Operations
Shake Shack's 'operational excellence' fuels earnings beat
October 30, 2025
Shake Shack Inc. demonstrated its resilience and operational prowess, reporting a stellar third quarter for 2025 that blew past Wall Street expectations and set the stage for an ambitious 2026 expansion. The burger chain's focus on efficiency, culinary innovation and customer retention is paying off, allowing it to navigate persistent macro-economic headwinds, said CEO Rob Lynch.
"We are extremely proud of our third quarter results, which showcase the important foundational work we've been doing to position ourselves for the achievement of our long term goals," he said during a call with investors. "Despite the strength of the outstanding quarter, we will not be complacent. Our focus remains to build a resilient long term business, one that's not defined by any single quarter. We are making the necessary strategic investments today that set us up for long term success."
Following the earnings announcement, investor confidence was renewed, sending the stock price up 2.47% in pre-market trading to $92.03.
Shake Shack reported:
- An adjusted EPS of 36 cents, significantly exceeding the analyst forecast of 31 cents.
- Total revenue of $367.4 million, narrowly topping the anticipated $363.89 million, marking a 15.9% year-over-year growth.
- Restaurant-level profit margin reached 22.8%, an increase of 180 basis points year-over-year.
- Same-stores sales of 4.9%, with traffic growth turning positive at 1.3% driven by its strategic initiatives.
Following the earnings announcement, investor confidence was renewed, sending the stock price up 2.47% in pre-market trading to $92.03.
Gaining share in a challenging environment
Lynch emphasized that a challenging environment is the moment for "great companies get better," framing the quarter's success as a direct result of executing a deliberate, long-term strategy centered on operational excellence, team member experience and a balanced value/premium offering.
"Collectively, our efforts have resulted in stronger team retention, better guest service, operational improvements and productivity, a steady cadence of culinary innovation and the foundation of a brand marketing model," he said.
New labor model
The chain's shift in its operational structure has led to major improvements in customer experience and cost control, according to Lynch, who said the company is now operating with fewer labor hours since rolling out an activity-based labor model and moving from a sales-based labor model. Although labor costs on an absolute dollar basis per operating week are down, they are still high relative to the fast casual industry.
"Our historical labor model and the execution of that model was not well positioned to achieve the operating excellence that we need to deliver on our aspirations," Lynch said. "In fact, the reduction in hours necessary to operate our shacks with excellence has improved our ability to serve our guests. Because we are using those hours in a more productive way, we will continue to optimize our operations and get even more efficient in areas where we're simply overstaffed, while at the same time focusing on and delivering on better hospitality. We also took a hard look at how we were deploying the hours that our shacks were allocated and streamlined a lot in the service of the guest experience."
Measuring success
The efficiency hasn't come at the expense of quality, however. Lynch said the company is seeing improved throughput and faster service, cutting the average speed of service from 7 minutes in 2023 to about 5 minutes and 50 seconds in Q3 2025. Crucially, guest satisfaction scores have improved across all key metrics, including meal taste and cleanliness.
He said the chain is also measuring success in a variety of other ways, including:
- Decreased turnover: By prioritizing an environment where team members can grow and succeed, Shake Shack has seen a significant reduction in turnover. This longer tenure translates directly to more experienced, skilled hourly team members, which is critical for a "made-to-order" model that has a longer learning curve than traditional fast food.
- Culinary innovation and value: The chain uses its fine-dining heritage for culinary innovation, but is also introducing a crucial counter-balance through its digital platforms to address the industry-wide push for value.
- Premium LTOs: LTOs like the successful Dubai Chocolate Shake not only drove incremental sales but also boosted brand perception on ingredient quality and innovation. The company continues to test premium concepts, including a French dip Angus steak sandwich and a baby back rib sandwich.
- Innovation: The company demonstrated agility by quickly shifting marketing support when its French Onion Soup Burger LTO did not generate the expected traffic in October. This pivot led to the rapid promotion of its in-app value platform, resulting in an over 80% spike in app traffic.
- Loyalty: The team is "building a best-in-class loyalty platform for 2026" and is using the app to test value and frequency offers. App guests have higher frequency and lifetime value, making the increased app downloads a key indicator for future growth.
2026 outlook
Lynch said he plans to capitalize on white space in the U.S. and has plans to open 55 to 60 company-operated locations in 2026.
"As part of our development work, we are also focused on new kitchen prototypes and equipment that could have a significant impact on improving our throughput and quality," he said.
The chain, which is on track to add at least 35 licensed locations by year's end, plans to open 40 to 45 licensed restaurants in 2026.
"This business is healthy and growing," Lynch said. "Our existing markets are performing better than expected despite global macro headwinds with strength coming from new openings in the U.S., Canada, Israel and Turkey. This year we have announced four new license partnerships, most recently with Union Mak in Hawaii to bring the Shake Shack experience to the Aloha State.
"We are building great momentum in the license business and there is much more to come as we reflect on the most recent quarter and what is to come."
