Shake Shack Inc. (SHAK) Earnings Call Transcript & Summary

Hi everyone. Good morning, it's John Ivankoe with JPMorgan. It's great to have all of you virtually for a conference which is, I think, for many of us, one of the kind of the adult spring breaks, if you will, for the past 15 or so years that we've been doing this conference in Las Vegas. We do hope to resume this conference in Las Vegas in-person in the middle of September, so do stay tuned for that. Certainly, that would be our intention as hospitality analysts to kind of reopen in-person conferences and the value that we think that's going to add. It's always been a pleasure to have the Shake Shack team. I mean, typically, they're either open events for us or closed events for us. It really does speak to the energy that this team brings and the dynamic nature of the overall company. Joining Shake Shack today, and I've been looking at a blank screen, excuse me, for the bad introduction here, Randy Garutti, the company's CEO; Tara Comonte, the company's President and CFO; and Rik Powell, who runs Investor Relations for them.

I will just ask the first question, and then I'm sure we'll have a dynamic chat as always. First, the team is -- we kind of look at the TAM of Shake Shack, and I think we're kind of at the place where we can start thinking about the longer-term domestic and longer-term international opportunities. Previously, you've given a number around 450 stores at around $2.8 billion to $3.2 billion AUVs, which will leave you a revenue just over $1 billion. I think most people believe that, that's a number that is easily exceeded, not just achieved, but exceeded. But how are you kind of thinking about the total addressable market opportunity in the U.S.? And what kind of metrics that you're doing of -- you're thinking of your Shake Shack can be an x.x billion-dollar brand, whatever the number could possibly be within the United States alone?

Yes, John, thank you, and thanks to everybody being here today. I think, look, we haven't changed those specific numbers at this point. We continue to look at that constantly, right? That is a 6-year-old number and since then, we've obviously overachieved nearly every metric we've talked about for all those years. I think what's important about it is this, through the pandemic and there's so much we can talk about about how we've learned and how we've pivoted and really, what we've done is accelerated and amplified the opportunity that we think we have. And one of those is the addressable market opportunity Shake Shack has. How do you get there? Well, for us, it's been this incredible shift in -- you may have caught in our last earnings that our digital AUV alone today, even on a much depressed AUV during COVID in the last quarter was $1.9 million when you analyze it. That's just digital. That's pretty exciting for a brand like Shake Shack when you think about the possibilities. And I'll take that into the formats and the physical formats. We have a real estate meeting today. We're looking at some new Shack opportunities. And how has things changed? Well, we know our Urban Shacks have been greatly impacted. We're going to keep building Urban Shacks. In the coming weeks, we'll be opening one in New York City in the heart of Midtown. It isn't going to be easy for a while. But trust me, over the long term, it's going to be a great Shack. And we're looking at that. But we're also now able to think about new formats. Drive-thru, we've talked about. Shack Track formats to drive it up through windows and through curbside, which we now have low 70s number of Shacks doing curbside. Those things are a game changer for the way people can experience Shake Shack. So what does that mean for the long term? Well, our goal is always going to be to find new formats that can take us to new places with new opportunities through strengthening AUV and Shack-level our profit over time. Again, we're not changing. We're not talking about the official metrics on that. But that's our goal. We've got a lot to prove. And we've got our site set on up to 8 drive-thrus in the next 2 years. A lot of conversions plus new builds this year in our 35 to 40 Shacks we expect to build for Shack Track windows. And we're really excited about it. But we got to get past this pandemic. We've still got a lot of recovery to go, as you know, and we're excited about how we're thinking about where that future can take us.

I read in a trade magazine, so I'm not sure that this is necessarily correct. Is Orlando going to be -- are you going to add the drive-thru functionality to your Orlando unit or with...

No. So it likely will be the first, but there's a few that could buy for the first one at the end of this year. Orlando in Vineland Pointe is an area where we will build the first full drive-thru experience. You've got a few others that we're targeting that it's so hard given the year of COVID and permitting and construction. But we'll see what we get open this year. But there's some others in the Midwest that we're targeting as well. And we really want to accelerate that learning, commit in a big way and figure out how do we -- how does Shake Shack the experience that we've made this thing so important to us do drive-thru. And how do you when you're driving through, look over and say, "That place is really cool, next time I'm going to hang out there." And hopefully be an additive thing towards our AUV and our opportunity long term. But John, we're going to invest. We were going to need to spend some money. We're going to do some cool stuff. You've seen some renderings and various designs we're working on. I've got some sitting on my desk over here, and it's going to be fun.

That sounds good. So obviously, the urban-suburban mix, I think is around 50-50. I think remind me if that sales or if that stores or maybe it's similar right now. There's so much conversation that's happening around independents that have permanently closed. And as we think about urban areas but also suburban areas, do you have a sense of what percentage of your Shake Shacks have had relevant year-end competition that have -- listen, I know you root for everyone's success. So I get that. But do you have a sense of how much in your competition has come out that's going to take a while for that to be reopened by somebody else? That's the first one. Secondly, do you have a sense of how many closures are actually temporary that would, for example, the new government money, which has come, $30 billion is a lot, that may allow some closed operators to reopen in the near term?

Yes. John, I'll tell you how I personally look at this, it may be different from the narrative. I think the narrative out there is a doomsday. And don't get me wrong, I would never lessen the challenges that every restaurant company has been through, whether large, small, tiny, independent, it has been tough. But when I look out of my window and what I think is the hardest hit part of America, which is Manhattan, I'm a believer that these guys are going to come back. And not all of them, and certainly not all of them in the same form. But I believe independents will come back, and I hope thrive on the other side of this. What has that meant for a competition? I don't know the percentage. Obviously, we've had kind of less competition in the urban areas because more closures, but I expect they're going to come back. And I think where we've had more competition in suburban areas, we've actually done pretty well. And that's a function of human beings and where they are. I believe there's -- obviously, there's been a great reshuffling of the universe and where people live and hang out and work. None of us know exactly where that goes in the future. It will be something different than what it was. But I also believe we have short-term memories in -- as human beings and I'm trying to get back to the things we thought we liked in the past. So anyway, I think it's going to be a mix, and I think every day we've got to earn our place. But there's no -- look, there's no question to your point, does -- has this created opportunity for a company like Shake Shack with our balance sheet, our strength and our vision? Yes, it has. And we will -- we intend to capitalize on that opportunity.

It's pretty amazing, this came out of your earnings release presentation, so I have it in front of me. In the second quarter, third quarter, fourth quarter, in January, your best-performing region was the northeast. Can you remind me like how that happened?

Yes. Well, I think it's a number of things, right? Where was our worst-performing region, Manhattan and New York, where all those northeast people generally hang out, right? So where are they now? Well, they're in Connecticut. They're in New York. They're in New Jersey. They're in suburban places that are more open than New York, right? And that mindset, that willingness, we've done pretty well. I mean, you saw a positive 8% comp in our Northeast Shacks. Is that right, Rik, on -- in period 1 in Shacks?

That was in our suburban. That was suburban Shacks.

That was in the suburban region, suburban Shacks.

So Northeast was actually 11%, I have it in front of me.

A lot of strength in that opportunity. Now that will shuffle out again, right? That will move around and figure out. But we want to capitalize on that strength. And I think we've made a lot of friends in neighborhoods where people might have only used us on the weekend before. And now don't forget what delivery means to that, right? And what Shack Track is going to mean to that, the availability and ease with which I can now roll up to Shake Shack. I can drive up there, sit in my car and have them bring it to me. That's not a thing Shake Shack ever did before. And now that creates like a new mindset of use that we've got to carry forward. We got a lot of work to do that.

So let's stay on digital. I mean you lead with it, and I think it's important to kind of expand. So 60% of your sales are coming on digital. I mean, how do you convert that? What do you do with that data? How does that become a structural advantage to you where you can "own that customer" where that digital as an asset versus if it goes on a third-party app, it's actually the customer of a DoorDash or Uber Eats, for example.

Yes, I'll have to take that, John. Yes, I mean, I think you nail it, right? When we have a customer that transacts outside of our channels where most of the third-party delivery marketplace, we don't know who they are, right? We can't communicate with them really if they're in the transaction, but more importantly, post the transaction. So we're very, very focused on retaining guests within our own ecosystem. And within that, encouraging them to Randy's point, not just to our digital channels because I think that we talk about that as a priority, but really just keeping them within the Shake Shack experience and with the focus of expanding these use cases. A few years ago, you had to walk up to a Shake Shack, join the queue, order your food, wait your food, fight for a seat and be there for a period of time. And over the pandemic, we've managed to accelerate and expand the convenience and the ways in which you can experience the brand. And it's going to be really interesting to see the extent to which that consumer behavior continues past the pandemic, and we believe a lot of it will. Convenience is something that we all increasingly expect more and more and more of. So that's all good. In the digital channels, I mean, our digital guest is a very valuable guest to us because going forward, they fit straight into our marketing strategy. As you know, our sort of marketing muscles have evolved over the years. This is a business that built a very strong brand in an incredible manner over many years, but really in-person, right, with with sort of chef collaborations or pop-ups in market, all the community work that we were put into pre-opening and as -- over the last few years, we've been -- not replacing that by any means, but expanding and adding to it with digital marketing capabilities, so that I can talk to you in those other channels that you're increasingly engaging in. So we view our digital guests as generally a stickier guest for those reasons because we can communicate with you a bit more. I think it's early days in the data, but we're beginning to see that. We know our digital guests generally spends a bit more, we think they frequent a bit more, and therefore, they have potentially a higher long-term value. We see that through those channels. We're seeing a little bit with curbside, where you pre-order on the app, but pick up in person. So kind of, to some degree, a hybrid, but with those checks coming in more than 20% higher than in Shack. So generally-speaking, across all these different characteristics, it behooves us to focus on retain -- acquiring and retaining guests within those digital channels. But again, for guest experience too so that as we go forward, we're communicating with you increasingly on a relevant basis. And we can segment you, we know what you like, we know your preferences, we kind of know where you live, and it can be a more valuable experience to our guests too.

Especially for your brand, order ahead is great and the functionality around it and to customize it works perfectly. So I'm sure that will work. I don't think you've said that a lot of companies have talked about their -- within their digital mix, takeout versus delivery is around 2/3 takeout, 1/3 delivery. I don't know if -- again, I don't know if you quoted exactly that number, which at least to this point, whatever that number is, a 100% of your delivery up until, more or less today, has been third-party. So how can we -- whatever that percent is, I'll say, 20 -- and again, I don't know exactly what is. I mean, how can be converted into a -- into the Shake Shack app, into the Shake Shack ecosystem? What -- because it is a -- whatever that number is, is that a sizable number?

Yes. It's exactly the right question. And so I think there are a lot of ways for us to think about doing that, and we're really at the beginning of this journey. So you know we've been working hard to get the delivery functionality within the app that is now functional across all our Shacks within the app. And we are -- we will start to test, I think, some different types of marketing strategies over a period of time to incentivize our guests if they want their food delivered to do so within our app. Now that doesn't mean there isn't a place for third-party delivery. We believe there is. We have relationships with sort of most of the -- all the big guys. And to some degree, if you're going to go on to a DoorDash or Uber Eats or whatever, and maybe if you don't know the brand and you're not specifically looking for Shake Shack, and we're there, you may order Shake Shack. But if we're not there, you may order something else. However, as we -- as you increasingly know the business and I think become more and more of a loyal guest of Shake Shack, we can communicate with you through some of these tools that we talked about before, but pricing might be one. So for example, pricing today is slightly higher for the first time on our third-party marketplace as been in our own channels. We haven't really communicated that. But I think over time, we might, and the ability for us to manage the economics differently within our own channels, whether that be pricing or delivery fees or service fees or whatever that might be, is obviously an option to us. But really making them a better guest experience. So that could be through promotions that are only available within our own channels, which you've seen us do. It could be menu items that launch ahead of time within our own channels. There are really a variety of different ways that you may see us test and learn. But again, we'll update you as we go. But certainly, the question is the right one, and the focus is absolutely maintain third-party delivery relationships through very healthy, very strong relationships, but incentivize guests to operate within our channels wherever possible.

Okay. No, that makes sense. Obviously, technology, I would assume, is a big part of your G&A guide in fiscal '21. So what I have in my note is $83 million to $86 million, is up approximately 28% from fiscal '19. Presumably, that also includes less travel, in fact, I know it does and less conferences, what have you. So it's a big -- it's probably a big increase in technology IT spend. That's where most companies are spending their money. So talk about what it is that you're spending on? What kind of functionality or benefit you expect to yield?

Yes. No, you're right. We continue to be very committed to investing in the business through G&A and CapEx. The bulk of our CapEx spend is in relation to the construction of new Shacks, but a lot of our digital technology spend is capitalized. So some of it will sit in capital, some of it will sit in G&A. It is a key part of that. But actually, we're really investing across the whole business, John. So we're investing across our ops teams. We're investing as we talk about people. And none of this when we look at our accelerated development plan and back to a full development schedule and stepping up next year, investing in our people, recruiting, training, benefits, wages, all these different things, these are all investment areas for us. As we think about new formats, it's the design and development and construction team. We talk about new marketing muscles. It's the marketing team. So it's really across the business. And we're very bullish about each of those investments. They go through a high degree of scrutiny, as you would expect. We don't make them without a high degree of thought, but they all focus on long-term ROI, long-term sustainable growth for this business across all these different areas that we've talked about.

The only thing I'd add to that, so probably 2020 included in a period where we had a fairly material portion of the home office followed. So we brought those back sort of through the year as well as we move throughout the year. So there was a bit of a dip in sort of the middle of the year as we were managing the COVID situation.

Certainly, so all companies were kind of like '19 as our base. '20 is up -- was up in the air for a million reasons.

Yes. That makes sense.

So you mentioned ops team, so that obviously resonates for me. Is -- tell me like what will happen, how this company will be managed or be structured in a post-COVID basis? So I mean, does it make sense to open and relocate some people, not the corporation, but again, people or engrossing people in like a Texas or California type of office to kind of put people closer to the stores? I mean, how do you feel about permanent work-from-home? I know you've recently expanded your New York headquarters. Is that something that you want to continue to grow or diversify some of your geography to allow people to be closer to some of the regions?

Randy, do you want to add or do you want me?

Go ahead.

Yes, John, we've actually -- we actually took an impairment on our New York expansion space in the fourth quarter, really with a view to embracing everything you're describing. So New York remains our home office. We're very passionate about the fact that New York is our home. However, along with many other things that we've talked about the pandemic accelerated. I think the ability for certain teams, particularly our back office teams to operate very effectively and very efficiently on a disparate and remote basis is something that we embrace. So yes, we're always about being closer to the Shacks. We're looking forward to getting that travel budget back up. We're actually looking forward to being in the field again and getting people back on planes. But in the meantime, it certainly has afforded us a more forward-looking hybrid type work environment. But we'll see, we've got a lot to learn like all companies, but it makes a lot of sense when you look at some of these functions that can now operate really well from home.

Okay. So yes, home as opposed to necessarily like other...

So I mean, again, we keep a very open mind in terms of our structure and being a company as young as we are, we'll see how it goes. But right now, the last year has shown us that some functions, more than others, obviously, everyone whose been at home for the most part -- the home office for the last year, some functions worked really, really well there. And it does intend to lean towards the back office, right? But we'll see. We'll see how it goes. But certainly, we embrace the opportunity.

Understood that. So you mentioned getting back on planes. I forget where I read it, but there's a great article about kind of the unexpected benefit of COVID is how LaGuardia's reconstruction is going fabulously, and LAX's going fabulously. Like people have come back and like they can't believe how much was accomplished in such a short amount of time. And LAX was, as you know the sign, the vein of everyone's existence and LaGuardia, maybe or maybe not much better. So that would be great. So let's -- I'm going to kind of push that into kind of domestic license Shacks and kind of like what you see, what you're imagining going forward and how big that specific segment, which doesn't get -- your international gets lot more air time than domestic for obvious reasons. But how big you think the domestic could or should be before we shift to international?

We were off and running huge on this. We had opened so many airports, John, and you just mentioned 2 of them that are close to our heart. I mean, here's the reality. One of our strongest Shake Shacks in the country was in LAX, and they tore down the terminal to build the next one that we were in, and we lost it, it's gone, right? One of our best Shacks in the country was LaGuardia, and in the new terminal. So we're excited about that getting back, but there's a fraction of the people. 2 of our best Shacks in the country and airports were in JFK, Delta Terminal 4. They remain closed today. Closed, 2 shacks. So our domestic business has been probably the hardest hit of all, believe it or not. So a little bit more than half of our airports are reopened. Some of them better than others, but mostly a fraction of themselves. Our stadiums, we're kind of awaiting what that looks like. If baseball fans come back at 10% of stadium in Citi Field for the Mets. What does that mean for Shake Shack? Are we even open? We're not exactly sure yet.

Is that -- is the number 10?

Yes, in certain -- like in New York, it's 10%.

Okay. Wow.

So that might be 50,000. So are they going to open us? Or they're going to open the regular hotdog stand? We don't really know. All that said, these locations that we had in our domestic license business were some of the best going and they will come back. They absolutely will come back. And we're excited, we want to do more. So where do we see immediate growth? Well, it's got to be recovery, it's got to get open and got to get flights back. But it's also some of the roadside opportunity. We have one on the Garden State Park. We're putting one, we hope later this year, at Vince Lombardi on the New Jersey turnpike. It's one of the busiest roadside stands anywhere in the country. We're super excited about getting that going. And we're looking towards other roadside. We really like that kind of vibe too for our domestic license business. But I think we're long-term on this. And I believe long term, air travel is going to be everything it used to be and more. The question is when, that will take some time. And Shake Shack has always been at the heart of where people travel, hang out, hang on. And we'll get there again. So I'm bullish on that business, but I do think it will have a longer tail.

Well, again, so if you -- yes, 450 and I would say that with kind of a link, domestic company Shacks, how many domestic license Shacks, do you think there can be? Again, I just...

I think that can be a lot, a lot. And we try not to compare that in the 450, but we haven't named that. I just think there's -- there can be a lot. Well, we're not actively working on today, John, but we never say never. But actively today, we're not assuming that any "normal" Shack would be licensed or franchised, right? But we want to be in places where we think other people can better operate than us. That's places like airports and stadiums and where there's infrastructure we don't want to deal with.

And a lot of that's contractual. I think you couldn't operate in the airport if you wanted to, I would say?

Correct. In most cases, that's correct. So that's why we want it. But look, we were supposed to open last year in Dodger Stadium, one of the best baseball teams going in L.A., and we couldn't open. So we're sitting there with a Shack built, ready to go, hopeful that L.A. decides to open. So that's going to be a fun recovery piece of the world. And for us, it would be interesting to see how that all goes. And look, every stadium, every airport is trying to figure this out right now.

Right. Yes. In leisure travel versus business travel, we're going to be talking to [Jamie Dunn] at 1:00 today. So that's obviously what he imagines business travel to be. And the CEOs are all over the place. Some are saying it's going to be 100, some are saying it's going be less than 50. But anyway, that's a discussion for another time, I suppose. Anyway, so let's talk about international. So one, these are functionally traditional Shake Shacks that are being licensed. It's the first point. Certainly, you are completely capital unconstrained in almost anything you want to do. You have nearly $400 million, like not just liquidity but actual cash. You have a lot of money. So I mean, how can we think about -- you're accelerating various investments with some of that money and getting some near-term return and is international a part of that?

Yes. So let's just talk about that. And so for those on the call who don't know, we were able to lead a convertible debt transaction a couple of weeks ago that really was some of the best terms you've ever seen in our industry. 0% coupon on $250 million for 7 years. That gives us an extraordinary opportunity and should convert go forward at a high rate, it's a very small dilution opportunity. I mean, it is a fantastic financial transaction for the company, rarely seen in our world.

Did you do that just because the terms were -- not that -- the money was not quite free, but nearly free?

Two reasons. We may never in our lifetime, again, see those kind of terms. Our brand captures those kind of terms, even though our relative size as a company might not for other companies. And why wouldn't we do that, which then to the second one is, it creates opportunity for us to really continue to think about how to accelerate development and other opportunities. So to your question on international or anything else, do we want to go buy back or start an international piece of our company? That's not our plan today. Again, we never say never. Anything could happen, but we're going to lead with what we've always led with. If we're the best person to operate, we will. If we're not, we want to work with the best. So when we expand our Southern China region this year to Shenzhen and Guangzhou and some of the other incredible areas, we're not the best people to operate that company today. So we're going to work with the ones who are. And that's how we're going to do it. So likely, there's no immediate plan to use that additional cash for that purpose. But it allows us to have that optionality, John. It allows us to think about when those things come, how might we want to do that? And how might we want to support things like the digital infrastructure here that supports our international partners and otherwise. And it just gives us such a clear line of sight in this 7-year time frame, to say, what's possible, there's 0 cash concern about it. And just an incredibly smart financial opportunity we have at our hand.

And so allow me to ask that question in a slightly different way. I mean, what can you do with $400 million of cash that you couldn't with $180 million? It was like not completely ever simple for that, right?

I think you can take on conversations that you might not have chosen to take on previously, either in increased development or opportunities outside of the business today. But again, I want to be very clear, that is not why we took the money, and we are not sitting around saying, "Oh, what acquisition can we make" or if that's not who we are today. That doesn't mean that, that won't happen, and it doesn't mean we want to take those on. But that kind of optionality creates -- look, 7 years is a long term. That's a lot of time. Those are where we've come from 7 years ago, it's a different universe that this company lives in today. And we believe we have one of the strongest brands with the biggest opportunities in white space in the country. And we now can go to sleep at night knowing we don't have to think about the cash end of how we how we chose to do that.

Listen, I mean, I think a lot of CEOs and a lot of Boards are evaluating tail risk differently, like this -- in terms of -- in the fact of, you raise money when you can, not when you have to. I mean, that's one of the first lessons in corporate finance. A lot of times, you're just trying to minimize the WACC and maximize the third rule, sometimes, say, hey, you got to have a cushion, sometimes bigger than others. I get that -- no, that's helpful. So sticking on the China piece, maybe you can mention some of the other international markets as well. I mean, kind of where are we in the path of recovery? What do you think better about? What are you feeling more cautious about?

Yes. I think it's -- you realize here we are today, actually kind of in this 1-year anniversary of COVID really starting to hit here, right? But really, for us in the United States, it's really like Monday where kind of sales fell off, right? So we're not quite there yet, but in a few days, so we're all feeling that anniversary. That happened earlier in Asia, right? So our China business was much more impacted in the initial phases in January, February now...

Of course.

Yes. So we're able to see better improvement upon that in some of our Asian opportunities. We noted that in the call. In our February numbers, we saw December, January coming down, February popped back up. So look, in Asia, we're bullish on it. We're super excited about our China growth. We've got 2 Shacks going in Beijing. We have 5 in Shanghai, and we're going to be really bullish about our growth there. Korea has done really well and hung in there through the pandemic, and we're hopeful that they can get back. Japan has had -- has been more conservative and suffered more for us as we've named. And places like -- one of our busiest Shacks in the world was in the Singapore Jewel Changi Airport. And not a lot of people flying through there right now. But will they in the future? You bet, we'll get there. And I think one of -- some of the harder hit areas, obviously, the U.K. remains on lockdown. You've got -- John, you've got Shacks in Leicester Square, Covent Garden, like these are some of the world's greatest pieces of real estate, and they're closed. These Shacks are closed.

But not much longer though.

Not much longer, but I do think it's going to be like Manhattan, right? There's going to be -- when new tourists come back, those local tourists for some period of time, right, before they're international again and there will be a long tail. So I think it's really, gosh, it's just -- we got to get through this vaccine period to bring it back. But when we look at our real estate and we look at our partnerships and the strength in the long term, we're excited to keep getting back on that. And we've shown that through the guidance of an accelerated development schedule internationally over this next couple of years.

And I'm not picking on you, but did you learn anything from the Middle East, Turkey, Russia experience in terms of how you want to approach international going forward? And if there's anything it tells you about the brand in terms of how it maybe to be tweaked for longer-term success?

Well, absolutely. Absolutely. I mean, I think international follows the same thinking of domestic, how are we going to create ease and access and convenience for the Shake Shack brand that has been pretty inconvenient. So if you go to China, for example, and you can use WeChat to order, it's just -- it's just like a different universe. Most people have visited that, experienced that and paid that way or ordered that way. It's a totally different thing. And there are so many places we're behind. I mean, you're watching the markets today and you're seeing Coupang go public from South Korea, right? These guys are figuring out how to deliver things that you order at midnight to your door before 6:00 a.m., and we think we have great next day or 2-day in this country. So like, there's so much better stuff happening that we are really good at learning from each other with our Asian partners and our global partners. So that's the best part for us about the global business that we have, is that constant back and forth learning. But it's a -- every market is a different universe every day. We've got to keep building it and finding the right menu items and finding the right access. So yes, I think you'll see over the long term, some of the Shack Track works, some of the digital convenience work start to come in, maybe even a drive-thru somewhere internationally.

I know you're excited about the new Philippines openings. I mean, do you want to continue to plant flags or does it make sense for you to focus out of the Hong Kong office?

You bet. I mean, we're constantly seeing -- I mean, the inbound, please bring a Shake Shack to name your favorite country, we're not in yet is constant. We're very balanced about that. And obviously, we haven't traveled much internationally in the last year. So it's been harder to take some of those on. But we absolutely believe we'll be continuing to look at new growth markets over this next couple of years. And hope to add some that are opportunistic with a good bit of focus while continuing to double down on those biggest opportunities like China.

Very helpful. And as we -- this is -- I mean, take this out of order for, I think, our final question. What kind of margin opportunities have come out, whether it's digital, whether it's simplification, just being smarter about your operations, obviously, having an increase operations focus. That long-term margin target of 18% to 22%. A lot of companies have talked about hundreds of basis points that have been structurally added to their business, by the way, that's how consumers are using digital and how restaurants are being run. Would you share that same your opinion for the Shake Shack brand? Or -- and if that was -- and if you did see that margin overage, would you, by definition, reinvest that back at business? Or would some of that be flow through?

Yes. So right now, we're not giving -- as you know, we haven't given a guidance for this year at all.

No. No, we're thinking -- that's a much bigger question beyond this year.

Yes. Right, right. And longer term, to the very beginning of this conversation, we're really not in a position today where we're updating any of those longer-term metrics. So those are what they are. And really, John, that's because with everything we've talked about today, as you can see in here, we have so much to learn. And there's so much to learn in terms of where digital settles, in terms of how these new formats perform, what the operational -- how the operational model within the Shack continues to evolve. Generally-speaking, though, when you compare us to some of those other brands that are potentially making comments like that, it's not really how we're thinking, okay? We came into this with strong top and bottom line, right? We're very proud of those metrics. We expect to continue to be very proud of our metrics going forward. So we're not looking at this per se in a way that says, "Well, how can we slash cost across our business." This is a business that -- the fastest way for us to drive better operating margin is to drive sales. Often, the way you do that is continuing to invest in the business, whether that in G&A or whether it be in the Shacks. So I think I'm conscious of time, but that's sort of our philosophy. Our philosophy is how do we continue to build great Shacks, expand the experience, drive sticky guests within the loyalty -- within the digital channels to drive long-term loyalty and advocacy and maximize those metrics where we can. Whilst, of course, being smart around cost discipline and use of technology and all those things that we're already doing pre-pandemic, so they go without saying, but we're really a young business focused on growth right now.

I understand. That's a very good answer. Thank you, Shake Shack team, very much.

Thank you.

Thanks, John. Great speaking to you, buddy.

Have a great day, everybody.

It was nice to see you. Okay. Bye.

Bye. Nice to see you.