All right. Good morning, everyone. Welcome to day three of our conference. I'm the restaurant analyst here at Raymond James. I'm Brian Vaccaro, for those of you in the room I haven't met. We're excited to end our conference on a high note with the team from Shake Shack. Shake Shack is a rapidly growing fast casual burger concept, almost 400 units here in the U.S., largely company owned, and then about 200 units internationally that are licensed. Joining us today is the CEO, Rob Lynch, and CFO, Katie Fogertey. Thanks so much for your time today. Thanks, Brian. So I guess we'll start at a high level if we could. 2024 has been a year, obviously, of positive comps and strong traffic outperformance, and it's been a tough industry environment. Just high level for anyone new to the story, talk about some of the levers that you've pulled to drive that and just how you view the health of your consumer exiting 2024 and into 2025? Yeah. So when I got here in May, one of the first questions I had to answer continuously for the first quarter and really ever since is, how's Shake Shack going to be competitive in this kind of value-oriented macroeconomic environment when all the big nationals are all running $5 programs on national television? And I got to hand it to the team. They've built a great model where they've stayed true to delivering value through the experience and the quality of the food while also supporting that with very targeted digital surgical promotions. So marketing is just starting to take hold at Shake Shack. And part of that marketing is kind of bottom funnel promotion, targeted digital offers. And the team's built a really good model that's allowed them to deliver incentives to the people that need them to come back. So we've been able to strike that right balance. While we've been doing that to maintain traffic and keep people coming back in this environment, we've also been able to grow margin at the same time. So these offers are designed to bring people in. And when they come in, their checks are actually higher with the offer than they are without the offer. They're buying a lot of things. Shake Shack is not like a sustenance brand. It's an experience brand. So when people come, they're not trying to just get the cheapest sandwich and get out. They're coming. They're buying burgers, fries, drinks, shakes. So it's really, I think, been a strong platform this year and helped to continue to deliver solid comps, solid traffic. And we're bullish about our ability to continue to do that next year. Yeah. Yeah. Well, that's a good segue into just sort of some of the levers you've pulled on the advertising and even the menu side to a degree. It's been a year where the consumer 2024 has been seeking value and where your brand and other brands have seemed to find a lot of success having a powerful hook to get them in. But to your point, they're not spending $10 on these promotions. And you've got these digital offers where you spend $10, but to get above $10, a lot of times you have to have a high margin shake added to it, et cetera, et cetera. So talk about the response you've seen to your value hooks, free Fridays, free chicken Sundays, if there's any additional context you can put around that? Yeah. Maybe we'll start with that. Yeah. I mean, I think the biggest, most successful one this year has been chicken Sundays. And what I love about chicken Sundays is we're not just giving away free chicken sandwiches. We're actually accomplishing a strategic objective of ours: to increase awareness that we even have chicken sandwiches. We're considered a burger place, but we bar none have the best chicken sandwich in the industry, and no one knows about it. So by featuring that item, promoting that item in a big way that has garnered a lot of attention and has driven a lot of trial, we're building lifetime value by bringing in people who want great chicken sandwiches into Shake Shack. So that's how we try to approach the big promotions. There's a strategic objective, not just like a one-time traffic driving objective. So it's been really successful for us. And you mentioned it before, but Shake Shack being an experiential brand, a premium positioning. I think you've said recently that your value mix is somewhere in the single digits range. Is that the right level for the brand longer term in your view? And maybe also touch on some thoughts on potentially offering some smaller size options, whether it be on fries or combos in the drive-thru has some drive-thru element to it as well. But maybe just how you're thinking about that and how that could play a role into 2025 and beyond. Yeah. I think we're constantly evaluating our menu structure and strategy. I think the drive-thru really shone a light on the fact that we have the need and the opportunity to optimize the menu dependent upon which channel a customer is coming through. So the pandemic was what drove this company to open drive-thrus. When you can't have people in the dining room, you're looking for other solutions. They went through the drive-thru, but they'd never done drive-thru before. And effectively, they took their dining room model, punched a hole in the wall, and executed it in the drive-thru. And what that did is it created the same behaviors that happen in our dining room, which we encourage and we try to facilitate, which is customization, exploration of the menu, looking at trying different things, especially when we're doing special culinary things. In the drive-thru, that's not the model. Experience and variety and those things are kind of premium benefits we offer in the dining room. Drive-thru has to be about accuracy and speed. So we are right now in the process of optimizing, testing, executing menu boards that are going to have the right items on the menu boards featured in the right places so as to increase throughput, increase speed, decrease complexity, decrease customization, which leads to accuracy errors. So we're doing all of that in addition to and kind of in concert with testing combos because combos accomplish all of those objectives I just talked about. And so I think 2026 is going to be a year of testing and starting to roll that out and looking at how do we do it in the best way possible. But that's going to be a long-term improvement to both our accuracy and our speed. When you talk about premium innovation, it's almost hard to believe that right now and through what we've guided to, which is October, right? Yeah. Through October, our comps have been really strong, and we're promoting the highest-priced LTO we've ever promoted, which is our Truffle Burger, and our Truffle Burger is a great representation of Shake Shack. It is something that with real truffle oil would cost $20-$25 in a sit-down restaurant. We're selling it for $10.99, so $10.99 is a premium price point for a burger in our marketplace. However, relative to the true value that we're delivering, which would be $20+, I think our guests have gravitated towards that, so it's been really successful despite being at a premium price point, so our goal moving forward is always going to be able to try to deliver that premium culinary positioning that makes us special, unique, differentiated while still offering value options that can keep the frequency up. In terms of sizes, you asked about the small size, and I said, we don't want to trade people down, obviously. And we don't really have a huge trial problem. It's really we're working on frequency, trying to get people to come back more. We have strong awareness. We have strong trial. We need better frequency. And so increasing the speed, increasing our menu variety, streamlining our operations to deliver better guest experience is really a long-term investment in bringing customers back more often. Okay. That's great. I guess sticking with advertising and brand perceptions a little bit. So Shake Shack is a brand that, of course, was founded and started in New York City and has grown to 300+ units across the country. You can answer this a lot of different ways, but how do brand perceptions differ across the country? How different is awareness? And then on the backside of that, where does connected TV and other types of advertising to drive that awareness play into that? One of the great things about being founded and started in New York City is you get a lot of people from other places in the country who come in and build an awareness and experience with brands that have strong penetration in this market. So we actually have relatively strong awareness throughout the country. And I think that's what's allowed us to go into these other markets all the way to California, the Pacific Northwest, Texas, Midwest, Southeast. All of these markets, I mean, we've been able to go and go from 50 units, 10 years ago, to 350 units and still maintain a $4 million AUV. So yeah, the model might look a little bit different in Texas than it does in New York City, but we still have a lot of successful shacks all across the country. I think that foundation in New York City has helped us. Whereas some of the other brands that are trying to push, other burger brands and other restaurant brands trying to push out of their home markets are having a little bit tougher time because the level of awareness just wasn't baked in. That being said, we can definitely do more and do better. We are testing and looking at equity building, awareness building, advertising. People don't know quite as well. They know the brand, but they don't know quite as well the premium story, the special way we make our food, the ingredients that go into our food, which is completely different than a lot of our competitors. We do have an opportunity moving forward to increase not just awareness, but engagement. You differentiate between those two things. People are aware of Shake Shack, but they may not know necessarily why our food is special, unique, different, premium, and that's what we have the opportunity to continue to reinforce. Yeah. Which ties back to the chicken sandwich and the quality of your sandwich and hand breading, et cetera, et cetera. Exactly. Versus the other chicken sandwiches that are out there. I guess sticking with value and the topic of pricing, everyone's taken elevated menu pricing over the last several years, but you've taken less than many of your larger competitors. What does your data show about Shack's relative value perception versus key competitors? And then how does that inform how you view the right amount of pricing to take into 2025 and on a long-term basis? There's a lot of things that go into value. Price is one of them. Price is the big one. It's the whole denominator. And then there's a bunch of things that live in the numerator of the value equation, right? And I think we have significantly increased our speed of service over the last year. We are way better today than we were a year ago. So that increases our convenience. That increases our guest experience, which goes into the numerator, helps us continue to drive the value equation. In addition to that, despite three years of unprecedented inflation and now in a kind of value-driven macro environment, this brand has stayed true to the quality of the ingredients. They've never made decisions that have created a less quality burger or shake. I mean, we're still making fresh custard in the shacks every day. We still have 20% of our grind is brisket. Those things, the premium nature of our products coupled with the improvement in guest satisfaction through speed have really improved our value equation. We see our relative value improving. And then just yesterday, I went into we have a couple of competitors across the street from our headquarters. And I don't go to one of those competitors all that often. And I went in there. And our single Shake Shack burger is a quarter-pound beef burger. I went in and looked at another competitor that offers a quarter-pound burger. And I looked at their price point for their quarter-pound deluxe, which would be the comparable sandwich to ours. And it's like $1 less. So when you actually just go and do those price checks on a one-for-one basis, it's pretty staggering to think we're able to execute and deliver a fresh-made, high-quality, premium ingredient burger for the price point that we have been able to maintain. So I think that's only going to bode really well for us moving forward. We're going to stay committed to the quality of the products and continue to take pricing really only when we need to to maintain our margins. I'm not a big believer in driving sales growth with pricing because that puts you in a competitive disadvantage at some point where everyone hasn't had to take pricing so they haven't. You have. And you get kind of addicted to it like a drug. And it's what you depend on to drive your growth. That's not necessarily our model. We need to drive traffic growth. We need to drive mix improvement through trading people up to premium items. So that's what we're focused on. All right. All right. You mentioned it's a good segue into ops at the beginning of your response there. You mentioned you've been able to reduce your ticket times, I think, by about 30 seconds in 2024. That's your goal in 2024. I guess the question I had is take us into how you're achieving that. Is it more holding people accountable, or are there also new processes that you're deploying as well? What are some examples of how you're driving that? Yeah, it's both. It definitely is both. I mean, we have brought in a new COO, and she has built a culture of accountability within our operations organization. I mean, we have always been a brand that's grounded in Enlightened Hospitality, and we stand for something good. We take pride in the fact that we really we're company operated. So we have these people working in the restaurants are our team members, our employees. We take pride in the fact that we maybe treat them a little bit differently. But that being said, we're a business, and we've got to hold ourselves accountable to delivering on the results that we've set for or the aspirations that we've set for ourselves. Stephanie has done an amazing job of aligning her organization in the right way, strategy structure, people. We've got the strategy in place. She's built a great structure, and she's permeating a level of operating discipline down through the organization, and I wish I could tell you it's like some kind of new software that we've created that's proprietary. It's not. It's just like basic blocking and tackling operations that we have gotten significantly better at in a very short period of time, so that's only going to continue to drive better performance and benefits. On the process side, where we can make improvements and streamline our operations, we're absolutely doing that. We're making a lot of process improvements, particularly in our drive-throughs, and long-term, that's going to drive a little bit of a different design in our back of house, depending on what format we're building at the time. So if we're building a small-format shack in an inline strip center in Kansas City, or if we're building a free-standing drive-through, or we're building a flagship in San Francisco, they're all going to be standardized, but they're all going to be different to make sure we're accomplishing the objectives that each of those shacks has, which, like I said, is different in a drive-through versus different in a strip center than it is in the theater district. Yep. Yep. I was tempted to do a 30-minute nerd-out session on back-of-house layout and kitchen operations, but I figured we'd spare the audience. So you've done a great job on margins the last couple of years, the team. And there's more to come. And I guess talk about so you've got 2025. You haven't guided to it. But over the next several years, as you think about you talked about new layouts, new design in the back of house, time and motion studies, even equipment. Is there equipment to make your shakes more efficient? Just talk about some of the big wins that are potentially out there. You have to explore them and test them and get them right and not do anything to harm the premiumization or the quality of the product. But what are some things that you're just thinking about the next few years that could be interesting? Yeah. I mean, I'll let Katie jump in on the margin question. But at a macro level, I mean, restaurants are all about operations. And every great operator is always challenging themself to get better. And we're the same. I think we just have more low-hanging fruit than maybe a lot of our competitors who have already achieved these kind of level of streamlined operations. So we do things like I'll use this as an example. We are committed to delivering fresh food. I mean, when you order a burger, we're making it. When you order a chicken sandwich, we're making it. Nothing is sitting back there waiting to be served. And that takes time. But it also delivers a level of quality that we believe is superior and differentiates us. In some instances, like French fries, making French fries only when they're ordered can sometimes lead to a lower quality experience. The reason is because you make them, and we don't have a great holding piece of equipment today. So you make them, and they sit there. You batch them, and you put them into the package. They sit there until the rest of the order is ready. They're sitting there in not the greatest environment to keep them as hot as they can possibly be. Hot-holding fries is actually a positive thing for the guest, even though it means you may make a batch of fries, and they sit in the hot hold, and they're not batched into a package to go immediately. I think we need to stay true to our roots and the quality that we offer. But we also need to challenge the way we've always done things and really look at it through a filter of what is best for the guest, right? And so those simple things that sound like obvious are really hard for an organization that's always done things their way and wants to stay true. So that change management is something that we're working on. We want people to be very motivated, engaged, and feel great and take pride in our brand. But we need to make necessary changes to move forward in an optimized way. So it's not exactly what you're talking about in margin, but it's just an example of where we can make kind of changes that improve the products that we're serving and the guest experience. So I'll let you talk to. Also, he's a French fry guru. I don't know if you want to share your experience. I didn't know this when you came in. He is a guru of French fries. All right. I ran Ore-Ida French Fries for Heinz, which is the largest retail seller. He knows what he's talking about when it comes to fries. We'll save that for the next fireside. All right, a French fry deep-dive. But yeah, we've made a ton of progress around improving our restaurant margins. I mean, we have gone from basically 17% to now we're going to close in. Our guidance is for approximately 21% this year, and I really want to just kind of preface that with we're still just getting started. The way that we've gotten to this level of improvement has been just kind of scratching the surface on all the big opportunities that we have to come. So I'll just kind of walk through the P&L on cost of goods sold and just our food costs in general. Our team has spent a lot of work kind of learning and refining the skill set around how we think about suppliers and adding more suppliers as we scale, and Rob's big focus is on opening up more restaurants and getting denser in markets. That's also just going to have a knock-on effect to the supply chain. We've been able to do all of this without cutting the quality of our ingredients. We are still making all of our custard in our shacks and hand-spinning our shakes. But we're just leveraging our supply chain in a broader way. On the labor side, we implemented a new labor model towards the end of this year. Prior state, we had scheduled labor at Shake Shack really just based on sales bands. So if you were a shack that was doing $1,100 an hour, and you were a large drive-through with a big dining room, you got the same amount of labor as a small food court that was just doing the same amount in sales. So last year, we kind of took a timeout. We identified this as an opportunity. We did a time and motion study across all of the different tasks that our team members do within the restaurants and built a bottoms-up, very bespoke labor model to help give that drive-thru probably the extra labor that they needed in order to run all the various channels they have and make sure that the dining room was kept clean. But then at the same time, with the food court that didn't have a dining room and probably was doing more just cold bev and fries, it gave them a more appropriate labor model. And it's really hard to be efficient in a kitchen, especially a smaller kitchen that's busy when there's so many bodies on top of each other. So just getting more efficient and prescriptive about the labor on that side has been really huge and instrumental. So we're still learning from this. Stephanie, our new COO, has been a tremendous partner in helping us bring this to life, and next year, we'll have continued benefits from that throughout the year, and there's just a whole host of other opportunities that we're working on today that, from her great experience and her outside-in view and Rob's as well, that will just help make one of the effects is driving more profitability, but if you go back to the whole value equation, it will provide a better guest experience, whether it's how we're cooking our fries to how we're training our managers, how we're going to get denser in certain markets so that we can build more leaders and have a better pipeline for management. All of this is just completely related, so it's a really special place to be in where we both have the opportunity, well, we have the opportunity for top-line growth. We have the opportunity for margin expansion, and all of that actually is done in a way that increases the experience for the guest. Great. Great. Well, we'll maybe finish up with the denominator of the unit economics equation, just development costs, and your cost in 2023 was $2.6 million, kind of an outlier, much higher than a lot of other fast casuals. You're making good progress, but it seems like there's more to come, so maybe tell us about where you're finding savings. And is there a way to think about the continuum you started $2.6 million? Is a few years from now something closer to $2 million potential? Is there any way to think about kind of a longer-term development cost? Yeah. Once again, I'll let Katie elaborate on this, but the team has done an unbelievable job decreasing the cost to build. I mean, simple things as only shipping like 50% of your tile from Italy has helped. It's a joke. I mean, there are. We have beautiful shacks. There are shacks that have Italian tile in them. But we have evolved our vision for our future. When this company went public, there was this idea, maybe someday we'll get to 400 shacks - 500 shacks. And we're well on our way to getting there, right? So as we think about the future and we think about what we aspire for this brand to be and where it can be and how it can show up in the world, it's going to require us to think differently about how we build our shacks, right? We need systemization. We need standardization. We need consistency. And as we grow, we're getting the benefits of that scale, right? The suppliers that we buy the construction materials with, we're getting better rates. The general contractors that we use to build our shacks are building more of them so they can give us more efficient pricing. Katie mentioned, I mean, a big cost of our shacks opening is the labor cost that goes into training these teams of people. It takes a lot more people to operate Shake Shack than it does Taco Bell, and so we're streamlining how we do that, how we get the right amount of team members set up to open the shack, how we retain those team members once the shack opens, how we think about training, how we think about management. All that stuff is being challenged so that we can open our shacks in the most efficient and effective way, and I mean, the cash-on-cash returns that we're seeing are best in class, and we're going to continue to get better. Yeah. I think last year's build costs at $2.6 million was kind of a perfect storm of a lot of things working against us. So it was obviously the broader inflation in the market. We also had a couple of projects which went much longer than we had anticipated and very much over budget, which we have called out. But even adjusting for all of that noise in that time period, the development team has just done a tremendous job of identifying ways to streamline this whole process. And part of that is you're seeing in our lower build costs. But then the other part of that is as you have prototypes and standardized options and you align on what the design principles are versus having an architect draw plans every single time that you want to build a new restaurant, you're able to move much faster. And that's what's really exciting as well with Rob's big focus on new unit development. And then the other thing to add too on the build cost side, there is also kind of a parallel story in supply chain as well. The more that we understand and bring in kind of the buying process as our scale gets larger, we're able to kind of cut out that middle person. And that too is just providing benefits in terms of lower price points for key inputs. But then also, we are more in control of our own destiny on the supply chain. Unfortunately, we are out of time. Thank you so much for joining us today. Thank you, Brian. We'll continue the conversation in the breakout. Always a pleasure. Thanks, man. Thank you. Appreciate it.