Operations

Shake Shack raising funds to add drive-thrus, digital upgrades

Shack Track is an enhanced digital order and pick-up solution that allows customers to order and pay via app or web, and pick up by way of drive-up window, curbside, walk-up window or in-store pick-up shelves. Provided

March 2, 2021

Shake Shack is borrowing $225 million from private investors to pay for drive-thrus and other new store formats. The New York-based chain is offering $225 million of convertible senior notes, due in 2028. Buyers may also purchase up to an additional $25 million of the notes according to a company press release. The sale will close Thursday.

"Investments may include, but not be limited to, the opening of new Shacks; Shack format evolution, such as drive-thru and Shack Track; the digital guest experience; and the continued investment in talent," according to the release. "Other uses of proceeds include working capital and general corporate purposes."

The 300-unit company, which reported last week an operating loss of $12.2 million during Q4, said it will continue to lean on its digital channels, which made up about 60% of sales, as well as building out Shack Track, an enhanced digital order and pick-up solution. It allows customers to order and pay via app or web and pick up by way of drive-up window, curbside, walk-up window or in-Shack pick-up shelves.

"So far, we've added 13 exterior windows, which have improved the flow of guest traffic, the experience for in-Shack orders and dining,"CEO Randy Garutti said during a Thursday call with investors. "In addition to delivery orders, about one-fourth of app and web orders are now picked up through these windows. Our curbside program available at more than 70 Shacks also continues to show great potential. Although curbside is not feasible for every Shack format, given layout location, we see this as an opportunity to further boost sales long term, especially in suburban markets."

The money raised from the notes sale will also help fund the chain's goal of adding between 35 to 40 company-operated Shacks this year and up to 50 in 2022, representing a 45% increase over the next two years.

"We believe we are uniquely positioned to exit this challenging period stronger and with greater opportunity than where we started," Garutti said. "We have laid out a robust and accelerated development pipeline for fiscal 2021 and 2022, which will capture great real estate opportunities while encompassing our new Shack Track, curbside and drive-thru experiences."