So welcome, everyone, today to our fireside chat with Shack today. We're very excited to have the new CEO, Rob Lynch, as well as CFO, Katherine Fogertey , with us today. My name is Christine. I'm the restaurant analyst here at Goldman Sachs. So really, a lot of things to be excited about Shack right now. Right. So you have been delivering 14 consecutive quarters of positive same Shack growth. You've been delivering on margin expansion. Also, with the 550 stores across the globe, you're still growing units at mid-teens levels. So great, a lot of things going on. Very excited about this conversation. I think I just wanna, first off, congratulate you on your first successful earnings call last month.
I know you've shared some early learnings, as well as some of the priorities, that you'd be focused on. How about we go through some of those components, starting with driving healthy Same Shack sales growth, as well as building the brand? And obviously, there are looming challenges in the macroeconomic environment. We do see price mix being less of a tailwind with all the normalized cost environment. And also, you're seeing stepped up competition in the industry, right? So what are some of the levers that you're looking to pull, to drive a sustainable Same Shack growth?
Yeah.
And-
So the first thing I would say is that with 14 straight quarters of Same Shack sales, I think it's, you know, been a strong testament to the ability of this company and this business model to continue to grow regardless of what the macroeconomic environment looks like over the last three and a half years. So, you know, obviously, being in the industry, seeing kind of what the macroeconomic environment has been and then coming to Shack Shack, but when I got here, there was a lot of concern around the premium nature of-
Mm-hmm
... our menu and our business and our price points that go with that. And I think that, you know, we actually look at that as a positive.
Mm-hmm.
And I think our results that we've disclosed so far this year would indicate that that's the case. You know, Shack Shack footprint is actually, you know, company-owned, 330-unit system. You know, we've had the opportunity to go into markets and really pick the best real estate in every market. We don't have franchisees out looking for, you know, units in their neighborhood. Like, we go into markets like, obviously, growing up here, you know, the business growing up in New York, where we have the highest penetration here, lots of Shacks in California.
But as you go into markets like Dallas and Houston and Atlanta, I mean, you'll go in and you look at our real estate, we don't have the same exposure to the hyper value-conscious consumer, which is probably the biggest challenge and biggest drag on from a spending standpoint right now. So we have a little bit of a buffer from that guest, and so we are gonna continue to focus on delivering both premium products and premium experience during these times, and so far, it's worked out really well. Looking forward in the future and how we're gonna drive comps, you know, we are building a strategic product innovation calendar. We're gonna... Culinary innovation has been a part of Shack Shack's DNA for a long time, but it hasn't necessarily been built as a strategic calendar.
You know, my background coming from Taco Bell and Arby's and Papa John's has really been, you know, I've been taught how to build a portfolio of new product innovation that complements each other and drives comp sales growth. That hasn't necessarily been the model at Shack Shack, so we're building that muscle right now. We don't have a loyalty platform. We're working on building out a loyalty platform to deliver our Enlightened Hospitality in a world where hospitality it needs to be delivered more across the digital footprint than necessarily in the dining room. So, you know, we're working hard on that, and that's gonna be a comp driver for us for a long time. And then lastly, you know, just operational efficiency, throughput. As I talked a lot on the earnings call, we don't have a demand problem.
We have lines at most of our Shacks pretty much every day. We can improve both our short-term sales by increasing our throughput, but also by decreasing the time to serve and increasing, it will improve the guest experience. That's gonna be a long time builder of repeat. So we're focused on driving frequency through improved guest experience, through our digital channels, and through throughput, decreasing the amount of time it takes to serve. So those are kind of the three areas from a top-line standpoint.
Mm-hmm.
But we're also super focused right now on improving our productivity inside our four walls. We just hired a new COO, Stephanie, who has come in and is, in just sixty days, you know, bringing a lot of new thinking to our operating model.
Mm-hmm.
And we believe that there is some short-term benefit to improving productivity, but over the long term, we're also challenging, you know, our restaurant footprint and how we can streamline our operations. Historically, we've been grounded in, you know, kind of a fine dining operating model with multiple stations all coming to an expo line and coordinating it all together. You know, QSR is about streamlined process. It's about starting here, finishing here, and handing it to the guest. And so, you know, we're looking at ways that we can execute our model more efficiently in a more streamlined way. That'll be a long-term impact to our operating productivity. So, and then lastly, you know, from a growth standpoint, you mentioned, you know, we've got 330 Shacks today.
We feel like there's a lot of room for us to-
Mm-hmm.
To do that better, but we can only do that if we continue to deliver the kind of cash-on-cash returns that we hold ourselves to right now. So we're gonna continue to look at ways that we can decrease our cost to build, as we enter into markets that have different levels of, you know, population density, and make sure that we can make the economic model just as lucrative as it is today. So that's-
Mm.
kind of the top line.
Wow, great overview. You covered a lot of my questions already.
Sorry.
But just going back to raising brand awareness, I know you have big plans to increase advertising this year. What is the key message that you're trying to get out there, and how do you see this evolving over time as you grow? And also, can you walk us through your plan to optimize those marketing dollars to reach the right core customers, as well as kind of generating the right return?
Yeah, for sure.
Mm.
I mean, you know, I think sometimes I get tagged with the moniker of being, you know, a marketing guy because I started at P&G in brand management. But for me, marketing is a lot more than just advertising.
Mm-hmm.
Like, marketing is truly understanding the wants and needs of your target customer base, understanding, you know, what you need to say or do to either increase or change your customer's behavior, right?
Mm-hmm.
And it all comes down to three questions: Who's your target audience? What do you need to tell them to change or increase their behavior? And then, how do you reach them most efficiently, right?
Mm.
If you can answer those three questions, you can drive top-line sales. And so we're starting with who is our target audience? And as I mentioned, you know, we've had a guest over, you know, the history of the brand that is willing to spend to pay a bit higher prices for a lot better quality.
Mm.
You know, whether that's in New York, with one level of household income, or in Oklahoma City, with another level of average household income, we still need that math to work, right? Because we're not gonna go in and decrease the quality of our products or sell our stuff for less than it's worth. We're really trying to make sure, as we increase our market penetration, as we look to these other markets, do we really understand what that target guest needs to hear from us, needs us to do for them, to make sure that they come to us and try our products, and then come back with a high level of frequency? That's the first step. The second step is, like, what are we gonna communicate to them?
And that's where, you know, we have a great story, and that story is around the quality of our product, what goes into our product, the way we take care of the people that, our suppliers, our guests, our team members, our communities. So that message has resonated.
Mm-hmm
... in a kind of a word-of-mouth way throughout, the markets that we currently compete in.
Mm-hmm.
We need to be able to, you know, preach that from the mountain in all the new markets that we're going into, and that's where the spend comes in, and that's the media dollars. And we have increased our investment behind media, primarily digital media, and primarily in a much more surgical, localized way. It wouldn't make sense for us to go out and run national advertising when we're, you know, only in probably 50% of the DMAs today. We'd be throwing some money out the window on a national level. So we have built a very structured, surgical marketing model that is helping to drive the kind of, comp growth and mitigate some of these industry traffic malaise that we've seen across the board.
So, all of those things are really critical, and we're gonna continue to invest in marketing as long as we get the returns on that investment that we expect. You know, I'm not here to spend marketing dollars or advertising dollars just for the sake of doing it because I'm the marketing guy. Like, it's got to generate a return, and so far, we're seeing great returns on that investment.
Great. I think you mentioned that loyalty program might be within your near-term plans.
Mm-hmm.
Can we just talk about how do you ensure that it just doesn't become a discounting mechanism for your top customers?
Yeah, it all goes into how you structure that, right?
Mm.
If it is just pure, you know, pay-to-play, points-based, then it does just become a discounting mechanism. But I've challenged our team... You know, our brand is, you know, was founded by Danny Meyer, with the whole core around Union Square Hospitality Group and Shack Shack is Enlightened Hospitality, right?
Mm.
It's in the name of Danny's company.
Mm.
So, you know, we have to find a way to leverage our loyalty platform, not just to give discounts, but to create that type of one-to-one connectivity-
Mm
... with our customers. It's been a part of our DNA since the founding in Madison Square Park. And once again, as our industry moves more towards a digital delivery channel, both through our organic channels, our web and app, and also the third-party delivery providers, like, we need to find ways and challenge ourselves to bring Enlightened Hospitality to life. And so I think the team has been able to do that through the seamless nature of ordering through our app, the way we partner with our delivery providers. Our loyalty platform also needs to deliver on that.
Great. Just moving on to the second area of focus, which is opening more stores with kind of a good cash-on-cash return, right? And it's very impressive to see your new stores performing very well while you're actually lowering-
Yeah
... your new build costs. So can you talk about the strategies that's been driving the success? And how do you plan to keep this momentum going as you expand further?
Yeah, I think it's about, you know, development comes down to real estate, construction costs, and operating efficient, like making sure you can operate efficiently, right? And the brand has been really good in the past at, you know, building big Shacks with really nice dining rooms and high traffic areas that do really high AUVs. That's great. We wanna continue to do that in a lot of places. We make a lot of margin and a lot of money on that model, but that footprint is limited, and our aspirations are to have a much bigger footprint.
Mm-hmm.
So we need to make sure that we can go into markets that don't have that same dynamic and be able to succeed financially. So in order to do that, we have to have restaurant designs that are lower cost to build, still able to support the amount of demand that generates the AUVs that we have, but in an efficient way, so that our margins can sustain kind of the expectations that we have in place today. So, you know, it really comes down to making decisions on, you know, the size, whether it's gonna have a drive-through. I mean, drive-through should add capacity, right?
Mm-hmm.
And so, we're looking at all of those things as we go into markets that, you know, where we're transitioning from a Manhattan model that is foot traffic-
Mm-hmm.
-to a Columbus, Ohio, model that is car traffic.
Mm-hmm.
We just need to make sure that our Shacks and our operating models are built to support that different channel.
Mm-hmm. I think that's a great segue to the next question, which is drive-throughs, right? It's less than 10% of your store base right now, but how important is the success of drive-throughs going forward for the growth of the U.S. in the long run?
Yeah, I think it's critically important.
Mm-hmm.
I think, once again, if we're gonna realize our full potential, we have to be able to successfully operate and execute a model that has the customers, the guests in these different geographies have grown accustomed to, and full disclosure, today, we don't do it as well as we need to.
Mm-hmm.
And so, you know, I give a lot of credit to the Shack Shack organization during the pandemic, when every unit was a dine-in unit. That business model was a bit challenged during the pandemic.
Mm-hmm.
They pivoted quickly-
Mm-hmm
... to be able to execute a different model. And essentially, you know, they punched a hole in the wall and tried to execute their dining room model through a hole in the wall. That's not how you do drive-through. Drive-through, the priority of benefits that a guest demands changes in the drive-through. Speed and accuracy become a lot more important.
Mm-hmm.
And so how you design your menu board, where you what you promote, drives, you know, how fast you can take orders, drives what level of customization you have, which leads to speed of service improvement and accuracy improvement. So we are right now challenging the model that we've launched drive-through with.
Mm-hmm.
We've hired Stephanie Sentell, who's spent, you know, 12 years operating in large company-owned QSR environment, who is kind of rethinking and rebuilding that model. The good news is, it's not gonna take a lot of capital to change it.
Mm-hmm.
It really is about changing some of the processes, changing some of the ways we do things. So, you know, we have a lot of confidence in our ability to significantly improve the speed of service through the drive-throughs, and that's gonna unlock, you know, real estate and markets that, you know, we wouldn't be able to-
Mm-hmm
... to really deliver the cash-on-cash returns if we just go in and build a big dining room.
Right. I'm sure Stephanie's very busy working with the on the ground, with the development teams. But any early thoughts on sprinkling the, the kind of Shack magic on the drive-through experience versus the traditional drive-through experience?
Yeah. I mean, it needs to be like... I mean, right now, we don't offer combos, right? I mean, things like that. You know, and then, as people come through the drive-through, making sure that we are delivering the same level of hospitality and service-
Mm-hmm
... when they show up, and you know, but the best way to deliver hospitality is to improve their experience through speed and efficiency.
Right.
I mean, that is the number one thing that people want in a drive-through. So it'll be Shack magic. It just might show up a little differently than, you know, it does in the dining room.
Great.
Yeah.
Any room for accelerating your unit growth, or are you happy with kind of that low to mid-teens kind of cadence?
Yeah, I'm never happy. So, always challenging ourselves to get better, move faster, do more. As long as we can execute with excellence.
Mm-hmm.
You know, you know, you don't wanna rush forward and then have to come back and fix a lot of stuff. So we're gonna be strategic about it. We're gonna be thoughtful about it. We're gonna be planned for about it. But yeah, I'm absolutely challenging our organization on how we can, how we can move faster.
Great. I think just moving on to driving profitability, Katie, maybe you might wanna chip in. The first half restaurant-level margins were close to almost 21%. You've revised up your kind of lower end of the guidance-
Mm-hmm
... but kind of kept the 21% on the high end. So can you actually walk us through some of the key drivers and assumptions there? And just at a high level, how should we think about the long-term margin potential if we assume that all of this operating leverage and cost efficiency continues to come through?
Yeah, I mean-
Yeah.
The margin expansion story here at Shack Shack has been absolutely, you know, tremendous. You know, we did a hundred basis points of expansion last quarter, and really, if you think about where we were relative to the past three years, our teams have just done so much to drive increased sales, make material improvements in our supply chain. On labor and staffing, we've already just moved the needle so much, and really throughout most areas within other OpEx as well, just getting better and smarter. And at the same time, there's still so much to go, and that's what's really exciting.
So whether it's, you know, the work that Stephanie has been doing within our restaurants, it's the work that our marketing team has been doing, and how we're thinking about digital and profitability, it's all taking hold, and it's a really exciting time here at Shack Shack. So I would say, you know, we're really proud of where we've come. A lot of that has been kind of through a mix of variety of strategies within supply chain, really just, you know, kind of utilizing our scale and doing kind of the things that one would do at this stage of growth at our company. So it's diversifying suppliers. It's kind of thinking more holistically about freight.
On the labor side, you know, we've made tremendous improvements in how we're staffing our restaurants to plan and to guide, and there's been a lot of coordination between finance and operations to help get our operators there. And still, we have more to go with the new labor model that's going in later this year, and then Stephanie has a ton of thoughts on that side, on, you know, managers and all other, you know, kind of parts of that P&L. So yeah, really, really excited about what we've accomplished and still a lot to go.
Great. So any metrics you can share on the new labor deployment model?
Yep.
And whether that would impact whether it would be a key factor to the overall full year guidance or the implied second half guidance?
Sure. So for everybody's benefit, this new labor deployment model, so historically at Shack Shack, labor was deployed kind of just based on your sales level. And what we've done is we've developed a model that's really unique to us, and looking at the major drivers that determine how many hours are needed per shift. And so, you know, basically, you know, at the high level, it is channel mix. So are you heavy delivery? Do you have drive-through? Are you heavy dine-in? It's menu mix. So, you know, there's certain items that we produce that just require more labor than others, so incorporating that into the mix. And then also looking at, you know, the peaks of the day.
So some of our restaurants operate, you know, pretty even throughout the day, and then we also have other restaurants that do very heavy lunch, very heavy dinner, and those just have different staffing requirements. And so with time and motion study, we've put up basically a bespoke labor model for each of our Shacks, working with the operator. Stephanie has been such an amazing enabler to help us, you know, deploy that, throughout the system, and we are very pleased by what we're seeing.
Great. Kiosk has been a very big win for you in the last eighteen months, and I wonder if you can talk about where we are in terms of that kiosk journey and how that kiosk experience would evolve over time.
So yeah, a couple of years ago, we made this, you know, decision that looking at kind of where all of our margin profile was and what the opportunities were, that kiosk was actually a really, really powerful tool for us, and we wanted to just retrofit all of our Shacks with kiosk. And so last year, that was a big focus of the year. And, you know, we've talked about just recently, you know, we're still seeing a mid-teens check lift, high teens check lift relative to traditional in-Shack. It's been such a powerful enabler for us to really get our guests to understand the menu. So how our kiosks work, if you haven't seen them yet, it really takes you through the entire trade building process, where, you know, you have an opportunity to add sandwich, drink, fries.
We heavily feature LTO through really, very compelling digital marketing, and it's a very successful tool. The new labor model helps us also to optimize labor for that tool, so you know, we have them largely deployed throughout our system, and now the work that the team's doing is really on optimizing and enhancing what those features are. You know, we're on this continuous evolution of, you know, of getting smarter about how we are offering in digital our digital merchandising experience with our guests.
Mm-hmm. Great. Could you also talk about additional tech unlock opportunities beyond the kiosk? Or, for example, is there any opportunities to automate some of the process or a digital kitchen opportunity?
My area.
Any of that in the midterm that we can look forward to? And how do we ensure that we have the right investments in place to ensure technology adoption in the right places?
That's a very complicated question, and, you know, something we focus a lot of our time on. If you really look at kiosk, that was a way of us automating the order process, automating the front of house, but still doing it in a way which we believe provides a actually superior guest experience. So really did that with the guest in mind. And, you know, the work that Rob and Stephanie have been doing on kitchen flow, you know, all ties into this as well.
Mm-hmm.
Yeah, I mean, a lot of it is the analytics, right? It's what you're measuring and what your KPIs are. And so, you know, when we think about technology, and you talk about automation, it's, you know, people envision robots back. I don't think we're moving to robots anytime soon, although we did have a robot delivering-
Delivery, yeah.
food in Los Angeles a couple weeks ago. You know, where technology is really impacting us is, you know, leveraging AI to really look at all of our processes and just think about how we can do things in a smarter way. And so it's really more analytics than it is necessarily engineering, if you will.
Right.
Those analytics are going to inform, like, I mean, Katie just walked you through, I mean, our whole labor model is way more sophisticated than it used to be.
Mm-hmm.
You know, we used to have $1 million of sales equal this amount of labor, and the GMs were deploying it however they saw fit. Now, you know, we're giving them guidance on, you know, based on your business, here's what you should be scheduling by hour.
Mm-hmm.
I mean, that, you know, there may be a lot larger companies that are already doing that, but that's a, kind of a game changer for us.
Right.
And so everything we do is grounded in analytics and technology at this point. And so yeah, it's our biggest, you know, G&A and our biggest capital investments outside of building new Shacks.
Mm-hmm
... is in tech.
Okay, great. Just a few long-term questions. So I know there's a lot of things that changed after the IPO, when you were looking at kind of like a 450-plus, kind of a long-term opportunity for stores coming up. You're laughing, Katie. You're already at 311, because, you know, in the last quarter, so. And still growing mid-teens% year over year. So that being said, could you help us to frame how we should think of, what are the key considerations in, in thinking about the TAM in the long run?
Yeah, well-
You have to give us a straight answer.
When, you know, when I was making the decision on whether I came to Shack, I got really excited knowing that we were going to be at, like, three hundred and thirty units this year, and we could build four hundred and fifty forever. No, that wasn't the case. So you know, obviously, with our growth rate and how we're looking at things, we're really excited about the potential of this brand.
Mm-hmm.
You know, our business has changed dramatically.
Mm-hmm
... since the IPO. I think the IPO, there was 15 units.
Yeah.
Four hundred and fifty seemed like a really, really big number.
Big, big number.
Yeah.
Yeah. I mean, what I would say is that all of the things... Well, first of all, as a former restaurant analyst, I see you look at this all the time. But, all of these things that we're working on today and improvements that we've made just make the opportunity bigger and bigger. And so, you know, we've talked about, you know, all the opportunities that we see, ripe opportunity for continued margin improvement and sales growth. But then, you know, we've talked about it a little bit, but we haven't focused that much on it. I mean, the real estate team is doing a tremendous job in lowering the build cost.
Mm-hmm.
So, and we, we've also, you know, talked about having line of sight to future reductions next year, and a bigger amount of unit growth next year than we're opening up this year. So all of these things kind of feed on themselves, and, you know, the total addressable market, you know, we're really, really, you know. It is a tremendous opportunity as we continue to execute on our plans.
Mm-hmm.
So you recently announced the closure of nine stores, your plans to do so. Does that impact your TAM? What, what was the thinking behind that? I know it's me.
That will have no impact on anything.
Mm-hmm.
I mean, that was really us... It was really me coming in and saying, "Okay, so you've never closed a restaurant before. Does that mean that every single restaurant we have is awesome?" And it came down to, of the three hundred and thirty, three hundred and twenty-one were. So pretty exciting.
Yeah
... that, you know? So there was nine Shacks that, frankly, weren't delivering on the financial performance that we need them to, and we didn't see a path to get them there.
Mm-hmm.
So, you know, not a material change in really any of our KPIs and frankly, no impact on our development plans moving forward.
Mm-hmm.
You know, I think the media really picked that story up and used it for their own purposes. But, you know, we still have 40 Shacks-
Mm-hmm
... in California, and we're still building more this year and next year.
Mm.
We didn't just close Shacks in California.
Mm
... we closed them in Texas and Ohio, which look a lot different than California.
Mm.
So, this is really just, I think, portfolio management, and it's never an easy decision for anybody to close down a business. It has impacts on team members. It has impacts on communities, and so I didn't make that decision lightly. But it was the right thing to shift resources from Shacks that were unproductive to productive Shacks. And we were able to move every single manager that worked in those Shacks to other Shacks and help fill our pipeline-
Mm
... as we continue to grow and build in those communities. So, yeah, I know it's been a wait on the stock for the last couple weeks. I-
Mm
... it's frankly surprising to me. But yeah, there's only positive benefit from what we've decided to do.
Yeah, and when we look at these restaurants-
Mm
... a lot of these restaurants, and we talked about the long lead time on development, it can be eighteen months, it can be much longer than that.
Mm.
And so a lot of these locations were things that were contemplated pre-COVID, during COVID. We also know that just the way that the people are moving around, the way that the world has changed, the rise and kind of very stable performance of delivery-
Mm
... as a kind of something that's here to stay, that's all changed the face of, the landscape for restaurants. So, you know, to Rob's credit, you know, coming in here and, you know, making this decision, you know, it really will set us up very well to be able to scale and focus our efforts on our restaurants, which have the opportunity to really generate a lot more profitability.
Mm-hmm.
Great. So the company has made a lot of hires, including very high-profile CEO, COO. So given the growing scale of the business, both domestically and internationally, do you feel like you have all the right people in place at it right now? And is there any obvious gaps that you're looking to fill?
... and more importantly, how do you ensure that everybody from kind of them all the way to the managers, to the store staff, are aligned in terms of achieving towards the goals that you've set for the next few years?
Yeah, I mean-
Yeah.
So you essentially just described what the CEO's job is, right? You know, I would tell you, my last couple roles, President of Arby's, CEO of Papa John's, I've come in and everyone said, "Rob, we need you to fix this." Like, Shack Shack doesn't need fixed. There is a huge amount of upside opportunity for us from an optimization standpoint, but it's not broken by any means, as evidenced by the great results that I got to stand up last quarter and take credit for, that I had nothing to do with. You know, so we have a great team in place. I have a ton of confidence in our management team. Yeah, there's some optimizations, and there's some-
Mm-hmm.
There are some changes, but that's... I mean, that's not just gonna happen today or tomorrow. I mean, that's my job, is to continue to make sure that for the changing needs of our business, we have the right people, the right resources, the right infrastructure in place. But once again, this is a situation where I have the luxury of coming into a business that has a ton of momentum.
Mm-hmm
... that has a really strong team, and we just need to challenge ourselves to look at things differently. I'll use the store closures as a, as an example.
Mm-hmm.
Like, that was off-limits in the past. And I said, "Look, I mean, you wouldn't keep in your portfolio, your, you know, your personal stock investment portfolio, you wouldn't keep investments that you didn't believe were gonna improve or were gonna be stable," and that shouldn't be how we run this business. I mean, we're gonna do everything we can. We looked operationally, we looked, you know, from a marketing standpoint, are there things we haven't done? And when we vetted all that, these nine said, you know, weren't, that we weren't gonna move forward with them.
Mm-hmm.
And, you know, those are the tough decisions and a change in philosophy that-
Mm
... that I brought, and there's other changes in the way we manage our restaurants, in the labor modeling, and in the development strategy, more penetration versus kind of scattered everywhere, so there's definitely gonna be change, and there's a lot of room, low-hanging fruit, for us to optimize the model, but right now, we've got a great team doing all the right things.
Mm-hmm. Excellent. I wanna touch a little bit on the international business.
Yeah.
I know, you're seeing price sensitivity across the globe-
Mm
... not just in the U.S. I think especially places in China has been under a lot of pressure. So how are your international licensee partners thinking about pricing and marketing in their own markets? And how do you ensure that those local strategies align with ours, right?
Yeah.
Especially in terms of the brand equity, that making sure that that's consistent across the globe.
Yeah, I mean, we have a great licensed business-
Mm-hmm, mm-hmm
... domestically and internationally.
Mm-hmm.
So, you know, our licensees in the U.S. are the folks that operate our airport units, which a lot of you have probably frequented, and the stadiums and other areas where we can't get into those pieces of real estate. And then we have our licensed partners that are essentially responsible for building out a country in the international markets. And yeah, there's no question that China and the Middle East, two markets where we are heavily penetrated, have been challenges over the last, you know, 12 months. But that's been offset by other markets that are performing really well.
Mm-hmm.
So our international business is actually doing, you know, really well relative to what the expectations were-
Mm
... this year, given the geopolitical macroeconomic environment.
Mm.
That being said, we can absolutely get better, and we've got a great international team that is working with our international partners to do what you, exactly what you just said.
Mm.
And we have great properties, and we have amazing Shacks across the globe.
Mm-hmm
... with partners that have the resources and have the acumen to be able to operate very effectively. So we do have strategic discussions with them on their value proposition, making sure that they're not thinking about or trying to do things that would compromise our brand. We have very strong, you know, license agreements with them. So... and they're bought into the future. So it has, even despite some of the business challenges-
Mm
... I think our partners are strong enough that they've been able to stay true to what has made them successful in the past and kind of ride out some of these waves.
Mm. Great. That's all the time we have, unfortunately. Thank you so much, Rob and Katie-
Thank you.
Thank you guys.