Good morning, everyone, and thank you for joining us. My name is Jeff Bernstein, and I'm the Restaurant and Food Service Distribution Analyst here at Barclays. I'm also joined by my partner in crime, Brandt Montour, who covers gaming, lodging, and leisure. The two of us wanna welcome you all to day one of our ninth annual Eat, Sleep, Play Conference. We've got a full two days for everybody, so hopefully, you get good, productive use of time. We hope to make small talk in the halls between meetings. But with that said, we're excited on my team to have 10 restaurants and food service distribution companies with us over the next two days, including fireside chats on day one with Shake Shack, BJ's, and First Watch, and day two with US Foods, and Jack in the Box, Brinker, Kura Sushi, Dutch Bros.
We also have meetings only with Texas Roadhouse and Wingstop over the two-day period. We actually have a fireside chat today at 12:30 P.M. with somebody who heads up the National Restaurant Association. Look forward to talking about a lot of topical issues in the industry, between minimum wage and unionization, and a variety of other topics that are popular in D.C. right now. With no further ado, I'd like to introduce our first presenting company, which is Shake Shack. With us this morning, from right here in New York City, we have Randy Garutti, CEO, and Katie Fogertey, CFO. Katie, by the way, we're thrilled that you're able to join us in her eighth month of pregnancy, but she'll do anything for the team.
True. That is true.
By way of background, for anyone not familiar, Shake Shack is a fast casual, primarily burgers, fries, and shakes. Fast casual chain with 280 company-operated restaurants in the U.S. They actually also license 40 or so units in the U.S. and another 175 outside the U.S. And despite ramping up in size, they are still growing at a mid-teens annual unit growth rate. And management is confident in their long-term guidance for 450 U.S. company-operated units.
And my guess is that'll ultimately prove conservative, with a variety of new formats that were never envisioned before, seeing some early success. So with that said, I wanna introduce Shake Shack, and I've got a handful of questions. So I will kick it off, but then would love to have audience participation. So I know there's a mic running around, so in a little bit, if there's any questions, I will throw it out to the audience. But with that said, Shake Shack.
Morning, Jeff.
Good morning.
Hi.
Morning.
Happy holidays.
You as well, and everyone. Appreciate you waking up, getting back at it.
Yes. Curious, just to start with a couple of broader consumer-related questions, just because it's very topical. You know, going into the summer and fall months, after seeing resilience from much of the industry, it seemed like there was a little bit of a slowdown. And I think there was a lot of investors concerned that the headwinds facing the consumer had finally taken hold. And then there were some restaurants that actually said, "You know what? It did soften a little bit, but we've actually seen a re-acceleration," and you guys were one of the first to talk about that. So there was some thought of, you know what, maybe that easing was just a little bit of a return to seasonality, which was historically what we saw in the late summer, fall, before a rebound in October.
So that really was invigorating for investors and a lot of companies alike to say: You know what? It might not be the consumer, it might just be the consumer is actually holding on surprisingly well. So I'm just wondering how your take on the consumer is. I guess, if you didn't see other government data points and you were just looking at your Shake Shack results, like, how would you say the consumer is faring?
Well, thanks, and, thanks, everybody, for listening in. Feel free to jump in here. Everything he said, I think we would agree with on, and, and talked about that on our last earnings call, especially seasonality and, things kind of slowing into September, re-strengthening into October. We're not gonna talk about anything past that today. But I think we're all waiting to see, right? We're coming off of Black Friday weekend and Cyber Monday. I know I didn't go to a single place to go shopping myself, and I did a lot online. So I think it's still a mixed story. I think you saw a lot of, value-based consumer, purchasing be successful this weekend. I think we'll see how it all shakes out. Generally pretty good. Generally, the consumer seems to be okay, and I, I think we're all watching very closely.
I think what I would say more than anything is that: Look, we look ahead into 2024, there's gonna be some uncertainty, there's gonna be a little wobbliness on the part of the consumer. Nobody's quite sure, but generally, people are employed. The consumer appears to be fairly strong, and I think they want value. And I think that's the goal of what Shake Shack has always brought and continue to bring. You're seeing more and more... I can't actually remember a time, personally, in my restaurant career, where I've seen as many promo, discount-heavy environment as you're seeing today. Every commercial you see is a BOGO for this or a deal for that. That's always the case, especially around this weekend, but I think it's been more pronounced.
I've not studied the actual data on that, but my sense is that there's more of that. We talked about this a little bit on our call in October. We're looking at more of that. We're never gonna be the, you know, compete on the lowest price. That's just not going to be Shake Shack. It's not who we are. It's not who we wanna be. We are the premium brand and experience in the industry, and we're gonna continue to be that.
But at the same time, we've got to continue to hit value for our guests, and we have been doing that, both on our channels, on our digital channels, in Shack, certain third-party deals, and looking at different ways we can reach our consumers in a way where they can say, "Hey, I love those guys, and I'm really seeing value there." We did a fun thing where we did something recently called the Chicken Dance, and we did some work with some NFL players, and if someone did a Chicken Dance in the end zone after scoring a touchdown, we would give away free Chicken Shacks for a week.
Turned out none of our players hit that, unfortunately, but we had a really big podcaster who did, so we kinda did the deal, and those kind of things have been fun for us. I think you'll see us continue to drive, both to our channels and our third-party channels and in Shack, really hitting more and more marketing in. As we head into next year, we think about where more of our focus and spend will be. We're gonna continue to increase our marketing spend. You know, we are a company who is not big enough quite yet to see us on, you know, we're not, we're not ready for the Shake Shack bowl game just yet, but we need to get there, right?
We need to continue to ramp our marketing spend as we go out, get bigger, and if you look at the, you know, your map, your good Bernstein's Burgers and Brews map, you'll see how fairly dispersed Shake Shack is, even as a small company. We've got to continue to market in those areas so that brand awareness and consumers who are still getting to know us can continue to come up the curve.
Yeah, just to build on that a little bit, too. You know, the trends that we've been very consistently talking about, you know, have really held up into October, and that is that we've had strength at the high-income consumer. We over-indexed to high-income guests relative to traditional fast food. And we've seen kind of very consistent trends around the low-income consumer. And back to Randy's point about kind of value being a message that's resonating with a certain cohort of consumers right now, you know, we've been working really hard to construct these offers in a way that conveys a value message, however, still is, you know, a good business opportunity for us as well.
And I think what's been really encouraging, and this is what we shared on earnings last quarter, is that the checks on some of these offers are actually very high. And it goes to show that, you know, that's the hook that the consumer is looking for right now. That's the reason why, you know, that incremental consumer might be, you know, looking to make an additional visit, knowing that they've got something that, you know, in their back pocket, they're getting something a little bit, you know, a value added in this moment. But still, the spend trends have been really good.
I believe you mentioned in the month of October that you had flat traffic, which is a win for anyone in the restaurant industry, and I think you gave credit to digital and in-store marketing. Are there examples of things like that that you've found that really work, that we'll see more of? I know you're not yet ready for national television, but, like, what was the biggest success that you saw that helped to really drive that?
Well, there's a few things. I think always we're gonna go towards brand campaigns and how that hits, right? This is not the answer to October, but to tell you, for instance, right now, we did a deal with the Trolls movie. If you have kids, maybe you've gone and seen the Trolls movie. Our shakes are Trolls Shakes. You look at... We've had a whole bunch of pop-ups. You look at our West Hollywood Shack right now, there's giant Trolls with huge hair coming off the building. And it's been a really fun team-up with Universal Studios. We'll try to do things like that from time to time that just are a brand and product coming together. And we're always gonna do that. LTOs, we have our hot chicken and our hot burger now.
We noticed, and we said this in part of September and into October, we're lapping over a really successful LTO with Hot Ones last year, which was a bigger media campaign, and that's a tougher compare. So we have that going through. But as we look at next year, you'll see us doing more with strong LTOs that we think we can have brand campaigns around. But also we continue to, in order to simplify operations, as much as possible, we're generally doing our LTOs for longer periods of time. A little bit better for ops to keep them going. We see that they generally stay strong, depending on the LTO, and for its run, and we'd like to see that. So, you know, shifting a little bit as we head into next year, and we talked about this on earnings.
Really, our number one focus is consistency, standardization, and our guest experience. You know, Shake Shack traditionally has been this incredible guest experience, and we've just got to get better and better and better at delivering that: more timely, looking at our guests' times, making sure that every burger is the same, no matter where we go, and that's really gonna be our operational, kind of, core, back to basics type of focus. And that gets into menu and LTO and all the things that we do to make sure we can keep driving sales through those fun initiatives, but making sure it supports the operator's ability to just be consistent every day.
I think when you look at the guidance that we have out there, and we're reiterating our guidance for fourth quarter and for full year today, what you want to see here is that, you know, the guidance we've given for G&A, that is leveraged versus last year. Even still, with producing leverage on that line, we're unlocking a lot of added funds for additional marketing opportunities. A couple of the ones that we've talked about recently have been some more performance-related, more, you know, brand-driven, campaigns in select markets, which we're really excited by those results, and you'll see us continue to double down on that strategy, continuing to find efficiencies within our overall G&A spend to unlock opportunities to invest more in sales-driving initiatives.
Realizing that there's, if I do the quick math, 34 days left in 2023, and we're really upon 2024, I'm just wondering, what would you say you're most excited about for 2024 relative to 2023?
Well, I'll start, and please jump in. I think the progress we've made on all the fronts that we've committed to in our strategic plan, starting with our profitability. If you look at our profitability at the Shack-level, which is a key part of everything we do, we've made some tremendous strides, 400 bps expansion in the last quarter. So much continuing to run up that curve and make our Shack-level operating profit stronger and stronger throughout the year. And honestly, like, if you really look at our COVID curve, we were super hard hit, worse than most because of our geographic distribution, and it's just been a straight line up since then. And on profitability, we've continued to get better and better.
So I think as we look into next year, continuing that path, continuing that work to be better at profit in our restaurants, continuing to gain margin, and do that at, continue to do that at scale. Additionally, we've committed in the next year to take down costs in our build-out. If you look at our development fees, we think this year is a high-water mark. Now, that's a lot of inflation, it's a lot of the type of formats. We've had a lot of drive-throughs that we've opened. These are more expensive. We're gonna continue to do drive-throughs next year, less percentage of the class, likely, than this year. We really had a big, big hit this year.
And we expect to take our build costs, on average, down about 10%, and our pre-opening costs down, on average, about 10%. So if you look at all that together, that means unit economics getting stronger, continuing to drive our sales, and looking at the model for Shake Shack is continuing to return to the strength that we've seen. It is strong now, and we believe it's gonna keep getting better.
Anything that gives you pause looking into next year? I mean, it feels like we're coming through the-
I'll do the pause.
the worst of it, but, there's something internal or external that you'd say is something we need to watch out for?
Yeah, yeah. I mean, I think the thing that, you know, keeps us in constant discussions all the time, you know, in the inflationary environment, continues to remain uncertain, meat kind of being the biggest part of our basket overall, and probably the area with the largest amount of uncertainty and just an area that we don't hedge. So, you know, we've consistently called that out as, as, you know, one thing that we're watching. And then also, you know, labor. Wages are not gonna go down. They're gonna go up next year. We have strategies in place in order to help offset the higher, you know, wage costs that we're gonna be paying our employees next year. It's not just California with the FAST Act. There's other regions which will have mandatory increases, as well.
We're really excited by the massive improvements we've had in retention and in hiring overall. So that natural offset is gonna help, you know, make that a little bit of an easier transition. We also have some labor programs in place as well that we're gonna be starting to test shortly. But, you know, overall, it's just gonna be, you know, an inflationary environment likely next year.
I think some investors believe that the worst is behind us, but clearly, there are things that are still inflationary by nature.
Yeah, there are things... I think, let's hope that that's true, right? And we're aligned with that, but that doesn't mean that certain products aren't up. It also doesn't mean that certain products are going to go down, right? We've had extraordinary increases in things like fries, buns, the things that are major inputs to our cost. We don't expect those to go down. Might their inflation be a lot lesser? That's the hope, and I think that'll be good, and, you know, that's what we're looking at. And by the way, we're doing a lot of work ourselves on supply chain optimization. How can we get better? I've always said, I really believe this, over the long-term trajectory of this company, we are still really small.
So many of the companies you mentioned that'll be here today are the biggest that we are compared to, have so much more scale than us. As we scale, we believe opportunities in our supply chain, economies of scale, as we go deeper into certain markets, will continue to grow. I'll give you one example. You know, Portland, Oregon, we had one restaurant until this year, right? Now, we opened a second and a third. So that's good, but it's only three.
And as we open more in that area, in Seattle, in the Northwest, we can have stronger operations there. We can borrow a cup of sugar when we need to, down the block from our friends at the Shack. We can borrow labor, and we can really help be better. But those things take time to scale into. To me, that's always been one of the most exciting things about the long-term trajectory for Shack.
I think when you balance it all out, you have the concerns of, obviously, persistent inflationary pressures. The optimism that we have with the strategies that we've been working on, from our supply chain, the labor model, build costs, all of these things that we have in flight, it makes next year a very exciting year for us. On the whole, you know, we're, we're excited.
Got it. You mentioned, Katie, the FAST Act.
Mm-hmm.
I think people have been very focused on that over the past quarter, as it looms. I think you mentioned you have roughly 15% of your store base there.
Yeah.
Just to clarify the facts, 15% of the store base, and you think it's how much inflation or how much price would you take? What's your strategy as you address that?
We're gonna be taking price to help offset inflationary pressures with wages in California. It's probably gonna be a low single digit type of increase, very low single digit type increase across our entire system. There are certain areas in California, which are gonna have to go up a lot. You know, if you look at kind of just wages overall in an area like San Diego, those wages are much less than what is paid in L.A. So, it'll be very interesting to see how the industry ends up smoothing out that differentiating impact across the state. But, you know, we're gonna be taking up prices and expect that a lot of our competitors will be as well.
Understood. The concern that the FAST Act, California, becomes FAST Act...
It's inevitable that other regions will increase price or wages, and we've just seen this, you know, trend over the past couple of years, where wages just continue to go up in various cities or metros or, you know, states overall. So, you know, it's nothing, you know, that surprising to us.
And listen, we've always had strong wages, competitive wages for our team. We're gonna continue to put ourselves in that position so that we can have great team members. And as these things happen, we'll deal with them as they come. And as Katie said, if in the event where we need to take price in a certain region differently than others to help offset some of that, we'll do that. And I think that has to be the goal. It has to be what we look at. One of the things that we are, and we've talked about this the last two earnings calls, that's been very encouraging, obviously, the hardest part of COVID was staffing. Those challenges have absolutely smoothed out. Our team members are staying longer. We have more applications.
At the management and higher levels, we have lower turnover, continuing. So we really feel like we're well-positioned right now. That's. If you ask about what, what's some of the best things you can do on profitability, it's keep your team. And that I feel like the team in this last two to three quarters has really seen some really nice upticks. And I think part of that's what's been behind the continued strength of our profitability. We're gonna be focused on that quite a bit next year. So, you know, let's find the right wage for our team, make sure they're well compensated for the lives and the jobs, the hard jobs that they do every day, and keep on moving that forward.
Just because we touched on pricing, I know your comment on the past couple of quarters is you'll take it when needed. So when we think about that, like, what's the objective of price in your mind? Do you take it because it's needed to hold the margin flat? Or some companies say, "I don't care if the margin takes a little bit of a hit, if it's gonna help the traffic." Like, how do you think about when needed? What's the objective of price?
I think that's it depends on the moment, and if you look at the history of this company, we've been quite cautious in price 'cause that's who we need to be. And we've taken generally, CPI are lower. You know, we've been in this kind of 2% range for decades. Obviously, that's increased over this last couple of years. We've now returned to... We're running about a low single digit right now. We just took about 1% in the fourth quarter, so let's see how next year goes, depending on what we need to take and where we can take it, right? You can look at it in various channels. You can think about this differently. There's obviously higher willingness to pay in digital channels.
We can look at that and be smart about pricing as well as regional tiers to make sure that we do that well. But we will take pricing to make sure that we have the company running for the long term the way it needs to run. That might mean some short-term takes, it might mean some short-term caution, and I think we'll have to watch it. But right now I feel comfortable about where we're at and our plans moving forward, and we've got to continue to offer great value for our guests. So that's really the continued focus of our marketing and all the stuff we talked about earlier.
I feel like you mentioned earlier that there are some areas where you're excited to get larger because there are some benefits of scale. I'm sure some of those larger companies would say, "Oh, we'd love to be Shake Shack sized," because they're talking about 15%-20% unit growth, which off of a smaller base. So I guess it goes both ways. Just wondering how you think about that. I know it used to be 20% unit growth, now it's down to 15%. Is the tempering more of a permanent idea, or is that - could it re-accelerate from a percentage basis, or are you comfortable being a little slower?
Well, look, I think that's probably industry leading to be in the mid-teens unit growth. Don't forget that we have roughly 40 this year and roughly 40 company-owned and roughly 40 international and domestic license. That's a tremendous growth rate of 80 restaurants. We're looking at a similar number for next year. We feel good about that. Well, so why wouldn't we accelerate it? Well, I think the work, everything you just heard us talk about in our strategic plan, the work is to continue to improve our unit economic model today for our current restaurants and the ones that we build moving forward.
As we look at development, we say: How do we take costs out of that Shack, make sure it's optimized, make sure it can still do strong sales, cost a little bit less, and keep that trajectory going so that's just not a one-year hit, that we think we can take things down, continue to take things down over time, while continue to expand our margins? All of that happening, let's do that from a strong base of a mid-teens unit growth and not rush it. You know, we don't need to go doing more Shacks than we need to. Another 80 Shacks next year is quite an impressive feat, and it's a lot for our teams, and it allows us to do the work we need to do to improve the long term.
You guys were victims of perhaps more divergence than others during COVID in terms of major metro versus other markets. When you see divergence now, would you say that it's, it is shrinking because COVID was the primary driver, or do you say, you know what? You've learned some things about major metro versus suburbs. Like, how do you think about the drivers of the divergence these days between some of your stronger and weaker markets?
I think it's still shaking out, but generally getting more normalized, right? I, I think there's still travel patterns that are a little bit weird. People are still figuring things out. There's still restaurants downstairs here in Midtown Manhattan that may have given up some of what they used to have on Monday and Friday, but are generally really similar in the few days a week, maybe call it three and a half days a week. There are some restaurants in major urban centers that are more neighborhood-like, that are continuing to be up from 2019 levels. So I think that's still shaking out, but I, I think what, what we can now bank on as we build our restaurants and our pro formas for future restaurants, we've got a much stronger baseline of understanding of where that's gonna go, and I think we've done quite well on that.
Our growth will generally be more suburban. That's just law of numbers. It's generally gonna happen that way as we go to the hundreds more Shacks in this country, and we open drive-through and other type of models that we can do in core Shacks. But we're gonna continue to do smart, great Shacks in urban centers when that makes a lot of sense.
The idea of removing 10% of your cost to build and 10% of the pre-open, I can't imagine that's easy in the environment that we're in right now. Is a lot of that because it was so outsized this past year because of drive-throughs, or have you found ways where you don't need to make as big of a splash, maybe it's not a new market anymore?
All the above. That's right. I think we can... certain flagships will continue to be built. Those can be more expensive. Drive-throughs are more expensive, but we've also learned a lot about drive-through as one example, but even core Shacks, it's most of what we will continue to build. First of all, let's hope that inflation on that side of construction comes down. You're starting to see, more contractors looking for work. It's not as crazy an environment. You're starting to see the real estate environment continue to be, favorable for us as a great brand, but we can and will take costs out of restaurants, and we believe... It's, in certain Shacks, the size can come down.... in certain Shacks, the way the guts of it, the interior can come down.
We're continuing to refine our kitchen model so that we can lessen the little bit of equipment, move food more quickly, and commit to all the things that we've been talking about on the strap plan. So all of it is taking a little tick here and there so that the brand remains stronger than ever. The experience of Shake Shack is stronger than ever, but we can take some of that cost out. So that's an ongoing project. There will be various models that come out of that.
You'll start seeing some of that be built more in 2025, 'cause a lot of the 2024s are already baked as we were doing this. But even with the 2024 Shacks, you'll see us make certain decisions where we can lessen costs. So, we're really confident in that trajectory that the team is on, and believe that there's gonna be a lot of unlock there in the future as well.
I feel like a lot of the Shake Shack story is talked about domestically, but clearly, there's a huge international business. It is licensed, so it's less operational risk for you and perhaps less financial contribution, but gets your brand out there globally. Can you just maybe talk about the commonalities of the strongest or markets where you've had the most challenge and?
You know, each international market is so exciting. I think there's very few brands ever who have achieved or could achieve what we did. You could probably count them on two hands. When we go to a place like Thailand this year, we open up and people sleep out overnight, and we have these incredible AUVs. We have a brand that transcends borders. We have a product that transcends cultures, and we are super excited to continue that trajectory. I think if we look at what's cautionary for this year, obviously, war in the Middle East is not a good thing for business. We'll have to keep an eye on that, and I think China's economy is something we're gonna have to keep an eye on.
That's become our biggest, most important region from a sales perspective, and we'll be watching that very closely in this coming years. And I expect there'll be some ups and downs there, but we've got great partners in these places, and we're continuing to grow all of them. We'll see new launches in a number of places next year. Canada is coming. We're very excited about that. We've got our first Shack in Toronto lined up, so that'll be next year. We have Kuala Lumpur, Malaysia, and some others. So we're—I think this is one of the most underappreciated, undervalued parts of our business. And by the way, then shift to we often think of it as international, but don't forget, a big part of that business is here in this country.
Our airports, and we're gonna continue to do airports, are really strong businesses, really strong. Really strong AUVs. We love that part of our business, gonna continue to grow it. This year, we've also unlocked various deals on roadside, so if you can now go, I had so many people texting me the Wednesday before Thanksgiving: "I'm going down the Jersey Turnpike or The Parkway, and I've stopped at a Shack, and I can't believe that they're taking over almost every rest stop." We love this part of the business. This is gonna be a fantastic way to achieve beating expectations. Every time you travel, you're disappointed when you got to pull over and get gas about your food options. Now, Shake Shack's gonna be there, make it more exciting.
So we are gonna continue to do more of those up the New York Thruway, New Jersey, and beyond. So that part of the business is super exciting and one we wanna keep building, and it's one of the most accretive, asset-light, highly profitable pieces of our business. We're gonna keep doing it.
I think you mentioned, in fact, as of a couple of weeks ago, you weren't supposed to be here with us today, that you were traveling internationally, but sounds like a store in Israel is on the come, but perhaps a little delayed.
Yeah. So, I was supposed to be in Israel today, opening our restaurant. For obvious reasons, that has been delayed. We are excited to open that restaurant and to work with and support our Israeli partners. They're an incredible company, and we look forward to growing a strong market there. And, we will open that restaurant in 2024. It's a question of when. And we're really excited to get there and make that happen. We got to do it at the right time.
To put it off, and then we spend a lot of time talking about the restaurant level, sales and expenses, but G&A has gotten a lot more focus more recently. I know in the early days it was: We have to invest in our infrastructure, but it feels like we're now at a point where this year we're seeing leverage on G&A, next year, we're gonna see leverage. What are the biggest buckets? I mean, is it primarily just scale that allows that to happen, or are there certain buckets where you say we can manage the cost differently? How do you think about the G&A going forward?
It's all of the above. I'd say, first of all, you know, on just finding efficiencies overall in our G&A budget, you know, once kind of these big rocks are put into place, you know, and the company is kind of scaled to a certain level, it's about kind of using more of what you have, and driving more efficiencies on that side. So whether it's on, you know, the finance side, accounting side, you know, across the board. Also, you know, as Randy's talked about too, you know, our strategy of how we are building out new restaurants.
You know, once you get a certain level of operation support in place, once you get a certain level of management in place, you know, the incremental cost to open up a new restaurant is just less. So being able to be smart and leverage those investments while also still growing, and then still unlocking more funds for sales-driving initiatives all the while. And that's been a big focus of ours, and you'll continue to see us do that next year as well.
I've got a slew of incremental questions, but we've got five minutes left. I'd love to open it up to the audience and see if there's any questions before I continue. If there is any questions, we have somebody with a microphone. Shaky audience, so I will-
Okay.
Okay.
All right.
Fairly.
We got one. We got one.
Oh, there we go. Good.
I just want to ask a clarification question on the pricing from California.
Mm-hmm.
When you say a very low single-digit impact, are you saying that system-wide pricing will be very low single digit, or that the California impact to system-wide will be very low single digit?
Yeah, so we're not giving guidance for pricing, overall, but the impact from California itself is very low single digits.
... We often, well, companies will often ask us to bring up the topic of what they think is most misunderstood about their own company. Obviously, you have your understanding of the company from the inside, and you read what we write and what the press and others write. I'm just wondering what you think is the most misunderstood or underappreciated part of the Shake Shacks.
We love all your headlines. I think the international business, I did just say that, so I don't want to go too deep into that, but I do think that's. It's not quite understood. If you haven't been to China, to Shanghai, and seen a Shake Shack or, or when you think about... What I can tell you, when we open in Kuala Lumpur, I mean, I've stood in the site. This is one of the biggest malls you're ever going to see in your life. It's brand new, the whole thing. We're on the roof next to the Apple Store in Shake Shack. And when you can talk about those two brands in the same sentence, and you continue to see that. If anyone's ever been to the Singapore airport, there's a giant, amazing waterfall.
We are at the base of it, next to the Apple Store. I think people need to go see these things with their own eyes to truly understand the power of the Shake Shack brand. And then I think the misunderstood part, I think one of the great gifts and challenges that Shake Shack has had since day one, since day one, our brand is so much bigger than our company. And that, so therefore, we compare ourselves to the biggest companies in the industry that may have many thousands or tens of thousands more restaurants than we have. Yet, we're building into those things. So our challenges are different at the scale that we're at, but our brand is up there. And our expectation, you know, the guest expectation is that, well, this brand is gonna be better.
And, doing that means we continue to punch above our weight. We continue to do things, do more with less. Our team is scrappy, tough, and constantly working. And I think that piece of the Shake Shack story is when we talked about this earlier, Jeff. About half of our restaurants, half in the whole company of over 500, opened since COVID. I'm not sure there's another company that can say that, and so you just think about the opportunity, think about how far we've come just in a few short years. It's really exciting. And we think about a big white space moving forward and the challenges that come along with having such a such a big brand at a small size.
So we've certainly produced a tremendous amount of margin improvement this year. And it's been a lot about building, you know, just setting the stage for what's to come. And I think that, you know, when you, when you look at a company that's expanded their margins by, you know, over 400 basis points year-over-year, you know, there's kind of a natural hesitation to think, well, that's probably as good as it's gonna get. And, you know, from, you know, my perspective, you know, the plans that we have in place, the strategies that the team is working on across supply chain, labor, and various items of the four-wall P&L, you know, it's just very exciting, time to be here at Shake Shack.
I think you mentioned, of those restaurant margin expansion opportunity, labor-
Mm-hmm.
being the biggest opportunity, presumably going into the
It is an important opportunity. Yeah.
Right. And the kiosks that have come up a lot more recently, we haven't mentioned that at all, but it seems like it's full steam ahead with that rollout. Can you talk about the near-term costs versus the long-term benefits of those kiosks?
Sure. Yeah, so it's part of the reason, not the largest reason, but it is a contributor to our higher CapEx spend this year versus last year. We have a really, you know, what I think is a very efficient way of rolling out kiosks overall across our system. And we're really pleased with the strong returns we've already seen from implementing them. So almost all of our Shacks right now have kiosks. We're seeing, you know, over half of our sales, well over half of our sales are going through that kiosk channel versus going to the traditional cashier. And, you know, we're focused on driving even more of that mix to the kiosk. We see at least a high single-digit check lift on the back of kiosk, and kiosk is our highest margin channel.
You're gonna see us continue to push on that strategy and also, you know, invest a little bit to improve what that upsell experience looks like.
Mm-hmm.
Continue to peel back the onion as to what this really important order mode can do for our company.
Anything that can drive higher sales, higher check, and lower costs seems like it's
I don't know.
worth the rapid rollout.
Good one.
Well, we have exhausted our time-
Okay.
But I did want to thank Randy and Katie for joining us.
Thanks, Jeff.
From Shake Shack this morning, and thank you all for being here. Have a great day.
Thank you.