Shake Shack has carved out a unique niche in the fast-casual dining landscape, positioning itself as a premium alternative to traditional fast food. However, as the chain expands its drive-thru operations, CEO Rob Lynch has acknowledged a critical operational challenge: drive-thru wait times that are “exceedingly too long.” In a recent conference call announcing Shake Shack’s earnings for the second quarter of 2024, the restaurant’s top executives addressed this specific problem, discussing the company’s efforts to streamline its drive-thru operations and enhance customer experience without compromising on food quality.
Speed of Service as a Key Performance Indicator
Shake Shack began its journey two decades ago as a humble hot dog cart in Madison Square Park, Manhattan, quickly amassing a devoted following of patrons who eagerly waited in line for its offerings. However, as the brand’s footprint expanded beyond its New York City roots, the dynamics of customer expectations shifted.
“As you move from all of your Shacks being in Manhattan … where a lot of folks are walking up to the Shacks and they’re used to waiting in line … and we start to compete against other brands in other markets, in Ohio and Georgia and Texas and all these other places, speed becomes something that’s part of the overall guest experience … especially as you move into a more drive-thru format,” Katie Fogertey, Shake Shack CFO, said during the call, according to Nation’s Restaurant News.
Acknowledging this challenge, Chief Financial Officer Katie Fogertey pointed out that the company has now incorporated speed of service as a key performance indicator for its restaurants.
What Makes the Lines So Long?
Improving operational efficiency without compromising food quality is a top priority for Lynch, and the company’s new COO, Stephanie Sentell, is tasked with spearheading this initiative, particularly in the drive-thru lane.
“Our drive-thru times are exceedingly too long,” Lynch admitted, acknowledging that current wait times are double the desired standard. Unlike its dine-in experience, Shake Shack’s drive-thru model is still in its infancy, only having rapidly expanded during the pandemic when former CEO Randy Garutti spearheaded the opening of restaurants in suburbs and the addition of drive-thru locations, whose number is now between 30 and 35.
Lynch pointed out that part of the delay stems from the ordering process, as the drive-thru menu mirrors that of the dining room. “We don’t have tools like combos and other things … that can improve the speed of ordering,” he observed.
Additionally, he mentioned that the lack of standardized linear lines across all drive-thrus contributes to inefficiencies. “So people are moving around; there’s a lot of steps to get to the drive-thru window,” he added.
The kitchens also need to enhance their speed, according to Lynch. “We execute pretty good accuracy. The team does a good job making food fresh and making it right. We’ve got to get faster. And we will.”
Despite these challenges, Lynch is optimistic about the chain’s potential for improvement. “I don’t know that there is another brand that has more upside opportunity on throughput than we do,” he stated.
He even noted that Sentell has already begun evaluating operations at individual restaurants. “I probably get about five texts from her every day about opportunities for us to get better,” he remarked, assuring that they would not compromise on quality.
Shake Shack Posts Strong Q2 Results, Defies Fast-Food Competition
Shake Shack delivered impressive second-quarter results, marked by robust revenue and profit growth. According to Nation’s Restaurant News, the burger chain reported a 16.4% increase in revenue to $316.5 million, driven by a 13.5% jump in systemwide sales. Comparable sales rose 4% for the 14th consecutive quarter, while restaurant-level profit margins reached their highest level since 2019 at 22%.
Shake Shack’s Q2 performance was seemingly not affected by the ongoing “value wars” among its rival fast-food chains, and that’s partly due to the restaurant’s relatively affluent demographic of customers. Lynch emphasized that Shake Shack’s premium positioning is a significant advantage.
Despite this edge, Lynch said the Shake Shack team “has been nimble and begun to employ strategic promotions to earn more than our fair share of transactions.”
These promotions included an April marketing campaign that highlighted Shake Shack’s commitment to using proteins never treated with antibiotics — a pointed reference to Chick-fil-A, which had recently scaled back its commitment to such practices. This was followed by new burger and fry offerings topped with two barbecue sauce options around Memorial Day.
“It is remarkable that we’ve been able to do this while also growing our restaurant-level profit margins,” Lynch added. “Our teams have truly struck the right balance between product innovation, pricing to mitigate inflation, technology implementations, and strategic promotions. This is the model that we will leverage moving forward, regardless of the macroeconomic environment, and given results so far, I have a lot of confidence in this team’s ability to keep the momentum going.”
To further improve Shake Shack’s sales, Lynch also revealed that there are ongoing initiatives aimed at leveraging the chain’s loyal customer base, including the development of a loyalty program which is currently in progress.