News

Aug 23, 2023

Shake Shack kiosk orders result in bigger bills, higher revenue

Shake Shack reported $271.8 million in revenue for the second quarter, up 17.8% compared to the period a year earlier. In 2017, Shake Shack introduced kiosk-only ordering for the first time in New

Shake Shack reported $271.8 million in revenue for the second quarter, up 17.8% compared to the period a year earlier.

In 2017, Shake Shack introduced kiosk-only ordering for the first time in New York City, at its Astor Place location.

The firm hyped the technology as “another way to experience Shake Shack” and a demonstration of “Shake Shack’s commitment to digital hospitality” in a press release at the time. But the launch was rough. Bad Yelp reviews and complaints about credit card-only payment systems led a New York Magazine reporter to conclude that “Robots’ attempt to overthrow society by controlling our restaurants has failed.”

Six years later, the company said the “overthrow” is all but complete. Shack Shack solidified its commitment to technology inside restaurants at its latest earnings call last week, explaining that the kiosks saved money on labor and increased the size of the average order.

The company installed kiosks in 30 Shake Shacks this quarter. There are now nearly 250 Shacks retrofitted with kiosks, on which customers place their orders without assistance, out of 270 total company-owned restaurants nationwide, thanks to a sped-up rollout of the technology. By the end of the third quarter, the company expects to have installed the kiosks in just about every location, a quarter ahead of schedule, according to CEO Randy Garutti on the company’s earnings call last week.

Guests, Garutti emphasized, like the kiosks, perhaps responding to the spirit of the 2017 critiques. “What we're learning is as we do these digital tools like kiosk or apps… [is] we need to build them so guests prefer it and that they really enjoy those experiences.”

Sales at the kiosks doubled year over year, he said, in part due to their increased prevalence. Customers simply order more when they press on a screen instead of talk to a person, the company has found, so that each kiosk sale has a “high single-digit percent lift” compared to orders placed with a cashier. Customers usually put their extra dollars to ice cream shakes, which cost $5.99 to $6.89 in New York City and have “very nice margin” according to CFO Katie Fogertey.

The company reported $271.8 million in revenue for the second quarter, up 17.8% compared to the period a year earlier. Same-store sales increased 3.0% compared to the second quarter of 2022, though the figure was lower in urban areas (2.5%) than in suburban locations (3.5%). Across the board, traffic to stores declined slightly, though this slowdown was offset by higher prices for food.

Shake Shack said it also plans to increase the ways it uses guest information collected at the kiosks for marketing and other purposes. It is not alone in bringing digital tools to in-person spaces: Bbot, also a New York-founded company, created technology to aid digitally ordered in-person sales at restaurants and sold to DoorDash for about $88 million in cash last year.

The use of kiosks contributed to a lower percentage of expenses on labor, results showed. At an individual store level, labor costs were 28.7% of all spending in the most recent quarter, down from 29.5% during the same quarter a year earlier. During the same period, the company increased its general and administration spending by about $2 million, in part due to “marketing and technology initiatives” that could relate to digital plans like the kiosks. Shake Shack also nearly doubled its payments to Block, the payments-processing company that operates some of the hardware and software connected to its kiosks during the quarter, to nearly $2 million, up from $1 million a year ago. That is a drop in the bucket compared to the company’s $75 million labor costs for the quarter. It is unclear what other technology vendors have benefitted from Shack Shack’s kiosk strategy.

In New York City, employment at limited-service restaurants has returned to pre-2020 levels in recent months, in spite of the technology takeover. There were 112,300 workers at local fast-food spots in June of 2023, compared to 111,700 in June of 2019, before the Covid-19 restaurant closures, according to the Department of Labor. In April of 2020, the figure dropped to 47,000 before returning gradually over the next three years. The average annual wage for such positions was $29,550, up 16% from a $25,447 wage in 2019.

Many fast-food jobs are not full-time, and so hours worked can matter to take-home wages as much as pay-per-hour. Shake Shack said it paid out 50 fewer hours per week in any given store during the second quarter of 2023 versus the same period last year.