Shake Shack CEO on deal with Uber, digital strategy, and menu innovation

Shake Shack CEO Randy Garutti discusses the company's exclusive delivery deal with Uber, its shift to digital and latest menu offerings.

Video Transcript

- Shake Shack revealed this week it will have an in-app delivery service nationwide powered by Uber Eats. Let's check in with Shake Shack CEO Randy Garutti for more on this one. Yahoo Finance food reporter Brooke DiPalma is here as well. Good morning to you both.

Randy, so why is this important to Shake Shack?

RANDY GARUTTI: Well, I'll tell you what Brian, it's been a heck of a year for all of us, right? And you go back a year ago, this was really the week, obviously, for all of us where things changed very quickly. A year ago, our business was 20% digital, 80% in person. Overnight that flipped, became 80% digital and 20% in person. Today we're about 20% digital, and what we've learned is, we have been known forever as the "Shake Shack Experience," right? Coming together in the park, wherever you are, in Shanghai, in Dubai, all these places around the world.

And when that has been taken away from us, we've learned very quickly that we want to give our guests more and more tools to add convenience to that experience. And when we come back in person and in New York and in the great cities of America and the world, we are super excited to give that full Shack experience, but to add all these convenient tools. And more and more what we've learned is that our guests, our team members, are loving the "Shack Track" experience, which is all the ways that digitally you can now engage with us, pre-order, and get rid of all that friction that we used to have.

And the next phase of this has been our own app and delivery through the app. Brian, 2 million new guests in the last year, 2 million, that's a lot for a company our size, have been new and added to our app and our digital channels. And we're up 3 and 1/2 times on our digital sales in the last year. So it's a pretty exciting momentum. And we've got a lot to do, but today's the next step.

BROOKE DIPALMA: And Randy, urban locations of Shake Shack are the ones that are really struggling throughout this pandemic versus suburban locations. So how exactly are you and your team thinking about the store footprint, and what might the next generation of those Shacks look like?

RANDY GARUTTI: Well we're really excited. We're leaning into all of it. We believe urban restaurants and centers are going to come back, and come back really strong. We know we have a long way to go in that, right, this year. That will probably take some time. But we'll come back. New York, you know, the great cities of America are going to come back. We're actually opening a restaurant in Bryant Park, in the heart of Midtown, next week. And that's how much we believe in the urban Renaissance.

That said, we've learned a lot in our suburban Shacks, and we have a lot of new formats. This Shack Track idea for us has been adding accessibility. More than 70 of our Shacks now have a curbside pickup option, where you don't have to get out of your car. We're building Shacks where you can actually drive up to a window, grab your food or walk up to a window. And we're actually at the end of the year going to build our first ever drive-throughs. And we're committed to a big learning there as well.

So everything about it is towards giving our guests the opportunity to control their experience. However you want your Shack, we'll get it to you. You want to hang out with us and bring it home, you want to pick it up and go, you want to drive through? Or, now you want to deliver it through the Shack app? We've got your back. And that's what Shake Shack's always been about, is hospitality, being on your side.

And if you think about the way restaurants need to evolve, technology should be the greatest opportunity to provide new hospitality and new forms of it. So we're super excited about this and suburbs, urban, and just getting back at it.

- Randy, it's Julie here and I have sort of an anecdotal question for you, I guess. Through my experiences with Shake Shack, as somebody who's had urban and now suburban experiences. You know, a jargon word comes to mind when I think of Shake Shack, which is "throughput." Because you talk about hospitality, you talk about the quality of the food, but to your point earlier, you talked about the friction sometimes that occurs at a Shake Shack. It can feel like you guys have not perfected that throughput experience, getting the stuff to the consumers in the most effective and efficient way. Where are you just in terms of the functioning inside the store, and how you can improve that experience? Because part of the allure of a Shake Shack as well is that maybe it does take a little bit longer to get your food done, because it's supposed to, you know, you guys have sort of a tradition of taking a little more care with that.

RANDY GARUTTI: Yeah Julie. First of all, you said it exactly right. We have never been accused of being the fastest. You know, every time someone says "fast food," we kind of say like, you know, we're not the fastest and we're never going to be. We're going to try to be the best and we're going to cook to order. We're going to spin shakes. We're going to do things with premium, no hormone, no antibiotic ingredients. That takes time. It takes full hands, full hearts of our team members. And we'll never be the fastest, and we don't want to be. We want you to know you've got to wait a little bit.

That said, of course, what these new tools allow us to do is get that process going a little faster for you. So let's take myself. I haven't ordered with a human being at Shake Shack in a couple of years, right? Because now I can take out my phone. I can pre-order. I can see things in a little different way. And by the way I can take my time, and order on my time. And I can tell you OK I'm going to be there at 1 o'clock today. Boom, pick it up. And when I get there, hopefully it's ready.

So when you think about the legacy friction in restaurants, it's really the ordering and pickup experience. We want to make that easy, so that the dining and the being there experience is good. And we'll still take our time, because we're going to remain, you know, the anti-fastfood kind of vision here, even as we try to figure out all these new formats. It's a lot of work for us. We'll get better at it. But we'll never be the fastest.

- Randy there's been a new wrinkle in the Shake Shack story that I wasn't used to hearing. You recently took out a convertible note offering, and that has some folks chattering that you might be looking at some M&A. So with all this money, what would you like to buy?

RANDY GARUTTI: Well Brian, that's not our key focus today. Our key focus is, understand, we have less than 200 company operated Shacks in this country. Compare that to anyone else you might cover in your world. And we are a tiny part of that. We see incredible growth. We've named that we intend to accelerate that growth. And we've got a smart team that was able to thread the needle on some incredible terms for this convertible debt, allowing us to have a truly fortress balance sheet so that anything is possible. We never say never to anything, that includes M&A. That's not our focus there. Our focus is on saying we have an incredible business model, we have a great return on that capital. Let's keep building and let's keep giving opportunity to our team members and building Shacks around the country and around the globe.

BROOKE DIPALMA: And Randy in the latest earnings call, go ahead Brian.

- Go ahead, Brooke.

BROOKE DIPALMA: And in your latest earnings call, you mentioned that there was limited time offerings that you're currently looking at, as well as culinary collaborations. Would you say that, as the chicken sandwich wars are heating up, are you adding more chicken options or perhaps even those healthy alternatives that are getting a lot of attention, to your menu?

RANDY GARUTTI: You bet. I mean we love expanding things in the right category. We've always been incredibly proud of the chicken sandwich that we offer, which has been one of our great sellers for years, and we're expanding on that with different LTOs and will continue that through this year.

We'll also be offering more vegetable items. You know, the 'Shroom Burger is something that's been on our menu since day one, 16 years ago, when the first Shack was born, and is a perennial great seller. And we're looking and testing other options. We know we need to meet our guests' needs, but we also want to keep our menu pretty tight, keep things together, and make sure that we are able to operate in a way that's good while giving people exciting new menu items.

We're teaming up with some of the country's best chefs. We're featuring women of color. We are featuring people from all types of different backgrounds around the country, whether Houston, Atlanta, New York, California. And that's something that only Shake Shack can really do, right? Our culinary background, being created in New York City as part of a fine dining background, that transcends the opportunity. And we're going to keep doing that and being who we are, and looking for new ways to continue to excite our guests. And if we want to do what everybody else is unwilling or unable to do, it's always been Shake Shack's goal. We've got a lot to do. We still have a lot of recovery left to make happen, but we're on the road.

- All right, we'll leave it there. Shake Shack CEO Randy Garutti, always good to see you. Stay safe. We'll talk to you soon. Brooke DiPalma, always good to see you too.