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

Good morning, everyone, and thank you for joining us. My name is Jeff Bernstein, and I'm the restaurant and food service distribution analyst here at Barclays. I want to welcome all in the room and on the webcast to day 2 of our 10th Annual Eat, Sleep, Play and now Shop conference. We're excited, at least within my coverage to have 8 restaurants and food service distribution companies here with us, including fireside chats and/or meetings with Wendy's and Kura Sushi yesterday, Shake Shack, Cheesecake Factory and Texas Roadhouse today and Performance Food Group, Brinker and Dine Brands tomorrow. I'm also once again joined by our gaming, leisure and lodging analyst, Brandt Montour. And for the first time in 10 years of the conference, we have added the word Shop to the title, which is code for a broader consumer discretionary. So Adrienne Yih, who covers specialty retail, apparel and footwear and Seth Sigman, who covers broadlines, hardlines and food retail. So along with our Staples conference for the consumer, right after Labor Day in Boston, we have this as a broader consumer discretionary conference, always the week following Thanksgiving. So we hope you find these days a good use of time. Hopefully, we get a chance to chat in the halls between meetings. And at this point, I'd like to introduce our first presenting company of the day, Shake Shack. So with us this morning from far away downtown New York City, we have Rob Lynch, the relatively new CEO; and Katie Fogertey, the long time on a relative basis CFO. Rob joined Shake Shack about 6 months ago from Papa John's, where he served as CEO for 5 years, but also has a very strong resume of restaurant experience, thinking of Arby's and Taco Bell, among others, so very strong brands in the restaurant industry. By way of background, for those not familiar, if that's possible here in New York, Shake Shack is a fast casual chain with just over 300 company-operated restaurants in the U.S., while licensing an additional 40 inside the U.S. and 200 outside the U.S. And with the current mid-teens annual unit growth rate, management is confident in long-term guidance, which was initially provided a while back for 450 U.S. company-operated units, and we believe such will ultimately prove conservative with lots of new formats seeing success. We want to thank Shake Shack very much for joining us, Rob and Katie, and I'm going to now turn it over to Katie for a quick comment, and then we will start our Q&A.

Great. Thank you, Jeff. It's great to be here. I just want to start off our comments today reiterating our guidance that we last provided on our 3Q earnings report. All of that information around our fourth quarter guidance, the fiscal year 2024 outlook and a couple of points around unit growth for 2025 can be found on our Investor Relations website. That's housekeeping out of the way.

That's what I was getting, but I wanted to make sure. That was good. No big surprise. So thank you for joining us.

We had a few broader consumer discretionary questions that we've been pointing to a lot of the companies over this 3-day period. First and foremost, just as you think about the consumer very high level, the state of the consumer as you look to next year, seems like industry sales trends have been somewhat volatile, but I've learned over the years that, I mean, the macro data is solid, which drives this. I mean, the employment numbers are strong, inflation seems to be easing. Just wondering how you think about your brand as you go into 2025, obviously, relative to other brands you've been with in the past and just your broader consumer thoughts.

Sure. So I've been at Shake Shack now since May and mid-May. And I think every day since I've been here, someone has said that Shake isn't going to be able to compete in this value-oriented macro environment that we're in. And I think our brand and our business has shown to be very resilient during these challenging macro times. There's a lot of uncertainty. There's a lot of unknowns. But I actually think that some of that uncertainty and some of those unknowns are starting to kind of clean themselves up. And I think we've got a really good path as an industry heading into 2025. Shake Shack specifically, we've spent this year really optimizing our model. Making sure that we can strike the right balance between delivering premium innovation, premium LTOs, while also keeping the value equation right for our customers that might be looking for a little bit of better value. And I've said it a lot of times, I think this year, we've actually found that our relative value for our guests has actually improved. Their perception of our value has improved and I think that's an outcome of a lot of things. One is our commitment and focus on staying in that premium space and delivering it. We haven't -- despite the inflation that happened over the last few years and some of the challenges that this brand faced. They never compromise the quality of the product, never compromise the food quality or the experience, never cut labor to a point where we're not able to take care of our guests. While at the same time, traditional QSR has pretty dramatically increased their prices, right? So that price gap that we've had historically versus QSR has actually shrunk and we've been able to really kind of start to enter into that mind space of, okay, when I want the best burger, fries, shake, I can go to Shake Shack, and it's not that much more expensive than McDonald's, but it might be much better.

Yes. And having been in the seat for 6.5 months. I'm sure you -- there's lots of learnings. But as you think about the next 12 months, what are you most excited as you think about Shake Shack and when you think about your first full year at the company, like what are the biggest opportunities, whether it's sales or margins? Or maybe on the flip side, what are you most concerned about as you think about next year?

Yes. When I made the decision to come to Shake Shack, I wasn't looking to change jobs. I wasn't looking at leaving Papa John's. We had a lot of work to do and a lot of things coming out of the pandemic. But when I looked at this opportunity, I felt like this is almost like kind of a once-in-a-career opportunity. And I kind of mentioned to you earlier today. It's a pretty special place where you've got high AUVs, strong unit margins, great products you can be proud of, great cash-on-cash returns from development. And actually, a lot of scale. When we talk about 300 units, that doesn't sound like a lot. But we are really one of the only scaled premium burger chains in the country. There's a lot of regional players, but Shake Shack has proven it can work in pretty much every market in the United States and in 20 countries outside the United States. So when I think about that, when I -- that's what got me really excited about coming to Shake Shack. And when I got here, I -- sometimes you pull back the shades or roll out the covers and you find something you don't like, like it's legit. Like we have a super strong foundation, but there's still so much opportunity, right? And so we're -- the thing I'm very -- there's a lot of things I'm really excited about. But first and foremost is just we're improving our company operations. We're significantly reducing our service times. We're increasing our throughput. We're improving our guest experience as a result of that. So we are transforming kind of what Shake Shack has been to what it can be as we speak. And as we enter into new markets outside of major metros like New York and L.A. and San Francisco and Chicago, we enter into the Pittsburgh and Rochester and Cincinnatus of the world. We're going to have to win in different formats. We're going to have to win in drive-thrus. And then drive-thrus the benefit profile and the prioritization changes, you have to be faster, you have to be more accurate. And so we're really focused on that. We made a ton of progress and heading into 2025, I mean, our plan for next year really emphasizes that and leverages those operational improvements. The other thing that I'm super excited about is Shake Shack really hasn't invested in marketing in its history. This year is the first year that we've really made a dent in the marketing piece of the puzzle. And so there's a ton of upside. And we're seeing great returns on our investments in marketing. We've been able to buck the trend and kind of deliver flat to positive transactions in an industry that's been very challenged with transactions despite a premium price point. So we're just kind of scratching the surface there. We're making a lot of investments, and I think that, that's really going to help us drive long-term value. And then the last piece is just on the development side. I mean this team has done an unbelievable job reducing the cost of build-outs on our Shacks. And so while our AUVs have held and our margins, 4-wall margins have improved dramatically. So the cash-on-cash returns that we're seeing from building our Shacks is amazing, and we're going to double down on that. We've guided to over 10% more builds next year than this year. We're going to do 45, and I see that accelerating in the out year. So those are the 3 things, operations, marketing and development that I think are really going to create value for our shareholders.

And just as you've announced said in a number of these meetings, as the CEO, I'm just wondering, now that you peeled back the onion, if I can layer in another expression there. What question do you get most from investors that surprises you or maybe a question that you don't get that surprises you since you've had these learnings a little bit 6-plus months.

Yes, I can't believe I'm going to do this, but I'm going to open up the can of worms here. The thing that surprised me all the time, I made the decision a few months ago to close a couple of Shacks because we did a review of all of our assets from top to bottom. And we got to the point where we're like, okay, we have some restaurants that are probably never going to be successful and we're putting resources up against trying to make them successful, and we could be putting those resources up against the Shacks that are going to continue to prosper and grow. So we closed 9 restaurants and I've been asked about that a lot. And those are the first 9 restaurants that Shake Shacks ever closed. But through that experience, what it did is it forced us to kind of rack and stack our Shacks. We just came up with that yesterday.

I was hoping to sneak in that first, but okay.

I apologize. I thought you wanted to -- yes. And so now we're looking at all of our Shacks and truly understanding like what makes our best Shacks successful and what makes our bottom-performing Shacks challenged. And through that visibility, we've created a culture of accountability. And it's not about coming in and telling people they're doing things wrong. It's really about understanding how we can get better in making sure that we have kind of a threshold of performance across all 300. And as we continue to build 40-plus shacks a year and increase our footprint over 10% a year, that accountability is going to become even more important. So that's probably what surprises me as when we talk about these closures, it really isn't a material impact on anything we're doing.

9 on 330, I would think, as if not closing any, doesn't seem that extreme.

Yes. And on the flip side, that means 321 are doing good. So yes, we've got a great footprint right now.

You're new to the C-suite, and I know you've made other changes. I'm just wondering, do you see the need for further change? Or how do you think maybe Shake Shack is going to be viewed or operated differently under new leadership than former?

A lot of my jobs when I've been asked to come in to a company have been, Rob, come and fix this. Shake Shack is not in that case. Like I talked a lot about coming here and having to take the hippocratic oath, first, do no harm, right? So we have a really strong foundation. We have a lot of momentum on the business. So I'm really happy with where we are. That being said, my job is to never be satisfied. My job is to always push us to be the best representation of Shake Shack. So I'm constantly evaluating how we can get better. And moving forward, as we identify new opportunities, we'll continue to challenge ourselves to have the right strategy, structure and people in place to achieve our aspirations.

When I think about the fast casual segment that you're in, you're coming from QSR in many of your prior roles, and you're coming from a franchise business, and now you're in fast casual, which is a primarily company-operated business. I'm wondering if you could just talk about maybe the pros and cons of that now being more in the operations or whether it's the competition that might be different. I mean different level of consumer. Like how do you think about role differently and this company differently than where you've been in the past?

Yes, it's one of the things that truly attracted me here is Shake Shack still has the soul of restaurant. Like when you listen to a lot of other restaurant companies talk about their business, they talk about their stores. They got this number stores. We got that number of stores. We don't have stores. We have restaurants. We serve food. We serve high-quality food that we can be proud of. I just spent a week in Asia meeting with our partners all over there. It was funny, I was in Seoul a week ago and yesterday, scary moments there. So -- but when you go into our Shacks, it feels different than QSR. You can't help but be proud. Like somebody who spent a lot of years in this business, when I walk into our Shacks and I see our people -- and by the way, there are people, they are employees, they're our team members which makes it more compelling. Like as a CEO, I feel not that I didn't feel the same way about our franchisees and all the businesses I've been in, but these are my teammates. These are people whose lives and dreams and aspirations and families all depend on us making the right decisions and doing right by them. There's something powerful there. And when you walk in there, you feel it. You feel the team members excited to see you. And you feel the energy in the Shack and when you try the food, it's just -- it's a sense of pride. And I fundamentally believe that in order to be great at anything, you have to take pride in what you do. Like whether you -- no matter what job you have, you can't achieve your full potential unless you take pride. And I don't think there's another restaurant company on the planet that can be as prideful about the quality and the experience that we deliver and how we build our team.

I feel like, first and foremost, restaurant investors like to focus on comp, which for better or for worse. And then COVID obviously threw everyone for a loop. But just looking back at our model, I mean, positive low to mid-single-digit comp growth for the past 6 quarters, opportunity to accelerate such growth. And I know it's a broad brush question, but then I'm going to hit on some of the specifics, but the primary drivers, I mean, you talked about new product news and digital and loyalty. I mean, is there pecking order that you'd say these are the biggest opportunities we have? I mean, I think you ended last quarter by saying that not to talk about weekly data. But you said recent trends with momentum into October. So it sounds like there was momentum coming out of the third quarter into the fourth quarter. Anything you care to share in terms of what you're most excited about looking into next year?

Yes. I mean this sounds like I'm blowing off the question, but every -- I really am excited about everything we have going on right now. And I've been here 6 months, and once again, I didn't get brought in here to like fix things. So I haven't made a lot of substantive changes in the first 6 months here. It's really been seeking to understand and seeking to learn. I've brought in Stephanie as our COO, and she has started to drive some substantive change in the operations. But in terms of like our corporate strategy, it doesn't require a complete overhaul. It's about continuing to develop great product innovation, continuing to create a positive and awesome experience through our enlightened hospitality and then being efficient in building -- finding new sites and building new Shacks. But how we do those things will evolve, right? And so operations is already changing. Marketing, all the things you just mentioned, we haven't had a strategic marketing calendar that's filled with LTOs and other innovation that is -- that are building blocks to drive comp sales. It's really been a culinary exploration. Our culinary team thinks this sandwich or this burger is going to be great or this Shacks is going to be great, and it shows up on the menu. And that's great. And it's helped build our guest affinity for the great product. We're not going to change that. But we're going to structure the calendar and how we bring things to market differently so that they complement each other and that we can drive both traffic and mix benefit as a function of our product innovation. And on the loyalty side, like world and guest recognition. Kiosk has been a huge part of our business. Now all of our company Shacks have kiosks in them, but we don't recognize guests at the kiosk. We recognize guests in our app. We recognize guests when they come on the web. But when they're ordering POS or kiosks, we don't really know who they are right now building the pipes that connect everything so that regardless of what channel our guests come to Shake Shack in. We're going to recognize them and we're going to be able to service that meet their needs and exceed their expectations as a function of understanding how they've ordered in the past. So these are kind of -- once again, it's nothing different than has led to those 6 straight quarters of same-Shack sales, but we're just optimizing and continuing to evolve and improve how we do it.

I can't help but think about marketing, I would think that's a dream of yours coming here because when I think about your prior experiences, I can tell you the slogan for each of those 3 companies. And I struggle with -- I don't see a lot of ads for Shake Shack or whatever from a media you want to choose. So just wondering, what do you think is the biggest opportunity? And at what level do you reach that? Because some people say, well, 300 stores, it's different than if we were at 1,000 stores. I'm just wondering added to that, if all of a sudden, magically, we were able to double your budget for marketing tomorrow, like what will be the first thing you'd say, well, we could punch above our way by doing this.

Yes. So I started my career at Procter & Gamble selling toothpaste, and I was excited about that. So just imagine how excited I am selling Shake Shack food, right? It is -- it really is a privilege to be able to be at the foundation of what we do with this brand from a marketing and communication standpoint. And we've dipped our toes in the water in a couple different formats, but we really haven't significantly invested behind marketing to drive affinity and frankly, frequency. We have relatively low frequency compared to the industry. So why is that? Well, to your point, we have 300 Shacks that are kind of -- the strategy in the past, I don't know that there's really been a super tight strategy. It's just been like, hey, we found a great site in this market. Let's go build a Shack. We're evolving that. We're going to move to more of a market penetration strategy where we can build scale in top markets, like I'll use Atlanta, for an example, we have 7 Shacks, we can have 30 Shacks in Atlanta. And when we do that. We're going to get efficiencies on our marketing investment because every dollar invested is going to impact 30 Shacks instead of 7 Shacks. We're going to get efficiencies in how we operate above store operations. We're going to be able to scale that and be able to train people and move them around the market. And then lastly, we're going to get supply chain efficiencies, right? So we're going to get scale delivering to a market that has 30 Shacks instead of 3 Shacks. So that market penetration strategy will allow us to go in and invest in these markets and marketing, we're probably a long way from running a national ad or a Super Bowl ad, but we definitely we'll be looking to invest in marketing on a regional level on a market-based level as we continue to build penetration.

Got you. When I think about comps and the ability to maintain or accelerate that. People often talk about value. And as you mentioned, fast food has raised prices a lot. So the value the differential in price has actually narrowed but the quality is still clearly differentiated. Just wondering, as you think about value, is there ever an opportunity where you'd say, you know what, from a speed of service perspective or accuracy perspective or just to set a price point for people, you know what? It's not a value meal per se, but a burger and fries is $10 and get people to be like, you know what, I can swing $10 bucks. Sometimes you get surprised, and all for a sudden it's $13 or $15. It's just like the things like that come into play? Or is that too much fast food? I feel like more and more restaurants are just doing a bundle where it just gives price certainty.

Yes. So we've definitely started to surgical value offers. So through our digital channels, we're definitely targeting customers who we have done the analytics to show they need some sort of incentive to come in as frequently as we want them to come in. We've started to do things like Chicken Sundays, where we're giving a free chicken sandwich with a certain level of purchase. And that's a strategic decision that we made because we have the best chicken sandwich in the industry, and a lot of people don't even know we have a chicken sandwich. So driving trial of items that people aren't aware of is going to create lifetime value. So we've done some value offerings. We just haven't done like a blanket national value play. And I don't think that's going to be in our strategy moving forward. But I will talk to -- when you say bundles, our challenge and our drive-thrus has been speed of service primarily and accuracy secondarily, but it's not nearly as big of a challenge. And most of the challenge in our drive-thrus is in the order zone. They can never want to be more than a minute in the order zone. You never want to be more than a minute at the window. And our order zone is significantly higher than a minute. And the reason why is because we've effectively taken the dining room menu and put it on a drive-thru menu. And Shake Shack is an experiential brand. You come into the dining room, you're like, oh, I want to try this, I want to do this. And we're customizing it, put the chili peppers here, leave the tomatoes off. And so people are doing that in our drive-thru. And that slows everything down, creates a problem. It also creates a problem with accuracy. And so we are definitely exploring combos at the drive-thru because fundamentally, it's going to increase speed, it's going to increase accuracy. So I don't know that we're looking at that necessarily as a huge value play. There probably won't be a significant amount of decrease in price by creating these bundles or combos, but it's definitely going to facilitate faster ordering and higher accuracy.

That's great. I'm still looking for my first drive-thru in Long Island.

It's coming.

Waiting, yes.

You have any site ideas?

I'll get back to you. I'll talk to my real estate team. The other key driver of top line, which I think perhaps is underappreciated here because everyone focuses so much on comp, but is the unit growth, which your unit growth is tremendous, clearly, with 300 units and an opportunity for a lot more still TBD, what that number is. But I'm just talking about in the U.S., obviously, it's a big world out there. But in the U.S., I think you talked about mid-teens annual growth and you talked about this year, you're going to do -- next year you're going to do 45 on top of 40. So it's more than a 10% increase, and it's north of 10% unit growth. And the idea is that I believe you mentioned to maintain not just the increase in the absolute number, but to maintain at least 10% unit growth, which for some investors, that's a key trigger point. But how do we think about -- it sounds like it's more in existing markets and maybe a few less in new. But how you split that out in terms of formats or urban versus rural or drive-thru? And how do you -- when your world is your oyster, how do you decide what to do and which units to open?

Yes. So I mean, we build a strategy. We have 20 target markets that we're focused on across the United States, and we're going to go in and focus on our real estate resources on finding great sites in those markets so we can increase our penetration. That doesn't mean if we have a great site that pops up outside of those 20 that we're not going to develop, it just means that's where we're prioritizing our resources. And as we build our plan for next year, my G&A investments are going into marketing and development and operations, right? That -- those are the 3 core things that I'm investing in to make sure that we can execute against our plan. So one of the limiting factors of development for a company-operated system is talent. Like if we're going to open up 45 Shacks next year, we need 45 general managers above and beyond the 330 that currently run our Shacks to get trained and be ready to go and open new Shacks. This is a different operation where we're like making food. It's not preparing food. It's not popping stuff in a rethermalizer or a microwave, like it's a different model than some of the QSRs. So you need managers who can train, you need managers who can develop, you need manager -- it's a different operation. So we are really focused in our operations and our HR functions on developing the pipeline of talent so that we can meet the need that we have for -- to open up 45 or plus Shacks a year. So that's one of the key investments we're making. From the development side, we're investing in real estate. We need to find more sites. There's a lot of them out there. But to your point, we're opening up the aperture on the sites that we can go into by looking at different formats. And it doesn't have to be a 4,000 square foot flagship like the theater district in Manhattan. We are definitely building models like drive-thrus, but also smaller formats that can go into different pieces of real estate and smaller markets and still deliver the kind of cash-on-cash returns that we're looking for. So that's just opening up the aperture for us to go out into these markets and develop a lot more Shack. So those are the things that were -- that are a little bit different than how we've approached it in the past.

You joined the company in kind of that mid-teen unit growth rate has kind of been the run rate for a while. But if you were coming in and you didn't inherit that growth rate, I'm always curious like how do you -- what defines that being the right number? Is it people where you just say, we got 300, we can only generate x number of new general managers off of those 300, or wouldn't that like -- or is it the real estate, like what makes 15% the right number versus 10% or 20%?

Yes, I don't know that it is the right number. I mean I think that our growth is only limited by our ability to find sites and develop managers to go in and open those Shacks. And so like I said, we're making investments to increase the number of managers that we're developing to increase our real estate resources to increase our construction resources and so we're in hyper growth mode. So if you're going to build more Shacks next year, you need more construction people. If you're going to find more sites, you need more real estate people. So we're making those investments to continue to deliver that accelerated rate of growth. It's interesting, too, like company versus franchise, delivering double-digit unit growth in a franchise system might mean that you have 100 franchisees each building one restaurant. Like we're one operator building 40-plus restaurants. There are very few of those out there like Chipotle, Cava, there's like a handful of operations like that. So we're kind of a unique and that requires some unique skills and we have them. So it also is kind of a barrier to entry from anybody coming in to try to do what we're doing.

Looking down the P&L, once you get past the comps in the units, obviously, it's all about the restaurant margin, which justifies the flywheel effect. But restaurant margins are now back at or slightly above 20%. That is among the best in place. Your confidence in sustaining that or moving back, like, I don't know how you or Katie decide like what the right number is. People often say, can you get back to the mid-20s? Like I don't know if we can or whether we should aspire for that because getting to the mid-20s, maybe the service levels aren't where you want them to be. So how do you decide what the target should be in the first place? So I'm just wondering how you think about it, again, Katie has laid out a number of initiatives get those margins moving back in the right direction already being the best-in-class, but how do you prioritize or decide what the right level of margin should be?

So I'll let Katie answer that question with some details, but I will just preface her answer by saying as long as I'm here, we -- and we will not compromise the quality of our food or the quality of our service. So we are not going to decrease the quality of our food to increase our margins. We're not going to decrease our labor specifically to increase our margins. If we find productivity or ways to do things better, we -- it doesn't require as much labor. We will definitely look for those opportunities and leverage those opportunities. But we are not going to -- like we are the premium player in the space. We're not going to compromise our product or experience to drive margins. So I'll just say that.

Absolutely echo that. I think that when you look at our margins, we've had incredible progression over the past couple of years. We've guided to now approximately 21% this year. There are so many opportunities on the horizon. But I would kind of bucket them in a couple of different ways. So first of all, just growing our scale, just getting more penetrated in certain markets has such an amazing knock-on effect to our supply chain, to freight, to our ability to grow and develop talent and leaders and have better turnover in these markets to open new Shacks in those markets better. That all has a very significant impact on the margin profile of our company. And that's all doing things that are better for the guest experience and are better for the long term of the company. Then also, as Rob talked about, all of the ideas and passion he has around marketing and driving comp, let's not forget that this is a business of incredible leverage. And so driving sales and increasing brand awareness at all of our restaurants has a great opportunity to continue to improve our margins from there. And then I've outlined a number of things that we've been working on through 4-wall just blocking and tackling, whether it's a new labor model, which really does provide a more bespoke way of allocating hourly labor within our Shacks to provide the best guest experience. We're probably -- we didn't go from 0 to 100 on that one. We still have more iterations and learnings to go. And Stephanie Sentell, our new COO, has been in Shack constantly learning and meeting with the team members and coming up with great ways that we're going to continue to be more efficient in our restaurants, but also that efficiency comes from also delivering a better guest experience. So even just looking at wait times and it's something that we've talked a lot about, operating better and training our teams better in order to lower wait times, that not only can it increase your throughput, but also probably increases your frequency over time. So I feel very confident about the number of opportunities that we have on the come and all of those are kind of right way of getting there.

And as you think about going into next year, I mean, obviously, it's a lot of commodities, labor and then the offset being pricing. Should we think about 2025 similar to 2024 and kind of all those fronts, so we now back to a level of normalcy. I know beef is a bigger component for you than others, and there's a lot of uncertainty there. I'm not sure whether there's any tariff or import concerns around beef, which we get that question a lot. But is there anything unusual we should think about in terms of commodities labor or pricing as we think about next year in terms of the margin outlook?

Yes. We haven't given any guidance yet for next year, but as we're kind of thinking about the lay of land, you named a couple of the big ones. Beef is a big input for us. It's something that we do not hedge. We also have a little bit of a different beef model than some of our QSR peers, where we had premium cuts, which we grow or we develop here in the U.S. and we purchase here in the U.S. and grind here in the U.S. So we actually have less of a reliance on an international distribution. And then also our restaurant equipment primarily made domestically as well. So we're continuing to watch the macroeconomic backdrop, continuing to watch the consumer. But those are kind of the inflationary pressures that I'd look for.

And as you think about G&A below the restaurant level, your ability over the next couple of years to leverage that line item has been a major turning point for you guys. I know in the early days, it's invest for growth. So wondering what your message is to the team as you say, well, we want to invest for growth, but we want to leverage G&A. I mean, it's just hard to balance those 2, but it would seem like there's still a big G&A opportunity. So what's the internal message around G&A? And how you balance, we want to make those investments, but we don't want it to. We want to be able to leverage.

You're so right in that all of the things that we want to do that we believe are in the best interest of long-term shareholder returns, accelerating the unit growth, driving long-term brand awareness. All of this stuff requires investment. But the team has been very, very committed to also being stewards of our capital and making sure that we're not kind of ahead of our skis and that we are growing and learning as far as advertising and increasing marketing expenses are concerned. Everything that we're doing we're trying to do with an eye of driving long-term shareholder value creation, whether that's how we are thinking about investing more in marketing or it's in adding more deal makers so that we can accelerate our development. But you probably have more to add.

No, I would just say I spend a lot of time in private equity. And so I'm a very -- I have a very big focus on productivity and G&A. That being said, there are less than 5 brands in this industry who have the growth potential that Shake Shack has. And so we're investing to drive that growth. Like you're not going to buy this stock because you're looking for G&A leverage. Like we are going to drive revenue growth, we're going to drive margin growth, and that's why you invest in Shake Shack. So I try not to say G&A a lot because I don't want to set the wrong expectation. But like we are in hyper growth mode right now.

That's a great way to close the segment, but we wanted to thank Shake Shack, Rob and Katie for joining us this morning. Thank you for joining us on the webcast and in the room. I hope everyone has a great day. Thank you.

Thanks, Jeff.

Take care.