With Shake Shack’s filing bringing much attention to the Manhattan-based fast causal burger chain and IPO investors continuing to clamor for the next hot fast casual concept, we thought running a side-by-side comparison of the numbers of Shake Shack to hugely successful IPO Habit Restaurants, as well as fast casual juggernaut Chipotle, would help put the latest fast casual IPO in context. Here are some of our quick takeaways:
• Juicy AUVs Shake Shack 2013 average unit volumes (AUVs; $5.0 million) were well above Habit ($1.7 million) and Chipotle ($2.2 million), in part due to its $10.50+ per customer spend, which is 40% higher than Habit. Note: we have yet to do the taste test comparison to see if the premium cost is warranted.
• International Shacks Shake Shack has a large Franchise (51% of locations) and international (42%) presence vs. almost none for Habit and Chipotle. Shake Shack has only added two domestic licensed locations over the last two years, while all of its international locations are licensed.
• Impressive Margins Despite its very strong AUVs, cash returns and low relative food costs, Shake Shack’s margins are currently below peers, which reflects the fact that nearly half of its company-owned stores were opened within the last year and have yet to reach maturity. Based on unit economics, we don’t see any reason why long-term margins can’t match or exceed Chipotle, giving Shake Shack the potential to be one of the more profitable publicly traded restaurant concepts.
• Cash is King Not shown below but worth mentioning, cash-on-cash returns for Shake Shack are well above Habit Restaurants, with Shake Shack’s domestic locations generating an average cash-on-cash return of 65% vs. 40% for Habit. This is driven by Shake Shack’s seven Manhattan locations, which generate an average 82% cash return vs. 31% for its non-Manhattan locations.
• Low Single-Digit Comps Shake Shack’s comps have lagged peers, and it posted a MRQ comp sales growth of only 1.2% (3% YTD). Habit Restaurants posted a 16.2% MRQ comps, boosted by a recent Consumer Reports survey that named it the Best Tasting Burger in America. Chipotle’s YTD comps have benefited from favorable year-over-year comparisons.
