24/05/2022

Telefonatbns

Making a New Home

Shake Shack borrows $225M to support expansion plans

2 min read

Table of Contents

Dive Brief:

  • Shake Shack plans to borrow $225 million to support its growth and development plans, including opening new units, new store formats and drive-thrus, as well as improving the digital guest experience and continued investment in talent, according to a press release.
  • The convertible senior notes will be offered to institutional investors, which will have the option to purchase an additional $25 million in aggregate principal amounts of notes. These notes will be converted to cash, stocks or both. 
  • Despite declines in same-store sales last year, Shake Shack has ambitious development plans, with 35 to 40 company-owned units expected to open in 2021 and plans to accelerate development with an additional 45 to 50 units in 2022, according to an earnings release.

Dive Insight:

The new funding will go a long way for the fast casual chain that began developing a plan to remodel stores with drive-thru lanes and walk-up windows following the impact of the pandemic, which led to rapid growth in digital sales. Shake Shack added over 2 million first-time users to its company-owned app and web channels from March 2020 through January 2021.

The company has already rapidly built up physical infrastructure to better support its growing digital sales channel. Within its existing store system, the company has added 13 exterior windows, which have improved guest traffic and the overall experience, Randy Garutti, Shake Shack CEO, said during the earnings call. About a quarter of app and web orders are now picked up through these windows, in addition to delivery orders. The company also expanded its curbside program to 70 restaurants, which Shake Shack sees as an opportunity to boost sales in the long term — especially in suburban markets, Garutti said. 

Roughly 10% of new Shake Shack locations this year will be in new markets such as Portland, Oregon; Tampa, Florida; and Indianapolis, with expansion in existing markets including California, the Northeast and Florida. The company is also planning to add more digitally led Shack Tracks within its urban markets, including New York City, while suburban markets will have a broader mix of elements from its Shack Track, such as a drive-thru window, walk-up window, curbside pickup and enhanced interior pickup, Garutti said.

Its first drive-thru location will open in Orlando, Florida, this year and a handful of others are planned to open in the next two years in Kansas City, Minneapolis and Detroit, he said. 

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