Employees and Community at Shake Shack
Shake Shack Business Model
Shake Shack has revolutionized the fast casual space with the simple business model of becoming “the best burger company in the world”[1]. Its CEO, Randy Garutti elaborates that his team focuses on the simple tasks that create the Shake Shack experience by doing “what you want to do really well in its most basic version”[2]. He has a picture on his wall that reminds him that “the bigger we get the smaller we need to act’’, and they indeed have now grown in scale greatly from its humble beginnings[3]. Shake Shack started as a hot dog stand founded by Danny Meyer 11 years ago in Madison Square Park in order to revitalize the neighborhood. It has now expanded to become a global chain with over 41 stores in the United States and 29 franchises around the world in cities such as London, Istanbul, Dubai and Moscow[4]. Shake Shack was valued at around 1.6billion after it raised $112 million in its IPO in the Spring of 2015.[5]
Shake Shack Operations Model
Despite its growth it has stayed true to its commitment to the neighborhood just the same way it was when it opened in Madison Square Park. According to Denise Lee Yohn, “Great brands use their brand identities as their one true focus because that’s the only way to ensure continued relevance and resonance with customers.”[6] And this is what Shake Shack has done. It has honed its operations on the aspects that define its business model, therefore creating a brand identity. Its brand identity is anchored in what Danny Meyer calls “enlightened hospitality” which is basically the company credo: “to create a welcoming atmosphere first for employees, next for customers, and then for the outside community, suppliers, and, finally, investors.”[7] The two main pillars of this philosophy are the happiness of its employees and its focus on the community.
Employees:
Employees are constantly empowered to deliver a superior customer experience. Garruti explains that whenever he opens a store he tells his employees to try to put the company out of business: “put us out of business because you are so damn generous with what you give the people who walk in this door. If there’s a kid crying, who’s going to walk over with a free cup of custard? I challenge you to put us out of business with how generous you are. Go do it. Give away free stuff.” [8]. In this way he empowers the employees to take the success of Shake Shack in their own hands. The Shake Shack team has also taken concrete operational steps to instill this empowerment and motivate its employees:
- It pays 1% of total top line revenue to employees as a monthly bonus.[9]
- It pays employees extra bonuses for additional work milestones such as coming to work for 30 days without interruption.[10]
- They offer a 401 (k) for employees that work over 25 hours a week as well as generous medical/dental/flex spending.[11]
- They offer opportunities to grow through their ‘leaders training future leaders’ program that allows hourly employees to rise through the ranks to general managers.[12]
Community:
Shake Shack employees a similar hands on approach when it comes to designing their own stores and connecting with the community in an effort to engage its customers and make them linger at the restaurant.[13] Ideas have ranged from ping-pong tables, bocce courts as well as sponsored music series[14]. The opening of their store in Philadelphia is a good example of how its operations of opening a store focuses on engaging the community both during the construction phase but also with the products that they offer. “When we started construction, instead of doing what everyone else does–put up a big, ugly wall that’s an eyesore in the neighborhood during construction–we teamed up with a local Philly designer to turn the plywood siding into a living green wall. It was a little a corner “park,” if you will, and our neighbors responded enthusiastically! (Similarly) … we teamed up with some of the best artisanal producers in the city–and added their best products into our “Concretes” on our Frozen Custard menu.”[15]
Garutti successfully sums up this focus on employees and community by stating: “And really, doesn’t a burger just taste better when a kind and happy person served it to you?’’[16]
Sources:
- Retrieved 12/8/2015: http://www.forbes.com/sites/aileron/2013/10/09/aligning-your-business-with-your-vision-part-1/
- Retrieved 12/8/2015: http://www.fastcompany.com/3046753/shake-shack-leads-the-better-burger-revolution
- Retrieved 12/8/2015: http://www.strategy-business.com/blog/Shake-Shacks-Secret-Sauce?gko=23501
- Retrieved 12/8/2015: http://marketrealist.com/analysis/stock-analysis/consumer/restaurants
- Retrieved 12/8/2015: https://hbr.org/2014/03/what-shake-shack-knows-about-growth-that-mcdonalds-has-forgotten
- Retrieved 12/8/2015: http://www.inc.com/jeff-haden/shake-shack-ceo-the-anti-chain-burger-chain.html
Footnotes:
[1] https://hbr.org/2014/03/what-shake-shack-knows-about-growth-that-mcdonalds-has-forgotten
[2] Ibid
[3] http://www.inc.com/jeff-haden/shake-shack-ceo-the-anti-chain-burger-chain.html
[4] http://www.fastcompany.com/3046753/shake-shack-leads-the-better-burger-revolution
[5] Ibid
[6] https://hbr.org/2014/03/what-shake-shack-knows-about-growth-that-mcdonalds-has-forgotten
[7] http://www.fastcompany.com/3046753/shake-shack-leads-the-better-burger-revolution
[8] Ibid
[9] http://www.inc.com/jeff-haden/shake-shack-ceo-the-anti-chain-burger-chain.html
[10] Ibid
[11] Ibid
[12] Ibid
[13] http://www.fastcompany.com/3046753/shake-shack-leads-the-better-burger-revolution
[14] Ibid
[15] http://www.inc.com/jeff-haden/shake-shack-ceo-the-anti-chain-burger-chain.html
[16] Ibid
Great choice! I thought about writing about Shake Shack as well. We are actually focusing on this business as part of our FIELD 2 project, which is to attract young families to a local bakery in Brazil. Our client has cited Shake Shack several times as a business model that they would like to emulate. Doing our market research, it was evident why. They hit all of the important points for attracting families to not only go to the restaurant, but make it a weekly go-to spot that is actually quite meaningful to them. They have all the small logistical components that are actually quite critical to bringing families in, such as having modern changing tables, high-chairs, movable furniture to cater to different sized groups, and an elevator to get to a second floor for people with strollers. Additionally, the “family friendly” feel to a restaurant is so powerful in giving families a place where they don’t have to feel ostracized if their child becomes disruptive. It really is an emotional connection that they form with their customer, which keeps them happy and returning to the business. Shake Shack’s staff are incredibly conscientious of their customers’ needs and of how important it is to deliver superior customer service. These key elements, although seemingly simple, are often missed on several dimensions by competitors, and are crucial to success in the industry.
I am impressed by how much the operating model hinges on human capital. In an industry that is very operationally intensive, it seems counter intuitive at first glance that the human component would be the most important part of the operating model. However, after more thought, one may consider the fact that just to exist in the restaurant space requires excellent logistical coordination and expertise, so executing the human component of the model better than your competitors can be a differentiating factor and advantage. I wonder if the level to which they empower employees will change as the existing stores mature and the business scales, opening more locations.
Really interesting post! I very much enjoyed how the philosophy puts employees first even before customers. The recognition that to create a sustainable business model and build a loyal customer base requires the commitment and dedication of employees is something that not many organizations realize. By putting this first, Shack Shake is uniquely able to scale. I did not realize the extent of their incentive structure, its reinforcement of non-monetary goals, and its commitment to providing health insurance and 401 (k) to employees that fail to meet the requirements in other organizations. Together this creates a specialized experience that maintains a high level of quality across locations farther differentiating Shake Shack from other burger shops. Moreover, I was very interested to see the collaboration with neighbors and local producers in their expansion into Philadelphia and I am curious to see how they have applied this in expanding to other areas.