The Story Behind Shake Shack's Success

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 377 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 $3.16 billion, as of February 2022. The initial price of its shares was $21, which immediately rose by 124% to $47 on the company's first day of trading on the New York Stock Exchange (NYSE). On February 11, 2021, shares of Shake Shack experienced a high, trading at approximately $130.76.

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 377 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 $3.16 billion, as of February 2022.
  • 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 office, 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 84 locations throughout the country and around the world.

Today, there are 377 Shake Shack locations throughout the world. In the fourth quarter of 2021, the company's total revenue increased by nearly 29% to $203.3 million, and it was up by 41.5% to $739.9 million for the fiscal year. The company now employs more than 7,000 workers. The company opened 36 new domestic company-operated stores and 26 new licensed stores in 2021, and is looking to add 45 to 50 new locations in 2022. In September 2021, the company announced delivery services directly through the Shack App and its online platform for participating stores.

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.

Article Sources
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  14. Shake Shack. "Delivery, Now on the Shack App!" Accessed Feb. 17, 2022.

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