Shake Shack Franchise In USA Cost, Profit, Wiki, How to Apply | SkillsAndTechSkillsandTech | February 8, 2022 |
Let’s be honest: you want in on the Shake Shack business and there’s really no need to explain the reasons. Delicious burgers, sophisticated design, global popularity. Who wouldn’t want to be a part of this brand? They’re one of the leading burger chains in America and around the world and what’s even more impressive is they’ve been in business for 17 years.
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How much does it cost to open Shake Shack?
We’ve got some bad news though. You can’t franchise a Shake Shack in the United States and there are no plans to do so in the future. But they do offer license agreements to partners internationally. I dig into the details of these license agreements below. So if you live outside of the United States, there’s a chance to be part of the Shake Shack family.
Read more about how you can open a Shake Shack franchise near you, find alternative franchise options, discover revenue estimates and challenges of this business.
Financial Requirements and Fees
Shake Shack has not disclosed their financial requirements for franchising mainly because they don’t offer it to anyone. You can’t franchise Shake Shack in the United States but if you’re someone who lives outside of the U.S. and has an existing company infrastructure then you may have a chance because Shake Shack offers licensing agreements to their international partners.
But if you’re wondering if there’s an estimate, let’s take one of their competitors as an example. Five Guys and In-n-Out are two burger chains that’s a hit in the United States and are considered close competitors of Shake Shack. Since In-n-Out does not allow franchising as well, you can take Five Guys’ financial requirement which is a capital of $5 million or more as an estimate.
Average Sales / Revenue per Year
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In 2019, Shake Shack’s revenue was reported to be $622 million. However, it dropped to $535 million in 2020 due to challenges associated with the pandemic. Some of the companies stores were forced to close temporarily. These shutdowns are not good for sales!
For their 3rd quarter revenue this year, Shake Shack reports that their numbers rose to $193.9 million from $130.4 million. The burger chain is expected to reach $200 million for the fourth quarter. Analysts following the company project sales growth through 2023.
Shake Shack Franchise Facts
|Incorporated Name||Shake Shack Inc.|
|Franchising Since||Does Not Allow Franchising|
|Subsector||Food and Beverage|
Out of all the top selling burger chains in America, Shake Shack one of the youngest. Shake Shack’s humble beginnings started in 2001 as a hot dog cart in Madison Square Park in Manhattan as part of a plan to revitalize the area. The small cart was a success that in 2004, the kiosk became a permanent location selling burgers, hot dogs, fries, shakes, frozen custard, beer, and wine.
Shake Shack expanded its locations in 2010 around New York City. The first location outside New York was in Miami, South Beach while the first two international branches of Shake Shack opened in 2011 in Kuwait and United Arab Emirates.
Shake Shack is known for their long lines even when they were just a hot dog cart. They even installed a “shack cam” at their original location so people can check how long the lines are. I can tell you that there’s usually a line outside their San Diego locations too. Wait times aren’t terrible, but expect to wait 10 – 15 minutes on weekdays to place an order. If you’re coming on the weekend, good luck finding a spot to sit down and eat on-site.
The menu at Shake Shack includes the same thing they’ve sold through the years except that from time to time, they release specials like the Black Truffle Burger. Some countries also feature different items that make use of local ingredients such as the Ube Shake in the Philippines and Gochujang Chicken Shack in South Korea.
Shake Shack currently has 339 stores. 200 of these stores are company-operated, 23 are licensed restaurants, and there are 116 international licensed stores.
Since you can’t franchise a Shake Shack in the United States, you may be able to franchise it in a different country. There is a catch though. Shake Shack has already granted exclusive licensing rights to countries listed below:
- Kingdom of Saudi Arabia
- South Korea
- United Arab Emirates
- United Kingdom
If your country isn’t mentioned here then you may still be able to apply for a licensing agreement. However, if you’re in the country listed above, it might not be possible for you to handle Shake Shack in your area.
Other requirements to be able to license a Shake Shack outside the United States include:
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- Existing company infrastructure.
- A good track record in retail or hospitality, specifically in food service that deals with casual dining, fine dining, or quick service.
- The right capital to be able to come to terms with a development agreement.
- Exceptional local knowledge.
One other opportunity help bring Shake Shack near you is by helping them find a location. You won’t be the one handling the business or profiting, but you’ll play a big role in finding them the right spot to put up their restaurant. Hey, at least you’ll be able to eat there. The type of location they’re looking for are urban storefronts, which you can find in malls, and freestanding spaces where a drive-thru can be easily accessible.
Another opportunity to do business with Shake Shack is to become a supplier for them. So if you have access to fresh ingredients that you know Shake Shack might buy from you, just fill in their form to contact them and begin the consideration process. Shake Shack was founded by Danny Meyer and is currently run by Randy Garutti as CEO.
How Much Does Shake Shack Make in Profit?
Previously report put Shake Shake the average gross revenue of $4.8 million or more per location. This means each unit would need to average more than $100,000 in sales each week. These are incredible numbers for a food franchise where in many cases $2 million or so in annual ticket sales is the goal.
Shake Shack reported that their net income in the second quarter of 2021 was $2.1 million and an adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $20.6 million.
Their sales may have fallen behind due to the pandemic but the company appears to be back on track financially and opening even more stores. In particular digital sales are growing and represented 60% of the companies total sales in a recent announcement. Mobile orders lead to curbside, delivery, or in-store pickup sales. Mobile ordering also allows customers to skip the line so to speak so there’s an added level of convenience for this channel.
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Advantages of a Shake Shack Franchise
Let’s say you can franchise Shake Shack. What would the advantages be? Here is a list of pros if you are ever able to open this burger chain.
If there’s one thing Shake Shack continues to do, it’s to spread their name. They’re not stopping with their expansion even if they have a lot of locations in the United States and around the world. Shake Shack plans to open 40 to 50 restaurants in 2022 and 25% of these stores will have Shack Track drive-up capability which is a safe way to pick up orders. Ten of these stores will also have drive-thru features.
Shake Shack is not backing down from this pandemic which goes to show that they’re one of the strongest brands out there.
Sophisticated Taste and Look
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Burgers are always associated with fast food which in turn makes it seem casual. But Shake Shack elevates this with their taste and look. Their buns aren’t just regular burger buns but potato buns that help keep your burger from getting soggy. Their fries are the classic crinkle cut fries that remind people of the days of old. Their store designs and look are sleek and vibrant.
Overall, dining at Shake Shack makes you feel like you’re not eating fast food but at some upscale restaurant. The meals are presented in an appealing way that’s ideal for snapping photos and sharing them on social media.
Shake Shack may not be in every country but the way they’re scattered around the globe has many become familiar of their reputation as being the best in the burger business. And Shake Shack isn’t stopping there. They make sure that they feature an item on their menu that locals would be able to relate to. This makes the restaurant appealing no matter where they open.
Challenges of a Shake Shack Franchise
Shake Shack might seem like it’s the perfect business, but not every brand runs smoothly. Here are some challenges you can expect.
If you take a look at Shake Shack and already think the menu is expensive, that’s because it is. The menu is more expensive compared to competitors like In-n-Out. Although that’s to be expected because they do provide a sophisticated dining experience, the price does get criticized by diners on social media. Coupled with the recent inflation costs, expect that the food items and labor costs could push these menu prices up even further. At some point, the prices will discourage customers from dining at the restaurant. According to the financial reports, it doesn’t seem like the company is seeing weaker demand yet.
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Shake Shack has many competitors. As mentioned above, you have In-n-Out, Five Guys, and Smashburger. Compared to all these names, Shake Shack and In-n-Out have the simplest menu too. Shake Shack offers ordinary items but at expensive prices which makes them fall behind with the rest of their competitors.
There’s seemingly always new burger concepts coming out too. The company will need to maintain its edge and innovative in the coming years to remain the “it” burger joint.
Exclusive Licensing Agreements
It’s nice to know that Shake Shack values their partners who signed up for their licensing agreements but the exclusivity of it doesn’t give other business owners a chance to franchise Shake Shack. You’re basically renting the brand name, not owning it.
Is the Shake Shack Franchise Right For You?
If Shake Shack does decide to open their business for franchising then be prepared for expensive financial requirements and fees. Shake Shack has given much thought to every aspect of their business from the menu, designs, to service, that they might just require a lot from you. Based on the financial requirements of similar food franchises, you’ll need a net work of at least $1 – $2 million to qualify.
But if you don’t want to wait for Shake Shack to accept franchisees then you should take a look at some of the other concepts accepting applicants right now.
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What is an alternative Shake Shack franchise?
While Shake Shack is unavailable to franchise at the moment, why don’t you take a look at Smashburger. They’re a big burger name as well with 200 restaurants in 38 states and 9 countries. They’ve been around since 2007 in Denver, Colorado.
The initial investment to franchise Smashburgers is $545,500 and $894,500 and their franchise fee is $40,000. They also offer multiple units for franchising too. Here are some other alternatives that I’ve reviewed:
So are you ready to start franchising a burger chain? Whether that’s going to be Shake Shack or not, if your goal is to be part of America’s burger industry and if you have the financial capabilities for it, then go for it! With this guide, you’ll know what to expect in your future burger investment.