{"id":4041,"date":"2015-12-09T19:59:51","date_gmt":"2015-12-10T00:59:51","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/shake-shack-winning-in-fast-casual-enlightened-hospitality-throughput-time\/"},"modified":"2015-12-09T19:59:51","modified_gmt":"2015-12-10T00:59:51","slug":"shake-shack-winning-in-fast-casual","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/shake-shack-winning-in-fast-casual\/","title":{"rendered":"Shake Shack winning in fast casual"},"content":{"rendered":"

We started as a hot dog cart, now we\u2019re here\"hot<\/u><\/strong><\/h3>\n

Danny Meyer made his career creating Michelin star restaurants.\u00a0 In 2001, his restaurant empire Union Square Hospitality Group\u00a0(USHG) launched a temporary hot dog cart to support an art installation\u00a0in Madison Square Park.\u00a0 It was 3 years before the first Shake Shack opened\u00a0in the same spot \u2013 expanded into a \u201cmodern day \u2018roadside\u2019 burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine\u201d. \u00a0(1)<\/p>\n

Isn\u2019t this just another burger chain?<\/u><\/strong><\/h3>\n

No.<\/p>\n

\"shake-shack\"<\/a><\/p>\n

Wait, why not?<\/u><\/strong><\/h3>\n

On opening day of the Newbury street location, CEO Randy Garutti addressed the staff with the simple message: “I want to challenge you to put us out of business<\/strong>\u2026 because you are so damn generous<\/strong> with what you give the people who walk in this door\u2026This is not merely about the occasional gratis dessert: It\u2019s part of a larger effort to empower employees to do whatever it takes to make customers feel loved.”(2)<\/p>\n

Does this sound like another chain to you?<\/p>\n

The root of what makes Shake Shack different is the idea of \u201cEnlightened Hospitality\u201d \u2013 it guides every decision and dictates both the business and operational model,\u00a0creating a unique and sustainable competitive advantage.<\/p>\n

\"shake-shack-RUP\"<\/p>\n

Enlightened hospitality \u2013 cliff notes version<\/u><\/strong><\/h3>\n

In his book, Meyer explains how he prioritizes his restaurant stakeholders, in a way almost no restaurant does: (3)<\/p>\n

    \n
  1. Employees<\/strong><\/li>\n
  2. Customers<\/strong><\/li>\n
  3. Community<\/strong><\/li>\n
  4. Suppliers<\/strong><\/li>\n
  5. Investors<\/strong><\/li>\n<\/ol>\n

    \u201cThe idea is to create a welcoming atmosphere first for employees, next for customers, and then for the outside community, suppliers, and, finally, investors.\u00a0 This is similar to what J&J outlined in their \u201cgroundbreaking\u201d 1943 mission statement that preceded decades of earnings growth, but dissimilar from what any other fast casual chain has laid out. (2) (4)<\/p>\n

    Employees<\/u><\/strong><\/h3>\n

    Compensation<\/strong> \u2013 \u201cEntry-level Shake Shack workers make $10 an hour in New York \u2026 the real financial incentives are designed for employees who stick around\u2026[with] a profit-sharing program called Shack Bucks that can\u2026add as much as $2 an hour to paychecks. And every<\/strong> full-time employee was given the chance to purchase stock in the IPO. 2\u00a0 \u00a0The company has a 401(k) match and health coverage for workers who work more than 30 hour\"newbury\"s a week. (5)<\/p>\n

     <\/p>\n

    \u201cThe No. 1 reason we pay our team well above the minimum wage is because we believe that if we take care of the team, they will take care of our customers,\u201d said Randy Garutti.(6)<\/p>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

    Career advancement —\u00a0\u00a0 \u201c<\/strong>\u2026our job is to promote that person and show them how they can make a lot more money if they choose to be a leader.” Many of Shake Shack\u2019s executives have been groomed from within, and it\u2019s not uncommon for hourly employees to get bumped up to manager, general manager, and beyond.\u201d<\/p>\n

    Hiring (\u201c51%\u2019ers\u201d<\/strong>—\u00a0 Target 51% EQ (people skills) vs. 49% IQ (technical skills). They look for \u201cpeople who are warm, friendly, motivated, caring, self-aware and intellectually curious.\u201d\u00a0<\/strong>(7)<\/p>\n

    Empowerment \u2013 <\/strong>As Garutti alluded to in the opening of the Newbury location, employees are not just able, but expected to go above to drive a better customer experience.<\/p>\n

    The customer\"img_0711\"<\/strong><\/span><\/p>\n

    Employees are instructed to “trust” customers and \u201ctry to be on their side\u2014to always make the charitable assumption\u201d. \u00a0Experience is key, it’s more than just\u00a0satisfying a functional meal need.<\/p>\n

     <\/p>\n

    The community<\/strong><\/span><\/h3>\n

    Both Meyer and Garutti have publicly declared their goal of \u201ccreating a new kind of wealth called \u2018community wealth\u2019 that not only enriches individuals and corporations but also makes communities stronger.\u201d (8)<\/p>\n

    Giving back \u2013\u00a0\u00a0 <\/strong>\u00a0\u201cWe would raise the money philanthropically to build the kiosk, then we\u2019d gift it to the park.\u201d\u00a0 Even the (now world famous) logo was born out of pro bono work surrounding this venture. \u00a0(9)<\/p>\n

    Restaurant design \u2013 <\/strong>Each restaurant is \u201cof their place, not something that happened to their place\u201d<\/a>\u00a0Each outlet is localized to some degree \u2013 on Newbury Street the walls are made out of materials from an old Boys & Girls Club in nearby Watertown.<\/p>\n

     <\/p>\n

    The Suppliers\"shackburger13.jpg13\"<\/strong><\/span><\/h3>\n

    Quality<\/strong> — \u201cNo hormones and no antibiotics ever.\u201d (10)<\/p>\n


    \nMission<\/strong> — They show ranchers \u201cphotos of Shake Shack\u2019s infamous crowds to drive home how excited customers are\u201d for top quality meat.\u00a0 This also includes working with the famed meat purveyor Pat LaFrieda\u2019s (meat + custom patty machine\u2019s each producing 80K\/day) (fast company).<\/p>\n

    <\/h3>\n

    <\/h3>\n

    The Investors<\/strong><\/span><\/h3>\n

    Are being rewarded.\u00a0 Revenue and EBITDA continue to grow steadily, as the footprint expands.\u00a0 The stock price has been volatile post one of the hottest IPO\u2019s of the year, but there is little doubt that the chain will continue to grow \u201ctheir way;\u201d\u00a0 sustainably with 10 a year, eventually reaching 450 \u2013 enabling the chain to maintain its operating philosophy of enlightened hospitality. (11)<\/p>\n

    \u00a0\"growth\"<\/a>\"footprint\"<\/a><\/em><\/p>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

     <\/p>\n

    So what?<\/strong><\/span><\/h3>\n

    In an industry obsessed with how quickly they can get customers in and out, Shake Shack is winning by focusing their business and operations on a different prioritization of goals.\u00a0 If you\u2019re not convinced yet, name another fast casual concept that celebrates their long lines with a live feed from the original<\/a>.<\/p>\n

    So close the computer, and go get a burger (and maybe a shake!).\u00a0 Hopefully the line is slightly shorter than this:<\/p>\n

    \"shack<\/a><\/p>\n

     <\/p>\n

    Sources:<\/strong><\/span><\/p>\n

    (1)\u00a0http:\/\/www.sec.gov\/Archives\/edgar\/data\/1620533\/000104746914010114\/a2222577zs-1.htm<\/a>\u2019<\/span><\/h6>\n
    (2) \u00a0http:\/\/www.fastcompany.com\/3046753\/shake-shack-leads-the-better-burger-revolution<\/a><\/span><\/h6>\n
    (3) \u201cSetting the Table.<\/span>\u00a0Danny Meyer. \u00a0Harper Collins, 2006. \u00a0<\/span><\/h6>\n
    (4) http:\/\/www.jnj.com\/sites\/default\/files\/pdf\/jnj_ourcredo_english_us_8.5x11_cmyk.pdf<\/span><\/h6>\n
    (5) \u00a0http:\/\/www.nytimes.com\/2014\/07\/05\/business\/economy\/boloco-and-shake-shack-offer-above-average-pay.html?_r=0<\/span><\/h6>\n
    (6) http:\/\/www.nytimes.com\/2014\/07\/05\/business\/economy\/boloco-and-shake-shack-offer-above-average-pay.html?_r=0<\/span><\/h6>\n
    (7) \u00a0http:\/\/www.businessinsider.com\/shake-shack-employees-51-percent-2014-12<\/span><\/h6>\n
    (8) https:\/\/www.nokidhungry.org\/blog\/our-partners\/2015\/02\/shake-shack-ipo-charity%E2%80%99s-gain<\/span><\/h6>\n
    (9) https:\/\/www.qsrmagazine.com\/outside-insights\/three-lessons-charitable-giving-shake-shack<\/span><\/h6>\n
    (10) https:\/\/www.shakeshack.com\/food-and-drink\/<\/span><\/h6>\n
    (11) http:\/\/s2.q4cdn.com\/686132520\/files\/doc_presentations\/SHAK-General-Investor-Presentation_Sept-2015_v4.pdf<\/span><\/h6>\n
    (12)\u00a0https:\/\/www.nokidhungry.org\/blog\/our-partners\/2015\/02\/shake-shack-ipo-charity%E2%80%99s-gain<\/span><\/h6>\n
    <\/h6>\n","protected":false},"excerpt":{"rendered":"

    Enlightened hospitality > throughput time<\/p>\n","protected":false},"author":682,"featured_media":5852,"comment_status":"open","ping_status":"closed","template":"","categories":[32,34,733,578,336,57],"class_list":["post-4041","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-fast-casual","category-restaurants","category-shake-shack","category-tom-winner","category-tom-winners","category-winning"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nShake Shack winning in fast casual - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/shake-shack-winning-in-fast-casual\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Shake Shack winning in fast casual - 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