Shake Shack’s rise from burger stand to billions

Kai Ryssdal, Tommy Andres, and Eliza Mills Jul 30, 2015
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Shake Shack’s rise from burger stand to billions

Kai Ryssdal, Tommy Andres, and Eliza Mills Jul 30, 2015
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It started as a way to raise money for a public park. When the Madison Square Park Conservancy debuted its first art installation “I ♥ Taxi,” two restaurateurs from Michelin-starred Eleven Madison Park decided to open the hot dog stand that would become Shake Shack. 

Randy Garutti, Shake Shack’s CEO, says the food was immediately popular. “All of a sudden, 50 people lined up, 100 people lined up, the hot dog cart became this unbelievable thing in New York,” says Garutti. “For three years, we ran that hot dog cart, as the park started to come back to life — all the money we made went to the park — and the city said to us, ‘Why don’t we create a little kiosk over here, 400 square feet?’ And we named it Shake Shack, thinking we’d sell a couple hot dogs.”

Garutti and Shake Shack co-founder sold way more than a couple hot dogs, and when Shake Shack introduced its ShackBurger to that first kiosk in 2004, a legend was born. Customers have been known to wait in long, snaking lines for close to an hour waiting for burgers. And Shake Shack has expanded from a hole in the wall into 70 worldwide locations, with outposts in the U.K., Middle East and Russia.

This growth shows no signs of slowing. This year Shake Shack made its initial public offering on the New York Stock Exchange and was valued at $21 per share. That number has tripled since then, with even higher peaks in the interim. The company says it plans to build only 450 locations, but investors are already predicting bigger expansion. 

Already, a single Shake Shack location is worth $50 million, compared to $10 million for a Chipotle, or $3 million for McDonald’s. Shake Shack’s high-quality ingredients and fast-casual (Garutti prefers “fine casual”) atmosphere put it in line with current trends in dining. 

“It’s all about the experience,” Garutti says, “every one of us had that roadside burger stand in our home town. What was that about? It was about going there with your mom, with your date, with your buddies … for every reason you would go to that place, it was the community gathering place. That’s what Shake Shack gave the world back, and if you look at what fast food did over 50 years, they actually did the opposite.”

Garutti says that it’s the Shake Shack team’s backgrounds that makes the restaurant so unique. “Our culinary director came from Gramercy Tavern. Some of our ops team are fine dining guys,” Garutti says, “and we combine that with people who’ve worked in much bigger and sometimes public companies … that tension is what makes Shake Shack what it is.”

Transforming from a fundraising project for the park into the valuable franchise that the New York Times dubbed “the anti-chain-chain” wasn’t part of the original plan for Garutti and his team, but as Shake Shack’s popularity soared, transitioning gracefully into its role as a chain became crucial to the restaurant’s success. 

“Chain can sometimes be a four letter word, and the way we’ve changed that is to say: Why couldn’t every link in the chain make the chain actually stronger, and why couldn’t every link be a little different, and be thoughtful and be built for that community, not happen to its community,” Garutti says. “That’s what we’ve tried to do and that’s what makes a chain of us even stronger every time we add one. “

The original Shake Shack in Madison Square Park, New York.

The original Shake Shack in Madison Square Park, New York.

Garutti says as long as there’s demand, Shake Shack will keep opening new locations, but he insists he’s capping things at 450, for the sake of his own team. Regardless of how many Shake Shacks there are, it’s important to Garutti not to dilute the brand, to continue to be a gathering place known for quality and cool. 

Garutti is known for saying “the bigger we get, the smaller we need to act.” That’s why Shake Shack uses high-quality ingredients, collaborating with local companies like Mast Brothers (“the coolest, most innovative chocolate makers in Brooklyn,” says Garutti) and Kreuz Market in Austin.   

“The next generation of millennials and younger care where their food’s coming from. They require more, and they will only be a part of a brand whose ethos we share,” Garutti says, “those are the people who are choosing to a place like Shake Shack every day.”

“We grew up in Silicon Alley in New York City when Twitter, Facebook, everything was growing and happening, and you think about it now, wherever I go, I want to take out my phone and I want to share where I am, all the time, with everyone in the world…. People are proud to say, ‘I’m at Shake Shack today.'”

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