Think this is a very valid question on the profitability. Although they do not release this level of details, we do know that they are very deliberately growing slowly. This is largely to do just what you referenced, and maintain the same unit economics and appeals (as opposed to the land grab model). So far, the brand awareness seems to be from a mostly natural strong organic “pull” from customers. This Forbes article adds some more detail:
I agree with many of the points above and thing of Chipotle as one of the pioneers and best in call. On the supply chain, how do you interpret the recent troubles with e-coli? Is this growing pains, or a fundamental problem with scaling their model?
I think this is a very valid concern, however I think what mitigates this is the locations as a destination rather than convenience play. Chipotle is about getting customers in and out quickly, and being the most convenient option. They are at 1,700 units en route to several thousands. Shake shack is en route to a few hundred. If anything these non-prime locations do even more to strengthen the link between operating and business model.
On the airport point, I would suspect these are actually some of the most profitable, because they actually are quite willing to pull the price lever. The most expensive Shake Shack in the company is in the Dubai airport. There is not enough public information to definitively say, but this is my strong hypothesis.
I think it is a very valid concern, but I firmly believe that they will hold firm with the current model. You already see dedication to this through one transition (from Danny Meyer essentially running, through spinning out as a separate company as it is now). Also, as mentioned they have set and maintained expectations on growth at ~10 a year, even though there is a much larger market opportunity. Some of this is probably why you are seeing such volatility around the stock price, but I do not believe there is any reason to worry of a divergence. This would be, the biggest mistake they could make at this point.
How have they thought about marketing and it’s role in maintaining, changing the business and operating models? Customization and customer service seem to be core pillars, which would put it at odds with traditional mass marketing. Do you see this as a challenge to expansion?
I can understand the logic to pull out of wholesale that you described above, however what I struggle with is understanding how this meshes with the ability o both expand and manage demand. If there is a 48 hour hard stop between roast and consumption, I imagine this puts immense pressure not only on the supply chain but also on demand forecasting. How do you think they are going to tackle this issue, especially as it is compounded by geographical expansion (e.g., require far more roasting fascilities)?
All makes, sense on how they align the business and operating model (huge fan of the Encore!). How specifically do you think they try to differentiate themselves from the competition? My sense is most have the same types of shops and focus on customer service. Did you think about design at all? E.g., they were a pioneer in having windows on the casino floor, ability to get to room without walking through gaming floor, etc.