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

How are you?

John, hi.

Hi.

We're sorry we're not with you in a more fun place.

We wish you were here. My team and I did go to Lotus of Siam last night, and I'd probably referenced to you about 5 different times during that dinner. Absolutely fantastic.

You're killing me. You're killing me.

The retail location still isn't open, believe it or not. That's been a long time. But obviously, the [ mingle ] location is just as great. So as everyone wonders what we're talking about, this is Randy Garutti from Shake Shack, Katherine Fogertey from Shake Shack. I'm John Ivankoe with JPMorgan. So you're my second session and my second virtual session. So I believe -- I am familiar with this, and it actually does work. So you're behind me on a screen. And so I -- but I don't have to turn around, but you're also in front of me on the small screen. I just can't see myself, so I never know if I'm actually staying in frame or not. So thank you for doing this. We're certainly happy to have you, and we're going to make every effort to go see some stores tomorrow or at least see the store on The Strip tomorrow.

So let me ask you. So I mean, as we've gone through COVID, so many people have learned new ways to live their lives, structure organizations and also change various store level operating metrics. I mean how do you think COVID has really changed Shake Shack? And would you say and why is this business a stronger business in September of '21 versus March of '20?

Well, John, thanks. We're really excited to be with you this way and sorry that we're not together. We love to be with you in Las Vegas and with all of the investors and shareholders that are listening here. It's funny as we think about you being in Vegas and us being in New York, those 2 markets right there can spell out a lot of where we're at right now and I think when we think about how challenging this time has been and, frankly, continues to be for a company like ours that is so not comparable to the many geographically dispersed and larger companies that you may follow. Our recovery is different. It's been frustrating at times. It's been triumphant at times, and it remains a work in progress. But when we come out of it and we think about the total addressable market and the things that we're doing right now to get there, we're more encouraged than we've ever been. And what do I mean by that? Well, if we were in Las Vegas right now with you, I would tell you that our tourist-based restaurants, one of which on the Las Vegas Strip, one of the strongest sales restaurants we have in the world, is far, far off of their 2019 numbers. The Strip isn't the same. Very few people are doing a conference, and those that are have people like us on the camera. And it's frustrating. So that restaurant, one of our largest, greatly drags down our overall results. But if you were to go to the suburban Shacks in Las Vegas, whether Henderson, Summerlin or others, you would see us doing pretty well, and that's indicative in our numbers. But let me get to the point because what matters here is how we look forward. When we look at the market of Las Vegas or others, we now believe we have a number of different arrows in our quiver to address growth. And we are looking at whether it's drive-thru opportunities of which we'll do about 10 between now and the end of next year, drive-ups, various versions of our pickup windows through the Shack Track digital experience. We consider a real estate committee now and have a very different conversation than we've ever been able to have. Now let's be really clear. We haven't opened a drive-thru yet. We have a lot to prove. I can't tell you what it's going to do. We have a lot to learn, and I'm certain we'll make a lot of mistakes. But we are really bullish about how this learning has forced the ability for us to add convenience factors that never existed at Shake Shack before to the traditional Shack experience and continue to grow from there. A lot of work to do. A lot of recovery to be had. We're not back yet where we want to be, and we're confident we'll get there. It's just going to take some time.

So let me -- on that last point, the convenience added to existing Shacks, I mean, I guess, how much has been done? How much is there still to go? I mean as you look at the overall portfolio, how much many conversions do you -- for a lack of a better phrase, how much more opportunity is there beyond what you've already done in place?

Most of the opportunity, John, will be in the new formats as we look ahead. Really, when you think about whether it's a drive-thru, there's no Shacks today that we could turn into a drive-thru, so they won't be [ remodeled ]. There's a few that we've been able to add Shack Track windows in the outside, the digital experience. The biggest one, I would say, is things like curbside pickup, where we got 75-plus restaurants now that can do curbside. But it's really going to be less about the existing Shack base and more about the future. It doesn't mean we're not getting better at existing Shacks through all of this. We certainly will, but there are certain changes that just can't be made. But we're -- I also want to make sure everyone hears this. It's critical that we stick with the Shack experience. This morning, I was prepping for some strategic planning we're doing next week as a company, and I was reviewing some of the things that got us here. I was reviewing a decade's worth of my own notes and things as I thought about it. And we are not ever going to abandon the Shake Shack experience even when we give you a convenient option like drive-thru. If you look at what we're building, we are going all in on keeping that differentiating factor that has grown Shake Shack's brand and adding those convenient features that we hope will bring more frequency, ease of use and different changes of daypart expansion and other things that we hope can drive the brand for the long term.

I spent a lot of time in market doing various things, the drive-thru being a particular focus. Do you anticipate putting an employee out in the drive-thru to take the order? Do you anticipate it being a menu board? Is that the model there? Chick-fil-A is -- obviously, I'll mention that. Chick-fil-A has kind of done an incredible hybrid approach in their drive-thru.

Yes. I -- nobody does it better than them, right? Hats off to them. I think what is this our brand then builds on is community gathering experience and hospitality. We are going to have that option for both of those. So we will have options where we would look like that, where we will have people outside taking orders either through a live bussing strategy or a hospitality strategy or both. We'll also have the option, if it's not the right day, if it's 28 degrees in Minnesota, maybe we won't do that, but we'll see. We're learning a lot, and I think it's going to be cool for us to set up that option outside in addition.

And will you have it -- so does that part of what I would call a modern drive-thru, will you be have a digital-only lane? I mean will you encourage digital to that extent?

Are you talking about for digital preorder pickup?

Yes, in the drive-thru.

They won't be a separate lane. They can certainly get in that lane for a sort of traditional pickup experience, but we will have curbside and other pickup options so that if you were to have ordered on your app before, you'll roll in, park and we'll get it for you. And that'll be a really big thing. I mean look at our sales now. High percentage of digital has remained. The retention is strong as we've talked about in previous quarters. And we see that being a huge part of the Shack experience moving forward, more and more people are using our channels to preorder. And then delivery, that will exist too with those restaurants. So I mean I don't think we know yet, John, what percentage will be drive-thru, what percentage will be in-person or preorder on our digital channels. And that's a lot of the learning we're going to have in the next 1.5 years.

You -- and your lead comments alluded to this, but I'm going to ask a more specific question. Certainly, we understand why your urban comps are down. One just has to look at urban mobility to see why you have less people that can be your customers. We understand that, down 18% to 25% over July and May in reverse order. Suburban markets were flat in July. And I asked you this on the conference call and I say, hey, whether it's QSR, whether it's casual dining, whether it's fast casual, even just isolating the suburban market, you guys did underperform a broad set. So have you thought -- again, sorry for pressing this so hard. Have you guys thought about that underperformance in suburban markets where the customer is, where the customer is spending and you are such a high-quality differentiated brand, why you didn't get your fair share?

Well, I think, look, we're positive in those markets, some more than others, right? And our places, John, whether it's Miami or other Shacks that you all know, are still pretty heavily traffic generation necessary, right? We're not -- We don't have thousands of drive-thrus in suburban markets like others. We don't have thousands of restaurants all over markets that have been [ showing up ]. We did note in our call markets like Texas, markets like Florida and the Southeast performed stronger. A lot of the companies you may be talking about in their fair share happen to be in some of those larger markets, right? We're a little bit different. So we're actually very pleased with the suburban mix right now. It continues to be outperforming urban. And we think we'll get there. But I do think Shake Shack being built as that community gathering experience without some of those more convenient features, it's taken a little bit longer for us. But look, we're really -- we are confident in what we're building. If you look at the last quarter, the return to the in-Shack part of our business was significant. And we think we'll see that for a while. It'd be interesting to see how cooler weather changes things if it does, whether some of the digital channels would tick up as we get to winter here. But again, now you're dealing with the Delta variant and other various challenges of change that the uncertainty continues. But we'll -- look, we'll get there. A lot to do yet.

I think when we're thinking about that point too, it's hard. We're 200 restaurants. We started in urban. We're largely -- our core base is urban. So when you look at this urban versus suburban mix and try to compare it to 6,000, 7,000, 12,000 unit company, it's just going to look a lot different.

Yes. So a small sample size and maybe you have a couple of major outliers that you can have if you pull down the base with just a couple that are down materially. So certainly, I understand that. So is there -- we talked a lot about convenience. So let's -- I think we understand that. Is there anything else on the, for a lack of a better word, self-help that you can do to bring more customers, higher ticket, whatever, what -- different day parts, whatever it is, especially with the increasing use of the Shack App, how you can bring your already loyal customer more and how you can attract new customers? What can you do?

Yes. John, we're really squarely focused on 3 things right now: improved guest and team member experience; second, the digital transformation; and third, the transformation of Shacks themselves. And those are the things we're doing. So when we think about self-help -- by the way, all of that is wrapped up in 2 great products. We've got a great LTO calendar coming really for the next 15 months that we've already planned out. We're excited about that. And you've seen some of the things that we've talked about this last quarter of how some of our beverage strategy has improved, items per check. Average check continues to grow. And we're going to keep improving and investing in those digital channels and the ease of use. I think that's where we're at, at the moment. And then those longer-term things are going to keep coming along with those investments. You're going to see us keep investing. There's a ton to do in digital. We have barely begun to scratch the surface. We're a small company still, and we've got a lot of investments to make. So you'll see those continue in the coming months and years.

And I think one thing to talk about here, too, is the Milk Bar shakes that we just launched that's app exclusive. Still early days but we really did see customers kind of read that messaging of download the app and get the shake. And they love it.

And I'm embarrassed I haven't had it yet, but again, hopefully...

You should definitely try them both.

I know I'm not doing my job that you have to say that. Hopefully, that will happen tomorrow. So no one is attributing sales in August for example. Now I'm going to make a comment on the industry. QSR ticked down. Casual dining ticked down. The Chase data ticked down. The industry actually lost jobs in the month of August, which is, for a recovery, I mean, how strange is that? The actual number of quits was at a near record. I guess we have these still very strange dynamics that are happening, especially with some of the stimulus ending. How do you view the overall labor market, whether it's ours or it's the quality of ours? Are you getting the staffing that you need and might the staffing actually be influencing how many customers you can serve in a given day?

Yes. John, it's hard. It's hard out there. We are not immune to the challenges that have happened in every labor issue, in every industry, especially in ours and in the supply chain. And we're impacted by that. There's no question about it. And you're seeing it everywhere. You're seeing it with vaccine mandates. You're seeing it with the challenges generally in staffing. And it's hard. It's hard for Shake Shack as it is for so many others of our peers and friends in the industry. All that said, that's why we noted last quarter that we're investing at least $10 million new dollars in considerable wage increases across our company, in bonuses that we've been working on various things for our teams at the management and hourly level and in commitments towards leadership development so that people realize, hey, I want to be with a company like this. That's always been our sweet spot. It doesn't mean it's easy for us. And I expect that challenge is going to continue for some time. There isn't a restaurant friend of mine, whether a huge company or small, that is feeling fully staffed right now. I wish we could say we are. But it's hard, and that's going to impact us. It's only going to impact us, as Katie talked about in the last call, in our margins for some time, right? We haven't -- we're going to be taking a little bit more price as we've noted, between 3%, 3.5%. That's a little bit more than we've done in the past but still pretty conservative as we've always been. And that won't happen until sort of fourth quarter mid to end. And that's impactful for us because we have a lot of the impact costs coming in now. And some of that will be offset when we take some of that price. But it's a more challenging time. We've noted that in the last earnings call.

And I mean you focused on improving your guest and team member experience. It's -- it might be fun to work in a Shake Shack, but it's difficult to work in a Shake Shack. I mean working on fryers and grills, what have you, I mean, it's just -- it's a hard job. And some people, it's always regardless of the pay, choose to do things of other alternatives. Especially coming out of COVID. Like everyone has got a chance to reevaluate how they want to spend their time and dedicate their energy. So how do -- I mean, do you think that that's an issue as like, hey, listen, Shake Shack, it's rewarding? There's opportunity in the company. You're growing, dynamic. It's very -- your office in Varick, it's a very cool dynamic, a place that really cares about its people. But how can you make that job easier? And has that been actually a detriment as people come back into the workforce?

Well, thank you for saying all that. And as a guy who's worked in restaurants since I was 13 years old, I've -- and I've worked behind the fryer many a shift. It's hard work working in restaurants. It's exceptionally hard work working in busy restaurants like Shake Shack. And that's not going to change. How do we make it easier? I don't know that it gets easy ever, right? There are ways through automation, through our digital investments that we can simplify things for our team. There are ways that we're really thinking about how we cook food and making it better than it's ever been at a higher quality that can simplify things. When we think about LTOs, how do we make it easier on the teams, not harder? And mostly, I think you have to appeal to people who are motivated to grow. And whether this is a job that is getting you through your current moment or something you want to be with, we have so many examples in this company of people who graduated from making -- started making $8, $10 an hour years ago, now $15 an hour to 6-figure salaries, growing, running regions, running Shacks. Our GMs, we've noted, generally can make over $100,000 a year. They have opportunity to earn stock, add bonuses and leadership development. We added a program. I think it's important to say this. It's called Shift Up, John, where we work with the local high school in the area to provide training for our team members because what we've learned is financial literacy and basic business communication and acumen is the #1 thing stopping people from graduating up the ladder in a business like ours. So we are running our own classes, paying people for every hour they're doing and graduating them up from Shift Up onward. And right now we have -- we just graduated our first class of almost 30 people, and we now have 2 more classes happening. When we talk about accelerating the development of Shake Shacks, which next year will be our busiest year ever, these are the ways we're going to staff it. And it's going to be hard.

And I'd just pile on there. One of the things that we might talk about, as a little bit coming from sell side to now working here inside a company, one of the things that has kind of surprised me the most is just every single thing that we do, the impact to our teams and our ability to make it easier and more efficient for our teams is just thread throughout it. So if it's about how a kitchen design is going to be laid out, if it's about how an LTO is going to be designed, it's about culinary. All of it, it really all starts with the team because we know that the better our teams are and the easier we make their job, the better it is for the company overall.

And I would ask you, I mean, certainly, being on the sell side is working in very small teams. So I had 2 people that work in the U.S. and 1 in India. I don't know what your situation was. But I mean how different is it? You came in straight to nearly the top in a financial role. I mean can you talk about what your experience has been with Shake Shack and maybe what your perspective is of things that the company -- it's hard to say this in front of your boss, but what the company could be doing better? And well, I know you can finesse that. And what type of accomplishments that you would like to achieve?

Yes, sure. Thanks for the question. Say, after spending almost 16, almost 17 years at Goldman, doing a variety of different roles and running different investment portfolios as well as covering the restaurant sector, coming in here, as you know, if you've seen my work, I was a bull on Shake Shack for a long time. And I really was a big believer in what this opportunity was for the company. I looked at many restaurants, and the opportunity for them to even move outside of a core market can often be challenged. And just the way that Shake Shack has been able to just go really global and also deeper within the U.S. has completely shocked me. So before I started, that's what I was thinking about. Now sitting here, just the immense respect that I have for all of the team members here, for all of the management -- everybody in management, for Randy, for Zach in ops, just for Jay, across the board, just the team here is so very strong. It consistently blows me away, the high-caliber people here. And I'm really grateful for the opportunity to help kind of bring this again to the next story here. That being said, like there's a lot of pressures out there. You've talked about them. Cost pressures are definitely there. Labor is a challenge. And with COVID, it's not done the restaurant business really any favors. But sitting here and looking at the investments that have been made in digital and those that are to come, the way that the company is pivoting and bringing more convenient experiences to customers that absolutely love them, it's just very exciting, and I'm very excited for the opportunity ahead.

Certainly, it's one of the, I guess, more controversial part of the story, has been new unit -- this is through the end of '19, and Randy and I have talked about this extensively, but the new unit volumes relative to the new unit volumes before it had been in decline and the business wasn't comping. So it was always a difficult thing for me to see like with that -- to have either same-store sales or stable new unit volumes, it was dragging down average unit volumes, which was dragging down your margin. So I understand new unit volumes relative to average unit volumes but -- with the new unit volumes, especially that really materialized in the fourth quarter of '19, perhaps. Most obviously, you had begun to see some pressure yet. In the recent quarters, new unit volumes have been great, very good, certainly above our expectations. Certainly, credit where credit is due. But you kind of talk about as you think about new unit volumes going forward and what might be influencing that. Whether we're going to be shifting from food courts to drive-thrus, wow, that's a profound change and -- in new unit development outlook. But if we can just spend a few minutes on that, and excuse me for the -- a little bit scattered question.

Yes. Well, we're going to do it all first of all. John, look, we've said from the day this company was built and went public that we had the expectation for some period of time of unit volumes coming down from those original amazing highs that were industry-leading and margin along with it and that at some point in the future, that would level and come back up. And that's always been our goal. We're thrilled with the class of 2021. It's balanced out by a number of new Shacks in new markets, right? We have new -- our first in Portland, Oregon; our first in Indianapolis; Hoboken, New Jersey; in the Bronx, right? So you could argue whether some of these are new markets or not, but we've had some really strong starts. And for that to happen in 2021, it just continues to buoy our confidence about the brand, where it lies, both out of our home market and within. What are we looking at for the future? We want to get back to growing AUV, to growing operating profit. We're not recovered. It's hard to look at the microcosm of that within the macro environment of the challenge that we still remain in as an overall company. But that is what we are targeting. That is why we are doing. That is our hope for drive-thru, is that it is a larger AUV. That is our hope for Shack Track convenient factors that allow for digital retention to stay strong as in-Shack returns. And again, we've got work to do on that, but we're bullish about the kind of Shacks we're building, and we're able to do it now in new places across the country. So you will see roughly only about 10% of our Shacks in this next couple of years be new market, right, truly new markets. And most of it will be filling in and going deeper in a bunch of different places. So frustrating 1.5 years on the overall but the signals that we're seeing when we think about new units, pretty exciting, continue.

And just the format of the Shacks really and it's pretty exciting to watch the drive-up windows. We have a couple of them now. We're very excited for what's going to happen with drive-thru.

Okay. John, we have one, as Katie noted, in Fishers, Indiana, okay? This is Indianapolis, suburban Indianapolis. You would have asked us 10 years ago, if the way we would launch -- well, first of all, we couldn't even imagine opening in Indianapolis 10 years ago. And we certainly couldn't imagine that our first one would be in the suburbs and that we would have a drive-around window, not a drive-thru, a pickup with your preorder on the app. And in such a strong start, roughly 20% of the orders of the whole restaurant in a very busy restaurant are happening through that window. I can't tell you what that means exactly for the future. It's too early. It's just a data point to say there is a certain group of people who really likes convenience and wants to use those. And in the meantime, there's a whole bunch of people that are driving around saying that place looks pretty cool. I want to hang out there, too.

So I'm going to take the bait on that. So is the order ahead, in-store pickup or curbside 20% lower than normal? So in other words, how much of that 20% is truly incremental to the business versus a transfer from another digital channel? I know that I normally wouldn't ask a question so specifically.

I want to make sure I get the question because the number we would talk about is 20% through the drive around.

20% of orders are through the drive-thru window. I could ask it simpler. How much of that is incremental versus your other digital channels?

Well, okay, it's a great question. At this stage, it's a brand-new restaurant, so 100%. I'd say this. I'd say this. Let's take curbside. I think it's a better measure of that conversation. When we think -- and again, all through COVID, all through contingent recovery, we don't know is the short answer. But when I think about the instance that now people might use Shake Shack in the future because of those tools, we believe it will lead to driving more frequency. I know I told the story last time around, we had -- I had a soccer game for my son, and we had to get back to the city. We're in the suburbs. And I gave him my phone and I said Nanuet suburban Shake Shack, put it in. We're doing curbside. I never would have done Shake Shack before if that wasn't an option. So because of that, do I believe that there's a whole bunch of people who might use Shake Shack more often for the long term? You bet. But we got to prove it, and that's the work we're doing.

Let me shift to -- just because we haven't talked about it, I mean, let me shift to commodities. I mean you don't participate in the commodity beef market, but the 50s and 90s are up a lot. Chicken -- commodity chicken is up a lot. I've been -- I know you're antibiotic free. So what does that mean for you in terms of like where the spot is relative to your contract? You mentioned supply chain. What opportunities, if any, you have to mitigate what could be some fairly significant increases?

Yes. I mean we contract for supply. So we feel pretty good about our supply that we're able to get here. But yes, I mean, we talked about it on last quarter's call. We are expecting a similarly elevated level of commodity inflation that we saw in the prior quarter. There are some puts and takes as you kind of noted there, but no change to that guidance there. In response to commodity inflation and also the labor inflation, we talked about taking some additional price, which Randy walked through. We're still going forward with that. No change there. We've also talked about we're watching the commodity landscape. We're also watching the labor landscape. It's possible that we take more price earlier next year, too. These are things that we're watching very closely. We don't want to take too much too fast. We want to learn and see how the landscape is evolving, but it's things that we are trying to be as proactive as possible about.

And John, none of us knows the answer, but I would probably agree with a lot of what I see and hear other business leaders say right now. I would expect a choppy supply chain through supply, price and otherwise, at least through 2022. And none of us know. Could be 6 months, could be 12, could keep going. But there isn't a thing on this planet that, whether you're building a restaurant or buying commodity or not, that is normalized at the moment. And that is going to have its choppiness for Shake Shack during this time, especially at our scale, especially when we buy hormone antibiotic-free premium cuts and things like that. It's challenging for us. And we'll have our quarters where that's up and we'll have where it's down.

Okay. Yes. I mean, certainly, we are prepared for that. So pricing has been historically more cost driven than it has necessarily based on consumer receptivity, at least sitting from my seat. So -- and the comment of being cautious not to take too much price, how do you evaluate that? How do you evaluate the price? There's price elasticity in all businesses. It just depends how much. So how do you evaluate? And what's the balance between maintaining customer traffic and maintaining profits because they're...

Well, we start with the fact that for 15 years, we've been a roughly 2% average price taking company. We've been around CPI. We try to do that. We try to keep a great value even though we are a premium-priced product and certainly when you compare to traditional fast food. Start there. And then we're constantly looking at brand health. We're looking at traffic. We're looking at various menu items and how we might do more with menu engineering, either through the beverage, as I talked about earlier, with some add-on checks. We've got some good strategies for other dayparts coming over time here and things like various pricing across our industry. We want to make sure, when you get a burger, fries, lemonade or burger, fries, shake, we're in that sweet spot of what a person expects to pay for a lunch or dinner meal. And we feel really good about where we are there, and we're not just going to take every penny right now because things are expensive. I think the world and we are trying to understand if -- which pieces of inflation will be transitory and which will be more long term. There's a lot I don't think's ever going down, and there's some that will. So we're careful with that. We just don't -- and then we're also strategic in where we can take some in digital. So for instance, we're now taking 10% on third-party delivery, right? So that's a way to get some significant price, and we feel pretty good about that. We feel pretty good about what we're seeing there. But again, I think the third-party delivery space is going to continue to evolve very quickly as it has over the last few years.

Can you elaborate...

There's a lot of care that goes into how price is determined. Some people at a conference might understand that. Others might not. But what's really important is it's not just 3%, 3.5% across the board type of increase. We strategically go into every single Shack, look at its position in the market, look at how sales have been doing, what that customer base looks like and tier it and then apply pricing that way. So again, it's much more strategic than kind of a blanket across-the-board pricing. And it's because we don't want to do something that's going to derail our progress in newer markets quite frankly.

Randy, I have to revisit the comment. Third-party delivery will evolve rapidly in the next few years. I mean, by your actions and by many other companies' actions, that seems to be cost shifted to the consumer. Is that what you mean? Or do you imply something else?

I think that's probably right, John. I think, look, we have lived in many years of -- I'm not sure anyone but the consumer has been particularly happy with the cost of delivery, right? So I do think there will be a balance now that the consumer is likely -- and it is today. This is not -- I'm not saying anything new. I think the consumer is beginning to take on more of that cost. We love third-party delivery. We love the delivery we're doing through our own channel and our app that is also delivered by third party. So there's a cost to that, too. And in many cases, I think the convenience of that will continue to be paid a little bit more by the consumer and shared by delivery companies and us. But that is shifting, and it is changing by the day. You're seeing it and by the market, as we've talked about for years in our strategy here.

Have you said, and I'm sorry if I missed that, the percentage of delivery that's happening on your app?

We haven't. It's still small, John. It's a new thing for us, right? Our focus -- our channels, by the way, are very strong. They continue to be strong for both app, web. We're actually launching in the coming month entirely new web platform. And most of that means mobile web, not your traditional web, but that is all together, new Android and continue to improve our iOS experience. So all of that is good. Delivery is a piece of that. And over time, we're going to grow more and more reasons to be [ omnia ], right? Number one, it's got the best price. It is less expensive than the 10% up charge we have with third parties. That will draw people there over time. We love it because, obviously, that's our consumer fully, right? All of the data and the connection and the relationship leads with us. And as we invest in programs, we'll have a lot more opportunity to personalize the connection through our channels. So that's what we're building, and delivery is one piece of that through our app.

You're a big brand. You're a small company. A lot of companies talk about the advantages of scale. I had CEO of Yum! up earlier, talked about his 50,000 restaurants and kind of what he can do. So how can you, in your size, you become a leader in technology, a leader in data, a leader in customer connection? I mean what can Shack do, being small and nimble and connected, maybe to compete with some of the others that literally have billions of dollars to spend?

John, that insight is so critical, and I appreciate that you raised it because we have this massive brand whose expectation is that we should -- our digital and every other thing we do should be as good or better than companies that have 100x our budget in the digital line, right? And we don't have it. We're still growing it. We'll get into that, too. We're growing too. By the way, look at our sales, look at where we're at and surpassing this year like likely over $1 billion in system-wide sales, right? Like we're getting close to some pretty extraordinary numbers, still a fraction of our peers. So what can we do? Well, we're scrappy. We're in New York. We're Shake Shack. We got to put it together. It's frustrating every budget season because we all want a heck of a lot more. But we've got to be smarter, and we've got to do it one at a time. So the brass tacks there is you won't see every single feature that we wish we could have, but you'll see smart ones. You'll see impactful one. You'll a see intentional leadership in those things. And we'll grow that one piece at a time over the months and over the years. I mean we sit here every day with the prioritization matrix of the most important investments we need to make right now. We will always lead with brand. We will always lead with long term. And by the way, this -- coming full circle here, this is why we have the fortress balance sheet we have today, so that we can make those critical investments. That's what we have that money for. It's development to build more Shacks. It is investment to build better digital and to grow our teams and to continue to reach the goals that we have. And we've barely scratched the surface on it.

So I mean you have over $400 million. You have a lot of money. So what are you inferring in terms of future G&A? What are you inferring in terms of future CapEx? I mean, obviously, your stores themselves generate a lot of cash. And so it's not like you're cash-burning business that needs to eat into that $400 million substantially outside of unit growth. So can you elaborate on that comment?

Well, we're not going to guide yet on G&A for next year, the coming years, but I'll guide you to what we've said for a long time. We're going to continue to -- we're not looking for efficiencies in our G&A. We're looking for investments. We're looking for return on capital, which we have. And you will see that mostly in our teams, our people and our tech. And that's where we're going to put our money. On the development side, though, you're going to see a lot in our investments in trying to get these new formats right. So we talked, John, last quarter, you'll see an impact -- excuse me, uptick in our investments in Shack build-out over this next period of time. We're going to spend more building some drive-thrus. We're going to spend more on a really great experience in some of these new restaurants. That will lead to a lot of learning and we believe a continued growth of the TAM. And that's what we're going to be investing in. And by the way, I'd rather be overinvested -- overcapitalized in a moment like this, the last 1.5 years, to have every opportunity sitting in front of us that could possibly come that we could take should we choose to than the opposite. And we're thankful we're in that position.

Yes. And being undercapitalized, and we saw it, is scary. That's when you talk about cash burn and some other things. And yes, so certainly, I understand that perspective and understand your growth. We are actually over time. Thank you so much, Randy. Thank you so much, Katie. It's great to see you 2. Thank you so much for the time, and it's good to have you here even on the screen.

Thanks a lot.

Thank you.

Thank you.

Bye-bye.