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Dive Brief:
- Shake Shack is set to launch a kitchen innovation lab adjacent to its new support center in Atlanta later this year, as announced by CEO Rob Lynch during a recent earnings call.
- The lab aims to facilitate the testing of process optimizations and new equipment, enabling the management team to learn, refine, and further evaluate developments, thereby accelerating the rollout of new models and processes.
- The primary objective is to enhance service times and overall convenience for customers, ultimately leading to increased visitation frequency, Lynch explained.
Dive Insight:
The establishment of the kitchen innovation lab is anticipated to expedite the introduction of new restaurant formats and potentially enhance cash-on-cash returns, according to Lynch. By streamlining and speeding up restaurant buildouts, this initiative will support Shake Shack’s ambitious growth plans, which include expanding from 330 locations in the U.S. to 1,500 company-owned restaurants. Furthermore, the company is actively working to reduce construction costs, aiming to lower buildout expenses from $2.4 million in 2024 to $2.2 million.
Previously, Shake Shack followed a lengthy process of building new restaurants while simultaneously testing various models for optimization. Lynch articulated the challenges, stating, “While you’re trying to open up a new restaurant in an optimized way [and] drive performance, you’re also testing ideas and thinking about maybe this could work, maybe that will work.” The kitchen innovation lab is designed to facilitate a modular approach, allowing for the testing and optimization of kitchen equipment, buildouts, workflows, and processes.
Among the types of equipment Shake Shack is considering are advanced hot holders, fryers, shake machines, and other innovations intended to reduce service times—particularly at drive-thru locations, where the company has encountered challenges with prolonged wait times. Since initiating drive-thru locations in 2021, these establishments now account for approximately 10% of Shake Shack’s total system, as noted by Lynch.
Optimizing store formats will also play a crucial role in achieving the chain’s objective of enhancing service speed. Although the company successfully reduced customer wait times by one minute last year, Lynch indicated that there remains potential to decrease service times by an additional minute. The brand continues to face challenges with long lines during peak hours; for instance, lunchtime queues often stretch ten people deep at many of its New York City locations, which can discourage potential customers from entering.
“At $4 million AUVs, we’re doing a lot of business. We have a lot of traffic and lines, so speed is a big factor for us,” Lynch continued. “To take a whole minute off speed of service in one year, that’s just not something that is possible at the QSRs of the world.”
The creation of the innovation lab and support center marks a strategic shift from a centralized corporate headquarters. Shake Shack will now operate three support centers, including existing facilities in New York City and Hong Kong, which caters to the international market. The new Atlanta center is expected to broaden the company’s access to a diverse talent pool across the nation, according to Lynch.
“We have a great team here in New York City doing amazing work and driving all these great results. That’s not going to change. We are not moving people from New York to Atlanta,” Lynch clarified. “We’re essentially just opening up the opportunities. … This new office gives us access to a whole new population of tech talent.”
Recently, the company appointed Justin Mennen as chief information and technology officer, who will be based in Atlanta. The city boasts 60 universities within a two-hour radius, making it a promising hub for restaurant operations talent, Lynch stated.
This strategic investment in Atlanta represents a departure from a broader trend among other fast-food chains, such as Yum and In-N-Out, which are consolidating their headquarters. For instance, KFC U.S. is relocating its headquarters from Kentucky to Plano, Texas.
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