Shake Shack Business Model
Shake Shack has revolutionized the fast casual space with the simple business model of becoming “the best burger company in the world”. Its CEO, Randy Garutti elaborates that his team focuses on the simple tasks that create the Shake Shack experience by doing “what you want to do really well in its most basic version”. He has a picture on his wall that reminds him that “the bigger we get the smaller we need to act’’, and they indeed have now grown in scale greatly from its humble beginnings. Shake Shack started as a hot dog stand founded by Danny Meyer 11 years ago in Madison Square Park in order to revitalize the neighborhood. It has now expanded to become a global chain with over 41 stores in the United States and 29 franchises around the world in cities such as London, Istanbul, Dubai and Moscow. Shake Shack was valued at around 1.6billion after it raised $112 million in its IPO in the Spring of 2015.
Shake Shack Operations Model
Despite its growth it has stayed true to its commitment to the neighborhood just the same way it was when it opened in Madison Square Park. According to Denise Lee Yohn, “Great brands use their brand identities as their one true focus because that’s the only way to ensure continued relevance and resonance with customers.” And this is what Shake Shack has done. It has honed its operations on the aspects that define its business model, therefore creating a brand identity. Its brand identity is anchored in what Danny Meyer calls “enlightened hospitality” which is basically the company credo: “to create a welcoming atmosphere first for employees, next for customers, and then for the outside community, suppliers, and, finally, investors.” The two main pillars of this philosophy are the happiness of its employees and its focus on the community.
Employees are constantly empowered to deliver a superior customer experience. Garruti explains that whenever he opens a store he tells his employees to try to put the company out of business: “put us out of business because you are so damn generous with what you give the people who walk in this door. If there’s a kid crying, who’s going to walk over with a free cup of custard? I challenge you to put us out of business with how generous you are. Go do it. Give away free stuff.” . In this way he empowers the employees to take the success of Shake Shack in their own hands. The Shake Shack team has also taken concrete operational steps to instill this empowerment and motivate its employees:
- It pays 1% of total top line revenue to employees as a monthly bonus.
- It pays employees extra bonuses for additional work milestones such as coming to work for 30 days without interruption.
- They offer a 401 (k) for employees that work over 25 hours a week as well as generous medical/dental/flex spending.
- They offer opportunities to grow through their ‘leaders training future leaders’ program that allows hourly employees to rise through the ranks to general managers.
Shake Shack employees a similar hands on approach when it comes to designing their own stores and connecting with the community in an effort to engage its customers and make them linger at the restaurant. Ideas have ranged from ping-pong tables, bocce courts as well as sponsored music series. The opening of their store in Philadelphia is a good example of how its operations of opening a store focuses on engaging the community both during the construction phase but also with the products that they offer. “When we started construction, instead of doing what everyone else does–put up a big, ugly wall that’s an eyesore in the neighborhood during construction–we teamed up with a local Philly designer to turn the plywood siding into a living green wall. It was a little a corner “park,” if you will, and our neighbors responded enthusiastically! (Similarly) … we teamed up with some of the best artisanal producers in the city–and added their best products into our “Concretes” on our Frozen Custard menu.”
Garutti successfully sums up this focus on employees and community by stating: “And really, doesn’t a burger just taste better when a kind and happy person served it to you?’’
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