Hi, everyone. Thanks for participating in Oppenheimer's 25th Annual Consumer Conference. I'm Mike Tamas, and I cover Shake Shack here at Oppenheimer. You know, Shake Shack's been one of our top picks in 2025, and we remain excited about management's new strategies to stimulate same-store sales, enhance margins, and accelerate unit growth. We're going to dig into all those topics and much more with Katie Fogerty, Shake Shack CFO. She joined the company in 2021, and just thanks for taking some time to spend some of the day with us today. I appreciate it. Yeah, always love to talk about Shake Shack and all the things that we've got cooking up here. Appreciate the interest. Awesome. You know, I want to start bigger picture with the long-term outlook that you guys installed in January this year and then recently updated. You know, the guidance targets growing EBITDA by low to high teens, which is underpinned by growing revenue and units by low teens, and expanding restaurant margins now by 50 basis points annually in 2026 and 2027. You know, we're going to touch on each of those pieces separately over this time, but, you know, how'd you construct the overall framework, and can you speak to your confidence in achieving it? Sure. I'll just start with, you know, how much excitement we have here around our pipeline. Because I think really when you think about Shake Shack and how our total revenue growth algo has been kind of constructed over, you know, the long history of this company, it really has been driven by very successful high cash-on-cash return unit growth. I can honestly say that our pipeline has never been stronger. You know, when Rob got in here and he was just looking at all of the returns that we were generating from our new restaurant openings and how this is a concept that works outside of New York City, outside of kind of key metros, and how really drive-through was starting to play out, he challenged us in a very serious way of how fast can we grow in a responsible, reasonable way. You know, this company, you know, before had really kind of been capped at about 40 new Shack openings a year. We hadn't really been able to break through. We did all of the hard work to identify what the blockers of our ability to accelerate our revenue growth were. You know, it really came down to, it's not really demand from our landlords. It's not like we couldn't find sites. It was really we had underinvested in our development team, and we needed to bring on more dealmakers, more construction resources, more project managers. We made that decision. We made that investment in our 2025 plan, hit the ground running with that right out of the gate, and it's already paying massive dividends. You know, last year we had a lot of success with really pushing ourselves to sign more leases. This year, you know, we've already upped our target to 45-50 new Shack openings. This will be the largest class we've ever been able to open. Our openings are going very, very well as well. You know, I can just go through. We're hitting new record high openings at, you know, suburban, you know, drive-through Shacks, you know, things that have surpassed, you know, opening up in Times Square in New York City. You know, the business and the new Shack opening side is going exceptionally well. When we look at the pipeline, it is very, very strong. Just to give some comparisons, you know, about a month ago last year, we were still trying to bring in deals for 2024. This year, we're completely locked in. In fact, we have, we're oversubscribed for next year by a very good degree. We're already working on 2027. This is a place that Shake Shack has never been in historically, that big place of strength from a pipeline perspective that we're able to bring in and, you know, and kind of massage, you know, our pipeline, and we're not just sitting there kind of begging to hit numbers by the end of the year. That has been really, really great. That gives us a lot of confidence that we're going to be able to continue to deliver best-in-class unit growth. On the comp side, you know, this is an area where, you know, we know we haven't done as well as we aspire to do. Rob has done a lot of work with our marketing team to really define a couple of things. One, it is, you know, we're probably going to spend more time talking about culinary, but it is really about putting a process around culinary innovation and having a planful approach for how we go to market and what the reason, what the driver is behind our LTOs. That allows us to plan our comp calendar out and have a good sense of if we want to, you know, drive however many basis points in mix how we're actually going to get there. The second part of it is about our go-to-market strategy with our guests and what our brand messaging is. You know, he hired a Chief Communications Officer last year, and, you know, they have been working together. He's pulled together the team that worked at Arby's on We Have the Meats and really had, you know, had a lot of strong track record on creating a brand slogan, a brand meaning that has driven, you know, deep consumer adoption. They're working on that here. That is just something that we haven't had before. You know, we think about Shake Shack. The cool thing about it is that it's this brand that is very, very strong. People love it, literally love it. We have, you know, some of the highest AUVs in the industry, and that's all great. Why do they love it? We've never really been able to articulate that into a cohesive message that we can then go out to the market and drive long-term sustainable traffic growth from. That work is going on right now. That's not really contemplated in our long-term algo, but as we kind of think about where those potential upside levers are, it's something that really, you know, it gets me excited every day. You know, on the margin side, we've made tremendous progress over the past, you know, we have 16-17 quarters on expanding our restaurant margins. We were able to do it in periods of positive traffic and negative traffic. We've been able to expand margins when we have cost headwinds and so forth. A lot of it is about, you know, really, you know, attacking the four-wall opportunities and improving our operations. Now, where we see great opportunity is continuing all of that great work, but it's also in our supply chain. You know, when you think about our supply chain, this is a part of our company that we really haven't invested enough resources in supporting and bringing in kind of the right talent to be able to get kind of the best price and build up a best-in-class supplier network. The team has done an amazing job growing this company. We've worked with some great people, but, you know, we have about the same number of suppliers that we had when we had 30, 40 Shacks as we have today at almost 400. Certainly our aspirations to grow to be at least 1,500 means that we are going to have to do some things in the supply chain to build in redundancy, but then also just to hold, you know, our suppliers accountable to supporting our growth. You know, those are kind of the two sides on that long-term algo that I would talk to on the revenue and on the margin opportunity. Really those two things together, you know, combined with our, you know, willingness to continue to invest for our growth, that outcome, you know, is the low to high teens adjusted EBITDA. Gotcha. That's a great overview. You know, bringing it back a little more near term, last week you reiterated your guidance for the quarter, for the full year and that three-year outlook. I just want to make sure, one, nothing's changed since last week, right? Nothing has changed. Perfect. You know, obviously I'm joking, but, you know, specific to Q2, this included positive low single-digit same-store sales, even though April was down 1%. I think mathematically that kind of suggests that like May and June need to average somewhere around 2-5%, but correct me if I'm wrong on that. Can you talk about the catalysts that were behind that inflection and how you're thinking about the contribution from maybe traffic mix and pricing in the context of that, you know, low single digits? Absolutely. Yeah. I think, you know, the implications of us reiterating our guidance is that, you know, things have accelerated from the negative one that we reported in April, because that's just the way that math works. I'll kind of talk about kind of the business overall, what drove our weakness in the first quarter, especially with having a couple more, you know, weeks of data here, and then kind of our thinking about what's, you know, what our opportunity is going forward. You know, we've been taking it back to the fourth quarter. We had an exceptionally strong fourth quarter, a ton of momentum in the business. Everything was really firing on all cylinders. Then, you know, into January, we actually started January quite well. You know, we had the mix of weather, and then with inauguration and kind of the geopolitical macro tariffs, all of this stuff that played out, you know, us and the industry saw a pretty sizable impact to traffic. You know, that persisted throughout the quarter. I think what made it even worse and more pronounced versus what we were hoping for is the fact that we did not have a new LTO on the menu. When we came in, when Rob came in and he looked at the culinary calendar for 2026, there just was not any plan there. You know, he hired our SVP of Culinary right now. Her name is Nancy. She came in. She has worked very closely with Rob before at Arby's and also at Papa John's on developing a culinary roadmap. She's been like hitting the ground running as fast as she can to build out, you know, a real plan for culinary. However, you know, that's just something that has even even for her who's like, you know, she's just a master at all of this, it just takes a little bit of time. We made the decision to run Black Truffle for our first quarter LTO as well. It ended up being a seven-month duration LTO. This is the longest we've ever run an LTO here. You really did see that fatigue. If anything, it really just further emphasized how culinary drives traffic, how culinary is our marketing muscle. Food news is our news. When we do not have that message out there to share and anything that is new and exciting, the knock-on impact of it is that our overall marketing and ability to drive traffic and sales is just not what it should be. We are suboptimized. You know, going into summer barbecue launch, we had, you know, even though that is not the full expression of what, you know, culinary will look like, Nancy, you know, had a little bit of time to add some fondness into that menu. Certainly we had, you know, fried pickles, first side innovation we have ever had. We did see a pickup in the business around that. We are really pleased by, you know, what we are seeing on that side. The other thing that I will highlight too is that we kind of had a great moment around our Dubai Chocolate Shake. We had put that in place late in April. It was, you know, only in 25 Shacks. We only had a limited number or sorry, 30 Shacks. We only had 25 per day. We sold out of it, you know, kind of immediately in almost every single Shack. It really did have a shift change in the traffic patterns and the comp at all of the Shacks and gave us a lot of confidence in, you know, the fact that we do have a lot of culinary newness coming to the menu that's exciting, that reaches our core guests to help, you know, kind of support the business going forward and that this is the right strategy. Yeah. That was a great overview. You know, I want to dig into kind of like the strategic innovation calendar that's now being put in place. Like, what does that mean for the cadence of sandwich LTOs that you're planning going forward? We're still planning for kind of, I would call it about four main platforms a year. That, you know, ideally, I think we would be kind of running three to four. You're probably going to see kind of that four a year, maybe three to four, depending on how, you know, certain years roll out. What they've done is they've really added in a lot more permission for innovation on beverage and sides. We have opened the aperture to be able to have kind of even some kind of new item outside of the typical LTO window that, you know, we believe will drive mix and traffic. You know, it is possible that you will see us have, you know, our core LTO platform and then introduce, you know, some new thing in on top of it for a little bit of time to just keep driving the interest and excitement with our guests. Gotcha. Makes sense. You know, that sort of leads into the next question about the sides, drinks, and shakes as an opportunity because you haven't done a lot of innovation outside of sandwiches, like you said. Is that sort of, are these platforms outside of sandwiches something that might allow you to have an always-on type of message? Yeah. I mean, we definitely have never innovated on sides before. Our beverage innovation, like we've had, you know, lemonades. We have our lemonade, you know, seasonal lemonades, and we have our shakes. You know, what we're doing on this side is just even taking that up a notch. You know, I think that what we're seeing with fried pickles shows us that we definitely have, you know, there is pent-up demand for us to continue to offer, you know, exciting new things in addition to our fries. Our guests love our fries. And when given the opportunity to buy something else, they're highly interested in that. You know, you also talked about marketing a little bit, and you're, you know, you're investing more marketing dollars than the brand has before, and that obviously has a flywheel as you grow sales. Are you simply sort of using that new spend in the same way, or how are you evolving the way you're deploying these extra dollars? Yeah. No. This is one of Rob's big focuses because as a company-operated business, we fund all of our marketing. We need to make sure that the strategies we have in place are driving the returns. You know, he's a really big believer in, you know, having a firm strategy, a great strategy in place before you just deploy a lot of advertising dollars. That is what ends up driving higher returns from your marketing. That is exactly why he's doing all of this work around our brand positioning and a brand message. You might start to see some of the early, you know, early signs of that later this year as we test and learn in various markets. You know, it is, I think we do have an opportunity to both optimize our returns in marketing and also invest more marketing to grow the business. You know, I think increasing frequency is clearly just a huge opportunity for you guys. You know, you introduced some loyalty type of offers like the $1 soda through the app with the web ordering and some different challenges. What are the early learnings from these? You know, how is it shaping the way you're thinking about maybe a broader loyalty program going forward? Yeah. Yeah. We've never had an official loyalty program, you know, as you were just talking about. What we've done is over the past couple of months, we have completed some investments, which have allowed us to do certain things to drive wanted behaviors within our app ecosystem. To take a step back, for those who aren't as familiar with it, our app users are extremely more valuable than our traditional InShack users. They come a lot more often. That really is the only channel that we have to one-to-one market. This year, you know, part of the reason for the step up in our G&A was around investments so that we can do more one-to-one offers to guests within the app ecosystem. The way that you really get a great payoff from those investments is if you drive a lot more people into your app. That is a really big opportunity for us. That is how we're viewing dollar drinks. That is how we're viewing some of these other, you know, opportunities that you can only get within the app. It really is to, you know, bring more and more users into our own digital channels so that we can continue to engage with them and drive higher frequency over time. You know, on the mix side of things, I think you're targeting about 1-2% positive mix going forward. I believe it's actually been negative for quite a while now. Some of that was by design with your marketing strategies, though. Can you help everybody understand maybe what's changing going forward that's going to flip you from negative mix to positive? Is that a near-term dynamic that we're talking about for like 2025, or is that more of like 2026 and beyond? Yeah. I mean, as we have, you know, without having kind of a more targeted loyalty program or a better way to communicate with our guests, what we've been, you know, as we've been building this, in order to drive traffic awareness with our guest base, we've been putting out kind of more blanket promotions. Those are great. However, they do have a negative impact on your mix. We still are promoting significantly less than traditional fast food. We say maybe a high single-digit% of our checks are on promo at any given time, which is far less than what everybody kind of industry average. You know, it's been important that we continue to step into this and build this muscle. We've also been able to construct these promotions so that they're margin accretive. If you look at the way that we've, you know, we go out there with these offers, there's usually a minimum spend associated with it. We have a great database that shows us which offers are highly incremental. We know that we are driving net new guests and not just discounts and people who are going to come in anyways. You know, that has been a headwind to our mix, though, kind of growing into that level. Going forward, you know, what the challenge is, is that we're going to be able to, with the investments we've made, we're going to be able to market one-to-one and be able to give you an offer that's most likely to drive a launch of behavior that we want from you to drive the frequency and the traffic long-term. That actually we are trying to have even higher incrementality from our offers. That will be less of a pressure on our overall mix. You combine that also with everything they're working on culinary. You know, the goal is to get 1-2% positive mix in any given year. One more on sales before we flip over to margins. You know, you guys talked a lot about combo meals, and you never really had combo meals before. I think the plan at the time of the last earnings call was to complete the rollout across all of your drive-throughs by the end of May. Did that go as planned? You know, can you talk about maybe anything you've learned early on, either from a sales perspective or operationally after deploying the combos? Sure. Yeah. We are now fully rolled out with combos across our 46 drive-thrus, which is really exciting. You know, it is letting us, letting the guests get through our drive-thrus in an expedited way. You know, one of the greatest barriers to our frequency in the drive-thru was that when guests would come in, it was taking a very long time for people to put their order in. Our average order time, so when you get up to the speaker box and you start putting your order in, was over three minutes. In some drive-thrus, it was even more. A lot of that had to do with just simply how the drive-thru menu boards were designed. They are complicated, could not get through it very easily. There was just kind of like choice overload, and it just slowed things down a lot. What Rob did was really challenge the team to come up with, you know, a combo menu board that, you know, would, you know, would allow us to execute our goals of faster drive-thru order time, but also would allow us to sell more, you know, fries and drinks in the drive-thru and, you know, drive frequency over the long term. You know, we think we've done that with these drive-thru, the new drive-thru combo wheels. They're not at a, you know, terribly large discount. It's really kind of more of just a rounding so that we don't have, you know, viewed, you know, something's not like $14.17. What we are seeing is that how we're using merchandising, how we are displaying the combos, you know, we are selling more of what we want to sell more of. We're selling more high-margin drinks and fries. We've also merchandised our Double Shack Burger to be the first item on the combo meal. And we're selling a lot more doubles on the back of it, which is a positive for mix. So overall, you know, we're really pleased with that. And we'll continue to, you know, test and learn what that means for all of our channels. Yeah. And just to follow up on that last point, you know, for all the channels, does that mean that there's a possibility we could see you roll these out through the, whether it's kiosk or InShack ordering? Yeah. I mean, it's very interesting because like one of the biggest issues that we're facing, I mean, issues that we're facing about these combo drive-thru menu boards is that the guests want to get them when they come in the Shack. You know, we're just trying to figure out a way that works for us if we were to allow, you know, or were to enable, I shouldn't say allow, enable combos to be offered in more channels, what that would look like, what are the implications from that, and what's the technology feasibility behind it. Yeah. So that was a great overview on sales. If we can shift over to margins now, you know, your guidance this year for about 22.5% margins implies 110 basis points of year-over-year expansion. And it would represent 500 basis points of improvement since 2022. It's pretty impressive. So, you know, can you talk about your confidence around the margins? And also, you updated your three-year targets to now include 50 basis points of expansion in 2026 and 2027. Yeah. Yeah. So we just reiterated our guidance. I feel very confident about all of our guidance points. You know, I'd say how we're getting there is probably the way that gets me most excited. You know, companies can get margin expansion through a lot of different ways. Some are good. Some are not so good. We had a lot of low-hanging fruit that we've been cleaning up around restaurant operations that is not just allowing us to run better shifts and, you know, expand our margins, but it's providing a better guest experience. You know, all of that together, you know, we are continuing to, you know, do very, very well on that point. I think even just the fact that, you know, in the first quarter, you know, we had comps of 20 basis points, traffic was negative, and yet we had, you know, triple-digit expansion in basis points on restaurant margins. I think we're probably one of the only concepts that was able to do something like that. You know, that I have a lot of confidence in our ability to continue to hold our restaurant operators accountable to standards and generate that, you know, strong follow-through that we have been seeing into our four walls. Yeah. And, you know, specific on some of the expansion, you deployed a new labor model in the fourth quarter of last year. Can you unpack for us, you know, how much of the improvement in 2025 is from that new labor model? And what do you expect to happen to margins, you know, once you lap those initial benefits? That's a great question. You know, the labor model that we put into place last year, we started testing kind of the beginning of the year and rolled it out, you know, full force by, you know, the fourth quarter. For those that aren't familiar, you know, prior state Shake Shack had a labor model that was just based on sales forecast and not anything more granular than that. It really was an opportunity for us to do time and motion studies and really, you know, identify what labor is required for all of our different menu items. The labor required to hand spin a shake is very different than fries and, you know, a cold beverage. We also took into account, you know, channel mix. You know, if you have people eating in the dining room, there's going to be a higher touch point there cleaning the dining room versus having people order delivery and just have a courier pick that up. Drive-thru also introduced a whole new wrinkle into it. Right-sizing our labor. There were some shacks that needed more labor. There were a lot of shacks that actually had too many bodies in the restaurant, and they were not operating efficiently. That was a big part of our momentum, you know, in last year and into this year. The last number that we shared was that that was providing 80 basis points of benefit. You know, we're tracking ahead on that. You know, that is, you know, we love the fact that we are able to expand our margins by having a labor model that best fits this company, you know, totally bespoke and built for us. We're also driving more accurate orders. We're driving a better guest experience, and our speed of service is going down. You know, all of that together, we're very, very pleased with that. Now your question is then, what's next? How do you anniversary that? There is opportunity to continue to get better on that side, especially with, you know, training and scorecard. You know, we are not, you know, 100% great on labor yet. It's not like, you know, every single shack is meeting their targets. You know, that big step up, we're, you know, going to be anniversarying later this year. What we are actively working on is work streams around supply chain. You know, there's just a tremendous opportunity there for us to continue to deliver margin expansion. That is one angle. That is what gives us a lot of confidence behind at the at least 50 basis points per year of margin expansion that we can deliver in 2026 and 2027. I will also say, though, that, you know, what is not contemplated in that 50 basis points and what is a really big opportunity for all restaurant companies is traffic growth and really driving, you know, that flow-through from higher sales on, you know, down to the bottom line. We have immensely improved our flow-through over the past couple of years. Our shacks are, you know, staffed correctly. We have great leaders in place. We are ready to absorb higher sales. You know, that is also a very important lever that's not contemplated in that long-term guidance. But, you know, as a shareholder, it's something that, you know, I personally, you know, get very excited about. Yeah. You know, you touched on the scorecard a little bit, but, you know, you're now using a scorecard to actively track, you know, your KPIs across the system. Can you just explain for everybody that's listening maybe what it is, why it's so important, what you're learning from it, and how it's helping you to improve like labor and productivity and food waste? Yeah. I'll just start with prior state, current state. Prior state, prior to Stephanie Santel coming in as our Chief Operating Officer, we actually didn't have a lot of great data for our operators. We didn't have metrics to hold them necessarily like terribly accountable to. We had their budgets of revenue and adjusted EBITDA, but we even just started measuring wait time for the first time in 2024. You know, it was a data ability issue. You know, that was a clear opportunity for us to gather the right metrics and just literally provide our operators with a sense of where they're standing. The team spent a lot of time determining which of those metrics to use. It's people, you know, basically I would think about three big buckets: people, performance, and profits. You know, on people, you can think about the normal things like, are you hiring the right people? Do you have a lot of turnover in your restaurant? Or are people, you know, staying around for longer and, i.e., getting more efficient? And that's the wanted behavior we want to drive. Are you staffing appropriately on performance? You know, think about wait time here. Think about order accuracy. How are your shifts running and what's that guest experience on the back of it? On profits, you know, we work really hard on creating the budgets for our operators. Are they meeting their targets? All of this together rolls up to roll up across the company. This is the first time that we've been able to do this. People can see who's at the top. People can see who's at the bottom. It's a really powerful performance management tool too. A lot of people at the bottom didn't know they were at the bottom. And, you know, helping them understand where their gaps are. We've seen people move from the bottom to the top. It wasn't just that the, you know, it just literally was the lack of visibility into their performance that was resulting in this. So, you know, I think that that has been a really great thing that we've put in place while also putting in place the labor model because the knock-on impact of that was really a drive to get people to hit their guide because we were able to measure it. I'm really not so sure that had we not had a tool to measure this, that we would be as successful in hitting and achieving the savings that we've had from our new labor model. Yep. And, you know, you touched on Stephanie and supply chain a little bit earlier, but, you know, can you just help us unpack a little bit more maybe what she's uncovered in the initial works and supply chain moved under her in 2024 around, you know, vendors, freight costs, contracts. And then is any of that work actually in the 2025 guidance, or is it really about 2026 and beyond? Sure. I'll try and remember both of those questions. Yeah. Prior state, you know, supply chain reported up into marketing. It really was a culinary-driven supply chain. We had a lot of the same suppliers that we had at 30 shacks that we have now at, you know, nearly nearing 400. Both Rob and Stephanie have run supply chain teams at scale before. They were able to come in, you know, pretty quickly and identify, you know, some opportunities for us to really evolve that team. You know, take what's really great about our culinary-focused supply chain team. We can do things very quickly and be very nimble, and we've got great relationships with our suppliers. Then also challenge them and maybe add in some additional resources to, you know, do things that we need to do as we're a scaling company, such as add on more vendors, have a more competitive bidding process, really kind of go and go item by item and just make sure that, you know, we are benefiting and the benefits of our scale, not just our suppliers. That work has been actively underway. What's also very exciting about it is some of the things that we're talking about overall, actually, like we've identified opportunities to make our products even better, which is very exciting. You know, sometimes it can just be the fact that we've never, we haven't looked at this in a long time. You know, we're putting fresh set of eyes to it. We're asking the question. We're able to get something that's a win for the guests. We're able to get something that's a win for the company and shareholders. You know, that is really kind of like the magic sauce of what's going on. Now, at the same time, you know, your question about is this in the guidance? It's not in the guidance for 2025. When we were thinking about the opportunities that at least 50 basis points that we've guided for the long-term guidance, that certainly is part of that. I think it, you know, when I look at the list of opportunities that we've already identified, you know, it's not like that 50 basis points is all. That is a small part of what has been identified. Now it's just a question of how we go after these opportunities and prioritize the work. Gotcha. We've got about 30 seconds left. I've got one more sort of on unit growth. You're targeting a 30-33% return on, you know, cash return with your new units. I think a lot of that, you know, you have a new unit task force. Can you maybe talk about what some of that specific work the team's doing and how they're driving the improvement you're seeing in your returns? This is so exciting. I could, we should have had a whole conference about this topic. Okay. So, you know, we took our number one Regional Director of Operations, and we took him out of running restaurants or overseeing Area Directors, I should say. And we put him solely in charge of new Shack openings. And he is working shoulder to shoulder with every AD and helping them train up their GMs around openings. We open really strong. I just told you we've had some of the highest openings in our company's history in suburban markets and drive-throughs. Like it's bananas what's going on. And, you know, we want to make sure that we're showing up really strong and we're holding on to those sales and we're hitting our profitability targets in a, you know, reasonable time frame. We've really never had that before here. If you think about what we do, I mean, a lot of what we do is opening up new restaurants. We really, you know, this is the support that we need to open up, well, grow these restaurants over time, you know, and really be able to deliver strong profits and returns. Awesome. That was great. Really appreciate the time. Thank you. Thank you very much, Katie. Have a good afternoon, everyone. Bye-bye.