The story of Shake Shack's success is a classic American success story. What began as a small hot dog stand operating out of Madison Square Park in New York City in 2001 eventually grew into a gourmet fast-casual restaurant with more than 275 locations both domestically and internationally. Shake Shack (SHAK) became a publicly-owned company through an initial public offering (IPO) in early 2015 and now commands a market capitalization of $1.63 billion, as of March 2020. The initial price of its shares was $21, which immediately rose by 123% to $47 on the company's first day of trading on the New York Stock Exchange. On September 20, 2019, shares of Shack Shack experienced a high, trading at approximately $104.28.

Key Takeaways

  • Shake Shack began as a small hot dog stand operating out of Madison Square Park in New York City in 2001 and grew into a gourmet fast-casual restaurant with more than 249 locations both domestically and internationally.
  • Shake Shack became a publicly-owned company through an initial public offering (IPO) in early 2015 and now commands a market capitalization of $1.63 billion, as of March 2020.
  • As the company continues to expand, it will also need to work harder and harder to preserve its commitment to quality and community. 

Shake Shack's Beginnings

Celebrity chef Danny Meyer opened the Shake Shack hot dog stand in 2001 as part of an effort by the city to revitalize Madison Square Park, which had fallen into a state of disrepair and misuse. The location of the stand was ideal, situated near investment bank Credit Suisse's New York City headquarters, and one block from the iconic Flatiron building.

Soon after the original cart opened, people began lining up daily during the lunchtime hours. At the time, expanding beyond the hot dog cart was not a priority. However, the city wanted to add permanent fixtures to Madison Square Park as part of its revitalization efforts and began actively soliciting bids for potential projects.

In July 2004, Meyer won the bid and was able to convert the hot dog cart into a permanent, kiosk-style fast food restaurant. Shake Shack served gourmet hamburgers, hot dogs, crinkle-cut french fries, and milkshakes under the umbrella of the Union Square Hospitality Group, operator of a number of the city's best upscale restaurants, including the nearby Eleven Madison Park. 

The original Shake Shack location was designed by the architecture firm SITE Environmental Design to exist in harmony with the design of the park, as well as its urban surroundings. Modeled after a classic roadside burger stand, the restaurant experienced immediate success. People would often create a line that stretched around the park, sometimes waiting two or even three hours to reach the counter.

Before long, people were coming from all over the world to eat at Shake Shack. A webcam was installed at the restaurant, known as the "shack cam," which allowed people to check on the length of the line before deciding whether or not to join it. The restaurant was not originally designed to be part of a chain; it was designed specifically for New York City.

International Expansion

In 2010, Shake Shack expanded its operations, opening up locations throughout New York City, including in the Theater District, the Upper East Side, and in the Chelsea neighborhoods. It also opened a location in Miami's South Beach, its first location outside of New York City. In 2011, the expansion continued in New York City, as Shake Shack scored deals for prime locations inside Grand Central Terminal, at John F. Kennedy International Airport, and at Citi Field, the home of the New York Mets baseball team. By 2015, Shake Shack had 63 locations throughout the country and around the world.

Today, there are 275 Shake Shack locations throughout the world. In the fourth quarter of 2019, the company's total revenue increased by nearly 22%, and it was up by 29.4 percent for the full year. The company now employs more than 6,000 workers. The company opened 73 new stores in 2019, an increase of 32.2 percent. In 2019, the company also introduced delivery, which 50% of its locations participate in.

Despite this rapid expansion, the company has maintained that community is important and that Shake Shack is in an integral part of New York City. As a result of this way of thinking, each new location has been designed specifically for its location, too. As the company continues to expand, it will also need to work harder and harder to preserve its commitment to quality and community. The company plans to introduce innovation to its menu, with new burgers and chicken options in the future.

The Bottom Line

With so many business success stories currently in the technology industry, it is unique to see a company that started as a small hot dog cart turn itself into a multi-billion dollar international restaurant chain. Because of Shake Shack's modest beginnings, it was able to build a sense of community and a loyal following that it has now capitalized on in order to serve gourmet burgers, crinkle fries, and milkshakes to people around the world.