Shake Shack CEO: Expect More Delayed Openings This Year
Photo Caption: The interior dining room of Shake Shack's innovation kitchen in New York City.
Skift Take
When routine opening problems surface — vendor disputes, landlord hassles — it doesn't look great for any restaurant trying to open. For Shake Shack, those same problems are magnified due to the brand's high level of awareness in each market.
Multiple Shake Shack locations have missed their opening target days this year, and Shake Shack CEO Randy Garutti warned today at a financial investment conference in New York that the trend will likely continue into 2019.
Shake Shack has been moving at an exponential rate of expansion, both in the United States and internationally. When the company first went public, it planned for 15 openings per year. By the end of this year, Shake Shack will have opened 33 to 34 locations in the U.S. in the past 12 months, and it plans to open another 36 to 40 locations next year.
However, as the rate of openings have ramped up, so have opening delays and setbacks, sometimes pushing the opening dates for new locations far past their original targets.
"We've been sitting on a fully built restaurant in Palo Alto for a month," Garutti said, referencing a high profile Shack opening in the Bay Area of San Francisco, California. "The landlord hasn't finished work. If it's not finished, we can't open. That has happened and continues to play out."
Shake Shack's brand awareness is a double-edged sword here. Any time Shake Shack announces a new location, instant excitement is generated around the openings. In less trafficked locations, the delays typically don't grab too many headlines, but for high profile openings, it's a different story.
The Seattle opening in particular was a loud miss for the company. When Shake Shack announced that it was pushing the Seattle opening back by a couple of days, everyone from the Seattle Times to Eater Seattle bemoaned the bad news, after having originally covered the anticipated opening date.
"It's not all landlord [issues], some of it is a city is being really busy with a lot of growth, permits taking longer than expected, inspection is taking longer than expected," Garutti continued. "So, just finding and locking down contractors to get the restaurants built. Good luck finding an electrician in the city of Seattle. These are real challenges."
Shake Shack still has 10 to 11 planned openings to execute before the end of 2018 in order to hit projected numbers, and Garutti expects the same kind of crunch to close out 2019 as well. "In the retail restaurant business, this is often a back-loaded situation and that will certainly be the case for this year," Garutti said. "We're planning to expect the same thing next year."