to my grave I’m gonna have to deal with this, but I’m known as the we have the meats guy, and it’s not necessarily what you want on your headstone, right, but I’ll take it, it is what it is.

Like, I brought in people who worked on that stuff. Like, that transformed our brand at Arby’s. I turned around a brand that was dead. Like, we don’t have to turn anything around here. People already love this brand.

We just have to be smart enough to tap into why and then distill it and then send it out into the world. So we’re working on a strategy. And the other thing is we’re going to have amazing culinary innovation to launch that brand positioning with. Like stuff that nobody’s seen in the industry before. I mean, we’re eating a lot.

Katie Bogarty, CFO, Shake Shack: It’s very fun. Yeah.

Rob Lynch, CEO, Shake Shack: It’s so exciting. And there’s also a narrative out there that’s like, okay, well, he’s the marketing guy and he’s going to spend all this money on marketing and it’s going to dilute the margins. It’s just not the case. Like, we have committed to delivering the EBITDA that we guided to. And, you know, my LTI, my annual bonus, everything is EBITDA driven.

I spent six years in private equity before going to Papa John’s. Like, I’m a steward of our P and L. Like, we’re going to deliver the profit. We’re going to continue to we’re going to fund all this with the productivity that I talked about, that we’re delivering in the operations and the supply chain. So part of Katie and I, our job is our teams are finding all this productivity.

We need to figure out how much of it drops to the bottom line because we’re committing to improving our margins and how much of it fuels the top line growth because we have to get transactions going in a positive direction. So that’s what we do every day.

Katie Bogarty, CFO, Shake Shack: Sure. So for the past, I think it’s sixteen, seventeen quarters, we’ve been delivering margin expansion at the company. A lot of that has come in how we’re operating our Shacks and just getting better and better at that. And, really, when we’re looking at the go forward, we’re gonna continue to do that. But where we have a lot of excitement and where we’ve uncovered a lot of opportunity is actually in the supply chain.

So if you kinda think about how our supply chain team has grown over time, you know, we’re using a lot of the same suppliers and a lot of the same number of suppliers that we used when we had 30 Shacks. And now we’re, you know, over 350, and we know we’re growing really fast. We have big aspirations here. And so Rob actually moved supply chain underneath Stephanie Sintel, our chief operating officer, who both of them have a lot of experience running supply chains at scale. And, you know, they’ve already identified a lot of really exciting opportunities, which, you know, Rob alluded it to it a little bit, but these things are, you know, items that or or projects that help us, you know, capitalize on our scale for sure.

But, also, they’re just part of what running an at scale supply chain team looks like. It’s about having redundancy in your supplier base, And there are also, you know, things that are improving our product. So those are the things that we’re really excited about.

David Tarantino, Restaurants Analyst, Baird: Great. Thank you for that. And then quick one, returning to free cash flow positive. We

Katie Bogarty, CFO, Shake Shack: already there.

David Tarantino, Restaurants Analyst, Baird: Yeah, you’re already there. So how do you plan to use your free cash flow?

Katie Bogarty, CFO, Shake Shack: Yeah, so last year was the first year as a public company that we have generated positive free cash flow. It was a very exciting moment for me. And, you know, look. We’re a business that has been generating you know, and our forward path is generating even greater returns on our investments, especially around our new restaurant development. And so we’re going to continue to build more restaurants and grow that scale on that side, and that’s the greatest potential investment that we have here.

David Tarantino, Restaurants Analyst, Baird: Great. Well, we’re out of time. Please join

Katie Bogarty, CFO, Shake Shack: Thank you.

Rob Lynch, CEO, Shake Shack: Thanks. Thanks, David.

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