Live Earnings Conference Call: Shake Shack will host a live Q1 2025 earnings call on May 1, 2025 at 8:00AM ET. Follow this link to get details and listen to Shake Shack's Q1 2025 earnings call when it goes live. Get details. NYSE:SHAK Shake Shack Q2 2023 Earnings Report $87.83 -0.43 (-0.49%) Closing price 04/30/2025 03:59 PM EasternExtended Trading$85.52 -2.31 (-2.63%) As of 07:47 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Shake Shack EPS ResultsActual EPS$0.18Consensus EPS $0.09Beat/MissBeat by +$0.09One Year Ago EPSN/AShake Shack Revenue ResultsActual Revenue$271.80 millionExpected Revenue$274.55 millionBeat/MissMissed by -$2.75 millionYoY Revenue Growth+17.80%Shake Shack Announcement DetailsQuarterQ2 2023Date8/3/2023TimeBefore Market OpensConference Call DateThursday, August 3, 2023Conference Call Time8:00AM ETUpcoming EarningsShake Shack's Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Shake Shack Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 3, 2023 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Greetings. Welcome to Shake Shack Second Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Keypad. Operator00:00:18Please note this conference is being recorded. I will now turn the conference over to Michael Aurelio, Director of FP and A. Thank you. You may begin. Speaker 100:00:29Thank you, and good morning, everyone. Joining me for Shake Shack's conference call is our CEO, Randy Geruti and CFO, Katie Fogarty. During today's call, we will discuss non GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release and the financial details section of our shareholder letter. Speaker 100:00:58Some of today's statements may be forward looking and actual results may differ materially due to a number of risks and uncertainties, including those discussed in our Annual Report on Form 10 ks filed on February 23, 2023. Any forward looking statements represent our views only as of today, and we assume no obligation to update any forward looking statements if our views change. By now, you should have access to our Q2 2023 shareholder letter, which can be found at investor. Shakeshack.com, in the quarterly results section or as an exhibit to our 8 ks for the quarter. As a reminder, during last year's Q2, our Shack level operating profit saw a benefit of 40 basis points from one time credits related to our 2022 leadership retreat. Speaker 100:01:42During today's call, we will discuss year over year Shack level operating profit and cost comparisons excluding these credits in order to provide a more like for like I will now turn the call over to Randy. Speaker 200:01:54Thanks, Mike, and good morning, everyone. Our team continued to execute our strategic plan through the Q2 and into July. We grew total revenue by 18 percent to $272,000,000 with 3% growth in same Shack sales, average weekly sales of 77,000 In trailing 12 month AUV across our Shacks at $3,900,000 we grew system wide sales by 21% year over year to $426,000,000 as we continue to accelerate the growth in our licensed business across new and existing markets. The company operated business, we opened 10 new Shacks with 23 currently under construction, well on our way to opening about 40 new Shacks this year. In Our licensed business, our partners opened 13 Shacks in the quarter. Speaker 200:02:37We target opening 35 Shacks this year, representing 17% system wide unit growth year over year. Since the quarter ended, we've seen an uptick in sales momentum with fiscal July same Shack sales up 4.5% and strong performance around the company. As we strengthen the company for the future, our commitment is to being a profitable growth company. In the Q2, our teams delivered 21% Shack level operating profit, our highest level since 2019 and a 240 basis point gain over last year. We are disciplined. Speaker 200:03:11We are more efficient across our Shacks, G and A and CapEx expenses. In our restaurants, We've identified numerous areas for improved process and cost reductions that we executed against in the quarter with the aim of growing profitability while delivering a great guest experience. We are still early days and seeing the full potential from this work. But with these strategies, we'll continue to improve how we run our Shacks, all the while Still improving upon our already strong returns and great guest experience. While our overall second quarter results were strong, Our same Shack sales slowed in May before rebounding through June and strengthening into July. Speaker 200:03:48Our highly successful white truffle LTO that contributed to our strong performance in 1st quarter in April sold out early. And we know that our best LTOs drive mix, frequency and margin, and we saw a slight dip in those contributors in May and early June that impacted the quarter. In late June, we launched our Bourbon Bacon Burger, a well liked LTO from last year, which is expected to sell out soon. And in late July, we pivoted to promoting our avocado bacon burgers and chicken. We're looking ahead to September when our LTOs will focus on the return of a guest favorite, Hot Chicken as well as a new menu item, the Spicy Shack Meister Burger to bring the heat into year end. Speaker 200:04:27I'm particularly excited about our culinary lineup For next year as well as we continue to evolve and improve the level of guest data and insights that we're weaving into our culinary story. Let me give a mid year update now on how we're tracking against our 2023 strategic plan. Our first priority is on recruiting, rewarding and retaining a winning team. I'm proud to report that while staffing is always challenging in the restaurant business, our teams have done incredible work towards improving our retention and turnover. Year to date, we're experiencing the best turnover numbers we've seen in years. Speaker 200:04:59Our team members are earning competitive wages, They're staying longer and all of this is contributing to our operational execution and profitability in the Shacks. The near and long term benefits and returns on this investment And retention cannot be overstated. Our people remain our priority and we're continuing to look at ways to improve their experience and opportunities for advancement in the Shacks. As just one data point, in the last 24 months, with the introduction of our Shift Up leadership curriculum, more than 180 Shack leaders across the country Have taken the 18 week course and many have graduated from hourly supervisory roles into the next level of management, fueling their development and building a pipeline of leaders ready to take on the growth ahead. Our second priority is our relentless focus on the guest experience. Speaker 200:05:46We continue to execute a broad culinary strategy of improving our core menu while delivering exceptional LTOs that we keep that keep operations running smooth and efficient. In addition to the comments I made earlier, We also launched our Veggie Shack Burger and non dairy shake, both of which have received a solid reception. We're featuring a great lineup of shakes this summer as well as option for our lemonades. In some Shacks this quarter, you'll see us testing a new mini shake size as well as a small test bringing sundaes Back to the menu as we look to broaden optionality and operational ease in our dessert category for the long term. We We also continue to expand our kiosks, which will be in nearly all Shacks by the end of the Q3, a full quarter ahead of our expectations. Speaker 200:06:30We doubled our kiosk sales year over year as guests return in Shack and choose this as their preferred experience. Kiosks enhance guest convenience while driving a higher average We've only begun to explore the potential full capabilities of kiosks such as upselling and connecting personalized marketing across channels. One of our primary focuses of digital investment next year will be improving the kiosk experience towards greater omnichannel adoption and long term guest connection. With our exciting culinary innovation, continued kiosk rollout, menu strategy and digital tools, guest perception and value scores continue to improve. Our 3rd priority is our targeted development strategy with a focus on drive thru and maximizing our total addressable market with great returns over the long term. Speaker 200:07:20I've consistently said we are investing for learning early on. So what have we learned so far? We've opened some amazing drive thrus in the 2nd quarter across the country, including Lancaster, Pennsylvania Richmond, Virginia as well as deepening our footprint in Texas, in Sugar Land and McKinney as well as Katy and San Marcos subsequent to the quarter. Each of these have started stronger than expectations and give us confidence in the ultimate potential for drive thru. Where we picked great real estate specific for drive thru, we are capable of driving strong AUVs and profitability. Speaker 200:07:53All told, Of the 18 drive throughs we're operating today, we have some great Shacks performing above our long term sales targets. We have some below our targets Build metrics and in others, we've invested more than our targets, which has contributed to a higher cost to build overall this year. We remain encouraged by the drive through opportunity and We're continuing to refine, take down cost to build and improve the model overall. We're expecting to open about 15 drive throughs this year and a similar amount in the coming years. We're ensuring future sites take in a lot of the learnings that we've gotten thus far and will continue to improve each and every day. Speaker 200:08:38We are bringing down build costs and prototyping future Shacks with 2023 drive thru build costs already trending down about 10% year over year. We believe we can build a more standardized operation in a smaller footprint with less seats and a lower cost to build overall, while still enhancing the great guest experience Shake Shack is known for. While this number may vary in the future due to geographic mix of openings, this gives us confidence we can bring down build costs over time. Next year, we're particularly excited to have much more of the drive thru class in our strong coastal markets in Long Island, New Jersey and California, We generally expect higher AUVs with higher brand awareness. We are continuing to focus on the guest experience and operational improvements specific to our drive throughs. Speaker 200:09:22We look forward to material progress over time. On our license business, our team is hard at work with our partners to open new Shacks and expand our business across the globe. In fiscal April, we opened our 1st Shack in Thailand. In fiscal July, we opened our 1st Resort Shack with a bar in the Bahamas in the Atlantis Resort. Our strong performance in the Q2 was primarily driven by outperformance in our license business domestically, which is one of our largest markets. Speaker 200:09:49Our airports and in New Jersey and upstate New York are thriving and capitalizing on busy summer travel patterns. We have a long runway ahead for our domestic license business With 36 licensed Shacks across the U. S, including 18 airports, 11 stadiums, 6 Shacks in Roadway Travel Plazas and 1 Museum. And Based on the strength of this business and the continued optimism shared by our partners around the globe, we expect approximately 35 new licensed Shacks openings this year. Our 4th priority is being even more profitable in our Shacks. Speaker 200:10:222nd quarter restaurant margin expanded 2 40 basis points year over year to 21%, Marking the Q1 since 2019 where our restaurant margin grew back above 20%. This is a testament to our continued progress on our key initiatives as we achieved 21% despite high single digit food and paper inflation in the quarter. Finally, the 5th pillar of our plan is we build an enduring business. We are committed to investing with discipline. To support our restaurants. Speaker 200:10:59Starting with development, we're excited about all the work the team has done to improve our build costs over time. However, unlike the high velocity of our restaurant operations, moving the needle here will take time given long lead times of design and build out. We have opportunity and a plan in place and we are optimistic it will show strong results with future classes. We expect 2023 to be the high watermark for build the class currently tracking about 10% up year over year. Unfortunately, we've had a few very challenging projects that drove the majority of the overruns, while also building the highest mix of drive throughs so far and working still working through elevated build costs and delays across the system. Speaker 200:11:38All this together had a heavy impact on our class. However, looking ahead, We are already seeing evidence that we have the right strategies in place to lower this cost materially next year and even further in the coming years as new prototypes come into design. Our commitment is to target lowering build costs next year by about 10% for the overall class. As we take down build costs and improve Shack level operating profit, we to continue to improve overall Shack returns well into the future. We've got the right plan in place and we're pleased to see progress taking root as we continue the evolution of Shake Shack. Speaker 200:12:12We remain one of the fastest growing publicly traded restaurant companies and we're growing profitably while strengthening our brand and are opportunity ahead. I'll now hand it off to Katie to share more about the details of the quarter and expectations for the rest of the year. Speaker 300:12:26Good morning, everyone. 2 40 basis points year over year to 21%, a function of us producing the highest restaurant operating profitability flow through on sales growth since 2015, the year that Shake Shack went public. With this improvement and discipline on other expense lines, we generated a record high $37,000,000 of adjusted EBITDA, 13.6 percent of total revenue, marking 370 basis points of adjusted EBITDA margin expansion year over year. Before diving into our financials though, I want to take some time to share progress in the quarter that contributed to our strong restaurant margin outperformance. To start, despite continued elevated inflationary pressures, we have preserved a good portion of our profitability by taking a strategic approach to pricing and widening the price differential across our markets to match regional and guest dynamics. Speaker 300:13:24But pricing alone did not bring us to today's strong results. As part of our work on our 2023 strategic plan, over the past few quarters, we've identified and executed against opportunities for operational improvements that contributed to the significant portion of our year over year margin expansion this quarter. Many of these are still early days in the making, and we are building on them as we progress throughout the year. So first, we are working closely with our operators on execution improvement plans across our Shacks. Major call outs here are better alignment on new standards and demand generated labor schedules, further increasing operating hours, driving waste reduction, T and E discipline and other initiatives. Speaker 300:14:03We are leveraging fresh weekly sales forecast in our Shacks to schedule labor, incorporating macro and micro drivers. This is helping us be more nimble in our management when sales types turn or even just modestly shift at the Shack level in either direction. 2nd, our kiosk retrofit plan is Already showing substantial impact, and we see a long runway for future improvements that can enhance what kiosk can offer in terms of driving sales and labor efficiencies. We ended the quarter with nearly 250 Shacks of kiosks and grew our kiosk sales by more than 100% year over year. We are seeing at least a high single digit percent lift in average order values in kiosks versus in Shack. Speaker 300:14:42This is driven by higher IPC and mix. As kiosk orders tend to skew to dine in, we are also able to use less packaging than in our digital order. But labor savings aside, this makes kiosk our most profitable channel. Kiosk is also a channel where we can get more guest data to learn and improve our marketing efforts over time. And our Shacks with kiosks are able We look to build on this incremental sales lift and early earnings and labor as we drive deeper kiosk adoption, advance our kiosk capabilities and capitalize from added efficiencies in the Shack. Speaker 300:15:16Additionally, we've also streamlined our packaging condiments and utensil standards for to go order. And our teams have been rebuilding our training programs for both new openings and existing Shacks with the help of our Head of Operations Training support. This includes how we hire for a new Shack opening and how and where we train, as well as simplifying our training program to allow our team members greater and flexibility as to what stations they can work during their shift. Early indications are that these initiatives will have a positive impact on our throughput and reduce our average preopening expense. Finally, we're also working with our operators to enhance the auditing and reporting in our Shacks to more quickly address over and under staffing situations, as well as making sure that we have the appropriate number of managers to support our Shacks and our growth. Speaker 300:16:00We are still early days in this journey, but we are confident that this will help us better control hourly labor expense and provide a more consistent guest experience. We are reassured by our results and we look forward to showing continued progress through the rest On these and other initiatives that we have in flight in order to improve on our profitability and deliver great guest experiences. On to the 2nd quarter results. Total revenue was $271,800,000 up 17.8 percent year over year. Shack sales grew 17.4 percent to $261,800,000 Licensing revenue grew 29.8 percent to 10,000,000 System wide sales reached a record high at $426,300,000 up 21.2 percent year over year. Speaker 300:16:44We maintain discipline on expenses, integral to our 2023 strategic plan. We grew adjusted EBITDA by 61.9 percent year over year to $37,100,000 reaching 13.6 percent of total revenue. We grew in Shack traffic by 4.7% in the quarter, and we generated a positive 10.7 Same Shack sales in our in Shack channel. As more guests are migrating to their in person habits and our wider scale kiosk rollout is having a positive impact on our mix and IPC trends in that channel. In check and kiosk in particular are our most profitable channel and we continue to focus our efforts on shifting our sales here as we execute against our plan to show sustained improvement in our overall restaurant margin. Speaker 300:17:27Our strong in Shack performance was offset by softer digital performance. Delivery traffic was down more than overall traffic, representing the continued positive trend towards our guests returning to our Shacks. Also, from time to time, as we deepen our footprint and open Shacks close to others, We may see near term traffic offsets as those neighborhoods and shared delivery radiuses take time to shake out. And this is the case in the 2nd quarter as we saw some sales impact that was heavily weighted on delivery in markets such as California and handful of Shacks on the East Coast that we plan for as we build critical mass in these key markets. This blended to an overall positive 3.0 percent Same Shack sales and negative 1.3 percent traffic versus prior year. Speaker 300:18:08We realized high single digit price in the quarter. We rolled off the comp benefit from the March 2022, 3.5% menu price increased and an additional 5% premium in our delivery channels, and we're only raising price by 2% in Flex locations at the back half of the second quarter. Our 2Q same Shack sales were pressured by approximately 100 basis points of mix as we sold out of our premium white truffle LTO ahead of schedule due to high and unexpected guest demand. It's hard to know the full traffic impact that this had on the quarter though. In addition, as people return to more normalized patterns, especially in our urban areas. Speaker 300:18:52July Same Shack sales rose 4.5%, an improvement from June, driven by improving mix. July AWS was 77,000 and that was 3% higher year over year. We generated record high kiosk average weekly sales and continue to grow in Shack traffic. Our urban markets such as Washington, D. C, Boston and New York City performed well. Speaker 300:19:13We had a positive impact from high single digit price. Our license partners opened 13 new Shacks in the quarter, growing our total licensed Shack count to 201. Together, we grew sales by 20 year over year, led by our airports and roadway locations. We had robust performance in China. We opened strong in Thailand, and that was our first new country opened in 3 years. Speaker 300:19:44In June, we opened our 1st licensed drive thru Shack in Dubai. Onto our restaurant profitability in the 2nd quarter. Shack level operating profit was $54,900,000 or 21 percent of Shack sales, marking 240 basis points of expansion versus last year despite continued inflationary pressures last year and 40 basis points versus the prior quarter. We benefited from improved waste trends in our Shacks and reduced packaging, smallwares and condiment usage in our off premise orders. Blended food and paper inflation rose high single digits year over year. Speaker 300:20:24Beef was up high single digits as well as continued inflationary pressures in custard and buns and an over 20% year over year increase in our freight costs. Importantly, our supply chain team has identified areas for cost efficiencies to help address persistent inflationary pressures, which we anticipate to start having an impact later this year with continued plans for focused improvement into 2024. Labor and related expenses were $75,200,000 or 28.7 percent of Shack sales, down 80 basis points versus last and down 170 basis points quarter over quarter. This quarter, we increased our focus on training to improve turnover and seek efficiencies across our as well as introduce several new strategies to better control our labor expenses within the Shacks. Our second quarter has typically marked our strongest sales and profitability of the year and requires more staffing than other quarters to support the higher demand. Speaker 300:21:16However, with our profitably enhancement strategies, including dynamic sales and labor Working closely with our operators to drive more standardized labor scheduling practices as well as early learnings on kiosk labor utilization and evolutions in training, We've been able to streamline hourly labor in our Shacks both quarter over quarter and year over year. Altogether, this is translated to us using 50 fewer hours per Shack per week in the quarter versus last year, resulting in 100 basis points of margin tailwind versus 2022. As is typical for our growing business, our labor expense was impacted by However, our profitability trends in our NSS improved throughout the quarter, and we have plans in place and operations and development to further reduce the expense we incur from new opening schedules on our overall restaurant profitability line. Other operating expenses were 30 $6,100,000 or 13.8 percent of Shack sales, down 60 basis points from the Q2 of 2022. We focused on investing in scaled marketing in the quarter, where we see broad based impacts and benefited from lower delivery sales as guests return to their in check dining. Speaker 300:22:22Our facilities team has been actively replacing older equipment to reduce R and M expense. And while this expense impacts our CapEx, these investments has helped us reduce R and M by an average of $100 per store week year over year. Occupancy and related expenses were $19,800,000 or 7.6 percent of Shack Sales, flat sequentially and up 10 basis points from last year's level. We ended the quarter with 471 Shacks system wide, 43% of which are operated by our licensed partners and 57% of which are company operated. In the quarter, G and A was 31,500,000 Excluding $1,700,000 in professional fees related to a one time matter, adjusted G and A was $29,800,000 or 11 percent of total revenue, 150 basis points favorable to last year. Speaker 300:23:10Our 2Q adjusted G and A expense rose 3.6% year over year total revenue that grew 17.8% year over year. We made key investments in technology, marketing, operations and our license business as we execute against strategies to grow our sales and profitability and support new Shack openings in our company operated and licensed business. We're making continued investments around our digital marketing efforts, leveraging personalized marketing to our guests, investing in guest data and analytics and are kiosks and other various marketing strategies to drive greater sales and brand awareness. We're also investing in technology and data broadly Across the company, automating labor scheduling and compliance as well as making improvements in our supply chain, among other initiatives, which we believe are critical to our long term success, Our ability to support our growth and to realize continued efficiencies over time. In operations and development, we've made investments in our teams to support new openings as well as test and learn strategies and tools, which we believe has the potential to improve throughput and take cost out of our Shacks over the long term. Speaker 300:24:12In our international license business, we have announced 5 new country openings in the past few years, including Israel and Canada that our teams are busy supporting. We have also had a strong pipeline of potential new countries as well as deeper expansion opportunities within current markets, leveraging a growing number of formats. But taken overall, the investments we made in the Q2 were partially offset by efficiencies in other departments as we continue to invest with discipline in G and A and target delivering leverage this year. Pre opening costs were $5,600,000 in the quarter, with our more even weighted development schedule versus last year. At the end of the Q3, we expect to have opened 27 units compared to 14 in the prior year. Speaker 300:24:54We have plans in place around development, training and operations as We target lowering our preopening expenses by about 10% per Shack in 2024 versus this year's level. In the quarter, depreciation was $22,300,000 up 23% year over year as we continue to invest in New Shack. We realized net income attributable to Shake Shack Inc. Of $6,900,000 or $0.16 per diluted share. We reported an adjusted pro form a net income of $7,900,000 or $0.18 per fully exchanged and diluted share. Speaker 300:25:27This is the highest level of earnings per share that we have had reported in more than 3 years. Our adjusted pro form a tax rate, excluding the tax impact of based compensation was 15.6%. Finally, our balance sheet remains solid with $295,200,000 in cash and cash This is an increase from $293,400,000 in the prior quarter. We invested $40,400,000 in CapEx in the quarter, up 48% year over year. We've opened 21 Shacks to date and are on track for the number of openings by the end of the Q3 versus last year. Speaker 300:26:03This more even weighted opening schedule is a primary driver behind the growth in our CapEx spending year over year. And as Randy noted, while it's hard to predict with full precision, we expect that this will be the peak of pressures on our bill costs, and we are starting to see traction from our efforts to lower our bill costs to 2024 and beyond. In addition, we've incurred expenses related to the more than 30 kiosks retrofits in this quarter and have about 15 left to go, which we expect will be completed by the end of Q3. We also incurred elevated maintenance CapEx as our teams made the necessary replacements to lower R and Now onto guidance, which balances the strong underlying business factors that we've seen in the first half of the year with a degree of uncertainty around the consumer spending outlook and inflationary headwinds. This range does not reflect any additional unknown delays to our development For the Q3, we guide total revenue of $273,500,000 to $278,000,000 with $10,500,000 to $11,000,000 of licensing revenue, 10 to 12 company operated openings, 11 to 13 licensed Shack openings and for same Shack sales to grow by low to mid single digits year over year with that high end very consistent with the 4.5% same Shack sales that we generated in July. Speaker 300:27:223rd quarter price will be up high single digits year over year. We expect to see mix headwinds until we launch our Hot Chicken and Burger LTO at the end of the quarter. And as a reminder, historically, we've seen AWS sequentially declined into August following peak summer travel and then again in September around back to school. We are guiding 3Q 2023 restaurant margins to be approximately 20%, as we are factoring in continued execution of our margin driving initiatives, balanced with uncertainty around inflationary outlook for beef. Our guidance reflects beef rising by low double digits year over year. Speaker 300:27:56However, if prices were to rise by more than this level, All else equal, given we do not hedge on this important line item, we would expect to fall below our approximately 20% restaurant margin guidance for the Q3. We expect food and paper inflation for the Q3 to be up mid single digits year over year, and we expect labor inflation to be in the mid single digit range year over year. Based on the strength that we've seen in the Q2 and our optimistic outlook for the Q3, we're adjusting our revenue guidance and increasing our profitability targets for the full year 2023. So for full year 2023, our guidance calls for total revenue of $1,070,000,000 to $1,080,000,000 growing 18% to 21% year over year Same Shack sales to grow by lowtomidsingledigits with mid to high single digits price. We are rolling off the high single digit price we took in October 2022. Speaker 300:28:47We expect to end the year running at just a low single digit price, which is in line with our more normal pricing patterns, and this will be a pressure to our same Shack sales in the 4th quarter. We expect licensing revenue to reach $40,000,000 to $41,000,000 While we're starting to see some signs of food costs declining and inflationary pressures decelerating, Most of our basket cost remains elevated and these inflationary pressures remain highly uncertain into the end of the year. But despite ongoing headwinds, we guide full year 2023 restaurant margins to reach 19.25 percent to 20%. This represents approximately 200 basis points to 2 70 basis points of restaurant margin expansion this year. While we are not providing specific 4th quarter guidance at this time, We expect to see typical seasonality in both our sales and profitability from the 3rd to the 4th quarter. Speaker 300:29:36As a reminder, prior to COVID, 4th quarter restaurant margins seasonally are lower than the 3rd quarter levels, and that's largely driven by lower sales. While this year, we expect to outperform that pre COVID margin seasonality given the strong success we were seeing in our strategic priorities, these inflationary risks are real and present a headwind to our profitability through the rest of the year. We expect this in addition to rolling off that significant October 22 price increase and ending the year with just about 2% price against the broad inflationary pressures we're seeing to impact our 4th quarter flow through overall. However, all else equal, If beef inflation was consistent with last year's performance and consumer spending patterns remain strong, we see a path for our restaurant margin to exceed 20% for the full year. We expect to open approximately 75 Shacks system wide this year, about 40 of them will be domestic company operated and approximately 35 will be operated by our licensed partners. Speaker 300:30:31We guide 2023 G and A of $125,000,000 to $130,000,000 absent the $3,300,000 in legal and professional fees that are excluded from adjusted EBITDA in the 1st and second quarters. At the midpoint, G and A would be 11.9 percent of total revenue, Approximately 75 basis points of leverage versus 2022 levels. Some other guidance points, equity based compensation expense of approximately 17,000,000 Pre opening of $17,000,000 to $19,000,000 depreciation of $88,000,000 to $93,000,000 and adjusted pro form a tax rate, excluding the impact of equity based compensation, to be 16% to 18%. Altogether, based on our performance so far this year, we are raising our fiscal 2023 adjusted EBITDA to and $20,000,000 to $130,000,000 representing approximately 65% to 80% growth year over year. And thank you. Speaker 300:31:20With that, turn it back to Randy. Speaker 200:31:22Thanks so much, Katie. We're really proud of the team and the way they continue to execute our strategic plan, Driving sales and better profitability across our Shacks. Today, I want to end with a note of special thanks. As you may have seen earlier this morning Through Form 8 ks, we announced that our long time COO, Zach Coff, will be leaving the company after more than 13 years. Zach joined Shake Shack when we opened our 4th Shack ever in Miami Beach, and he's been a key fixture in all we've done to build this special brand and culture. Speaker 200:31:50His heart, soul and leadership sits at the foundation of Shake Shack So much of what we've accomplished as a team has been thanks to his contributions. Zach will be greatly missed, but we're excited for him in his next chapter And for Shake Shack, as we look ahead to adding new leadership. Zach will be transitioning out of the company September 7, and we will begin an executive search for his replacement. In the meantime, Zach has built an exceptional team. And along with our executive team, we will continue the operational excellence and improvements we shared earlier in this call to ensure progress moving forward. Speaker 200:32:22With that, operator, please open up the call for questions. Operator00:32:27Thank you. Our first question is from Brian Mullen with Piper Sandler. Please proceed. Speaker 400:32:54Hey, thank you. Just a question on top of the bill costs. They're going to be down 10% next year. That's encouraging to see. Could you perhaps separate that between the drive thru format and the more traditional formats? Speaker 400:33:05We've known you're looking to get the cost of the drive thru down. Just Are you making progress across the other formats as well? And then just kind of related to that, holding inflation constant, Do you think you could get that down even further in 2025, if given more time and with more focus on the issue? Speaker 200:33:23Yes. Thanks, Brian. Appreciate the question. I think broadly the answer is yes on all fronts. Our commitment next year is both in drive through costs and overall, but in our core formats, we're working towards new formats, more standardized, more templated, Really optimizing the right size and doing so much to continue to bring that down over time. Speaker 200:33:47The team is doing great work on this. It takes Right. You've got Shacks that are already designed and in place. Some of those will be more expensive drive throughs. Some of those will be in more expensive places like I named in New York, California. Speaker 200:33:58But overall, Next year, we're targeting a $2,300,000 average roughly, and we're going to hold to that. As we look at years forward, depending on the mix of Shacks, We believe and we are targeting lots of improvements in how we build our restaurants, the way we do it, but still doing it in a Shake Shack way. So we believe this is a great opportunity for us long term and we're committed to having this be an important fixture of our strategic plan in this coming year. Speaker 400:34:28Okay. Thanks a lot. Just as a follow-up, I think a part of the recent cooperation agreement that the company has agreed to work with Outside consultants to work at ways to be more efficient. My question is just given all of the various strategic efforts That are already underway internally and yielding progress. Do you expect any consulting agreement would yield even more Efficiency is above and beyond. Speaker 400:34:50And have you kind of entered into an agreement yet? Speaker 200:34:53Thanks, Brian. Yes. First of all, I think the team right now Has been and you've seen this in the results of the quarter and in our guide forward, really focused on improving so many things in the company and that's taking root as you can see. We will be and we're working with the working group of our Board in concert with Talking to consultants and thinking about what that scope might look like. And we're continuing to define that and we'll certainly let you know. Speaker 200:35:19But we believe that's going to be another Exciting opportunity for us to dive deeper into some of the things we're already doing and identify some other things. So, yes, we're looking forward to that. That's going to take time and we'll keep you posted as it goes. Operator00:35:32Our next question is from Michael Tamas with Oppenheimer and Company. Please proceed. Speaker 200:35:38Thanks. Good morning. It sounds like you're just getting started on Some of the opportunities to expand your restaurant margins above the 20% you're targeting this year. So but as your pricing normalizes and Hopefully, inflation does as well. Do you think you have the levers to pull on a core basis to expand margins above the 20% range? Speaker 200:35:56Or do you think you need Menu pricing to sort of outpace inflation to do that. Speaker 300:36:02Great. Yes. And so we talked about on the Call today, the 2 40 basis points of margin improvement that we showed year over year, the bulk majority of that, the majority of that is coming from our operational And some of these we factored into our guidance. Others we're learning more as time goes along. But we're really encouraged by what we're seeing. Speaker 300:36:25We're not going to give long term guidance at this point, so nothing beyond what we've given for the full year target of 19.25 percent to 20%. But these are kind of really improving the foundation of Shake Shack and helping us Become a more profitable company over the long term. Operator00:36:43Our next question is from Brian Harper with Morgan Stanley. Speaker 500:36:50Yes, thanks. Good morning. I was curious if you could just provide more detail on some of the mix impact because I realize that kind of delivery is coming off. You talked about that piece. But are you seeing pretty good attach of some of your new menu items? Speaker 500:37:06How much more do you think can kind of come from kiosks over time if we separate out some of the different mix drivers that you're seeing? Speaker 300:37:14Sure. So really one of the most important mix headwinds that we had in the quarter was the fact that we sold out of our Highly successful White Truffle LTO Early. We think that was about 100 basis points of just mix alone in the quarter. Hard to tell what that traffic impact was, but we know that our most successful, our great LTOs, they are traffic and frequency drivers as well. Within each of our channels, what we're seeing overall is pretty consistent. Speaker 300:37:41We're seeing better mix trends within our in chat channel though just as Driving fee per kiosk adoption, you're getting that natural lift on that side. But across the board, we do have higher attach rates of items per protein year over year and we're pretty encouraged by what we're seeing there. Now overall, what you're seeing at the company level though is that channel shift mix More people coming in Shack. Those tend to be less people per order, especially in our urban markets. And that's that natural shift that we've been seeing since pretty much last year into now. Operator00:38:18Our next question is from Peter Sala with BTIG. Please proceed. Speaker 600:38:24Yes, great and good morning. Good day. I wanted to ask on the kiosk, I think you mentioned a high single digit check lift. Can you elaborate a little bit On that, are you seeing that just more customization add ons or is it or you're seeing Group sizes, just trying to understand what's driving that high single digit lift? Speaker 300:38:48Great. Yes. So it's really exciting. What we're pretty consistently seeing In our Shacks, as we're accelerating our kiosk retrofit program here, is that once we kind of shift that gas from the cashier into the kiosk channel, They tend to we have a high single digit at least check lift right there. And what that's coming from is really, I think, People being able to sit with the visual merchandising of our products, you see a higher instance of LTO sales on that. Speaker 300:39:16And I think that when you get to see the very exciting items that we're promoting up there. Guests are interested in that. I think it comes across a little bit differently on the kiosk channel than in our traditional menu boards. We're also seeing greater instances of sales of our premium cold beverage as well, which is and shakes, which has obviously very nice margin on that side. So that's most of what we're seeing, but what's really exciting also is that we're still in the very early days here. Speaker 300:39:41There's a lot of opportunity for us to invest Some money around driving more upsell in the kiosk channel. Our priority today is driving just that greater adoption of it. You're going to see you'll expect to see from us continued strategies to drive more upsell in that channel. Operator00:40:00Our next question is from Andrew Charles with TD Cowen. Please proceed. Speaker 700:40:06Great. Thanks. Two questions for me. First, I know beef obviously remains pretty volatile, but 2Q beef inflation, high single digits is more favorable than your low double digit forecast. I know you don't contract these, but is there any mitigation strategy that contributed to that? Speaker 700:40:22Or was that strictly more favorable spot rates? And Just kind of a question on the 3Q guidance. I appreciate the disclosure for July, up 4.5%. If I look at the guidance for low to mid single digits, Is there a reason to believe same store sales would decrease from July to just harder comparisons in August and September? Or would you just label the guidance to be conservative? Speaker 300:40:42Great. So on let's take beef first. So as we progress throughout Quarter on beef, it was a little bit more favorable. I mean, we're talking about high single digits versus low double digits, kind of very much on the cusp there. And we really started to see beef though pick up more in July. Speaker 300:40:59So that is something that we are watching very closely and we've reflected that view into of what we're seeing today into our guidance. And then on the comp, we're running a 4.5% in July, we ran a 4.5% in July. Think about that mid double the mid single digits range as being kind of around that 4.5% to 5% range. And how we typically progress throughout the quarter on AWS is August is a little bit lower Last year, we had a more muted decline in September versus August, but in pre COVID, times that was a little bit more pronounced. Operator00:41:48Our next question is from Jake Bartlett with Truist Securities. Please proceed. Speaker 800:41:54Great. Thanks for taking the question. My first one is on the consumer. In the past, you've made some comments about Whether there's any specific movements in lower income or higher income, any comments you can see on what you're seeing from just underlying strength of demand? Speaker 200:42:12Yes, Jake, I think you've seen this kind of broadly in our industry and a lot of industries. Generally, I think we're all surprised at how resilient the consumer has been. At Shake Shack, I think what we've said in the past has stood true in this last quarter, which is we generally benefit from a higher end consumer. You're seeing that also in the strength of some of our LTOs, people being willing to spend a little bit more. But we're not immune to The lower consumer trading down, and you'll probably see some of that in our numbers in this quarter and moving forward, right? Speaker 200:42:42There's going to be more battles on discounting And your kind of traditional fast food that we're going to compete against from time to time. And that's going to be a pressure, I think, during This uncertain time, and we expect that. And that's built into the guide as we go. It's built into how we're thinking about things. But I think in general, The consumer has been pretty resilient. Speaker 200:43:04So, we're happy with that. We're looking ahead to continue to build on the strategies we've employed so far that you heard a lot about today. Operator00:43:14Our next question is from Brian Vaccaro with Raymond James. Please proceed. Speaker 900:43:21Hi, thanks and good morning. I just wanted to ask about the labor improvements. And Katie, I think you said wage inflation up in the mid single digits, if I heard Correctly and you saw cost per week at least on our math down year on year. So could you just provide a little more color on the benefits You're seeing some kiosks and also the dynamic labor scheduling. Just more perspective on that. Speaker 900:43:43I'm curious if your The hours of this, like where is that during the day, during the week? Is it clustered in a certain set of stores that were significantly underperforming? Just any incremental clarity there would be helpful. Speaker 300:43:58Yes, absolutely. So just a kind of reminder of what we're doing on that side. So first of all, working with our operators very closely and digging in and building bespoke labor schedules The Shack that are kind of the most pressured. And that has been really helpful way of managing kind of our lower performing Shack base and working with them to help make those more profitable. On the dynamic labor scheduling side, this is an important point. Speaker 300:44:29We switched to a more demand based, more real time what we're seeing on the ground forecast that's leveraging both micro and macro variables across all of our Shacks in the quarter. And this is a really hard one to measure the full benefit, but what I will say is that if sales type turn in either direction, You're able to be much more nimble and react much more much quicker, to changes in consumer behavior where we can staff up and staff down, to reflect that change instead of being a little bit more lagged and delayed. We're also working closely to audit labor schedules as well and just make sure that we're adhering to our standards, which has really helped kind of reduce that overall. And then Kiosk overall, With the 250 Shacks that we have in place right now and continuing to drive, kiosk adoption, we're starting to see some early signs of labor savings on that. And that's been helpful and we're going to continue to leverage that over time. Speaker 300:45:25The number that we gave in my prepared remarks is that we're running 50 fewer hours this year versus last year. So a pretty good clip of savings on that side. And that's helping to offset Some of the other pressures that we're facing in labor and that plus our higher price contributed to the delevers that we produced in the quarter. Operator00:45:51Our next question is from David Tarantino with Baird. Please proceed. Speaker 1000:45:58Hi, good morning. My question is more about kind of the strategy With respect to kind of optimizing the model to lower costs and shift the behavior towards kiosks. And my Question is really related to how are you measuring the guest experience as you go through this transition? It seems like you're making a lot of progress Early on, on the cost side, but are you I guess, what are you doing to make sure that you're not changing the guest experience in a way that you A lot longer term. Speaker 200:46:35David, I love that question. I'm so thankful you asked it because that's at the core of everything that we think about, right? And as we think about Improving the operating model, we need to do that through ways that only increase and improve the guest experience. That's a part of our strategic plan. You heard me talk about it earlier. Speaker 200:46:52And it will be a part of our strategic plan next year and evolved in new ways. So a couple of things. What we're learning is as we do these digital tools like kiosk or app or whatever, we need to build them so guests prefer it and that they really enjoy those experiences. What we're seeing in our guest scores that we track a lot and get more and more data from is that they're improving. They're improving through the time that we are improving as operational execution. Speaker 200:47:18I know that part of the what we need to do better as well It's just consistency, standardization so that guests can count on what they need to count on for Shake Shack day after day. You can know when your food is going to come out. You can know that it's going to be ready and you can count on it being exactly the same. Standardization and us Doing that better is going to lead to better guest experience. We know that we're doing that. Speaker 200:47:40But in the Shacks as well, we're actually ramping up efforts So the things that we do, for instance, in most Shacks now, when you come in and you used to have kind of that stress of waiting for your buzzer or waiting for us to text you, Now in most Shacks most of the time, we're going to run your food to you. We're adding that added level of service. So we've been doing that for about a year now. That's all part of the shift in the way we can optimize our labor instead of taking an order where guests would prefer to do it themselves and our kiosks benefit in all the ways you heard. We can spend that time and effort and put our hospitality towards a different part of the experience. Speaker 200:48:16And we found that people are really enjoying that. That has And just a de stressor and an added experience. And as we think about cutting costs and bringing things down, we got to do it in ways, as I said, that improves. So if we're going Have a smaller dining room. It's still got to be a great dining room that has the right amount of seats. Speaker 200:48:34And all the things that we're doing are going to add to that. So, thank you for that question. You can Sure. And our shareholders can be assured that we will not do anything but work to improve the guest Operator00:48:51Our next question is from Jeffrey Steve Bernstein with Barclays. Please proceed. Speaker 700:48:58Great. Thank you. One clarification on a question. Just the clarification, The acceleration you saw in July from a comp perspective, I'm just wondering if there's anything you specifically attribute that to, any new drivers or perhaps change in consumer behavior to drive that improvement. Otherwise, Speaker 1100:49:17my question is on G Speaker 700:49:18and A. Speaker 1100:49:19Go ahead. Speaker 700:49:21Just on G and A. Yes, Katy mentioned the 75 basis points of leverage in 23, which is obviously impressive. I'm just wondering what the biggest buckets of savings are, whether you think there's more opportunity for leverage in 'twenty four and beyond, Maybe it's for you to benchmark yourself again. Just trying to figure out how you define what the right ultimate level is. Thank you. Speaker 200:49:42Yes. Thanks. On the Trends, we're really encouraged by quarter to date seeing some of the strongest comp that we've seen all year. A few things. As we talked about, we had a return of a strong LTO With Bourbon Bacon, we had some of the other menu things happening that are really good. Speaker 200:49:58And I think we're just continuing to see some of that trend that benefits Shake Shack, some of things that we were most hit on, whether it's urban or the offices, tourism, travel, the kind of way people move, Those things continue to improve in general mobility for us. We are seeing some hits in the mid distance consumer that are different from last year, but generally those trends continue to benefit us. And it's just been good. It's just been a really good momentum through July. So we're encouraged by that. Speaker 200:50:28And really, it's been strengthening since mid June. So, that's good. We'll see where it goes. We've got tougher compares as we go through the year, But we feel good about that. On G and A, look, we need to keep investing where we need to invest. Speaker 200:50:40We're happy that, as Katie shared, we're tracking towards leverage this year and we can look at some of that next year as well, but we're not going to fully guide there just yet. We've got to make sure we're making the investments. But we're leading this company with the right amount of people and efforts and making sure that we can continue to drive all the initiatives that make sense From a return perspective, we are as I said, we are a very much a growth company, leading with percentage sales increases that you don't see in a whole lot of places in the public company restaurant space. And we have to continue to invest to ensure that that continues, but we're going to do it profitably overall. Operator00:51:24Our next question is from Andy Varnish with Jefferies. Please proceed. Speaker 200:51:31Hey, guys. Speaker 1100:51:32Just having a question about some of the sales impacts, I think, you mentioned on the And in regard to maybe some delivery sales, could you tease that out for us just How much and how long do you think that will last? And is that restaurants as well as consumer behavior or mostly Your development that's impacting some of that sales layer? Speaker 200:52:01Thanks. Yes, I think it's Near term, when you start to lap some of those, there's going to be always and there has been since the day we created this company at every restaurant, you're going to see From time to time, you're going to see impact when you open a restaurant close to another. And I think we've got a couple of handfuls of restaurants that are in that category, Some in LA where we opened 5 new Shacks on top of other restaurants. Those are our whole goal is market Share overall and building a strong market. We have a long, long runway to do so and we're confident in that. Speaker 200:52:30But from time to time, Speaker 900:52:31In the world we Speaker 200:52:32live in today, you may eat up a section of a delivery radius, for instance, and just start to share that portion of delivery sales. That may happen. But we do think we roll off some of those, but let's go back to the important strategy of development. We've got a long runway ahead and part of our strategy is to cluster our Shacks A little bit closer together. We know and you're seeing that in our profitability measures that we're continuing to improve. Speaker 200:52:55So we know that from time to time, When you do that, you might impact sales at another restaurant, but you're also going to impact our ability to open better, faster, have stronger profitability sooner and over the long run. So we feel really good about all those decisions and we'll also keep taking that learning And making sure our development schedule is taking that in and spreading out our Shacks as best that makes sense and still building lots of restaurants. I think we're still the thing that I think needs to be said that even we remain surprised by from time to time is Shake Shack has this Giant brand that punches so far above its weight. But in reality, there are many places in this country where our brand awareness still needs to grow, We're actually still coming up and we're not the incumbent and that takes time. And I think our history has shown that we do that really well over time, But it does take time and we're confident we'll keep doing that and you'll see us committing more and more to marketing and funding brand awareness so that we can continue to grow our overall base of guests. Operator00:54:03Our next question is from John Ivankoe with JPMorgan. Please proceed. Speaker 1200:54:09Hi, thank you. I hope everyone is well. I know we've talked about previously and I was just trying to get to Capitalized cost per new unit. I know it's not a fair calculation, and I know you'll correct me for the reasons why. But In fiscal 2023, just taking your CapEx divided by number of units, it was around $4,000,000 In first half of twenty twenty four, it's actually That was in 'twenty two. Speaker 1200:54:37In first half of 'twenty three, we're actually running a little bit ahead of $4,000,000 Now I do understand It does sound like you're doing some projects to convert R and M into CapEx and obviously kiosk cost some money, But it actually is running ahead of $4,000,000 in the first half of twenty twenty three. So as we think about That 24 number, just try to get it as clean as possible. I mean, what do you think the capitalized cost Per new unit is going to be in 24%. I know you said 10% less, but 10% less of what? Speaker 200:55:15Well, John, I think overall feel free to jump in here, Katie. I think we're not guiding to 24 today. What we're guiding to is continue to bring down those costs. You have to In your numbers that you are quoting, you're not giving credit to the significant digital investments, tech investments, The many other CapEx investments that happen around this company that are not about the individual unit, those are things that have to happen as you grow a restaurant company, Actually at our still small scale. So some of those may be outsized in total dollars today. Speaker 200:55:48But where are we at in committing to this? We're committed to taking down That overall cost to build and improving the numbers you just said in 2024 and beyond, I expect we will, maybe by your measure, certainly by the measures that we share. And that's our goal to improve our overall return on capital for our individual restaurants and our company overall. And I think let's just take a beat because I don't think we're I don't think we've talked about this yet on Paul, really, take a look at the adjusted EBITDA to EBITDA growth of this company year over year. It is significant. Speaker 200:56:18It is Materially game changing in the percentage growth of adjusted EBITDA over this year. And we expect to continue to generate Significant adjusted EBITDA next year and a lot of cash. So I think it's going to be a good year for all the metrics you're asking about. And those things take time. As I said, you've got a lot of restaurants designed and in flight, you can't change those things mid flight, But we're putting all the things in place that will improve that next year and in the years to come. Operator00:56:52Our next Question is from Jim Sanderson with Northcoast Research. Please proceed. Speaker 1300:56:58Hey, thanks for the question and congratulations on the improvement in Store level margin. Wanted to dig into the detail on the labor hours per week. Is that only for stores that had the kiosk Or is that a system wide number that you cited? Speaker 300:57:13Yes. No, that's system wide. And it's not just kiosk that's driving Matt, it is a blend of higher retention. It's more of what we're doing on the scheduling side. Kiosk is certainly a little bit of a help, but we're definitely learning more and more as to what kiosk can bring us in terms of labor savings as we drive deeper Operator00:57:39Our next question is from Jeff Farmer With Gordon Haskett, please proceed. Speaker 1300:57:44Great. Good morning and thank you. I have a follow-up and a question. So just following up on Michael's earlier question, which was one of the first on the earnings call, you guys made some huge strides or have made some huge strides driving improved restaurant level margins. Long list of initiatives have helped you do that. Speaker 1300:58:02But as we look out into 2024, do you see additional opportunities to drive Further improvement? Speaker 200:58:10We're not guiding there just yet. We're always looking for further improvement. We are Let's celebrate for a moment that being up 2 40 basis points from last year and looking ahead at our guide being significantly up from The guide for the quarter for next year from last year. So we'll start there. We're continually committed. Speaker 200:58:30If you Here are our comments on strategic plan towards improving our restaurants overall profitability cost to build and the metrics that we use. So we'll keep you posted on what 2024 looks like as we get closer to that year. Operator00:58:43Our final question is from Brian Vaccaro with Raymond James. Please proceed. Speaker 900:58:50Hi. Yes, thank you. Just one last big picture question, and I guess it's tied to the mix a little bit as well. But I guess, as you've expanded into new markets and you're reaching a different consumer in the suburbs, Randy, maybe some that are a little older, different stage of life, more income levels, what have you. I'm just curious what you've learned about the brand and any differences you've noticed in customer perceptions around value, quality, Anything along those lines and just how you're sort of adjusting or plan to adjust your strategy, your go forward brand proposition, etcetera, as you adapt to some of those differences. Speaker 200:59:29Yes, that's great. We think about that a lot, big picture long term. And it goes back to a little bit what I said earlier. When we have strong brand awareness in the very many markets where we do, we generally tend to capture all types All the time, strong AUVs, strong Shacks, right? Where we enter with lesser brand awareness and consideration, we've got more work to do and those take time. Speaker 200:59:53Our evidence for us has shown that over time, we continue to build that and build that and build that and it's really strong. But we're not immune to opening in a place where people don't really know us. So what do we do with that? A couple of things. We've gotten better and better in our pricing. Speaker 201:00:08When you think about the geographic disparity of our pricing And our ability to take price in our more expensive, but also higher brand awareness markets, we generally tend to take more price there. We're generally Well, more cautious in those lower brand awareness. So we think having the right price, having the right opportunity is really important as we look across Shacks. But we've also got to optimize other costs in the restaurants, right? And we've been able to do that on down the line and you're seeing that And the improvement. Speaker 201:00:39I think what's always amazing to me, even almost 500 Shacks into this journey is that Even when we open in 4 Shacks in Texas in the last 2 months, all drive thrus, it's amazing to me how many people come out, Celebrate with us and really continue to start with a bang. And I think that says something for the continued probably stronger than ever brand we have. But you're hearing me acknowledge loud and clear that we've got also build brand awareness. The other thing we haven't done a lot of in the history of this company, we've never really done Traditional mass media advertising. We've done a lot of local Shake Shack style, guerilla marketing, if you will. Speaker 201:01:24And in the coming years, and you'll see this probably next year, we're going to commit to increasing Our overall marketing spend, so that we can drive brand awareness and drive all kinds of guests in the places where you talked about. But, look broadly, When you can execute a 21% operating profit, there's few restaurant companies in this country that have ever done that. And for us to do that at scale in this Quarter. I think that's where we end and I hope that's the note that people hear a lot going forward as we've grown sales, as we are materially growing this We are a profitable growth company and it's a really exciting time for us. So with that, operator, I think we finished the questions. Speaker 201:02:04I just want to say thank you to everybody on the call andRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallShake Shack Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Shake Shack Earnings HeadlinesShake Shack Announces First Quarter 2025 Financial ResultsMay 1 at 7:00 AM | businesswire.comShake Shack Readies Opening Of Brick LocationMay 1 at 6:12 AM | msn.comWhat President Trump’s Executive Order 14154 means for your moneyNearly $3 trillion disappeared from the stock market on Thursday morning. According to Whitney Tilson - a former hedge fund manager who predicted the dotcom crash, the housing crisis, and the 2022 tech stock bloodbath - a little-known executive order from the President's first day in office could spark a paradigm-shift that will likely catch millions of Americans off guard.May 1, 2025 | Stansberry Research (Ad)Shake Shack (SHAK) Q1 Earnings Report Preview: What To Look ForApril 30 at 8:04 PM | msn.comPopular burger chain releases a new summer menuApril 30 at 8:04 PM | msn.comShake Shack's first Ocean County restaurant is just about ready to openApril 30 at 8:04 PM | raiderswire.usatoday.comSee More Shake Shack Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Shake Shack? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Shake Shack and other key companies, straight to your email. Email Address About Shake ShackShake Shack (NYSE:SHAK) owns, operates, and licenses Shake Shack restaurants (Shacks) in the United States and internationally. Its Shacks offers hamburgers, chicken, hot dogs, crinkle cut fries, shakes, frozen custard, beer, wine, and other products. The company was founded in 2001 and is headquartered in New York, New York.View Shake Shack ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon's Earnings Will Make or Break the Stock's Comeback CrowdStrike Stock Nears Record High, Dip Ahead of Earnings?Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of Earnings Upcoming Earnings NatWest Group (5/2/2025)Shell (5/2/2025)Exxon Mobil (5/2/2025)Chevron (5/2/2025)Apollo Global Management (5/2/2025)Eaton (5/2/2025)The Cigna Group (5/2/2025)Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 14 speakers on the call. Operator00:00:00Greetings. Welcome to Shake Shack Second Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Keypad. Operator00:00:18Please note this conference is being recorded. I will now turn the conference over to Michael Aurelio, Director of FP and A. Thank you. You may begin. Speaker 100:00:29Thank you, and good morning, everyone. Joining me for Shake Shack's conference call is our CEO, Randy Geruti and CFO, Katie Fogarty. During today's call, we will discuss non GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release and the financial details section of our shareholder letter. Speaker 100:00:58Some of today's statements may be forward looking and actual results may differ materially due to a number of risks and uncertainties, including those discussed in our Annual Report on Form 10 ks filed on February 23, 2023. Any forward looking statements represent our views only as of today, and we assume no obligation to update any forward looking statements if our views change. By now, you should have access to our Q2 2023 shareholder letter, which can be found at investor. Shakeshack.com, in the quarterly results section or as an exhibit to our 8 ks for the quarter. As a reminder, during last year's Q2, our Shack level operating profit saw a benefit of 40 basis points from one time credits related to our 2022 leadership retreat. Speaker 100:01:42During today's call, we will discuss year over year Shack level operating profit and cost comparisons excluding these credits in order to provide a more like for like I will now turn the call over to Randy. Speaker 200:01:54Thanks, Mike, and good morning, everyone. Our team continued to execute our strategic plan through the Q2 and into July. We grew total revenue by 18 percent to $272,000,000 with 3% growth in same Shack sales, average weekly sales of 77,000 In trailing 12 month AUV across our Shacks at $3,900,000 we grew system wide sales by 21% year over year to $426,000,000 as we continue to accelerate the growth in our licensed business across new and existing markets. The company operated business, we opened 10 new Shacks with 23 currently under construction, well on our way to opening about 40 new Shacks this year. In Our licensed business, our partners opened 13 Shacks in the quarter. Speaker 200:02:37We target opening 35 Shacks this year, representing 17% system wide unit growth year over year. Since the quarter ended, we've seen an uptick in sales momentum with fiscal July same Shack sales up 4.5% and strong performance around the company. As we strengthen the company for the future, our commitment is to being a profitable growth company. In the Q2, our teams delivered 21% Shack level operating profit, our highest level since 2019 and a 240 basis point gain over last year. We are disciplined. Speaker 200:03:11We are more efficient across our Shacks, G and A and CapEx expenses. In our restaurants, We've identified numerous areas for improved process and cost reductions that we executed against in the quarter with the aim of growing profitability while delivering a great guest experience. We are still early days and seeing the full potential from this work. But with these strategies, we'll continue to improve how we run our Shacks, all the while Still improving upon our already strong returns and great guest experience. While our overall second quarter results were strong, Our same Shack sales slowed in May before rebounding through June and strengthening into July. Speaker 200:03:48Our highly successful white truffle LTO that contributed to our strong performance in 1st quarter in April sold out early. And we know that our best LTOs drive mix, frequency and margin, and we saw a slight dip in those contributors in May and early June that impacted the quarter. In late June, we launched our Bourbon Bacon Burger, a well liked LTO from last year, which is expected to sell out soon. And in late July, we pivoted to promoting our avocado bacon burgers and chicken. We're looking ahead to September when our LTOs will focus on the return of a guest favorite, Hot Chicken as well as a new menu item, the Spicy Shack Meister Burger to bring the heat into year end. Speaker 200:04:27I'm particularly excited about our culinary lineup For next year as well as we continue to evolve and improve the level of guest data and insights that we're weaving into our culinary story. Let me give a mid year update now on how we're tracking against our 2023 strategic plan. Our first priority is on recruiting, rewarding and retaining a winning team. I'm proud to report that while staffing is always challenging in the restaurant business, our teams have done incredible work towards improving our retention and turnover. Year to date, we're experiencing the best turnover numbers we've seen in years. Speaker 200:04:59Our team members are earning competitive wages, They're staying longer and all of this is contributing to our operational execution and profitability in the Shacks. The near and long term benefits and returns on this investment And retention cannot be overstated. Our people remain our priority and we're continuing to look at ways to improve their experience and opportunities for advancement in the Shacks. As just one data point, in the last 24 months, with the introduction of our Shift Up leadership curriculum, more than 180 Shack leaders across the country Have taken the 18 week course and many have graduated from hourly supervisory roles into the next level of management, fueling their development and building a pipeline of leaders ready to take on the growth ahead. Our second priority is our relentless focus on the guest experience. Speaker 200:05:46We continue to execute a broad culinary strategy of improving our core menu while delivering exceptional LTOs that we keep that keep operations running smooth and efficient. In addition to the comments I made earlier, We also launched our Veggie Shack Burger and non dairy shake, both of which have received a solid reception. We're featuring a great lineup of shakes this summer as well as option for our lemonades. In some Shacks this quarter, you'll see us testing a new mini shake size as well as a small test bringing sundaes Back to the menu as we look to broaden optionality and operational ease in our dessert category for the long term. We We also continue to expand our kiosks, which will be in nearly all Shacks by the end of the Q3, a full quarter ahead of our expectations. Speaker 200:06:30We doubled our kiosk sales year over year as guests return in Shack and choose this as their preferred experience. Kiosks enhance guest convenience while driving a higher average We've only begun to explore the potential full capabilities of kiosks such as upselling and connecting personalized marketing across channels. One of our primary focuses of digital investment next year will be improving the kiosk experience towards greater omnichannel adoption and long term guest connection. With our exciting culinary innovation, continued kiosk rollout, menu strategy and digital tools, guest perception and value scores continue to improve. Our 3rd priority is our targeted development strategy with a focus on drive thru and maximizing our total addressable market with great returns over the long term. Speaker 200:07:20I've consistently said we are investing for learning early on. So what have we learned so far? We've opened some amazing drive thrus in the 2nd quarter across the country, including Lancaster, Pennsylvania Richmond, Virginia as well as deepening our footprint in Texas, in Sugar Land and McKinney as well as Katy and San Marcos subsequent to the quarter. Each of these have started stronger than expectations and give us confidence in the ultimate potential for drive thru. Where we picked great real estate specific for drive thru, we are capable of driving strong AUVs and profitability. Speaker 200:07:53All told, Of the 18 drive throughs we're operating today, we have some great Shacks performing above our long term sales targets. We have some below our targets Build metrics and in others, we've invested more than our targets, which has contributed to a higher cost to build overall this year. We remain encouraged by the drive through opportunity and We're continuing to refine, take down cost to build and improve the model overall. We're expecting to open about 15 drive throughs this year and a similar amount in the coming years. We're ensuring future sites take in a lot of the learnings that we've gotten thus far and will continue to improve each and every day. Speaker 200:08:38We are bringing down build costs and prototyping future Shacks with 2023 drive thru build costs already trending down about 10% year over year. We believe we can build a more standardized operation in a smaller footprint with less seats and a lower cost to build overall, while still enhancing the great guest experience Shake Shack is known for. While this number may vary in the future due to geographic mix of openings, this gives us confidence we can bring down build costs over time. Next year, we're particularly excited to have much more of the drive thru class in our strong coastal markets in Long Island, New Jersey and California, We generally expect higher AUVs with higher brand awareness. We are continuing to focus on the guest experience and operational improvements specific to our drive throughs. Speaker 200:09:22We look forward to material progress over time. On our license business, our team is hard at work with our partners to open new Shacks and expand our business across the globe. In fiscal April, we opened our 1st Shack in Thailand. In fiscal July, we opened our 1st Resort Shack with a bar in the Bahamas in the Atlantis Resort. Our strong performance in the Q2 was primarily driven by outperformance in our license business domestically, which is one of our largest markets. Speaker 200:09:49Our airports and in New Jersey and upstate New York are thriving and capitalizing on busy summer travel patterns. We have a long runway ahead for our domestic license business With 36 licensed Shacks across the U. S, including 18 airports, 11 stadiums, 6 Shacks in Roadway Travel Plazas and 1 Museum. And Based on the strength of this business and the continued optimism shared by our partners around the globe, we expect approximately 35 new licensed Shacks openings this year. Our 4th priority is being even more profitable in our Shacks. Speaker 200:10:222nd quarter restaurant margin expanded 2 40 basis points year over year to 21%, Marking the Q1 since 2019 where our restaurant margin grew back above 20%. This is a testament to our continued progress on our key initiatives as we achieved 21% despite high single digit food and paper inflation in the quarter. Finally, the 5th pillar of our plan is we build an enduring business. We are committed to investing with discipline. To support our restaurants. Speaker 200:10:59Starting with development, we're excited about all the work the team has done to improve our build costs over time. However, unlike the high velocity of our restaurant operations, moving the needle here will take time given long lead times of design and build out. We have opportunity and a plan in place and we are optimistic it will show strong results with future classes. We expect 2023 to be the high watermark for build the class currently tracking about 10% up year over year. Unfortunately, we've had a few very challenging projects that drove the majority of the overruns, while also building the highest mix of drive throughs so far and working still working through elevated build costs and delays across the system. Speaker 200:11:38All this together had a heavy impact on our class. However, looking ahead, We are already seeing evidence that we have the right strategies in place to lower this cost materially next year and even further in the coming years as new prototypes come into design. Our commitment is to target lowering build costs next year by about 10% for the overall class. As we take down build costs and improve Shack level operating profit, we to continue to improve overall Shack returns well into the future. We've got the right plan in place and we're pleased to see progress taking root as we continue the evolution of Shake Shack. Speaker 200:12:12We remain one of the fastest growing publicly traded restaurant companies and we're growing profitably while strengthening our brand and are opportunity ahead. I'll now hand it off to Katie to share more about the details of the quarter and expectations for the rest of the year. Speaker 300:12:26Good morning, everyone. 2 40 basis points year over year to 21%, a function of us producing the highest restaurant operating profitability flow through on sales growth since 2015, the year that Shake Shack went public. With this improvement and discipline on other expense lines, we generated a record high $37,000,000 of adjusted EBITDA, 13.6 percent of total revenue, marking 370 basis points of adjusted EBITDA margin expansion year over year. Before diving into our financials though, I want to take some time to share progress in the quarter that contributed to our strong restaurant margin outperformance. To start, despite continued elevated inflationary pressures, we have preserved a good portion of our profitability by taking a strategic approach to pricing and widening the price differential across our markets to match regional and guest dynamics. Speaker 300:13:24But pricing alone did not bring us to today's strong results. As part of our work on our 2023 strategic plan, over the past few quarters, we've identified and executed against opportunities for operational improvements that contributed to the significant portion of our year over year margin expansion this quarter. Many of these are still early days in the making, and we are building on them as we progress throughout the year. So first, we are working closely with our operators on execution improvement plans across our Shacks. Major call outs here are better alignment on new standards and demand generated labor schedules, further increasing operating hours, driving waste reduction, T and E discipline and other initiatives. Speaker 300:14:03We are leveraging fresh weekly sales forecast in our Shacks to schedule labor, incorporating macro and micro drivers. This is helping us be more nimble in our management when sales types turn or even just modestly shift at the Shack level in either direction. 2nd, our kiosk retrofit plan is Already showing substantial impact, and we see a long runway for future improvements that can enhance what kiosk can offer in terms of driving sales and labor efficiencies. We ended the quarter with nearly 250 Shacks of kiosks and grew our kiosk sales by more than 100% year over year. We are seeing at least a high single digit percent lift in average order values in kiosks versus in Shack. Speaker 300:14:42This is driven by higher IPC and mix. As kiosk orders tend to skew to dine in, we are also able to use less packaging than in our digital order. But labor savings aside, this makes kiosk our most profitable channel. Kiosk is also a channel where we can get more guest data to learn and improve our marketing efforts over time. And our Shacks with kiosks are able We look to build on this incremental sales lift and early earnings and labor as we drive deeper kiosk adoption, advance our kiosk capabilities and capitalize from added efficiencies in the Shack. Speaker 300:15:16Additionally, we've also streamlined our packaging condiments and utensil standards for to go order. And our teams have been rebuilding our training programs for both new openings and existing Shacks with the help of our Head of Operations Training support. This includes how we hire for a new Shack opening and how and where we train, as well as simplifying our training program to allow our team members greater and flexibility as to what stations they can work during their shift. Early indications are that these initiatives will have a positive impact on our throughput and reduce our average preopening expense. Finally, we're also working with our operators to enhance the auditing and reporting in our Shacks to more quickly address over and under staffing situations, as well as making sure that we have the appropriate number of managers to support our Shacks and our growth. Speaker 300:16:00We are still early days in this journey, but we are confident that this will help us better control hourly labor expense and provide a more consistent guest experience. We are reassured by our results and we look forward to showing continued progress through the rest On these and other initiatives that we have in flight in order to improve on our profitability and deliver great guest experiences. On to the 2nd quarter results. Total revenue was $271,800,000 up 17.8 percent year over year. Shack sales grew 17.4 percent to $261,800,000 Licensing revenue grew 29.8 percent to 10,000,000 System wide sales reached a record high at $426,300,000 up 21.2 percent year over year. Speaker 300:16:44We maintain discipline on expenses, integral to our 2023 strategic plan. We grew adjusted EBITDA by 61.9 percent year over year to $37,100,000 reaching 13.6 percent of total revenue. We grew in Shack traffic by 4.7% in the quarter, and we generated a positive 10.7 Same Shack sales in our in Shack channel. As more guests are migrating to their in person habits and our wider scale kiosk rollout is having a positive impact on our mix and IPC trends in that channel. In check and kiosk in particular are our most profitable channel and we continue to focus our efforts on shifting our sales here as we execute against our plan to show sustained improvement in our overall restaurant margin. Speaker 300:17:27Our strong in Shack performance was offset by softer digital performance. Delivery traffic was down more than overall traffic, representing the continued positive trend towards our guests returning to our Shacks. Also, from time to time, as we deepen our footprint and open Shacks close to others, We may see near term traffic offsets as those neighborhoods and shared delivery radiuses take time to shake out. And this is the case in the 2nd quarter as we saw some sales impact that was heavily weighted on delivery in markets such as California and handful of Shacks on the East Coast that we plan for as we build critical mass in these key markets. This blended to an overall positive 3.0 percent Same Shack sales and negative 1.3 percent traffic versus prior year. Speaker 300:18:08We realized high single digit price in the quarter. We rolled off the comp benefit from the March 2022, 3.5% menu price increased and an additional 5% premium in our delivery channels, and we're only raising price by 2% in Flex locations at the back half of the second quarter. Our 2Q same Shack sales were pressured by approximately 100 basis points of mix as we sold out of our premium white truffle LTO ahead of schedule due to high and unexpected guest demand. It's hard to know the full traffic impact that this had on the quarter though. In addition, as people return to more normalized patterns, especially in our urban areas. Speaker 300:18:52July Same Shack sales rose 4.5%, an improvement from June, driven by improving mix. July AWS was 77,000 and that was 3% higher year over year. We generated record high kiosk average weekly sales and continue to grow in Shack traffic. Our urban markets such as Washington, D. C, Boston and New York City performed well. Speaker 300:19:13We had a positive impact from high single digit price. Our license partners opened 13 new Shacks in the quarter, growing our total licensed Shack count to 201. Together, we grew sales by 20 year over year, led by our airports and roadway locations. We had robust performance in China. We opened strong in Thailand, and that was our first new country opened in 3 years. Speaker 300:19:44In June, we opened our 1st licensed drive thru Shack in Dubai. Onto our restaurant profitability in the 2nd quarter. Shack level operating profit was $54,900,000 or 21 percent of Shack sales, marking 240 basis points of expansion versus last year despite continued inflationary pressures last year and 40 basis points versus the prior quarter. We benefited from improved waste trends in our Shacks and reduced packaging, smallwares and condiment usage in our off premise orders. Blended food and paper inflation rose high single digits year over year. Speaker 300:20:24Beef was up high single digits as well as continued inflationary pressures in custard and buns and an over 20% year over year increase in our freight costs. Importantly, our supply chain team has identified areas for cost efficiencies to help address persistent inflationary pressures, which we anticipate to start having an impact later this year with continued plans for focused improvement into 2024. Labor and related expenses were $75,200,000 or 28.7 percent of Shack sales, down 80 basis points versus last and down 170 basis points quarter over quarter. This quarter, we increased our focus on training to improve turnover and seek efficiencies across our as well as introduce several new strategies to better control our labor expenses within the Shacks. Our second quarter has typically marked our strongest sales and profitability of the year and requires more staffing than other quarters to support the higher demand. Speaker 300:21:16However, with our profitably enhancement strategies, including dynamic sales and labor Working closely with our operators to drive more standardized labor scheduling practices as well as early learnings on kiosk labor utilization and evolutions in training, We've been able to streamline hourly labor in our Shacks both quarter over quarter and year over year. Altogether, this is translated to us using 50 fewer hours per Shack per week in the quarter versus last year, resulting in 100 basis points of margin tailwind versus 2022. As is typical for our growing business, our labor expense was impacted by However, our profitability trends in our NSS improved throughout the quarter, and we have plans in place and operations and development to further reduce the expense we incur from new opening schedules on our overall restaurant profitability line. Other operating expenses were 30 $6,100,000 or 13.8 percent of Shack sales, down 60 basis points from the Q2 of 2022. We focused on investing in scaled marketing in the quarter, where we see broad based impacts and benefited from lower delivery sales as guests return to their in check dining. Speaker 300:22:22Our facilities team has been actively replacing older equipment to reduce R and M expense. And while this expense impacts our CapEx, these investments has helped us reduce R and M by an average of $100 per store week year over year. Occupancy and related expenses were $19,800,000 or 7.6 percent of Shack Sales, flat sequentially and up 10 basis points from last year's level. We ended the quarter with 471 Shacks system wide, 43% of which are operated by our licensed partners and 57% of which are company operated. In the quarter, G and A was 31,500,000 Excluding $1,700,000 in professional fees related to a one time matter, adjusted G and A was $29,800,000 or 11 percent of total revenue, 150 basis points favorable to last year. Speaker 300:23:10Our 2Q adjusted G and A expense rose 3.6% year over year total revenue that grew 17.8% year over year. We made key investments in technology, marketing, operations and our license business as we execute against strategies to grow our sales and profitability and support new Shack openings in our company operated and licensed business. We're making continued investments around our digital marketing efforts, leveraging personalized marketing to our guests, investing in guest data and analytics and are kiosks and other various marketing strategies to drive greater sales and brand awareness. We're also investing in technology and data broadly Across the company, automating labor scheduling and compliance as well as making improvements in our supply chain, among other initiatives, which we believe are critical to our long term success, Our ability to support our growth and to realize continued efficiencies over time. In operations and development, we've made investments in our teams to support new openings as well as test and learn strategies and tools, which we believe has the potential to improve throughput and take cost out of our Shacks over the long term. Speaker 300:24:12In our international license business, we have announced 5 new country openings in the past few years, including Israel and Canada that our teams are busy supporting. We have also had a strong pipeline of potential new countries as well as deeper expansion opportunities within current markets, leveraging a growing number of formats. But taken overall, the investments we made in the Q2 were partially offset by efficiencies in other departments as we continue to invest with discipline in G and A and target delivering leverage this year. Pre opening costs were $5,600,000 in the quarter, with our more even weighted development schedule versus last year. At the end of the Q3, we expect to have opened 27 units compared to 14 in the prior year. Speaker 300:24:54We have plans in place around development, training and operations as We target lowering our preopening expenses by about 10% per Shack in 2024 versus this year's level. In the quarter, depreciation was $22,300,000 up 23% year over year as we continue to invest in New Shack. We realized net income attributable to Shake Shack Inc. Of $6,900,000 or $0.16 per diluted share. We reported an adjusted pro form a net income of $7,900,000 or $0.18 per fully exchanged and diluted share. Speaker 300:25:27This is the highest level of earnings per share that we have had reported in more than 3 years. Our adjusted pro form a tax rate, excluding the tax impact of based compensation was 15.6%. Finally, our balance sheet remains solid with $295,200,000 in cash and cash This is an increase from $293,400,000 in the prior quarter. We invested $40,400,000 in CapEx in the quarter, up 48% year over year. We've opened 21 Shacks to date and are on track for the number of openings by the end of the Q3 versus last year. Speaker 300:26:03This more even weighted opening schedule is a primary driver behind the growth in our CapEx spending year over year. And as Randy noted, while it's hard to predict with full precision, we expect that this will be the peak of pressures on our bill costs, and we are starting to see traction from our efforts to lower our bill costs to 2024 and beyond. In addition, we've incurred expenses related to the more than 30 kiosks retrofits in this quarter and have about 15 left to go, which we expect will be completed by the end of Q3. We also incurred elevated maintenance CapEx as our teams made the necessary replacements to lower R and Now onto guidance, which balances the strong underlying business factors that we've seen in the first half of the year with a degree of uncertainty around the consumer spending outlook and inflationary headwinds. This range does not reflect any additional unknown delays to our development For the Q3, we guide total revenue of $273,500,000 to $278,000,000 with $10,500,000 to $11,000,000 of licensing revenue, 10 to 12 company operated openings, 11 to 13 licensed Shack openings and for same Shack sales to grow by low to mid single digits year over year with that high end very consistent with the 4.5% same Shack sales that we generated in July. Speaker 300:27:223rd quarter price will be up high single digits year over year. We expect to see mix headwinds until we launch our Hot Chicken and Burger LTO at the end of the quarter. And as a reminder, historically, we've seen AWS sequentially declined into August following peak summer travel and then again in September around back to school. We are guiding 3Q 2023 restaurant margins to be approximately 20%, as we are factoring in continued execution of our margin driving initiatives, balanced with uncertainty around inflationary outlook for beef. Our guidance reflects beef rising by low double digits year over year. Speaker 300:27:56However, if prices were to rise by more than this level, All else equal, given we do not hedge on this important line item, we would expect to fall below our approximately 20% restaurant margin guidance for the Q3. We expect food and paper inflation for the Q3 to be up mid single digits year over year, and we expect labor inflation to be in the mid single digit range year over year. Based on the strength that we've seen in the Q2 and our optimistic outlook for the Q3, we're adjusting our revenue guidance and increasing our profitability targets for the full year 2023. So for full year 2023, our guidance calls for total revenue of $1,070,000,000 to $1,080,000,000 growing 18% to 21% year over year Same Shack sales to grow by lowtomidsingledigits with mid to high single digits price. We are rolling off the high single digit price we took in October 2022. Speaker 300:28:47We expect to end the year running at just a low single digit price, which is in line with our more normal pricing patterns, and this will be a pressure to our same Shack sales in the 4th quarter. We expect licensing revenue to reach $40,000,000 to $41,000,000 While we're starting to see some signs of food costs declining and inflationary pressures decelerating, Most of our basket cost remains elevated and these inflationary pressures remain highly uncertain into the end of the year. But despite ongoing headwinds, we guide full year 2023 restaurant margins to reach 19.25 percent to 20%. This represents approximately 200 basis points to 2 70 basis points of restaurant margin expansion this year. While we are not providing specific 4th quarter guidance at this time, We expect to see typical seasonality in both our sales and profitability from the 3rd to the 4th quarter. Speaker 300:29:36As a reminder, prior to COVID, 4th quarter restaurant margins seasonally are lower than the 3rd quarter levels, and that's largely driven by lower sales. While this year, we expect to outperform that pre COVID margin seasonality given the strong success we were seeing in our strategic priorities, these inflationary risks are real and present a headwind to our profitability through the rest of the year. We expect this in addition to rolling off that significant October 22 price increase and ending the year with just about 2% price against the broad inflationary pressures we're seeing to impact our 4th quarter flow through overall. However, all else equal, If beef inflation was consistent with last year's performance and consumer spending patterns remain strong, we see a path for our restaurant margin to exceed 20% for the full year. We expect to open approximately 75 Shacks system wide this year, about 40 of them will be domestic company operated and approximately 35 will be operated by our licensed partners. Speaker 300:30:31We guide 2023 G and A of $125,000,000 to $130,000,000 absent the $3,300,000 in legal and professional fees that are excluded from adjusted EBITDA in the 1st and second quarters. At the midpoint, G and A would be 11.9 percent of total revenue, Approximately 75 basis points of leverage versus 2022 levels. Some other guidance points, equity based compensation expense of approximately 17,000,000 Pre opening of $17,000,000 to $19,000,000 depreciation of $88,000,000 to $93,000,000 and adjusted pro form a tax rate, excluding the impact of equity based compensation, to be 16% to 18%. Altogether, based on our performance so far this year, we are raising our fiscal 2023 adjusted EBITDA to and $20,000,000 to $130,000,000 representing approximately 65% to 80% growth year over year. And thank you. Speaker 300:31:20With that, turn it back to Randy. Speaker 200:31:22Thanks so much, Katie. We're really proud of the team and the way they continue to execute our strategic plan, Driving sales and better profitability across our Shacks. Today, I want to end with a note of special thanks. As you may have seen earlier this morning Through Form 8 ks, we announced that our long time COO, Zach Coff, will be leaving the company after more than 13 years. Zach joined Shake Shack when we opened our 4th Shack ever in Miami Beach, and he's been a key fixture in all we've done to build this special brand and culture. Speaker 200:31:50His heart, soul and leadership sits at the foundation of Shake Shack So much of what we've accomplished as a team has been thanks to his contributions. Zach will be greatly missed, but we're excited for him in his next chapter And for Shake Shack, as we look ahead to adding new leadership. Zach will be transitioning out of the company September 7, and we will begin an executive search for his replacement. In the meantime, Zach has built an exceptional team. And along with our executive team, we will continue the operational excellence and improvements we shared earlier in this call to ensure progress moving forward. Speaker 200:32:22With that, operator, please open up the call for questions. Operator00:32:27Thank you. Our first question is from Brian Mullen with Piper Sandler. Please proceed. Speaker 400:32:54Hey, thank you. Just a question on top of the bill costs. They're going to be down 10% next year. That's encouraging to see. Could you perhaps separate that between the drive thru format and the more traditional formats? Speaker 400:33:05We've known you're looking to get the cost of the drive thru down. Just Are you making progress across the other formats as well? And then just kind of related to that, holding inflation constant, Do you think you could get that down even further in 2025, if given more time and with more focus on the issue? Speaker 200:33:23Yes. Thanks, Brian. Appreciate the question. I think broadly the answer is yes on all fronts. Our commitment next year is both in drive through costs and overall, but in our core formats, we're working towards new formats, more standardized, more templated, Really optimizing the right size and doing so much to continue to bring that down over time. Speaker 200:33:47The team is doing great work on this. It takes Right. You've got Shacks that are already designed and in place. Some of those will be more expensive drive throughs. Some of those will be in more expensive places like I named in New York, California. Speaker 200:33:58But overall, Next year, we're targeting a $2,300,000 average roughly, and we're going to hold to that. As we look at years forward, depending on the mix of Shacks, We believe and we are targeting lots of improvements in how we build our restaurants, the way we do it, but still doing it in a Shake Shack way. So we believe this is a great opportunity for us long term and we're committed to having this be an important fixture of our strategic plan in this coming year. Speaker 400:34:28Okay. Thanks a lot. Just as a follow-up, I think a part of the recent cooperation agreement that the company has agreed to work with Outside consultants to work at ways to be more efficient. My question is just given all of the various strategic efforts That are already underway internally and yielding progress. Do you expect any consulting agreement would yield even more Efficiency is above and beyond. Speaker 400:34:50And have you kind of entered into an agreement yet? Speaker 200:34:53Thanks, Brian. Yes. First of all, I think the team right now Has been and you've seen this in the results of the quarter and in our guide forward, really focused on improving so many things in the company and that's taking root as you can see. We will be and we're working with the working group of our Board in concert with Talking to consultants and thinking about what that scope might look like. And we're continuing to define that and we'll certainly let you know. Speaker 200:35:19But we believe that's going to be another Exciting opportunity for us to dive deeper into some of the things we're already doing and identify some other things. So, yes, we're looking forward to that. That's going to take time and we'll keep you posted as it goes. Operator00:35:32Our next question is from Michael Tamas with Oppenheimer and Company. Please proceed. Speaker 200:35:38Thanks. Good morning. It sounds like you're just getting started on Some of the opportunities to expand your restaurant margins above the 20% you're targeting this year. So but as your pricing normalizes and Hopefully, inflation does as well. Do you think you have the levers to pull on a core basis to expand margins above the 20% range? Speaker 200:35:56Or do you think you need Menu pricing to sort of outpace inflation to do that. Speaker 300:36:02Great. Yes. And so we talked about on the Call today, the 2 40 basis points of margin improvement that we showed year over year, the bulk majority of that, the majority of that is coming from our operational And some of these we factored into our guidance. Others we're learning more as time goes along. But we're really encouraged by what we're seeing. Speaker 300:36:25We're not going to give long term guidance at this point, so nothing beyond what we've given for the full year target of 19.25 percent to 20%. But these are kind of really improving the foundation of Shake Shack and helping us Become a more profitable company over the long term. Operator00:36:43Our next question is from Brian Harper with Morgan Stanley. Speaker 500:36:50Yes, thanks. Good morning. I was curious if you could just provide more detail on some of the mix impact because I realize that kind of delivery is coming off. You talked about that piece. But are you seeing pretty good attach of some of your new menu items? Speaker 500:37:06How much more do you think can kind of come from kiosks over time if we separate out some of the different mix drivers that you're seeing? Speaker 300:37:14Sure. So really one of the most important mix headwinds that we had in the quarter was the fact that we sold out of our Highly successful White Truffle LTO Early. We think that was about 100 basis points of just mix alone in the quarter. Hard to tell what that traffic impact was, but we know that our most successful, our great LTOs, they are traffic and frequency drivers as well. Within each of our channels, what we're seeing overall is pretty consistent. Speaker 300:37:41We're seeing better mix trends within our in chat channel though just as Driving fee per kiosk adoption, you're getting that natural lift on that side. But across the board, we do have higher attach rates of items per protein year over year and we're pretty encouraged by what we're seeing there. Now overall, what you're seeing at the company level though is that channel shift mix More people coming in Shack. Those tend to be less people per order, especially in our urban markets. And that's that natural shift that we've been seeing since pretty much last year into now. Operator00:38:18Our next question is from Peter Sala with BTIG. Please proceed. Speaker 600:38:24Yes, great and good morning. Good day. I wanted to ask on the kiosk, I think you mentioned a high single digit check lift. Can you elaborate a little bit On that, are you seeing that just more customization add ons or is it or you're seeing Group sizes, just trying to understand what's driving that high single digit lift? Speaker 300:38:48Great. Yes. So it's really exciting. What we're pretty consistently seeing In our Shacks, as we're accelerating our kiosk retrofit program here, is that once we kind of shift that gas from the cashier into the kiosk channel, They tend to we have a high single digit at least check lift right there. And what that's coming from is really, I think, People being able to sit with the visual merchandising of our products, you see a higher instance of LTO sales on that. Speaker 300:39:16And I think that when you get to see the very exciting items that we're promoting up there. Guests are interested in that. I think it comes across a little bit differently on the kiosk channel than in our traditional menu boards. We're also seeing greater instances of sales of our premium cold beverage as well, which is and shakes, which has obviously very nice margin on that side. So that's most of what we're seeing, but what's really exciting also is that we're still in the very early days here. Speaker 300:39:41There's a lot of opportunity for us to invest Some money around driving more upsell in the kiosk channel. Our priority today is driving just that greater adoption of it. You're going to see you'll expect to see from us continued strategies to drive more upsell in that channel. Operator00:40:00Our next question is from Andrew Charles with TD Cowen. Please proceed. Speaker 700:40:06Great. Thanks. Two questions for me. First, I know beef obviously remains pretty volatile, but 2Q beef inflation, high single digits is more favorable than your low double digit forecast. I know you don't contract these, but is there any mitigation strategy that contributed to that? Speaker 700:40:22Or was that strictly more favorable spot rates? And Just kind of a question on the 3Q guidance. I appreciate the disclosure for July, up 4.5%. If I look at the guidance for low to mid single digits, Is there a reason to believe same store sales would decrease from July to just harder comparisons in August and September? Or would you just label the guidance to be conservative? Speaker 300:40:42Great. So on let's take beef first. So as we progress throughout Quarter on beef, it was a little bit more favorable. I mean, we're talking about high single digits versus low double digits, kind of very much on the cusp there. And we really started to see beef though pick up more in July. Speaker 300:40:59So that is something that we are watching very closely and we've reflected that view into of what we're seeing today into our guidance. And then on the comp, we're running a 4.5% in July, we ran a 4.5% in July. Think about that mid double the mid single digits range as being kind of around that 4.5% to 5% range. And how we typically progress throughout the quarter on AWS is August is a little bit lower Last year, we had a more muted decline in September versus August, but in pre COVID, times that was a little bit more pronounced. Operator00:41:48Our next question is from Jake Bartlett with Truist Securities. Please proceed. Speaker 800:41:54Great. Thanks for taking the question. My first one is on the consumer. In the past, you've made some comments about Whether there's any specific movements in lower income or higher income, any comments you can see on what you're seeing from just underlying strength of demand? Speaker 200:42:12Yes, Jake, I think you've seen this kind of broadly in our industry and a lot of industries. Generally, I think we're all surprised at how resilient the consumer has been. At Shake Shack, I think what we've said in the past has stood true in this last quarter, which is we generally benefit from a higher end consumer. You're seeing that also in the strength of some of our LTOs, people being willing to spend a little bit more. But we're not immune to The lower consumer trading down, and you'll probably see some of that in our numbers in this quarter and moving forward, right? Speaker 200:42:42There's going to be more battles on discounting And your kind of traditional fast food that we're going to compete against from time to time. And that's going to be a pressure, I think, during This uncertain time, and we expect that. And that's built into the guide as we go. It's built into how we're thinking about things. But I think in general, The consumer has been pretty resilient. Speaker 200:43:04So, we're happy with that. We're looking ahead to continue to build on the strategies we've employed so far that you heard a lot about today. Operator00:43:14Our next question is from Brian Vaccaro with Raymond James. Please proceed. Speaker 900:43:21Hi, thanks and good morning. I just wanted to ask about the labor improvements. And Katie, I think you said wage inflation up in the mid single digits, if I heard Correctly and you saw cost per week at least on our math down year on year. So could you just provide a little more color on the benefits You're seeing some kiosks and also the dynamic labor scheduling. Just more perspective on that. Speaker 900:43:43I'm curious if your The hours of this, like where is that during the day, during the week? Is it clustered in a certain set of stores that were significantly underperforming? Just any incremental clarity there would be helpful. Speaker 300:43:58Yes, absolutely. So just a kind of reminder of what we're doing on that side. So first of all, working with our operators very closely and digging in and building bespoke labor schedules The Shack that are kind of the most pressured. And that has been really helpful way of managing kind of our lower performing Shack base and working with them to help make those more profitable. On the dynamic labor scheduling side, this is an important point. Speaker 300:44:29We switched to a more demand based, more real time what we're seeing on the ground forecast that's leveraging both micro and macro variables across all of our Shacks in the quarter. And this is a really hard one to measure the full benefit, but what I will say is that if sales type turn in either direction, You're able to be much more nimble and react much more much quicker, to changes in consumer behavior where we can staff up and staff down, to reflect that change instead of being a little bit more lagged and delayed. We're also working closely to audit labor schedules as well and just make sure that we're adhering to our standards, which has really helped kind of reduce that overall. And then Kiosk overall, With the 250 Shacks that we have in place right now and continuing to drive, kiosk adoption, we're starting to see some early signs of labor savings on that. And that's been helpful and we're going to continue to leverage that over time. Speaker 300:45:25The number that we gave in my prepared remarks is that we're running 50 fewer hours this year versus last year. So a pretty good clip of savings on that side. And that's helping to offset Some of the other pressures that we're facing in labor and that plus our higher price contributed to the delevers that we produced in the quarter. Operator00:45:51Our next question is from David Tarantino with Baird. Please proceed. Speaker 1000:45:58Hi, good morning. My question is more about kind of the strategy With respect to kind of optimizing the model to lower costs and shift the behavior towards kiosks. And my Question is really related to how are you measuring the guest experience as you go through this transition? It seems like you're making a lot of progress Early on, on the cost side, but are you I guess, what are you doing to make sure that you're not changing the guest experience in a way that you A lot longer term. Speaker 200:46:35David, I love that question. I'm so thankful you asked it because that's at the core of everything that we think about, right? And as we think about Improving the operating model, we need to do that through ways that only increase and improve the guest experience. That's a part of our strategic plan. You heard me talk about it earlier. Speaker 200:46:52And it will be a part of our strategic plan next year and evolved in new ways. So a couple of things. What we're learning is as we do these digital tools like kiosk or app or whatever, we need to build them so guests prefer it and that they really enjoy those experiences. What we're seeing in our guest scores that we track a lot and get more and more data from is that they're improving. They're improving through the time that we are improving as operational execution. Speaker 200:47:18I know that part of the what we need to do better as well It's just consistency, standardization so that guests can count on what they need to count on for Shake Shack day after day. You can know when your food is going to come out. You can know that it's going to be ready and you can count on it being exactly the same. Standardization and us Doing that better is going to lead to better guest experience. We know that we're doing that. Speaker 200:47:40But in the Shacks as well, we're actually ramping up efforts So the things that we do, for instance, in most Shacks now, when you come in and you used to have kind of that stress of waiting for your buzzer or waiting for us to text you, Now in most Shacks most of the time, we're going to run your food to you. We're adding that added level of service. So we've been doing that for about a year now. That's all part of the shift in the way we can optimize our labor instead of taking an order where guests would prefer to do it themselves and our kiosks benefit in all the ways you heard. We can spend that time and effort and put our hospitality towards a different part of the experience. Speaker 200:48:16And we found that people are really enjoying that. That has And just a de stressor and an added experience. And as we think about cutting costs and bringing things down, we got to do it in ways, as I said, that improves. So if we're going Have a smaller dining room. It's still got to be a great dining room that has the right amount of seats. Speaker 200:48:34And all the things that we're doing are going to add to that. So, thank you for that question. You can Sure. And our shareholders can be assured that we will not do anything but work to improve the guest Operator00:48:51Our next question is from Jeffrey Steve Bernstein with Barclays. Please proceed. Speaker 700:48:58Great. Thank you. One clarification on a question. Just the clarification, The acceleration you saw in July from a comp perspective, I'm just wondering if there's anything you specifically attribute that to, any new drivers or perhaps change in consumer behavior to drive that improvement. Otherwise, Speaker 1100:49:17my question is on G Speaker 700:49:18and A. Speaker 1100:49:19Go ahead. Speaker 700:49:21Just on G and A. Yes, Katy mentioned the 75 basis points of leverage in 23, which is obviously impressive. I'm just wondering what the biggest buckets of savings are, whether you think there's more opportunity for leverage in 'twenty four and beyond, Maybe it's for you to benchmark yourself again. Just trying to figure out how you define what the right ultimate level is. Thank you. Speaker 200:49:42Yes. Thanks. On the Trends, we're really encouraged by quarter to date seeing some of the strongest comp that we've seen all year. A few things. As we talked about, we had a return of a strong LTO With Bourbon Bacon, we had some of the other menu things happening that are really good. Speaker 200:49:58And I think we're just continuing to see some of that trend that benefits Shake Shack, some of things that we were most hit on, whether it's urban or the offices, tourism, travel, the kind of way people move, Those things continue to improve in general mobility for us. We are seeing some hits in the mid distance consumer that are different from last year, but generally those trends continue to benefit us. And it's just been good. It's just been a really good momentum through July. So we're encouraged by that. Speaker 200:50:28And really, it's been strengthening since mid June. So, that's good. We'll see where it goes. We've got tougher compares as we go through the year, But we feel good about that. On G and A, look, we need to keep investing where we need to invest. Speaker 200:50:40We're happy that, as Katie shared, we're tracking towards leverage this year and we can look at some of that next year as well, but we're not going to fully guide there just yet. We've got to make sure we're making the investments. But we're leading this company with the right amount of people and efforts and making sure that we can continue to drive all the initiatives that make sense From a return perspective, we are as I said, we are a very much a growth company, leading with percentage sales increases that you don't see in a whole lot of places in the public company restaurant space. And we have to continue to invest to ensure that that continues, but we're going to do it profitably overall. Operator00:51:24Our next question is from Andy Varnish with Jefferies. Please proceed. Speaker 200:51:31Hey, guys. Speaker 1100:51:32Just having a question about some of the sales impacts, I think, you mentioned on the And in regard to maybe some delivery sales, could you tease that out for us just How much and how long do you think that will last? And is that restaurants as well as consumer behavior or mostly Your development that's impacting some of that sales layer? Speaker 200:52:01Thanks. Yes, I think it's Near term, when you start to lap some of those, there's going to be always and there has been since the day we created this company at every restaurant, you're going to see From time to time, you're going to see impact when you open a restaurant close to another. And I think we've got a couple of handfuls of restaurants that are in that category, Some in LA where we opened 5 new Shacks on top of other restaurants. Those are our whole goal is market Share overall and building a strong market. We have a long, long runway to do so and we're confident in that. Speaker 200:52:30But from time to time, Speaker 900:52:31In the world we Speaker 200:52:32live in today, you may eat up a section of a delivery radius, for instance, and just start to share that portion of delivery sales. That may happen. But we do think we roll off some of those, but let's go back to the important strategy of development. We've got a long runway ahead and part of our strategy is to cluster our Shacks A little bit closer together. We know and you're seeing that in our profitability measures that we're continuing to improve. Speaker 200:52:55So we know that from time to time, When you do that, you might impact sales at another restaurant, but you're also going to impact our ability to open better, faster, have stronger profitability sooner and over the long run. So we feel really good about all those decisions and we'll also keep taking that learning And making sure our development schedule is taking that in and spreading out our Shacks as best that makes sense and still building lots of restaurants. I think we're still the thing that I think needs to be said that even we remain surprised by from time to time is Shake Shack has this Giant brand that punches so far above its weight. But in reality, there are many places in this country where our brand awareness still needs to grow, We're actually still coming up and we're not the incumbent and that takes time. And I think our history has shown that we do that really well over time, But it does take time and we're confident we'll keep doing that and you'll see us committing more and more to marketing and funding brand awareness so that we can continue to grow our overall base of guests. Operator00:54:03Our next question is from John Ivankoe with JPMorgan. Please proceed. Speaker 1200:54:09Hi, thank you. I hope everyone is well. I know we've talked about previously and I was just trying to get to Capitalized cost per new unit. I know it's not a fair calculation, and I know you'll correct me for the reasons why. But In fiscal 2023, just taking your CapEx divided by number of units, it was around $4,000,000 In first half of twenty twenty four, it's actually That was in 'twenty two. Speaker 1200:54:37In first half of 'twenty three, we're actually running a little bit ahead of $4,000,000 Now I do understand It does sound like you're doing some projects to convert R and M into CapEx and obviously kiosk cost some money, But it actually is running ahead of $4,000,000 in the first half of twenty twenty three. So as we think about That 24 number, just try to get it as clean as possible. I mean, what do you think the capitalized cost Per new unit is going to be in 24%. I know you said 10% less, but 10% less of what? Speaker 200:55:15Well, John, I think overall feel free to jump in here, Katie. I think we're not guiding to 24 today. What we're guiding to is continue to bring down those costs. You have to In your numbers that you are quoting, you're not giving credit to the significant digital investments, tech investments, The many other CapEx investments that happen around this company that are not about the individual unit, those are things that have to happen as you grow a restaurant company, Actually at our still small scale. So some of those may be outsized in total dollars today. Speaker 200:55:48But where are we at in committing to this? We're committed to taking down That overall cost to build and improving the numbers you just said in 2024 and beyond, I expect we will, maybe by your measure, certainly by the measures that we share. And that's our goal to improve our overall return on capital for our individual restaurants and our company overall. And I think let's just take a beat because I don't think we're I don't think we've talked about this yet on Paul, really, take a look at the adjusted EBITDA to EBITDA growth of this company year over year. It is significant. Speaker 200:56:18It is Materially game changing in the percentage growth of adjusted EBITDA over this year. And we expect to continue to generate Significant adjusted EBITDA next year and a lot of cash. So I think it's going to be a good year for all the metrics you're asking about. And those things take time. As I said, you've got a lot of restaurants designed and in flight, you can't change those things mid flight, But we're putting all the things in place that will improve that next year and in the years to come. Operator00:56:52Our next Question is from Jim Sanderson with Northcoast Research. Please proceed. Speaker 1300:56:58Hey, thanks for the question and congratulations on the improvement in Store level margin. Wanted to dig into the detail on the labor hours per week. Is that only for stores that had the kiosk Or is that a system wide number that you cited? Speaker 300:57:13Yes. No, that's system wide. And it's not just kiosk that's driving Matt, it is a blend of higher retention. It's more of what we're doing on the scheduling side. Kiosk is certainly a little bit of a help, but we're definitely learning more and more as to what kiosk can bring us in terms of labor savings as we drive deeper Operator00:57:39Our next question is from Jeff Farmer With Gordon Haskett, please proceed. Speaker 1300:57:44Great. Good morning and thank you. I have a follow-up and a question. So just following up on Michael's earlier question, which was one of the first on the earnings call, you guys made some huge strides or have made some huge strides driving improved restaurant level margins. Long list of initiatives have helped you do that. Speaker 1300:58:02But as we look out into 2024, do you see additional opportunities to drive Further improvement? Speaker 200:58:10We're not guiding there just yet. We're always looking for further improvement. We are Let's celebrate for a moment that being up 2 40 basis points from last year and looking ahead at our guide being significantly up from The guide for the quarter for next year from last year. So we'll start there. We're continually committed. Speaker 200:58:30If you Here are our comments on strategic plan towards improving our restaurants overall profitability cost to build and the metrics that we use. So we'll keep you posted on what 2024 looks like as we get closer to that year. Operator00:58:43Our final question is from Brian Vaccaro with Raymond James. Please proceed. Speaker 900:58:50Hi. Yes, thank you. Just one last big picture question, and I guess it's tied to the mix a little bit as well. But I guess, as you've expanded into new markets and you're reaching a different consumer in the suburbs, Randy, maybe some that are a little older, different stage of life, more income levels, what have you. I'm just curious what you've learned about the brand and any differences you've noticed in customer perceptions around value, quality, Anything along those lines and just how you're sort of adjusting or plan to adjust your strategy, your go forward brand proposition, etcetera, as you adapt to some of those differences. Speaker 200:59:29Yes, that's great. We think about that a lot, big picture long term. And it goes back to a little bit what I said earlier. When we have strong brand awareness in the very many markets where we do, we generally tend to capture all types All the time, strong AUVs, strong Shacks, right? Where we enter with lesser brand awareness and consideration, we've got more work to do and those take time. Speaker 200:59:53Our evidence for us has shown that over time, we continue to build that and build that and build that and it's really strong. But we're not immune to opening in a place where people don't really know us. So what do we do with that? A couple of things. We've gotten better and better in our pricing. Speaker 201:00:08When you think about the geographic disparity of our pricing And our ability to take price in our more expensive, but also higher brand awareness markets, we generally tend to take more price there. We're generally Well, more cautious in those lower brand awareness. So we think having the right price, having the right opportunity is really important as we look across Shacks. But we've also got to optimize other costs in the restaurants, right? And we've been able to do that on down the line and you're seeing that And the improvement. Speaker 201:00:39I think what's always amazing to me, even almost 500 Shacks into this journey is that Even when we open in 4 Shacks in Texas in the last 2 months, all drive thrus, it's amazing to me how many people come out, Celebrate with us and really continue to start with a bang. And I think that says something for the continued probably stronger than ever brand we have. But you're hearing me acknowledge loud and clear that we've got also build brand awareness. The other thing we haven't done a lot of in the history of this company, we've never really done Traditional mass media advertising. We've done a lot of local Shake Shack style, guerilla marketing, if you will. Speaker 201:01:24And in the coming years, and you'll see this probably next year, we're going to commit to increasing Our overall marketing spend, so that we can drive brand awareness and drive all kinds of guests in the places where you talked about. But, look broadly, When you can execute a 21% operating profit, there's few restaurant companies in this country that have ever done that. And for us to do that at scale in this Quarter. I think that's where we end and I hope that's the note that people hear a lot going forward as we've grown sales, as we are materially growing this We are a profitable growth company and it's a really exciting time for us. So with that, operator, I think we finished the questions. Speaker 201:02:04I just want to say thank you to everybody on the call andRead morePowered by