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What changed in Shake Shack Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Shake Shack Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+548 added−541 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-23)

Top changes in Shake Shack Inc.'s 2023 10-K

548 paragraphs added · 541 removed · 393 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

113 edited+98 added−108 removed39 unchanged
Biggest changeSome examples of our exclusive offerings from 2022 included: ▪ Veggie Shack — In November, we launched an updated vegetarian sandwich at select locations with crispy onions, pickles, ShackSauce, American cheese, and a vegetarian patty packed with real vegetables and grains like quinoa, mushrooms, and sweet potatoes. ▪ Non-Dairy Chocolate Shake and Frozen Custard — In May, we partnered with NotCo to offer a non-dairy chocolate frozen custard and non-dairy chocolate shake at select locations in NYC and Florida. ▪ Caffeinated Lemonades — In June, we launched our first-ever caffeinated lemonades at select Shacks in San Diego, featuring Strawberry Lemonade, Mango Passionade and Cherry Hibiscus, made in-house with naturally caffeinated green coffee extract and guarana. ▪ Frozen Lemonade — At our West Village Shack, we offered a Strawberry Frozen Lemonade for the Summer season, made with real strawberries and lemon juice.
Biggest changeExclusive offerings from fiscal 2023 included: ▪ Veggie Shack — In May, we launched a vegetarian sandwich at all locations with crispy onions, pickles, ShackSauce, American cheese, and a vegetarian patty packed with real vegetables and grains like quinoa, mushrooms, and sweet potatoes. ▪ Non-Dairy Chocolate Shake and Frozen Custard — In May, we partnered with NotCo and launched a non-dairy chocolate frozen custard and non-dairy chocolate shake at all of our U.S.
Today, across our domestic and international locations, we secure vibrant sites and give them a hand-crafted, community-appropriate look by blending unique local features with our core Shake Shack design elements. We have also developed a number of iconic brand identifiers, like wrap-around steel beams; open kitchens; large, distinctive menu boards; and comfortable, distinctive furniture that advances our sustainability initiatives.
Today, across our domestic and international locations, we secure vibrant sites and give them a hand-crafted, community-appropriate look by blending unique local features with our core Shake Shack design elements. We have also developed a number of iconic brand identifiers, like wrap-around steel beams; open kitchens; large, distinctive menu boards; and comfortable furniture that advances our sustainability initiatives.
We Are All-In To make sure every Shake Shack Team Member at every level has a positive experience, we strive to build an inclusive workplace, made up of diverse talent throughout the Company. Our Diversity Equity and Inclusion (DEI) program, All-In, is part of that mission.
We Are All-In To make sure every Shake Shack team member at every level has a positive experience, we strive to build an inclusive workplace, made up of diverse talent throughout the Company. Our diversity, equity and inclusion program, All-In, is part of that mission.
Shakes remain our guests' favorite in this category, and they're scooped and spun to order. Beer, Wine and Beverages Our proprietary ShackMeister® Ale, brewed by Brooklyn Brewery, was specifically crafted to complement the ShackBurger's flavor profile. At select locations, we also offer local craft beers.
Shakes remain our guests' favorite in this category, and they're scooped and hand-spun to order. Beer, Wine and Beverages Our proprietary ShackMeister® Ale, brewed by Brooklyn Brewery, was specifically crafted to complement the ShackBurger's flavor profile. At select locations, we also offer local craft beers.
Our Chicken Bites are made with all-natural, antibiotic-free whole muscle chicken that is sous-vide cooked for optimum flavor, moisture and texture. Crinkle Cut Fries Our classic, passionately beloved crinkle cut fries are made from premium Yukon potatoes and are prepared 100% free of artificial trans fats.
Our Chicken Bites are made with all-natural, antibiotic-free whole muscle chicken that is sous-vide cooked for optimum flavor, moisture and texture. Crinkle Cut Fries Our classic, passionately beloved crinkle cut fries are made from premium potatoes and are prepared 100% free of artificial trans fats.
While ingredient specifications and menu options can vary by country, the core menus at our US-based locations include the following: Burgers Our burgers are made with a proprietary whole-muscle blend of 100% all-natural, hormone and antibiotic-free Angus beef, ground fresh, cooked to order and served on a non-GMO potato bun.
While ingredient specifications and menu options can vary by country, the core menus at our US-based locations include the following: Burgers Our burgers are made with a proprietary whole-muscle blend of 100% all-natural, no added hormone, and antibiotic-free Angus beef, ground fresh, cooked to order and served on a non-GMO potato bun.
We remain well-positioned to continue significant, sustainable financial growth and we plan to continue to execute our growth strategies while remembering to Stand For Something Good in everything we do.
We believe we remain well-positioned to continue significant, sustainable financial growth and we plan to continue to execute our growth strategies while remembering to Stand For Something Good in everything we do.
Occasionally, we supplement our menu with limited time offers, and we experiment with potential new categories we may consider adding to the menu over time. We are committed to culinary creativity and excellence, collaborating with award-winning chefs, talented bakers, farmers and artisanal purveyors, each of whom bring their unique skills and expertise to the Shake Shack experience.
We often supplement our menu with limited time offers, and we experiment with potential new categories we may consider adding to the menu over time. We are committed to culinary creativity and excellence, collaborating with award-winning chefs, talented bakers, farmers and artisanal purveyors, each of whom bring their unique skills and expertise to the Shake Shack experience.
Engaging the Community A Warm Community Gathering Place Our Shacks are so much more than a place to get burgers, fries and shakes; they’re places for the community to safely gather. We place a high premium on connecting with our communities whether through the physical design of our Shacks or by the local causes we support.
Engaging the Community A Warm Community Gathering Place Our Shacks are so much more than a place to get burgers, fries and shakes; they’re places for the community to gather. We place a high premium on connecting with our communities through the physical design of our Shacks or by the local causes we support.
The contents of our website are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. Shake Shack Inc. Form 10-K | 21
The contents of our website are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. Shake Shack Inc. Form 10-K | 19
We interact with fans across Facebook, Instagram, Twitter, TikTok and more by sharing engaging content, comments, replies and the use of user-generated content; a quick search of "#shakeshack" on Instagram reveals over 1.1 million organic posts from our fans.
We interact with fans across Instagram, TikTok, X (formerly Twitter), Facebook, and more by sharing engaging content, comments, replies and the use of user-generated content; a quick search of "#shakeshack" on Instagram reveals over 1.1 million organic posts from our fans.
Campaigns, Promotions and Events Throughout fiscal 2022 we continued to extend our brand by collaborating with celebrated chefs, developing new creative concepts, unveiling exciting promotions and participating in special events to drive brand awareness and engage with our guests.
Campaigns, Promotions and Events Throughout fiscal 2023 we continued to extend our brand by collaborating with celebrated chefs, developing new creative concepts, unveiling exciting promotions and participating in special events to drive brand awareness and engage with our guests.
Our Shack Red®, Shack White® and Shack Rose wines are sourced and produced exclusively by Gotham Project, providing our guests with premium beverage options not commonly found in our industry; a nod to our fine dining heritage.
Our Shack Red®, Shack White® and Shack Rose wines are sourced and produced exclusively by Gotham Project, providing our guests with premium beverage options not commonly found in our industry; a nod to our fine-dining roots.
We are not aware of any federal, state or local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have materially affected, or are reasonably expected to materially affect, our results of operations, competitive position, or capital expenditures. Shake Shack Inc.
We are not aware of any federal, state or local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have materially affected, or are reasonably expected to materially affect, our results of operations, competitive position, or capital expenditures.
Our commitment to doing things differently includes a focus on exceptional career support for our teams, while creating meaningful impact in both our neighborhoods and the global industry. ▪ We are committed to environmental responsibility — We source our world-class ingredients from suppliers who share our values, including 100% antibiotic- and hormone-free proteins from ethically raised animals and non-GMO buns, and are committed to sustainable packaging, a focus on renewable energy, and assessing and managing our greenhouse gas emissions. ▪ We empower our teams to act like entrepreneurs — At the heart of a Shake Shack experience is our teams’ personal commitment to craft and hospitality.
Our commitment to doing things differently includes a focus on exceptional career support for our teams, while creating meaningful impact in both our neighborhoods and the global industry. ▪ We are committed to environmental responsibility — We source our domestic ingredients from suppliers who share our values, including antibiotic-free and no added hormone proteins from ethically raised animals and non-GMO buns, and are committed to sustainable packaging, a focus on renewable energy, and assessing and managing our greenhouse gas emissions. ▪ We empower our teams to act like entrepreneurs — At the heart of a Shake Shack experience is our teams’ personal commitment to craft and hospitality.
We also have exclusive arrangements with our suppliers of crinkle cut fries, ShackMeister Ale, Shack Red wine, Shack White wine, Shack Rosé wine, hot dogs and cherry peppers.
We also have exclusive arrangements with our suppliers of crinkle cut fries, ShackMeister Ale, Shack Red wine, Shack White wine, Shack Rosé wine, hot dogs and cherry peppers. Shake Shack Inc.
Hot Dogs Shake Shack was born as a hot dog cart in 2001 and we’re proud to honor that legacy by continuing to offer a premium hot dog. Our hot dogs are made from 100% all-natural, hormone and antibiotic-free beef.
Hot Dogs Shake Shack was born as a hot dog cart in 2001 and we’re proud to honor that legacy by continuing to offer a premium hot dog. Our hot dogs are made from 100% all-natural, no added hormone and antibiotic-free beef. Shake Shack Inc.
In addition to opening new Shacks, we continue to focus on improving our same-Shack sales performance by providing a dynamic, personalized guest experience that includes new seasonal and Shack-specific offerings, technological upgrades like the Company-owned app and web ordering/delivery, thoughtful integration with local communities and excellent standards of hospitality.
In addition to opening new Shacks, we continue to focus on improving our same-Shack sales performance by providing a dynamic, personalized guest experience that includes seasonal and Shack-specific offerings, technological upgrades like the Company-owned app, web ordering, and delivery, thoughtful integration with local communities and Enlightened Hospitality.
During fiscal 2022, we purchased all of our (i) ground beef patties from 10 approved beef processors, with approximately 42% of our ground beef patties from one supplier; (ii) chicken breasts from two suppliers; (iii) potato buns from one supplier; (iv) custard base from two suppliers; (v) 'Shroom Burgers from one supplier; (vi) crinkle cut fries from two suppliers; and (vii) ShackSauce from one supplier.
During fiscal 2023, we purchased all of our (i) ground beef patties from 10 approved ground beef processors, with approximately 41% of our ground beef patties from one supplier; (ii) chicken breasts from two suppliers; (iii) potato buns from one supplier; (iv) custard base from two suppliers; (v) 'Shroom Burgers from one supplier; (vi) crinkle cut fries from two suppliers; and (vii) ShackSauce from one supplier.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS We are subject to extensive federal, state, local and foreign laws and regulations, as well as other statutory and regulatory requirements, including those related to, among others, nutritional content labeling and disclosure requirements, food safety regulations, local licensure, building and zoning regulations, employment regulations and laws and regulations related to our licensed operations.
Form 10-K | 17 GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS We are subject to extensive federal, state, local and foreign laws and regulations, as well as other statutory and regulatory requirements, including those related to, among others, nutritional content labeling and disclosure requirements, food safety regulations, local licensure, building and zoning regulations, employment regulations and laws and regulations related to our licensed operations.
Innovation Kitchen Our Innovation Kitchen is located on the lower level of the West Village Shack and connected to our home office and allows us to explore exciting new menu items for our guests.
Innovation Kitchen Our Innovation Kitchen is located on the lower level of the West Village Shack in New York City, connected to our home office and allows us to explore exciting new menu items for our guests.
We believe these identifiers are key components to the expression of the brand and the Shake Shack experience. Shake Shack Inc. Form 10-K | 9 The overall atmosphere of our Shacks evokes our original upbeat and relaxed park ambiance, combined with the fine dining experience that has become part of our brand's DNA.
We believe these identifiers are key components to the expression of the brand and the Shake Shack experience. The overall atmosphere of our Shacks evokes our original upbeat and relaxed park ambiance, combined with the fine-dining experience that has become part of our brand's DNA.
Shakes and Frozen Custard Our premium, dense, rich and creamy frozen custard, hand-spun daily on-site, is crafted from our proprietary vanilla and chocolate recipes. We use only real sugar (no high-fructose corn syrup) and milk from dairy farmers who pledge not to use artificial growth hormones.
Form 10-K | 11 Shakes and Frozen Custard Our premium, dense, rich and creamy frozen custard, hand-made daily on-site, is crafted from our proprietary vanilla and chocolate recipes. We use only real sugar (no high-fructose corn syrup) and milk from dairy farmers who pledge not to use artificial growth hormones.
Our strategy continues to be to recruit talented people who have integrity, who are warm, motivated, self-aware, and intellectually curious alongside having the competencies and skills that continue to foster our growth.
We recruit talented people who have integrity, who are warm, motivated, self-aware, and intellectually curious alongside having the competencies and skills that continue to foster our growth.
INTELLECTUAL PROPERTY Since our inception, we have strategically and proactively developed our intellectual property portfolio by registering our trademarks and service marks worldwide. As of December 28, 2022, we had 23 registered marks domestically, including registrations of our core marks ("Shake Shack," "Shack Burger," " " and " ") and certain other marks, such as Stand for Something Good.
INTELLECTUAL PROPERTY Since our inception, we have strategically and proactively developed our intellectual property portfolio by registering our trademarks and service marks worldwide. As of December 27, 2023, we had 25 registered marks domestically, including registrations of our core marks ("Shake Shack," "Shack Burger," " " and " ") and certain other marks, such as Stand for Something Good.
In addition to our in-house team of experienced real estate professionals, we also use a national real estate broker to manage a network of regional brokers to leverage external resources in pursuit of pipeline development. Looking beyond, we are pursuing and developing sites where we can continue to implement our Shack Track and drive-thru concepts.
In addition to our in-house team of experienced real estate professionals, we also use a national real estate broker to leverage external resources in pursuit of pipeline development. Looking beyond, we are pursuing and developing sites where we can continue to implement our development strategy, including drive-thru concepts.
Our burger offerings also include the SmokeShack®, 'Shroom Burger™ (a vegetarian burger), Shack Stack®, Avocado Bacon Burger and Hamburger. Shake Shack Inc. Form 10-K | 12 Chicken Our Chicken Shack is a 100% all-natural, hormone-free, antibiotic-free and cage-free chicken breast, slow cooked in buttermilk herbs, hand-battered, hand-breaded and crisp-fried to order.
Our burger offerings also include the SmokeShack®, 'Shroom Burger™ (a vegetarian burger), Shack Stack®, Avocado Bacon Burger and Hamburger. Chicken Our Chicken Shack is a 100% all-natural, no added hormone, and antibiotic-free chicken breast, slow cooked in buttermilk and herbs, hand-battered, hand-breaded and crisp-fried to order.
With a focus on technology and automation we are working to streamline and eliminate manual work for our teams while driving compliance and minimizing human error. We are dedicated to the continuous improvement of technology, processes, and experiences within the Shake Shack team member journey.
With a focus on technology and automation, we are working to streamline and eliminate manual work for our teams while driving compliance and minimizing human error. We are dedicated to the continuous improvement of technology, processes, and experiences within the Shake Shack team member lifecycle. In fiscal 2023, we made several improvements for our team member experience.
We use many customized features to increase operational effectiveness, improve internal communication and enhance data analysis. The point-of-sale system uses a touch screen interface, graphical order confirmation display, touch screen kitchen display and integrated, high-speed credit card and gift card processing. This system also collects daily transaction data, which generates information about sales, product mix and average transaction size.
The point-of-sale system uses a touch screen interface, graphical order confirmation display, touch screen kitchen display and integrated, high-speed credit card and gift card processing. This system also collects daily transaction data, which generates information about sales, product mix and average transaction size.
Of course, the rate of future Shack growth in any particular period is inherently uncertain and is subject to numerous factors beyond our control. As a result, we do not currently have an anticipated timeframe for such expansion.
In the long-term, we believe we have the potential to grow our current domestic Company-operated Shack footprint to at least 450 Shacks. Of course, the rate of future Shack growth in any particular period is inherently uncertain and is subject to numerous factors beyond our control. As a result, we do not currently have an anticipated timeframe for such expansion.
This designation highlights the core of our Enlightened Hospitality ethos and our commitment to a great workplace for all. The HUG Fund One of the ways we embrace Enlightened Hospitality internally is through the administration of our own HUG (Help Us Give) Fund, a 501(c)(3) organization available for all our Team Members.
The HUG Fund One of the ways we embrace Enlightened Hospitality internally is through the administration of our own Help Us Give (HUG) Fund, a 501(c)(3) organization funded by and available for our team members.
With the support of executive leaders, All-In works to ensure Shake Shack provides equal opportunities for all, and removes obstacles or barriers to success, while also fostering a culture of inclusion and belonging.
With the support of executive leaders, All-In works to ensure Shake Shack provides equal opportunities for all, and removes obstacles or barriers to success, while also fostering a culture of inclusion and belonging. Our All-In program's initiatives include: ▪ Workforce Diversity — We aim to be as diverse as the communities we serve.
Form 10-K | 19 SEASONALITY Our business is subject to seasonal fluctuations which can impact sales from quarter-to-quarter. Year-over-year and quarter-to-quarter results can be also be impacted by the number and timing of new Shack openings. Additionally, given our use of a fiscal calendar, there may be some fluctuations between quarters due to holiday shifts in the calendar year.
However, given our use of a fiscal calendar, there may be some fluctuations between quarters due to holiday shifts in the calendar year. Year-over-year and quarter-to-quarter results can also be impacted by the number and timing of new Shack openings.
Working at Shake Shack is about more than making a great burger, it's about creating elevated and uplifting experiences for our team members and guests and getting opportunities to build a rewarding career. We strive to make every team member at Shake Shack feel empowered to impact our Shacks and the communities around them.
Working at Shake Shack is about more than making a great burger; it's about creating elevated and uplifting experiences for our team members and guests and getting opportunities to build a rewarding career.
We are subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and file or furnish reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC").
AVAILABLE INFORMATION Our website is located at www.shakeshack.com, and our investor relations website is located at https://investor.shakeshack.com. We are subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and file or furnish reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC").
As of December 28, 2022, approximately 95% of certain food and beverage ingredients including chicken, fries and custard were fulfilled through our broadline distributor for distribution and delivery to each Company-operated Shack which collectively represents approximately 43% of our total purchases. Shake Shack Inc.
As of December 27, 2023, approximately 95% of certain food and beverage ingredients including chicken, fries and custard were fulfilled through our broadline distributor for distribution and delivery to each Company-operated Shack which collectively represents approximately 47% of our total purchases. As of December 27, 2023, we were utilizing 20 affiliated distribution centers to supply our domestic Company-operated Shacks.
Fogertey was a Vice President, Lead Derivative Strategist overseeing single stock options in the US and Latin America as well as global ETFs and market structure. Ms. Fogertey has a BSBA in Accounting, Finance and International Business from Washington University in St. Louis, Olin School of Business. Zachary Koff has served as Shake Shack’s Chief Operating Officer since January 2017.
Prior to covering the Restaurant sector, Ms. Fogertey was a Vice President, Lead Derivative Strategist overseeing single stock options in the U.S.and Latin America as well as global ETFs and market structure. Ms. Fogertey has a BSBA in Accounting, Finance and International Business from Washington University in St. Louis, Olin School of Business.
In addition, we serve Abita Root Beer, Shack-made lemonade, organic fresh brewed iced tea, Fifty/Fifty (half lemonade, half organic iced tea), Honest Kids organic apple juice and Shack|20® bottled still and sparkling waters, from which 1% of sales help support the clean-up of water sources around the world.
In addition, we serve Abita Root Beer, Shack-made lemonade, organic fresh brewed iced tea, Fifty/Fifty (half lemonade, half organic iced tea), Honest Kids organic apple juice and Shack|20® bottled still and sparkling waters.
We achieve this through innovations in service, trendsetting culinary innovation, and the design of warm community gathering places. Shake Shack Inc. Form 10-K | 7 Digital Evolution The focus of our digital strategy is to deliver Enlightened Hospitality to our guests across multiple channels.
We achieve this through innovations in service, trendsetting culinary innovation, and the design of warm community gathering places. Digital Evolution The focus of our digital strategy is to deliver Enlightened Hospitality to our guests across multiple channels. Through modern platforms, we continuously strive to build more frictionless ways to deliver the tailored Shake Shack experience with convenience and accessibility.
We pride ourselves on sourcing premium ingredients from partners who share our dedication to quality, like 100% all-natural proteins with no hormones or antibiotics, that are humanely raised and source-verified.
During fiscal 2023, we continued to see elevated levels of cyber attacks including phishing, malware and bot attacks. Sourcing and Supply Chain We pride ourselves on sourcing premium ingredients from partners who share our dedication to quality, like 100% all-natural proteins with no added hormones or antibiotics, that are humanely raised and source-verified.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, statements of changes in beneficial ownership and amendments to those reports are available for free on our investor relations website as Shake Shack Inc.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, statements of changes in beneficial ownership and amendments to those reports are available for free on our investor relations website as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.
Domestic Company-Operated Shacks We have a strong pipeline of Shacks, however, further opportunity for growth lies in opening new, domestic Company-operated Shacks and we believe there is still tremendous whitespace opportunity to expand in both new and existing U.S. markets. We will continue to invest in infrastructure with an eye toward growing rapidly, but with discipline.
Domestic Company-Operated Shacks Although we have a strong pipeline of Shacks, further opportunity for growth lies in opening new, domestic Company-operated Shacks as we believe there is still tremendous whitespace to expand in both new and existing U.S. markets. We remain committed to investing with discipline for strong returns as we continue to build a robust pipeline for future growth.
In some markets, we have existing tenured partnerships with organizations, like Food Bank of the Rockies in Colorado, and in others we are building new relationships in our local communities with every Shack we open. In 2022, we matched $1 for every sandwich purchased at every new Shack opening day back to our chosen local nonprofit partner.
For certain new Shack openings, we partner with local charities for opening day. In some markets, we have existing tenured partnerships with organizations, like Food Bank of the Rockies in Colorado, and in other markets we are building new relationships in our local communities with Shacks we open.
Investors and others can receive notifications of new information posted on our investor relations website in real time by subscribing to email alerts. We also make certain corporate governance documents available on our investor relations website, including our corporate governance guidelines, board committee charters, code of business conduct and ethics, as well as certain Company policies.
We also make certain corporate governance documents available on our investor relations website, including our corporate governance guidelines, board committee charters, code of business conduct and ethics, as well as certain Company policies.
The culinary team uses this dedicated space to get even more creative, dig deeper into our fine dining roots, collaborate with other chefs and explore new opportunities as we continue to grow. The West Village Shack’s menu has all our classic items and features items from the Innovation Kitchen, with guest-favorite test items potentially becoming permanent menu items.
The culinary team uses this dedicated space to get even more creative, dig deeper into our fine-dining roots, collaborate with other chefs and explore new opportunities as we continue to grow.
In addition to social media, we also connect with our guests through our email marketing program via targeted menu item alerts, local event invites, new Shack opening information and other relevant Shake Shack news. Shake Shack Inc.
In addition to social media, we also connect with our guests through our email marketing program via targeted menu item alerts, local event invites, new Shack opening information and other relevant Shake Shack news. Media, Product Placement and Influencers Shake Shack’s unique positioning has helped us garner robust media coverage across food, lifestyle, business and trade publications.
We help foster an environment that attracts and welcomes diverse talent; enables a culture of belonging, inclusion, and equity; and supports an engaging, and overall positive Team Member experience.
We help foster an environment that attracts and welcomes diverse talent; enables a culture of belonging, inclusion, and equity; and supports an engaging, and overall positive team member experience. We continued to lean into our team member value proposition by training managers in positive team member relations and effective people practices.
Guests can support by mentioning the fundraiser when checking out in-Shack or using a fundraiser code on the Shack app for pick-up or delivery. Additionally, we provide a Donation Day flyer for the local school or organization to use as an invitation to the community. For all new Shack openings, we partner with local charities for opening day.
Guests who participate in these fundraisers have a portion of their order totals donated to a local nonprofit by mentioning the fundraiser when checking out in-Shack or using a fundraiser code on the Shack app for pick-up or delivery. Additionally, we provide a Donation Day flyer for the local school or organization to use as an invitation to the community.
Form 10-K | 15 International Licensed Operations In fiscal 2022, we opened 25 international Shacks and closed two international Shacks.
Form 10-K | 14 International Licensed Operations In fiscal 2023, we opened 38 international Shacks and closed three international Shacks.
As we've expanded domestically, we have nine approved raw beef suppliers and 10 approved beef processors around the country who produce our burgers on a daily basis. To ensure dependable quality, we have a limited number of domestic suppliers for our major ingredients, including beef patties, chicken, potato buns, custard, portobello mushrooms and cheese sauce.
To ensure dependable quality, we have a limited number of domestic suppliers for our major ingredients, including beef patties, chicken, potato buns, custard, portobello mushrooms and cheese sauce.
Shake Shack Inc. Form 10-K | 2 ▪ We do the right thing and hold ourselves accountable — At Shake Shack, we've always believed in leading by example and making better possibilities come to life with our teams and community, beyond just making great food.
Form 10-K | 2 ▪ We gather communities and enrich our neighborhoods — Across the globe, Shacks have been an integral part of their communities, and, we believe we have a role to play in supporting and revitalizing the neighborhoods where we work and serve. ▪ We do the right thing and hold ourselves accountable — At Shake Shack, we've always believed in leading by example and making better possibilities come to life with our teams and community, beyond just making great food.
During fiscal 2022, we provided 41 Team Members with financial grants to help alleviate financial burdens caused by catastrophic events. Leadership & Talent Development We are dedicated to producing the human capabilities the Company needs to accomplish its business objectives, and to provide modern content and experiences that develop and retain Team Members.
Leadership & Talent Development We are dedicated to cultivating the human capabilities the Company needs to accomplish its business objectives, and to provide modern content and experiences that develop and retain team members.
This space also allows us to house our quality assurance and culinary teams together, ensuring that every item on our menu meets our strict standards. Shack-Wide Limited Time Offerings ("LTO") Our LTO program generally features a new, premium burger or chicken sandwich, and special fry options for varying time periods throughout the year along with unique beverages and shakes.
Shack-Wide Limited Time Offerings ("LTO") Our LTO program generally features a new, premium burger or chicken sandwich, and special fry options for varying time periods throughout the year along with unique beverages and shakes.
As new competitors enter the burger and fast casual segment and offer new digital experiences as well as companies that offer subscription based meal options, our competition continues to intensify. We also face increasing pressures from certain Shake Shack Inc.
As new competitors enter the burger and fast casual segment and offer new digital experiences as well as companies that offer subscription based meal options, our competition continues to intensify. We also face increasing pressures from certain competitors who have announced initiatives to offer better quality ingredients relative to their previous offerings, such as antibiotic-free meat or plant-based meat alternatives.
Name Age Position Randy Garutti 47 Chief Executive Officer and Director Katherine I. Fogertey 39 Chief Financial Officer Zachary Koff 43 Chief Operating Officer Randy Garutti has served as Shake Shack’s Chief Executive Officer and on the Board of Directors since April 2012. Prior to becoming Chief Executive Officer, Mr.
Fogertey 40 Chief Financial Officer Randy Garutti has served as Shake Shack’s Chief Executive Officer and on the Board of Directors since April 2012. Prior to becoming Chief Executive Officer, Mr. Garutti served as Chief Operating Officer of SSE Holdings since January 2010. Prior to leading Shake Shack, Mr.
Since the original Shack opened in 2004 in NYC’s Madison Square Park, the Company has expanded to over 400 locations system-wide, including over 260 in 32 U.S. States and the District of Columbia, and over 140 international locations across London, Hong Kong, Shanghai, Singapore, Mexico City, Istanbul, Dubai, Tokyo, Seoul and more.
Since the original Shack opened in 2004 in NYC’s Madison Square Park, the Company has expanded to 518 Shacks in operation, system-wide, of which 295 were domestic Company-operated Shacks, 39 were domestic licensed Shacks and 184 were international licensed Shacks across London, Hong Kong, Shanghai, Singapore, Mexico City, Istanbul, Dubai, Tokyo, Seoul and more.
This 18-week classroom-style program aligns to our organizational competencies and supports the transfer of learning between graduates through cohort mentoring, business integration and real-world Shack experience. During fiscal year 2022, the Shift Up program had 86 participants. Additionally, the program had a 88% completion rate and 91% retention rate for fiscal year 2022.
This 16-week classroom-style program aligns to our organizational competencies and supports the transfer of learning between graduates through cohort mentoring, business integration and real-world Shack experience.
We are also excited about opening our first Shack in Malaysia in 2024, and continuing to consider opening up new markets in the future. The enduring strength of our brand continues to create opportunities to expand domestically and abroad. Shake Shack Inc.
In 2024, we look forward to opening our first Shack in three new markets — Kuala Lumpur, Tel Aviv, and Toronto — and we are optimistic about future expansion opportunities beyond these exciting new markets. The enduring strength of our brand continues to create opportunities to expand domestically and abroad. Shake Shack Inc.
We embrace that heritage and are committed to sourcing premium ingredients, such as antibiotic- and hormone-free proteins while offering excellent value to our guests. Our core menu is inspired by the finest versions of the classic American roadside burger stand.
Culinary Approach Shake Shack's unique value proposition is partially defined by our roots in fine-dining. We embrace that heritage and are committed to sourcing premium ingredients, such as antibiotic-free and no added hormone proteins while offering excellent value to our guests. Our core menu is inspired by elevated versions of American classics.
Digital Hospitality As our guests have become more accustomed to our digital channels, it’s increasingly important for our Hospitality team to be able to meet the guest wherever and whenever they prefer. To help us reach guests faster and on more channels, we implemented Gladly as a new customer engagement platform.
Digital Hospitality: Live Chat As our guests have become more accustomed to our digital channels, it is increasingly important for our hospitality team to be able to meet the guest wherever and whenever they prefer.
Form 10-K | 17 As of December 28, 2022, we were utilizing 20 affiliated distribution centers to supply our domestic Company-operated Shacks. We recognize that the safety and consistency of our products begins with our suppliers, so suppliers must meet certain criteria and strict quality control standards in the production and delivery of our food and other products.
We recognize that the safety and consistency of our products begins with our suppliers, so suppliers must meet certain criteria and strict quality control standards in the production and delivery of our food and other products.
She additionally developed deep relationships and unique insights into the largest peers in our industry, and currently serves as a Member of the Society of Fellows for the Culinary Institute of America. Prior to covering the Restaurant sector, Ms.
In this position, she had a heavy focus on the impact of technology on restaurant profitability and market share and built various statistical forecasting models. She additionally developed deep relationships and unique insights into the largest peers in our industry, and currently serves as a Member of the Society of Fellows for the Culinary Institute of America.
Thanks to our roots in New York and the success of our licensed Shacks around the world, we continue to attract interest from potential licensees from many different markets. In 2023, we look forward to opening our first Shack in two new countries--Thailand and the Bahamas--and we are optimistic about future expansion opportunities beyond these exciting new markets.
Thanks to our roots in New York and the success of our licensed Shacks around the world, we continue to attract interest from potential licensees from many different markets.
We believe we have developed a reliable supply chain, but we have also taken strides to identify alternative sources to help lessen the possible interruptions of service and product. Distribution We have a centralized distribution process with one distributor, which we refer to as our "broadline" distributor, to provide virtually all of our food distribution services in the U.S.
Distribution We have a centralized distribution process with one distributor, which we refer to as our "broadline" distributor, to provide virtually all of our food distribution services in the U.S.
Our competition includes multi-unit international, national, and regional chains, as well as a wide variety of locally-owned restaurants. Our competitors may operate company-owned restaurants, franchised restaurants or some combination. Many of our competitors offer breakfast, lunch and dinner, as well as dine-in, carry-out, drive-thru and delivery services.
Our primary competitors include other fast casual restaurants, quick service restaurants and casual dining restaurants. Our competition includes multi-unit international, national, and regional chains, as well as a wide variety of locally-owned restaurants. Our competitors may operate company-owned restaurants, franchised restaurants or some combination.
OVERVIEW Shake Shack serves modern, fun and elevated versions of American classics using only the best ingredients. We are known for our made-to-order Angus beef burgers, crispy chicken, hand-spun milkshakes, house-made lemonades, beer, wine, and more. With our fine dining roots and a commitment to crafting uplifting experiences, Shake Shack has become a cult-brand and created a new category, fine-casual.
We are known for our made-to-order Angus beef burgers, crispy chicken, hand-spun milkshakes, house-made lemonades, beer, wine, and more. With our fine-dining roots and a commitment to crafting uplifting experiences, Shake Shack has become a cult-brand. Our purpose is to Stand For Something Good®, from premium ingredients and employee development to inspiring designs and community investment.
We have developed and implemented training and operating standards related to the food preparation, cleanliness and safety in each Shack, and of course, we have a dedicated Quality Assurance team. Management Information Systems Our domestic Company-operated Shacks use computerized point-of-sale and back-office systems designed for the restaurant industry.
We have developed and implemented training and operating standards related to the food preparation, cleanliness and safety in each Shack, and of course, we have a dedicated Quality Assurance team. Shake Shack Inc.
Of the 86 participants, 31 Team Members were promoted into Manager-In-Training, Manager or California Non-Exempt Manager roles. GUEST EXPERIENCE Danny Meyer's original vision of Enlightened Hospitality guided the creation of Shake Shack's unique culture. We believe that culture is the single most important factor in our success.
This year, 72% of our new General Managers and 58% of new Area Directors were promoted from within. GUEST EXPERIENCE Danny Meyer's original vision of Enlightened Hospitality guided the creation of Shake Shack's unique culture. We believe that culture is the single most important factor in our success.
The 25 new international Shacks included 13 Shacks in China and Hong Kong, one in the United Arab Emirates, four in South Korea, one in Japan, one in the Philippines, one in Singapore, two in Mexico, one in Turkey, and one in Qatar. As of the end of fiscal 2022, one of our international licensed Shacks was temporarily closed.
The 38 new international Shacks included 13 in China and Hong Kong, four in Kuwait, five in Mexico, two in the Philippines, one in Singapore, three in South Korea, two in Thailand, one in The Bahamas, two in Turkey, one in the United Arab Emirates, and four in the United Kingdom.
As of December 28, 2022 we had 182 licensed Shacks, of which 149 were international and 33 were domestic. Through learnings from our licensed partnerships, we are able to share insights with the broader Company and we continue to work with our licensees to navigate both COVID-19 pressures and inflationary challenges across the globe.
Through learnings from our licensed partnerships, we are able to share insights with the broader Company and we continue to work with our licensees to navigate macroeconomic uncertainty, inflationary challenges, and geopolitical interdependency across the globe.
Each Shack is designed to convey a consistent brand message while also tailoring marketing efforts to its specific region. We offer menu items that feature ingredients and beers specific to each Shack's community, and we often team up with local chefs and restaurants to offer our guests unique, collaborative menu items.
We may offer menu items that feature ingredients and beers specific to each Shack's community, and we often team up with local chefs and restaurants to offer our guests unique, collaborative menu items. We also collaborate with local artists and designers to bring beautiful artwork and installations to our Shacks.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases as part of our investor relations website.
Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by subscribing to email alerts.
Through modern platforms, we continuously strive to build more frictionless ways to deliver the unique Shake Shack experience with convenience and accessibility. Our digital initiatives are defined by each of the following themes: ▪ Enlightened Hospitality — Using our digital channels to bring guests an uplifted sense of hospitality.
Our digital initiatives are defined by each of the following themes: ▪ Enlightened Hospitality — Using our digital channels to bring guests an uplifted sense of hospitality.
Environmental Responsibility We focus on environmental responsibility across our operations, including with respect to our ingredients, where we are committed to sourcing our world-class ingredients from suppliers who share our values, using 100% antibiotic- and hormone-free proteins from ethically raised animals and non-GMO buns, continuing to mitigate impact by removing unnecessary packaging elements and substituting more sustainable, certified materials where possible, and increasing our use of renewable energy and improving our energy management.
Form 10-K | 16 Environmental Responsibility We focus on environmental responsibility across our operations, including with respect to our ingredients, where we are committed to sourcing our premium ingredients from suppliers who share our values, using antibiotic-free and no added hormone proteins from ethically raised animals and non-GMO buns.
Domestically, we expanded our Company-operated footprint by opening 36 net new Shacks in 2022, which represents a 17% increase from the prior fiscal year. As of December 28, 2022, we had 254 domestic Company-operated Shacks.
Domestically, we expanded our Company-operated footprint by opening 41 new Shacks in fiscal 2023, which represents a 16% increase from the prior fiscal year. As of December 27, 2023, we had 295 domestic Company-operated Shacks. Our disciplined expansion strategy is designed to leverage our business model's strength and our brand awareness.
Growing Our Licensed Shack Business In addition to expanding the footprint of our Company-operated Shacks, we see additional opportunities to continue growing our licensed portfolio by expanding further both domestically and internationally. To date, our licensed business has been an asset-light and high-return strategy for growing our brand awareness and increasing cash flow.
Moreover, we have bolstered our home office capacities to provide greater levels of support to our Shacks. Growing Our Licensed Shack Business In addition to expanding the footprint of our Company-operated Shacks, we see additional opportunities to continue growing our licensed portfolio by expanding further, both domestically and internationally.
We saw elevated costs to repair and maintain our restaurants and equipment due to shortages and inflationary press in fiscal 2022. Digital Capital Expenditures To further support our Shacks and improve the guest experience we have made investments in various digital tools to expand our reach with more convenient channels, laying the groundwork for sustainable, long-term growth Shake Shack Inc.
Kiosk & Digital Capital Expenditures To further support our Shacks and improve the guest experience, we have made investments in various digital tools to expand our reach, laying the groundwork for sustainable, long-term growth. Kiosk is an example of how we are bridging the in-Shack and digital world.
COMPETITION The restaurant industry is highly competitive and fragmented, with restaurants competing on a variety of fronts, including taste, price, food quality, service, location and the ambiance and condition of the restaurant. Our primary competitors include other fast casual restaurants, quick service restaurants and casual dining restaurants.
We track and calculate scope 1 and scope 2 greenhouse gas emissions to report in compliance with industry standards, in order to assess our current standing. COMPETITION The restaurant industry is highly competitive and fragmented, with restaurants competing on a variety of fronts, including taste, price, food quality, service, location and the ambiance and condition of the restaurant.
Community and Charitable Partners In addition to special events, we regularly serve our communities in a variety of ways including 25% Donation Days to show support for local schools and organizations. Supporters who participate in these fundraisers have a portion of their order totals donated to a local nonprofit.
We participate in local celebrations and develop relationships within the community, helping position Shake Shack as a premium brand that is connected to its neighborhood. Community and Charitable Partners In addition to special events, we regularly serve our communities in a variety of ways including 25% Donation Days to show support for local schools and organizations.
As our Team continues to grow, we believe that our culture of Enlightened Hospitality helps us deliver a consistent Shack experience, and to develop future leaders from within. One such program is The Shacksperience — a functional growth model and overall employment experience for Shake Shack Team Members.
As our team continues to grow, we believe that our culture of Enlightened Hospitality helps us deliver a consistent Shack experience, and to develop future leaders from within. In fiscal 2023, the learning and talent development team focused on our mission to promote, support, and enable people capabilities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Operating in the Restaurant Industry ▪ Incidents involving food safety and food-borne illnesses could adversely affect guests' perception of our brand, result in lower sales and increase operating costs. ▪ The digital and delivery business, related expenses, execution and expansion thereof, is uncertain and subject to risk. ▪ Rising labor costs and difficulties recruiting and retaining the right team members could adversely affect our business. ▪ Increased food commodity and energy costs could decrease our Shack-level operating profit margins or cause us to limit or otherwise modify our menu, which could adversely affect our business. ▪ Shortages or interruptions in the supply or delivery of food products could adversely affect our operating results. ▪ We face significant competition for guests, and if we are unable to compete effectively, our business could be adversely affected. ▪ Inflationary environment poses a new risk to broader demand for restaurants, including ours. ▪ The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results. ▪ Our international licensed Shacks import many of our proprietary and other core ingredients from the United States and other countries.
Biggest changeRisks Related to Operating in the Restaurant Industry ▪ Incidents involving food safety and food-borne illnesses could adversely affect guests' perception of our brand, result in lower sales and increase operating costs. ▪ Rising labor costs and difficulties recruiting and retaining the right team members could adversely affect our business. ▪ Increased food commodity and energy costs could decrease our Shack-level operating profit margins or cause us to limit or otherwise modify our menu, which could adversely affect our business. ▪ The digital and delivery business, related expenses, execution and expansion thereof, is uncertain and subject to risk. ▪ We face significant competition for guests, and if we are unable to compete effectively, our business could be adversely affected. ▪ Shortages or interruptions in the supply or delivery of food products could adversely affect our operating results. ▪ Inflationary environment poses a risk to broader demand for restaurants, including ours. ▪ Pandemics or disease outbreaks, such as the COVID-19 pandemic, have disrupted, and may continue to disrupt our business, and have materially affected our business, results of operations and our financial condition. ▪ The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.
We may incur significant costs and damage our brand if we are unable to identify, develop and execute on appropriate business strategies, which could have a material adverse effect on our business, financial condition and results of operations.
We may incur significant costs and damage our brand if we are unable to identify, develop and execute appropriate business strategies, which could have a material adverse effect on our business, financial condition and results of operations.
If the costs of funding new Shacks or renovations or enhancements to existing Shacks exceed budgeted amounts, and/or the time for building or renovation is longer than anticipated, our profits could be reduced. Additionally, recent inflation of material and labor costs in addition to our new, larger drive-thru formats have resulted in higher construction costs.
If the costs of funding new Shacks or renovations or enhancements to existing Shacks exceed budgeted amounts, and/or the time for building or renovation is longer than anticipated, our profits could be reduced. Additionally, recent inflation of material and labor costs in addition to our larger drive-thru formats have resulted in higher construction costs.
However, since we do not have day-to-day control over all of these Shacks, we cannot give assurance that there will not be differences in product and service quality, operations, labor law enforcement, marketing or that there will be adherence to all of our guidelines and applicable laws at these Shacks.
However, since we do not have day-to-day control over these Shacks, we cannot give assurance that there will not be differences in product and service quality, operations, labor law enforcement, marketing or that there will be adherence to all of our guidelines and applicable laws at these Shacks.
The restaurant industry depends on consumer discretionary spending, and any economic downturn or disruptions in the overall economy, including political unrest and protests, high inflation rates, high unemployment and financial market volatility and unpredictability, may cause a related reduction in consumer confidence, which negatively affects the restaurant industry.
The restaurant industry depends on consumer discretionary spending, and any economic downturn or disruptions in the overall economy, including high inflation rates, high unemployment, financial market volatility and unpredictability, and political unrest and protests, may cause a related reduction in consumer confidence, which negatively affects the restaurant industry.
Further, if we enter into a new market with unionized construction companies, or the construction companies in our current markets become unionized, construction and build costs for new Shacks in such markets could materially increase. ▪ The Affordable Care Act - We are required to provide affordable coverage to substantially all full-time employees, or otherwise be subject to potential excise tax penalties based on the affordability criteria in the Act.
Further, if we enter into a new market with unionized construction companies, or the construction companies in our current markets become unionized, construction and build costs for new Shacks in such markets could materially increase. ▪ The Affordable Care Act - We are required to provide affordable coverage to substantially all full-time employees, or otherwise be subject to potential excise tax penalties based on the affordability criteria in the Affordable Care Act.
We may not be able to open our planned new Shacks within budget or on a timely basis, if at all, given the uncertainty of these factors, which could adversely affect our business, financial condition and results of operations. As we operate more Shacks, our rate of expansion relative to the size of our Shack base will eventually decline.
We may not be able to open our planned new Shacks within budget or on a timely basis, if at all, given the uncertainty of these factors, which could adversely affect our business, financial condition and results of operations. As we operate more Shacks, our rate of expansion relative to the size of our Shack base will decline.
If we are unable to maintain and grow Shack sales at our existing Shacks, our financial performance could be adversely affected. The level of same-Shack sales growth, which represents the change in year-over-year revenues for domestic Company-operated Shacks open for 24 full months or longer, could affect our Shack sales growth.
If we are unable to maintain and grow Shack sales at our existing Shacks, our financial performance could be adversely affected. The level of same-Shack sales growth, which represents the change in year-over-year revenues for domestic Company-operated Shacks open for 24 full months or longer, could affect our overall Shack sales growth.
Recent litigation against restaurant chains has resulted in significant judgments and settlements under dram shop statutes. Because these cases often seek punitive damages, which may not be covered by insurance, such litigation could have an adverse impact on our business, financial condition and results of operations.
Litigation against restaurant chains has resulted in significant judgments and settlements under dram shop statutes. Because these cases often seek punitive damages, which may not be covered by insurance, such litigation could have an adverse impact on our business, financial condition and results of operations.
Any of these problems could slow our growth from licensing operations and reduce our licensing revenues. If we fail to maintain our corporate culture, our relationships with our team members and guests could be negatively affected. We take great pride in our culture and believe that it is an extremely important factor in our success.
Any of these problems could slow our growth from licensed operations and reduce our licensing revenues. If we fail to maintain our corporate culture, our relationships with our team members and guests could be negatively affected. We take great pride in our culture and believe that it is an extremely important factor in our success.
Our ability to make scheduled payments of the principal of, to pay special interest on or to refinance our indebtedness, including the $250.0 million 0% Convertible Senior Notes due 2028 (the “Notes”), depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
Our ability to make scheduled payments of the principal of, to pay special interest on or to refinance our indebtedness, including the $250.0 million 0% Convertible Senior Notes due in 2028 (the “Notes”), depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
Form 10-K | 23 Risks Related to Our Convertible Notes ▪ Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt. ▪ The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results. ▪ Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our Class A common stock. ▪ Certain provisions in the indenture governing the Notes may delay or prevent an otherwise beneficial takeover attempt of us.
Form 10-K | 21 Risks Related to Our Convertible Notes ▪ Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt. ▪ The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results. ▪ Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our Class A common stock. ▪ Certain provisions in the indenture governing the Notes may delay or prevent an otherwise beneficial takeover attempt of us.
We may experience challenges in achieving the goals we have set and we may be unsuccessful in executing on our strategies once identified and we will be required to make significant capital expenditures to pursue these goals.
We may experience challenges in achieving the goals we have set and we may be unsuccessful in executing our strategies once identified and we will be required to make significant capital expenditures to pursue these goals.
As a result, we are and will be, on an increasing basis, subject to the risks of doing business outside the United States, including: ▪ changes in foreign currency exchange rates or currency restructurings and hyperinflation or deflation in the countries in which we operate; ▪ the imposition of restrictions on currency conversion or the transfer of funds or limitations on our ability to repatriate non-U.S. earnings in a tax effective manner; ▪ inability to achieve international tax treaty status with select licensed partners; ▪ the presence and acceptance of business corruption in various international markets; ▪ the ability to comply with, or impact of complying with, complex and changing laws, regulations and policies of foreign governments that may affect investments or operations, including foreign ownership restrictions, import and export controls, tariffs, embargoes, intellectual property, licensing requirements and regulations and changes in applicable tax laws; ▪ the difficulties involved in managing an organization doing business in many different countries; ▪ the ability to comply with, or impact of complying with, complex and changing laws, regulations and economic policies of the U.S. government, including U.S. laws and regulations relating to economic sanctions, export controls and anti-boycott requirements; ▪ increase in an anti-American sentiment and the identification of the licensed brand as an American brand; ▪ the effect of disruptions caused by severe outbreak of disease, weather, natural disasters or other events that make travel to a particular region, as well as domestic visits, less attractive or more difficult; and ▪ political, social and economic instability.
As a result, we are and will be, on an increasing basis, subject to the risks of doing business outside the United States, including: ▪ changes in foreign currency exchange rates or currency restructurings and hyperinflation or deflation in the countries in which we operate; ▪ the imposition of restrictions on currency conversion or the transfer of funds or limitations on our ability to repatriate non-U.S. earnings in a tax effective manner; ▪ inability to achieve international tax treaty status with select licensed partners; ▪ the possibility of business corruption in various international markets; ▪ the ability to comply with, or impact of complying with, complex and changing laws, regulations and policies of foreign governments that may affect investments or operations, including foreign ownership restrictions, import and export controls, tariffs, embargoes, intellectual property, licensing requirements and regulations and changes in applicable tax laws; ▪ the enforceability of contract rights; ▪ the difficulties involved in managing an organization doing business in many different countries; ▪ the ability to comply with, or impact of complying with, complex and changing laws, regulations and economic policies of the U.S. government, including U.S. laws and regulations relating to economic sanctions, export controls and anti-boycott requirements; ▪ increase in an anti-American sentiment and the identification of the licensed brand as an American brand; ▪ the effect of disruptions caused by severe outbreak of disease, weather, natural disasters or other events that make travel to a particular region, as well as domestic visits, less attractive or more difficult; and ▪ political, social and economic instability.
Our mission to Stand For Something Good also exposes us to criticism from special interest groups who have different opinions regarding certain food issues or who believe we should pursue different strategies and goals. Any adverse publicity that results from such criticism could damage our brand and adversely affect customer traffic.
Our mission to Stand For Something Good also exposes us to criticism from special interest groups who have different opinions regarding certain food issues or who believe we should pursue different strategies and goals. Any adverse publicity that results from such criticism could damage our brand and adversely affect guest traffic.
Our results have been, and in the future may continue to be, significantly impacted by the timing of new Shack openings (often dictated by factors outside of our control), including landlord, construction and permitting delays, associated Shack pre-opening costs and operating inefficiencies, as well as changes in our geographic concentration due to the opening of new Shacks.
Our results have been, and in the future may continue to be, significantly impacted by the timing of new Shack openings (often dictated by factors outside of our control), including landlord, construction and permitting delays, associated Shack pre-opening costs and operating inefficiencies, as well as changes in our geographic concentration.
RISKS RELATED TO OUR TAX RECEIVABLE AGREEMENT We are a holding company and our principal asset is our interest in SSE Holdings, and, accordingly, we will depend on distributions from SSE Holdings to pay our taxes and expenses, including payments under the Tax Receivable Agreement. SSE Holdings' ability to make such distributions may be subject to various limitations and restrictions.
We are a holding company and our principal asset is our interest in SSE Holdings, and, accordingly, we will depend on distributions from SSE Holdings to pay our taxes and expenses, including payments under the Tax Receivable Agreement. SSE Holdings' ability to make such distributions may be subject to various limitations and restrictions.
We may be adversely affected by any negative publicity, regardless of its accuracy, including with respect to: ▪ food safety concerns, including food tampering or contamination; ▪ food-borne illness incidents; ▪ the safety of the food commodities we use, particularly beef; ▪ guest injury; ▪ security breaches of confidential guest or team member information; ▪ third-party service providers, particularly related to delivery services and information technology, and potential guest dissatisfaction from circumstances out of our control relating to third-party service providers; ▪ employment-related claims relating to alleged employment discrimination, wage and hour violations, labor standards or health care and benefit issues; or ▪ government or industry findings concerning our Shacks, restaurants operated by other food service providers or others across the food industry supply chain.
We may be adversely affected by any negative publicity, regardless of its accuracy, including with respect to: ▪ food safety concerns, including food tampering or contamination; ▪ food-borne illness incidents; ▪ the safety of the food commodities we use, particularly beef; ▪ guest injury; ▪ security breaches of confidential guest or team member information; ▪ third-party service providers, particularly related to delivery services and information technology, and potential guest dissatisfaction from circumstances out of our control relating to third-party service providers; ▪ concerns over our reported financial results; ▪ employment-related claims relating to alleged employment discrimination, wage and hour violations, labor standards or health care and benefit issues; or ▪ government or industry findings concerning our Shacks, restaurants operated by other food service providers or others across the food industry supply chain.
It is possible such initiatives will not be successful, that we will not achieve our target same-Shack sales growth or that same-Shack sales growth could be negative, which may cause a decrease in Shack sales and profit growth that would adversely affect our business, financial condition or results of operations.
It is possible such initiatives will not be successful, that we will not achieve our target same-Shack sales growth or that same-Shack sales growth could be negative, which may cause a decrease in Shack sales and profit growth that would adversely affect our business, financial condition or results of operations. Shake Shack Inc.
We are also subject to a variety of other claims from third parties arising in the ordinary course of our business, including contract claims. The restaurant industry has also been subject to a growing number of claims that the menus and actions of restaurant chains have led to the obesity of certain of their customers.
We are also subject to a variety of other claims from third parties arising in the ordinary course of our business, including contract claims. The restaurant industry has also been subject to claims that the menus and actions of restaurant chains have led to the obesity of certain of their customers.
Alcoholic beverage control regulations generally require our Shacks to apply to a state authority and, in certain locations, county or municipal authorities for a license that must be renewed annually and may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations generally require our Shacks to apply to a state authority and, in certain locations, county or municipal authorities for a license that must be renewed annually, or as required, and may be revoked or suspended for cause at any time.
The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, expanding our systems as we grow or a breach in security of these systems could result in interruptions to or delays in our business and guest service and reduce efficiency in our operations.
The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, expanding our systems as we grow or a breach in security of these systems could result in loss of sales, interruptions to or delays in our business and guest service and reduce efficiency in our operations.
Similar lawsuits have been instituted from time to time alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal deductions, overtime eligibility of assistant managers and failure to pay for all hours worked.
Similar lawsuits have been instituted from time to time alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal-time deductions, overtime eligibility of exempt managers and failure to pay for all hours worked.
Prolonged negative trends in sales could cause us and our licensees to, among other things, reduce the number and frequency of new Shack openings, close Shacks, delay remodeling of our existing Shacks or recognize asset impairment charges.
Prolonged negative trends in sales could cause us and our licensees to, among other things, reduce the number and frequency of new Shack openings, close Shacks, delay remodeling of our existing Shacks or recognize asset impairment charges. Shake Shack Inc.
Similar legislation may be enacted in other jurisdictions in which we operate as well, and in turn, could result in increased costs. Additionally, we may suffer losses from or incur significant costs to defend claims alleging non-compliance.
Similar legislation has been and may be enacted in other jurisdictions in which we operate as well, and in turn, could result in increased costs. Additionally, we may suffer losses from or incur significant costs to defend claims alleging non-compliance.
Additionally, we believe that, because our mission to Stand For Something Good promotes the use of higher quality ingredients, our guests have high expectations of us and we could be more severely affected by incidents of food-borne illnesses or food safety issues than some of our competitors who do not promote such standards.
Additionally, we believe that, because our mission to Stand For Something Good promotes the use of premium ingredients, our guests have high expectations of us and we could be more severely affected by incidents of food-borne illnesses or food safety issues than some of our competitors who do not promote such standards.
Many social media platforms immediately publish the content their subscribers and participants can post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning us may be posted on such platforms at any time. Shake Shack Inc.
Many social media platforms immediately publish the content their subscribers and participants can post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning us may be posted on such platforms at any time.
In addition, the Delaware General Corporation Law (the "DGCL"), to which we are subject, prohibits us, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with any stockholder or group of stockholders who owns at least 15% of our common stock.
In addition, the Delaware General Corporation Law (the "DGCL"), to which we are subject, prohibits us, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with any stockholder or group of stockholders who owns at least 15% of our common stock. Shake Shack Inc.
The non-controlling interest holders are able to, subject to applicable laws and the voting arrangements, participate in the election of a majority of the members of our Board of Directors and actions to be taken by us and our Board of Directors, including amendments to our certificate of incorporation and bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets.
The non-controlling interest holders are able to, subject to applicable law and the voting arrangements, participate in the election of majority of the members of our Board of Directors and actions to be taken by us and our Board of Directors, including amendments to our certificate of incorporation and bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets.
A negative report or negative publicity surrounding such an incident, whether related to one of our Shacks or to a competitor in the industry, may have an adverse impact on demand for our food and could result in a material decrease in guest traffic and lower sales. Shake Shack Inc.
A negative report or negative publicity surrounding such an incident, whether related to one of our Shacks or to a competitor in the industry, may have an adverse impact on demand for our food and could result in a material decrease in guest traffic and lower sales.
Occasionally, our guests file complaints or lawsuits against us alleging that we are responsible for some illness or injury they suffered at or after a visit to one of our Shacks, including actions seeking damages resulting from food-borne illness or accidents in our Shacks.
Occasionally, our guests file complaints or lawsuits against us alleging that we are responsible for an alleged illness or injury they suffered at or after a visit to one of our Shacks, including actions seeking damages resulting from alleged food-borne illness or accidents in our Shacks.
In addition, the determination of future tax reporting positions, the structuring of future transactions and the handling of any future challenges by any taxing authorities to our tax reporting positions may take into consideration these non-controlling interest holders' tax or other considerations, which may differ from the considerations of us or our other stockholders.
In addition, the determination of future tax reporting positions, the structuring of future transactions and the handling of any future challenges by any taxing authorities to our tax reporting positions may take into consideration these non-controlling interest holders' tax or other considerations, which may differ from the considerations of us or our other stockholders. Shake Shack Inc.
We may be adversely affected if any of our third party service providers experience any interruptions in their systems, which could potentially impact the services we receive from them and cause a material failure or interruption in our own systems. Shake Shack Inc.
We may be adversely affected if any of our third-party service providers experience any interruptions in their systems, which could potentially impact the services we receive from them and cause a material failure or interruption in our own systems.
Generally, our leases are net leases that require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent. We generally cannot cancel these leases. Additional sites that we lease are likely to be subject to similar long-term, non-cancelable leases.
Form 10-K | 32 Generally, our leases are net leases that require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent. We generally cannot cancel these leases. Additional sites that we lease are likely to be subject to similar long-term, non-cancelable leases.
As a result, our expenses for legal, tax and accounting compliance may be significantly greater than other companies of our size that do not have a similar organizational structure or a tax receivable agreement in place.
As a result, our expenses for legal, tax and accounting compliance may be significantly greater than other companies of our size that do not have a similar organizational structure or a tax receivable agreement in place. Shake Shack Inc.
Because many of our domestic Company-operated Shacks are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas. Since our founding, we have built some of the industry's favorite community gathering places.
Form 10-K | 34 Because many of our domestic Company-operated Shacks are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas. Since our founding, we have built some of the industry's favorite community gathering places.
The significance of the operational and financial impact on us will depend on how long and widespread the disruptions caused by COVID-19, and the corresponding response to contain the virus and treat those affected by it prove to be.
The significance of the operational and financial impact on the Company will depend on how long and widespread the disruptions caused by the COVID-19 pandemic, and the corresponding response to contain the virus and treat those affected by it prove to be.
We will continue to incur relatively outsized costs as a result of being a public company and in the administration of our complex organizational structure. As a public company, we incur significant legal, accounting, insurance and other expenses that we would not incur as a private company, including costs associated with public company reporting requirements.
Form 10-K | 43 We will continue to incur relatively outsized costs as a result of being a public company and in the administration of our complex organizational structure. As a public company, we incur significant legal, accounting, insurance and other expenses that we would not incur as a private company, including costs associated with public company reporting requirements.
We are subject to risks associated with leasing property subject to long-term, non-cancelable leases. We do not own any real property and all of our domestic Company-operated Shacks are located on leased premises. The leases for our Shacks generally have initial terms ranging from 10 to 15 years and typically include two five-year renewal options.
We are subject to risks associated with leasing property subject to long-term leases. We do not own any real property and all of our domestic Company-operated Shacks are located on leased premises. The leases for our Shacks generally have initial terms ranging from 10 to 15 years and typically include two five-year renewal options. Shake Shack Inc.
Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error or inadvertent releases of data all threaten our and our service providers' information systems and records.
Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error or inadvertent releases of data all threaten our information systems and records and that of our service providers.
In addition, certain of the non-controlling interest holders are in the business of making or advising on investments in companies and may hold, and may from time to time in the future acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or the business of our suppliers.
Form 10-K | 42 In addition, certain of the non-controlling interest holders are in the business of making or advising on investments in companies and may hold, and may from time to time in the future acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or the business of our suppliers.
Any failure to achieve our ESG goals or a perception of our failure to act appropriately with respect to environmental, sustainability, social or governance matters could adversely affect our business and impact our reputation with investors, guests and other business partners and impact our ability to attract and retain team members.
Any failure to achieve our ESG goals or meeting evolving stakeholder expectations, or a perception of our failure to act appropriately with respect to environmental, sustainability, social or governance matters could adversely affect our business and impact our reputation with investors, guests and other business partners and impact our ability to attract and retain team members.
Many of our competitors emphasize low cost "value meal" menu items or other programs that provide price discounts on their menu items, a strategy we have yet to pursue. We also face increasing competitive pressures from some of our competitors who have announced initiatives to offer better quality ingredients, such as antibiotic-free meat.
Many of our competitors emphasize low cost "value meal" menu items or other programs that provide price discounts on their menu items, a strategy we have just begun to test. We also face increasing competitive pressures from some of our competitors who have announced initiatives to offer better quality ingredients, such as antibiotic-free meat.
In addition, if SSE Holdings does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.
In addition, if SSE Holdings does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired. Shake Shack Inc.
If we fail to maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial information or comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired, which could have a material adverse effect on our business and stock price.
If our remediation of the material weakness is not effective or if we fail to develop and maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial information or comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired, which could have a material adverse effect on our business and stock price.
Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of management evaluations and independent registered public accounting firm audits of our internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC.
Any failure to remediate the identified material weakness, or to implement and maintain effective internal control over financial reporting also could adversely affect the results of management evaluations and independent registered public accounting firm audits of our internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC.
In fiscal 2022, we purchased all of our (i) ground beef patties from 10 approved beef processors, with approximately 42% of our ground beef patties supplied from one supplier; (ii) chicken breasts from two suppliers; (iii) potato buns from one supplier; (iv) custard base from two suppliers; (v) 'Shroom Burgers from one supplier; (vi) crinkle cut fries from two suppliers; and (vii) ShackSauce from one supplier.
In fiscal 2023, we purchased all of our (i) ground beef patties from 10 approved ground beef processors, with approximately 41% of our ground beef patties from one supplier; (ii) chicken breasts from two suppliers; (iii) potato buns from one supplier; (iv) custard base from two suppliers; (v) 'Shroom Burgers from one supplier; (vi) crinkle cut fries from two suppliers; and (vii) ShackSauce from one supplier.
Form 10-K | 28 Although we believe that alternative supply and distribution sources are available, there can be no assurance that we will continue to be able to identify or negotiate with such sources on terms that are commercially reasonable to us.
Although we believe that alternative supply and distribution sources are available, there can be no assurance that we will continue to be able to identify or negotiate with such sources on terms that are commercially reasonable to us.
The continued operation and expansion of our business will require substantial funding. Accordingly, we do not currently expect to pay any cash dividends on shares of our Class A common stock.
Form 10-K | 44 We do not currently expect to pay any cash dividends. The continued operation and expansion of our business will require substantial funding. Accordingly, we do not currently expect to pay any cash dividends on shares of our Class A common stock.
In certain cases, payments under the Tax Receivable Agreement to the non-controlling interest holders may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
Form 10-K | 45 In certain cases, payments under the Tax Receivable Agreement to the non-controlling interest holders may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
Form 10-K | 36 Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction.
Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction.
If a catastrophe, such as a fire, were to occur at the distribution center that services the Shacks located in New York and northern New Jersey, we would be at immediate risk of product shortages because that distribution center supplies 21% of our domestic Company-operated Shacks as of December 28, 2022, which collectively represented 26% of our Shack sales for fiscal 2022.
If a catastrophe, such as a fire, were to occur at the distribution center that services the Shacks located in New York and northern New Jersey, we would be at immediate risk of product shortages because that distribution center supplies approximately 21% of our domestic Company-operated Shacks as of December 27, 2023, which collectively represented 25% of our Shack sales for fiscal 2023.
We currently have nine approved raw beef suppliers and ten approved beef processors in the United States. If there is a supply issue with all U.S. raw beef, we have eight approved raw beef suppliers and nine approved beef processors in other countries.
We currently have nine approved raw beef suppliers and 10 approved beef processors in the United States. If there is a supply issue with all U.S. raw beef, we have 12 approved raw beef suppliers and nine approved beef processors in other countries.
Additionally, if a significant percentage of our workforce or the workforce of our business partners are unable to work due to reasons including illness or travel restrictions in connection with pandemics or disease outbreaks, our operations may be negatively impacted, which could have a material adverse effect on our business, financial condition and results of operations. Shake Shack Inc.
Form 10-K | 31 Additionally, if a significant percentage of our workforce or the workforce of our business partners are unable to work due to reasons including illness or travel restrictions in connection with pandemics or disease outbreaks, our operations may be negatively impacted, which could have a material adverse effect on our business, financial condition and results of operations.
Should our competitors increase their spend in these areas, or if our advertising and promotions be less effective than our competitors, there could be an adverse impact on our business in this space. Third-party delivery services within the restaurant industry typically charge restaurants a fee per order.
Should our competitors increase their spend in these areas, or if our advertising and Shake Shack Inc. Form 10-K | 29 promotions be less effective than our competitors, there could be an adverse impact on our business in this space. Third-party delivery services within the restaurant industry typically charge restaurants a fee per order.
The SEC has proposed new rules which, if adopted, would impose significant new disclosure obligations related to climate change and cybersecurity which would require us to develop and implement effective controls with respect to these new obligations.
The SEC has proposed new rules which, if adopted, would impose significant new disclosure obligations related to climate change, and has recently adopted new rules relating to cybersecurity which have required us to develop and implement effective controls with respect to these new obligations.
New markets may have competitive conditions, consumer tastes and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets. We may need to make greater investments than we originally planned in advertising and promotional activity in new markets to build brand awareness.
New markets may have competitive conditions, consumer tastes and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets. We may need to make greater Shake Shack Inc. Form 10-K | 23 investments than we originally planned in advertising and promotional activity in new markets to build brand awareness.
We may not be able to adequately protect our trademarks and service marks, and our competitors and others may successfully challenge the validity and/or enforceability of our trademarks and service marks and other intellectual property. Additionally, we may be prohibited from entering into certain Shake Shack Inc. Form 10-K | 39 new markets due to restrictions surrounding competitors' trademarks.
We may not be able to adequately protect our trademarks and service marks, and our competitors and others may successfully challenge the validity and/or enforceability of our trademarks and service marks and other intellectual property. Additionally, we may be prohibited from entering into certain new markets due to restrictions surrounding competitors' trademarks.
We have an aggregate of 160,715,002 shares of Class A common stock authorized but unissued, including 2,869,513 shares of Class A common stock issuable upon the redemption or exchange of LLC Interests held by the non-controlling interest holders.
We have an aggregate of 160,525,685 shares of Class A common stock authorized but unissued, including 2,834,513 shares of Class A common stock issuable upon the redemption or exchange of LLC Interests held by the non-controlling interest holders.
Under the terms of the SSE Holdings LLC Agreement, SSE Holdings is obligated to make tax distributions to its members, including us. In addition to tax expenses, we will also incur expenses related to our operations, including payments under the Tax Receivable Agreement, which we expect will be Shake Shack Inc. Form 10-K | 46 significant.
Under the terms of the SSE Holdings LLC Agreement, SSE Holdings is obligated to make tax distributions to its members, including us. In addition to tax expenses, we will also incur expenses related to our operations, including payments under the Tax Receivable Agreement, which we expect will be significant.
Form 10-K | 35 in excess of our insurance coverage for any claims or any adverse publicity resulting from claims could adversely affect our business, financial condition and results of operations. Our business is subject to risks related to our sale of alcoholic beverages. We serve beer and wine at most of our Shacks.
A judgment or other liability in excess of our insurance coverage for any claims or any adverse publicity resulting from claims could adversely affect our business, financial condition and results of operations. Our business is subject to risks related to our sale of alcoholic beverages. We serve beer and wine at most of our Shacks.
Furthermore, any instances of food contamination, whether or not at our Shacks, could subject us or our suppliers to voluntary or involuntary food recalls and the costs to conduct such recalls could be significant and could interrupt our supply to unaffected Shacks or increase the cost of our ingredients.
Furthermore, any instances of food contamination, whether or not at our Shacks, could subject us or our suppliers to voluntary or involuntary food recalls and the Shake Shack Inc. Form 10-K | 27 costs to conduct such recalls could be significant and could interrupt our supply to unaffected Shacks or increase the cost of our ingredients.
We have worked to expand our international supply chain with secondary suppliers for various key ingredients across Turkey, Japan, South Korea and China. While we have established secondary supply solutions for some of these ingredients, we have not acquired secondary Shake Shack Inc. Form 10-K | 34 suppliers for all of them.
We have worked to expand our international supply chain with secondary suppliers for various key ingredients across Turkey, Japan, South Korea and China. While we have established secondary supply solutions for some of these ingredients, we have not acquired secondary suppliers for all of them.
A judgment significantly in excess of our insurance coverage or not covered by insurance could have a material adverse effect on our business, financial condition and results of operations. GENERAL BUSINESS AND ECONOMIC RISKS Damage to our reputation could negatively impact our business, financial condition and results of operations.
A judgment significantly in excess of our insurance coverage or not covered by insurance could have a material adverse effect on our business, financial condition and results of operations. Shake Shack Inc. Form 10-K | 33 GENERAL BUSINESS AND ECONOMIC RISKS Damage to our reputation could negatively impact our business, financial condition and results of operations.
We rely heavily on information systems, including point-of-sale processing in our Shacks, for management of our supply chain, accounting, payment of obligations, collection of cash, credit and debit card transactions, digital ordering and other processes and procedures.
We rely heavily on information systems, including point-of-sale processing in our Shacks, for management of our supply chain, accounting, payment of obligations, collection of cash, credit and debit card transactions, digital ordering and other processes Shake Shack Inc. Form 10-K | 35 and procedures.
Although we maintain what we believe to be adequate levels of insurance to cover any of these liabilities, insurance may not be available at all or in sufficient amounts with respect to these or other matters. A judgment or other liability Shake Shack Inc.
Although we maintain what we believe to be adequate levels of insurance to cover any of these liabilities, insurance may not be available at all or in sufficient amounts with respect to these or other matters.
Risks Related to Our Organizational Structure ▪ Shake Shack has non-controlling interest holders, whose interests may differ from those of our public stockholders. ▪ Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the non-controlling interest holders that will not benefit Class A common stockholders to the same extent as it will benefit the non-controlling interest holders. ▪ The non-controlling interest holders have the right to have their LLC Interests redeemed or exchanged into shares of Class A common stock, which may cause volatility in our stock price. ▪ We will continue to incur relatively outsized costs as a result of becoming a public company and in the administration of our complex organizational structure. ▪ Our anti-takeover provisions could prevent or delay a change in control of our Company, even if such change in control would be beneficial to our stockholders. ▪ The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers. ▪ We do not currently expect to pay any cash dividends.
Risks Related to Our Organizational Structure ▪ Shake Shack has non-controlling interest holders, whose interests may differ from those of our public stockholders. ▪ Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the non-controlling interest holders that will not benefit Class A common stockholders to the same extent as it will benefit the non-controlling interest holders. ▪ The non-controlling interest holders have the right to have their LLC Interests redeemed or exchanged into shares of Class A common stock, which may cause volatility in our stock price. ▪ We will continue to incur relatively outsized costs as a result of being a public company and in the administration of our complex organizational structure. ▪ Our anti-takeover provisions could prevent or delay a change in control of our Company, even if such change in control would be beneficial to our stockholders. ▪ We do not currently expect to pay any cash dividends.
A takeover of us may trigger the requirement that we repurchase the Notes and/or increase the conversion rate, which could make it costlier for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors. Shake Shack Inc.
A takeover of us may trigger the requirement that we repurchase the Notes and/or increase the conversion rate, which could make it costlier for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors. Item 1B. Unresolved Staff Comments. None.
The success of our licensed operations depends on our ability to establish and maintain good relationships with our licensees. The value of our brand and the rapport that we maintain with our licensees are important factors for potential licensees considering doing business with us.
The success of our licensed operations depends on our ability to establish and maintain good relationships with our licensees. The value of our brand and the rapport that we maintain with our licensees are important factors for potential licensees Shake Shack Inc. Form 10-K | 26 considering doing business with us.
Under the ADA, our Shacks are required to meet federally mandated requirements for the disabled and we could be required to incur expenses to modify our Shacks to provide service to, or make reasonable accommodations Shake Shack Inc. Form 10-K | 41 for the employment of, disabled persons.
Under the ADA, our Shacks are required to meet federally mandated requirements for the disabled and we could be required to incur expenses to modify our Shacks to provide service to, or make reasonable accommodations for the employment of, disabled persons.
Our licensees compete for guests with other restaurants in their geographic markets, and the ability of our licensees to compete for guests directly impacts our business, financial condition and results of operations, as well as the Shake Shack Inc. Form 10-K | 29 desirability of our brand to prospective licensees.
Our licensees compete for guests with other restaurants in their geographic markets, and the ability of our licensees to compete for guests directly impacts our business, financial condition and results of operations, as well as the desirability of our brand to prospective licensees.
As a result, payments could be made under Shake Shack Inc. Form 10-K | 47 the Tax Receivable Agreement in excess of the tax savings that we realize in respect of the tax attributes with respect to non-controlling interest holders that are the subject of the Tax Receivable Agreement.
As a result, payments could be made under the Tax Receivable Agreement in excess of the tax savings that we realize in respect of the tax attributes with respect to non-controlling interest holders that are the subject of the Tax Receivable Agreement.
Our continued success depends on our guests' ability and willingness to pay for rising menu prices across our channels. The restaurant industry broadly has faced widespread inflation over the past two years, and is likely to continue to face inflationary pressures for the foreseeable future.
Inflationary environment poses a risk to broader demand for restaurants, including ours. Our continued success depends on our guests' ability and willingness to pay for rising menu prices across our channels. The restaurant industry broadly has faced widespread inflation over the past two years, and is likely to continue to face inflationary pressures for the foreseeable future.
Shake Shack Inc. Form 10-K | 45 These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire.
These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire.
These risks are discussed more fully below and include, but are not limited to the following: Risks Related to Our Growth Strategies and Operations ▪ Pandemics or disease outbreaks, such as the COVID-19 pandemic, have disrupted, and may continue to disrupt our business, and have materially affected our business, results of operations and our financial condition. ▪ Our long-term success is dependent on the selection, design and execution of appropriate business strategies. ▪ Our primary growth strategy is highly dependent on the availability of suitable locations and our ability to develop and open new Shacks on a timely basis and on terms attractive to us. ▪ Our plans to open new Shacks, the ongoing need for capital expenditures at our existing Shacks and our ongoing digital enhancements require us to spend capital. ▪ Our expansion into new domestic markets may present increased risks, which could affect our profitability. ▪ Our failure to manage our growth effectively could harm our business and operating results. ▪ New Shacks, once opened, may not be profitable, and may negatively affect Shack sales at our existing Shacks. ▪ If we are unable to maintain and grow Shack sales at our existing Shacks, our financial performance could be adversely affected. ▪ Our mission to Stand For Something Good subjects us to risks. ▪ We have a limited number of suppliers for our major products and rely on one national distribution company for the majority of our domestic distribution needs.
These risks are discussed more fully below and include, but are not limited to the following: Risks Related to Our Growth Strategies and Operations ▪ Our long-term success is dependent on the selection, design and execution of appropriate business strategies. ▪ Our investments to enhance the customer experience through expanding the availability of our drive-thru options has required and will continue to require significant capital expenditures and may not generate the expected returns. ▪ Our primary growth strategy is highly dependent on the availability of suitable locations and our ability to develop and open new Shacks on a timely basis and on terms attractive to us. ▪ Our plans to open new Shacks, the ongoing need for capital expenditures at our existing Shacks and our ongoing digital enhancements require us to spend capital. ▪ Our expansion into new domestic markets may present increased risks, which could affect our profitability. ▪ Our failure to manage our growth effectively could harm our business and operating results. ▪ New Shacks, once opened, may not be profitable, and may negatively affect Shack sales at our existing Shacks. ▪ If we are unable to maintain and grow Shack sales at our existing Shacks, our financial performance could be adversely affected. ▪ Our mission to Stand For Something Good subjects us to risks. ▪ We have a limited number of suppliers for our major products and rely on one national distribution company for the majority of our domestic distribution needs.
The other 19 distribution centers collectively supply the other approximately 79% of our domestic Company-operated Shacks, which represented the remaining 74% of our Shack sales. Shake Shack Inc.
The other 19 distribution centers collectively supply the other 79% of our domestic Company-operated Shacks, which represented the remaining 75% of our Shack sales.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on Shake Shack Inc.
Such increases have and may continue to cause an increase to our labor and related expenses and cause our Shake Shack Inc. Form 10-K | 31 Shack-level operating profit margins to decline.
Such increases have and may continue to cause an increase to our labor and related expenses and cause our Shack-level operating profit margins to decline.
If not utilized, $506.5 million of our federal NOLs can be carried forward indefinitely, and the remainder will begin to expire in 2035. If not utilized, $48.6 million of our state NOL carryforwards can be carried forward indefinitely, and the remainder will begin to expire in 2023.
If not utilized, $544.5 million of our federal NOLs can be carried forward indefinitely and the remainder will begin to expire in 2035. If not utilized, $49.9 million of our state NOL carryforwards can be carried forward indefinitely, and the remainder will begin to expire in 2024.
Risks Related to Our Tax Receivable Agreement ("TRA") ▪ We are a holding company and our principal asset is our interest in SSE Holdings, and, accordingly, we will depend on distributions from SSE Holdings to pay our taxes and expenses, including payments under the TRA.
Risks Related to Our Tax Receivable Agreement ("TRA") ▪ We will continue to incur relatively outsized costs as a result of our complex organizational structure. ▪ We are a holding company and our principal asset is our interest in SSE Holdings, and, accordingly, we will depend on distributions from SSE Holdings to pay our taxes and expenses, including payments under the TRA.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCompany- Operated Licensed Total Alabama 1 — 1 Arizona 4 1 5 California 36 1 37 Colorado 8 1 9 Connecticut 5 — 5 Delaware 1 — 1 District of Columbia 6 1 7 Florida 19 2 21 Georgia 7 1 8 Illinois 10 — 10 Indiana 3 1 4 Kansas 1 — 1 Kentucky 1 — 1 Louisiana 3 1 4 Maryland 7 1 8 Massachusetts 13 — 13 Michigan 7 — 7 Minnesota 4 1 5 Missouri 5 1 6 Nevada 4 2 6 New Jersey 13 3 16 New York 38 6 44 North Carolina 6 2 8 Ohio 5 1 6 Oregon 1 — 1 Pennsylvania 9 2 11 Rhode Island 1 — 1 Tennessee 3 1 4 Texas 20 2 22 Utah 2 1 3 Virginia 5 1 6 Washington 3 — 3 Wisconsin 3 — 3 DOMESTIC 254 33 287 Shake Shack Inc.
Biggest changeCompany- Operated Licensed Total Alabama 1 — 1 Arizona 4 1 5 California 44 1 45 Colorado 9 1 10 Connecticut 6 — 6 Delaware 1 — 1 District of Columbia 6 1 7 Florida 19 2 21 Georgia 7 1 8 Illinois 10 — 10 Indiana 3 1 4 Kansas 1 — 1 Kentucky 1 — 1 Louisiana 3 1 4 Maryland 8 1 9 Massachusetts 13 — 13 Michigan 7 — 7 Minnesota 4 1 5 Missouri 6 1 7 Nevada 5 2 7 New Hampshire 1 — 1 New Jersey 14 7 21 New York 41 8 49 North Carolina 7 2 9 Ohio 8 1 9 Oregon 3 — 3 Pennsylvania 11 2 13 Rhode Island 2 — 2 Tennessee 4 1 5 Texas 28 2 30 Utah 4 1 5 Virginia 6 1 7 Washington 5 — 5 Wisconsin 3 — 3 DOMESTIC 295 39 334 Bahamas — 1 1 Shake Shack Inc.
Item 2. Properties. Our home office is located at 225 Varick Street, Suite 301, New York, NY 10014. We lease our home office, which is approximately 32,000 square feet and all of our domestic Company-operated Shacks. We also have an international office in Hong Kong.
Item 2. Properties. Our home office is located at 225 Varick Street, Suite 301, New York, NY 10014. We lease our home office, which is approximately 32,000 square feet and all of our domestic Company-operated Shacks. We also lease an international office in Hong Kong.
We do not own any real property, nor do we own or lease any property related to our licensed operations. The following table sets forth the number of Company-operated and licensed Shacks by geographic location as of December 28, 2022.
We do not own any real property, nor do we own or lease any property related to our licensed Shacks. The following table sets forth the number of Company-operated and licensed Shacks by geographic location as of December 27, 2023.
Form 10-K | 50 Bahrain — 2 2 China — 32 32 Japan — 13 13 Kuwait — 13 13 Mexico — 9 9 Oman — 1 1 Philippines — 5 5 Qatar — 5 5 Saudi Arabia — 5 5 Singapore — 9 9 South Korea — 24 24 Turkey — 6 6 United Arab Emirates — 14 14 United Kingdom — 11 11 INTERNATIONAL — 149 149 SYSTEM-WIDE 254 182 436
Form 10-K | 49 Bahrain — 2 2 Mainland China, Hong Kong and Macau — 45 45 Japan — 13 13 Kuwait — 16 16 Mexico — 14 14 Philippines — 7 7 Qatar — 5 5 Saudi Arabia — 5 5 Singapore — 10 10 South Korea — 26 26 Thailand — 2 2 Turkey — 8 8 United Arab Emirates — 15 15 United Kingdom — 14 14 Wales — 1 1 INTERNATIONAL — 184 184 SYSTEM-WIDE 295 223 518

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs of December 28, 2022, we do not expect the amount of ultimate liability with respect to these matters to be material to the Company's financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures. Not applicable. Shake Shack Inc. Form 10-K | 51 Part II
Biggest changeAs of December 27, 2023, we do not expect the amount of ultimate liability with respect to these matters to be material to the Company's financial condition, results of operations or cash flows. Shake Shack Inc. Form 10-K | 50 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparison of 5 Year Cumulative Total Return 12/27/2017 12/26/2018 12/25/2019 12/30/2020 12/29/2021 12/28/2022 Shake Shack Inc. $ 100.00 $ 97.45 $ 135.21 $ 191.38 $ 158.12 $ 95.96 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.89 S&P 600 Restaurants Index 100.00 110.09 123.74 156.99 150.35 119.82 Shake Shack Inc. Form 10-K | 53 Item 6. Selected Financial Data.
Biggest changeComparison of 5 Year Cumulative Total Return 12/26/2018 12/25/2019 12/30/2020 12/29/2021 12/28/2022 12/27/2023 Shake Shack Inc. $ 100.00 $ 138.74 $ 196.39 $ 162.25 $ 98.47 $ 175.75 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P 600 Restaurants Index 100.00 112.39 142.59 136.57 108.84 132.12 Shake Shack Inc. Form 10-K | 52 Item 6. Selected Financial Data.
As of February 15, 2023, there were 19 shareholders of record of our Class B common stock. DIVIDEND POLICY We currently intend to retain all available funds and any future earnings for use in the operation of our business, and therefore we do not currently expect to pay any cash dividends on our Class A common stock.
As of February 7, 2024, there were 19 shareholders of record of our Class B common stock. DIVIDEND POLICY We currently intend to retain all available funds and any future earnings for use in the operation of our business, and therefore we do not currently expect to pay any cash dividends on our Class A common stock.
Form 10-K | 52 STOCK PERFORMANCE GRAPH The following graph and table illustrate the total return from December 27, 2017 through December 28, 2022 for (i) our Class A common stock, (ii) the Standard and Poor's 500 Index, and (iii) the Standard and Poor’s 600 Restaurants Index, assuming an investment of $100 on December 27, 2017 including the reinvestment of dividends, where applicable.
Form 10-K | 51 STOCK PERFORMANCE GRAPH The following graph and table illustrate the total return from December 26, 2018 through December 27, 2023 for (i) our Class A common stock, (ii) the Standard and Poor's 500 Index, and (iii) the Standard and Poor’s 600 Restaurants Index, assuming an investment of $100 on December 26, 2018 including the reinvestment of dividends, where applicable.
HOLDERS OF RECORD As of February 15, 2023, there were 154 shareholders of record of our Class A common stock. The number of record holders does not include persons who held shares of our Class A common stock in nominee or "street name" accounts through brokers.
HOLDERS OF RECORD As of February 7, 2024, there were 172 shareholders of record of our Class A common stock. The number of record holders does not include persons who held shares of our Class A common stock in nominee or "street name" accounts through brokers.
Not applicable. Shake Shack Inc. Form 10-K | 54
Not applicable. Shake Shack Inc. Form 10-K | 53

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

117 edited+27 added−19 removed49 unchanged
Biggest changeForm 10-K | 68 (in thousands, except per share amounts) 2022 2021 2020 Numerator: Net loss attributable to Shake Shack Inc. $ (24,091) $ (8,655) $ (42,158) Adjustments: Reallocation of Net loss attributable to non-controlling interests from the assumed exchange of LLC Interests (1) (1,876) (1,456) (3,376) Legal settlements (2) 6,710 560 — Gift card breakage cumulative catch-up adjustment (1,281) — — Asset impairment charge (3) 99 — 7,644 Executive transition costs 34 179 150 Debt offering related costs (4) — 231 — Other (income) loss related to the adjustment of liabilities under tax receivable agreement — (2) 1,147 Revolving Credit Facility amendments related costs (5) — 323 — Reduction in Occupancy and related expenses due to Shack closure (6) — — (897) Project Concrete (7) — — (229) Other (8) — — 285 Tax impact of above adjustments (9) 7,498 6,175 15,089 Adjusted pro forma net loss $ (12,907) $ (2,645) $ (22,345) Denominator: Weighted average shares of Class A common stock outstanding—diluted 39,237 39,085 37,129 Adjustments: Assumed exchange of LLC Interests for shares of Class A common stock (1) 2,892 2,927 3,096 Adjusted pro forma fully exchanged weighted average shares of Class A common stock outstanding—diluted 42,129 42,012 40,225 Adjusted pro forma loss per fully exchanged share—diluted $ (0.31) $ (0.06) $ (0.56) 2022 2021 2020 Loss per share of Class A common stock—diluted $ (0.61) $ (0.22) $ (1.14) Assumed exchange of LLC Interests for shares of Class A common stock (1) (0.01) (0.02) 0.01 Non-GAAP adjustments (10) 0.31 0.18 0.57 Adjusted pro forma loss per fully exchanged share—diluted $ (0.31) $ (0.06) $ (0.56) (1) Assumes the exchange of all outstanding LLC Interests for shares of Class A common stock, resulting in the elimination of the non-controlling interest and recognition of the net loss attributable to non-controlling interests.
Biggest changeForm 10-K | 67 (As Restated) (As Restated) (in thousands, except per share amounts) 2023 2022 2021 Numerator: Net income (loss) attributable to Shake Shack Inc. $ 20,264 $ (21,229) $ (4,561) Adjustments: Reallocation of Net income (loss) attributable to non-controlling interests from the assumed exchange of LLC Interests (1) 726 (1,876) (1,456) Legal settlements (2) 619 6,710 560 Gift card breakage cumulative catch-up adjustment — (1,281) — Asset impairment charge (3) — 99 — Severance 211 — — CEO transition costs 206 — — Debt offering related costs (4) — — 231 Other income related to the adjustment of liabilities under tax receivable agreement — — (2) Revolving Credit Facility amendments related costs (5) — — 323 Other (6) 3,386 — — Tax impact of above adjustments (7) (9,254) 4,636 2,081 Adjusted pro forma net income (loss) $ 16,158 $ (12,941) $ (2,824) Denominator: Weighted average shares of Class A common stock outstanding—diluted 43,899 39,237 39,085 Adjustments: Assumed exchange of LLC Interests for shares of Class A common stock (1) — 2,892 2,927 Adjusted pro forma fully exchanged weighted average shares of Class A common stock outstanding—diluted 43,899 42,129 42,012 Adjusted pro forma earnings (loss) per fully exchanged share—diluted $ 0.37 $ (0.31) $ (0.07) (As Restated) (As Restated) 2023 2022 2021 Earnings (loss) per share of Class A common stock—diluted $ 0.48 $ (0.54) $ (0.12) Assumed exchange of LLC Interests for shares of Class A common stock (1) — (0.01) (0.02) Non-GAAP adjustments (8) (0.11) 0.24 0.07 Adjusted pro forma earnings (loss) per fully exchanged share—diluted $ 0.37 $ (0.31) $ (0.07) (1) Assumes the exchange of all outstanding LLC Interests for shares of Class A common stock, resulting in the elimination of the non-controlling interest and recognition of the net income (loss) attributable to non-controlling interests.
For Shacks that are not open for the entire period, fractional adjustments are made to the number of operating weeks such that it corresponds to the period of associated sales. "Same-Shack sales" represents Shack sales for the comparable Shack base, which is defined as the number of domestic Company-operated Shacks open for 24 full fiscal months or longer.
For Shacks that are not open for the entire period, fractional adjustments are made to the number of operating weeks open such that it corresponds to the period of associated sales. "Same-Shack sales" represents Shack sales for the comparable Shack base, which is defined as the number of domestic Company-operated Shacks open for 24 full fiscal months or longer.
Liabilities under Tax Receivable Agreement include amounts to be paid to the non-controlling interest holders, assuming we will have sufficient taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.
Liabilities under the Tax Receivable Agreement include amounts to be paid to the non-controlling interest holders, assuming we will have sufficient taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.
By assuming the full exchange of all outstanding LLC Interests, we believe these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in Net loss attributable to Shake Shack Inc. driven by increases in our ownership of SSE Holdings, which are unrelated to our operating performance, and excludes items that are non-recurring or may not be indicative of our ongoing operating performance.
By assuming the full exchange of all outstanding LLC Interests, we believe these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in Net income (loss) attributable to Shake Shack Inc. driven by increases in our ownership of SSE Holdings, which are unrelated to our operating performance, and excludes items that are non-recurring or may not be indicative of our ongoing operating performance.
In connection with any redemption or exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings. The weighted average ownership percentages for the applicable reporting periods are used to attribute net loss and other comprehensive loss to Shake Shack Inc. and the non-controlling interest holders. Shake Shack Inc.
In connection with any redemption or exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings. The weighted average ownership percentages for the applicable reporting periods are used to attribute net income (loss) and other comprehensive income (loss) to Shake Shack Inc. and the non-controlling interest holders.
The timing and nature of these commitments are expected to have an impact on our liquidity and capital requirements in future periods. Refer to Note 8, Debt and Note 9, Leases, in the accompanying Consolidated Financial Statements included in Part II, Item 8 for additional information relating to our long-term debt and operating and financing leases.
The timing and nature of these commitments are expected to have an impact on our liquidity and capital requirements in future periods. Refer to Note 9, Debt and Note 10, Leases, in the accompanying Consolidated Financial Statements included in Part II, Item 8 for additional information relating to our long-term debt and operating and financing leases.
Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole and Shack-level operating profit and Shack-level operating profit margin should be reviewed in conjunction with our GAAP financial results. A reconciliation of Shack-level operating profit to Loss from Operations, the most directly comparable GAAP financial measure, is as follows.
Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole and Shack-level operating profit and Shack-level operating profit margin should be reviewed in conjunction with our GAAP financial results. A reconciliation of Shack-level operating profit to Income (loss) from Operations, the most directly comparable GAAP financial measure, is as follows.
Upon conversion, we pay or deliver, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at our election. Refer to Note 8, Debt, in the accompanying Consolidated Financial Statements included in Part II, Item 8, for additional information.
Upon conversion, we pay or deliver, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at our election. Refer to Note 9, Debt, in the accompanying Consolidated Financial Statements included in Part II, Item 8, for additional information.
While these measures are useful in evaluating our performance, they do not account for the earnings attributable to the non-controlling interest holders and therefore do not provide a complete understanding of the Net loss attributable to Shake Shack Inc.
While these measures are useful in evaluating our performance, they do not account for the earnings attributable to the non-controlling interest holders and therefore do not provide a complete understanding of the Net income (loss) attributable to Shake Shack Inc.
Accordingly, we consolidate the financial results of SSE Holdings and report a non-controlling interest on our Consolidated Statements of Loss, representing the portion of net loss attributable to the other members of SSE Holdings.
Accordingly, we consolidate the financial results of SSE Holdings and report a non-controlling interest on our Consolidated Statements of Income (Loss), representing the portion of net income (loss) attributable to the other members of SSE Holdings.
Presentation of adjusted pro forma net loss and adjusted pro forma loss per fully exchanged and diluted share should not be considered alternatives to net loss and earnings (loss) per share, as determined under GAAP.
Presentation of adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share should not be considered alternatives to Net income (loss) and earnings (loss) per share, as determined under GAAP.
NON-GAAP FINANCIAL MEASURES To supplement the Consolidated Financial Statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we use the following non-GAAP financial measures: Shack-level operating profit, Shack-level operating profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro forma net loss, adjusted pro forma loss per fully exchanged and diluted share (collectively the "non-GAAP financial measures").
NON-GAAP FINANCIAL MEASURES To supplement the Consolidated Financial Statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we use the following non-GAAP financial measures: Shack-level operating profit, Shack-level operating profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro forma net income (loss), and adjusted pro forma earnings (loss) per fully exchanged and diluted share (collectively the "non-GAAP financial measures").
Adjusted EBITDA is defined as EBITDA (as defined above) excluding equity-based compensation expense, deferred lease costs, Impairment and loss on disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that we do not believe directly reflect our core operations and may not be indicative of our recurring business operations.
Adjusted EBITDA is defined as EBITDA (as defined above) excluding equity-based compensation expense, Impairment and loss on disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that we do not believe directly reflect our core operations and may not be indicative of our recurring business operations.
Refer to Note 8, Debt, in the accompanying Consolidated Financial Statements, for additional information. On June 7, 2021, we filed a Registration Statement on Form S-3 with the SEC which permits us to issue a combination of securities described in the prospectus in one or more offerings from time to time.
Refer to Note 9, Debt, in the accompanying Consolidated Financial Statements, for additional information. On June 7, 2021, we filed a Registration Statement on Form S-3 with the SEC which permits us to issue a combination of securities described in the prospectus in one or more offerings from time to time.
Adjusted pro forma loss per fully exchanged and diluted share is calculated by dividing adjusted pro forma net loss by the weighted average shares of Class A common stock outstanding, assuming the full exchange of all outstanding LLC Interests, after giving effect to the dilutive effect of outstanding equity-based awards.
Adjusted pro forma earnings (loss) per fully exchanged and diluted share is calculated by dividing adjusted pro forma net income (loss) by the weighted average shares of Class A common stock outstanding, assuming the full exchange of all outstanding LLC Interests, after giving effect to the dilutive effect of outstanding equity-based awards.
How These Measures Are Useful When used in conjunction with GAAP financial measures, adjusted pro forma net loss and adjusted pro forma loss per fully exchanged and diluted share are supplemental measures of operating performance that we believe are useful measures to evaluate our performance period over period and relative to our competitors.
How These Measures Are Useful When used in conjunction with GAAP financial measures, adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share are supplemental measures of operating performance that we believe are useful measures to evaluate our performance period over period and relative to our competitors.
There were no transactions subject to the Tax Receivable Agreement for which we did not recognize the related liability, as we concluded that we would have sufficient future taxable income to utilize all of the related tax benefits generated by all transactions that occurred in fiscal 2022.
There were no transactions subject to the Tax Receivable Agreement for which we did not recognize the related liability, as we concluded that we would have sufficient future taxable income to utilize all of the related tax benefits generated by all transactions that occurred in fiscal 2023.
Limitations of the Usefulness of These Measures Adjusted pro forma net loss and adjusted pro forma loss per fully exchanged and diluted share may differ from similarly titled measures used by other companies due to different methods of calculation.
Limitations of the Usefulness of These Measures Adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share may differ from similarly titled measures used by other companies due to different methods of calculation.
A reconciliation of adjusted pro forma net loss to Net loss attributable to Shake Shack Inc., the most directly comparable GAAP measure, and the computation of adjusted pro forma loss per fully exchanged and diluted share are set forth below. Shake Shack Inc.
A reconciliation of adjusted pro forma net income (loss) to Net income (loss) attributable to Shake Shack Inc., the most directly comparable GAAP measure, and the computation of adjusted pro forma earnings (loss) per fully exchanged and diluted share are set forth below. Shake Shack Inc.
Our mission is to Stand For Something Good in all aspects of our business, including the exceptional team we hire and train, the premium ingredients making up our menu, our community engagement and the design of our Shacks.
Our mission is to Stand For Something Good in all aspects of our business, including the talented team we hire and train, the premium ingredients making up our menu, our community engagement and the design of our Shacks.
Form 10-K | 67 Adjusted Pro Forma Net Loss and Adjusted Pro Forma Loss Per Fully Exchanged and Diluted Share Adjusted pro forma net loss represents Net loss attributable to Shake Shack Inc. assuming the full exchange of all outstanding SSE Holdings, LLC membership interests ("LLC Interests") for shares of Class A common stock, adjusted for certain non-recurring items that we do not believe are directly related to our core operations and may not be indicative of our recurring business operations.
Form 10-K | 66 Adjusted Pro Forma Net Income (Loss) and Adjusted Pro Forma Earnings (Loss) Per Fully Exchanged and Diluted Share Adjusted pro forma net income (loss) represents Net income (loss) attributable to Shake Shack Inc. assuming the full exchange of all outstanding SSE Holdings, LLC membership interests ("LLC Interests") for shares of Class A common stock, adjusted for certain non-recurring items that we do not believe are directly related to our core operations and may not be indicative of our recurring business operations.
Because of the uncertainty inherent in these matters, actual results may differ from those estimates we use in applying our critical accounting estimates. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
Because of the uncertainty inherent in these matters, actual results may differ from those estimates we use in applying our critical accounting estimates. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. Shake Shack Inc.
Form 10-K | 69 LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash Our primary sources of liquidity are cash from operations, cash and cash equivalents on hand, short-term investments and availability under our Revolving Credit Facility.
Form 10-K | 68 LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash Our primary sources of liquidity are cash from operations, cash and cash equivalents on hand, short-term investments and availability under our Revolving Credit Facility.
The components of food and paper costs are variable by nature, changing with sales volume, and are impacted by menu mix, channel mix and fluctuations in commodity costs, as well as geographic scale and proximity.
The components of Food and paper costs are variable by nature, change with sales volume, impacted by menu mix, channel mix and fluctuations in commodity costs, as well as geographic scale and proximity.
OFF-BALANCE SHEET ARRANGEMENTS Except for operating leases entered into in the normal course of business where we have not yet taken physical possession of the leased property, certain letters of credit entered into as security under the terms of several of our leases and the unrecorded contractual obligations set forth above, we did not have any other off-balance sheet arrangements as of December 28, 2022.
OFF-BALANCE SHEET ARRANGEMENTS Except for operating leases entered into in the normal course of business where we have not yet taken physical possession of the leased property, certain letters of credit entered into as security under the terms of several of our leases and the unrecorded contractual obligations set forth above, we did not have any other off-balance sheet arrangements as of December 27, 2023.
The IBR is an estimate based on several factors, including financial market conditions, comparable company and credit analysis as well as management judgement. If the IBR was changed, our operating lease assets and lease liabilities could differ materially. Shake Shack Inc.
The IBR is an estimate based on several factors, including financial market conditions, comparable company and credit analysis as well as management judgement. If the IBR was changed, our operating lease assets and lease liabilities could differ materially.
Adjusted pro forma net loss and adjusted pro forma loss per fully exchanged and diluted share should be evaluated in conjunction with our GAAP financial results.
Adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share should be evaluated in conjunction with our GAAP financial results.
It may also assist investors to evaluate our performance relative to peers of various sizes and maturities and provides greater transparency with respect to how our management evaluates our business, as well as our financial and operational decision-making.
It may also assist investors to evaluate our performance relative to peers of various sizes and maturities and provides greater transparency with respect to how our management evaluates our business, as well as our financial and operational decision-making. Shake Shack Inc.
EBITDA and adjusted EBITDA exclude certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures. A reconciliation of EBITDA and adjusted EBITDA to Net loss, the most directly comparable GAAP measure, is as follows. Shake Shack Inc.
EBITDA and adjusted EBITDA exclude certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures. A reconciliation of EBITDA and adjusted EBITDA to Net income (loss), the most directly comparable GAAP measure, is as follows.
Leases We currently lease all of our domestic Company-operated Shacks, the home office, and certain equipment under various non-cancelable lease agreements.
Leases We currently lease all of our domestic Company-operated Shacks, the home office, and certain equipment under various lease agreements.
Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. As of December 28, 2022, we are in a three-year cumulative loss position. This is considered significant evidence that is difficult to overcome.
Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. As of December 27, 2023, we are in a three-year cumulative loss position. This is considered significant evidence that is difficult to overcome.
Form 10-K | 72 Income Taxes In determining the provision for income taxes for financial statement purposes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax assets on a quarterly basis.
Income Taxes In determining the provision for income taxes for financial statement purposes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax assets on a quarterly basis.
(10) Represents the per share impact of non-GAAP adjustments for each period. Refer to the reconciliation of Adjusted Pro Forma Net Loss above, for additional information. Shake Shack Inc.
(8) Represents the per share impact of non-GAAP adjustments for each period. Refer to the reconciliation of Adjusted Pro Forma Net Income (Loss) above, for additional information. Shake Shack Inc.
Convertible Notes In March 2021, we issued $250.0 million aggregate principal amount of 0% Convertible Senior Notes due 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances.
Convertible Notes In March 2021, we issue d $250.0 million aggregate principal amount of 0% C onvertible Senior Notes due 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances.
As of December 28, 2022, we were in compliance with all covenants. Contractual Obligations Material contractual obligations arising in the normal course of business primarily consist of operating and finance lease obligations, long-term debt, liabilities under Tax Receivable Agreement and purchase obligations.
As of December 27, 2023, we were in compliance with all covenants. Contractual Obligations Material contractual obligations arising in the normal course of business primarily consist of operating and finance lease obligations, long-term debt, liabilities under the Tax Receivable Agreement and purchase obligations.
Impairment and Loss on Disposal of Assets Impairment and loss on disposal of assets consist of impairment charges related to our long-lived assets, which includes property and equipment, as well as operating and finance lease assets.
Impairment and Loss on Disposal of Assets Impairment and loss on disposal of assets primarily consists of impairment charges related to our long-lived assets, which includes property and equipment, as well as operating and finance lease assets.
Refer to Note 14, Income Taxes, and Note 17, Commitments and Contingencies, in the accompanying Consolidated Financial Statements included in Part II, Item 8, for additional information relating to our Tax Receivable Agreement and related liabilities.
Refer to Note 15, Income Taxes, and Note 18, Commitments and Contingencies, in the accompanying Consolidated Financial Statements included in Part II, Item 8, for additional information relating to our Tax Receivable Agreement and related liabilities.
How These Measures Are Useful When used in conjunction with GAAP financial measures, EBITDA and adjusted EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to historical performance and competitors' operating results.
Form 10-K | 65 How These Measures Are Useful When used in conjunction with GAAP financial measures, EBITDA and adjusted EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to historical performance and competitors' operating results.
Limitations of the Usefulness of this Measure Shack-level operating profit and Shack-level operating profit margin may differ from similarly titled measures used by other companies due to different methods of calculation.
Form 10-K | 64 Limitations of the Usefulness of this Measure Shack-level operating profit and Shack-level operating profit margin may differ from similarly titled measures used by other companies due to different methods of calculation.
However, the three-year cumulative loss position is not solely determinative, and, accordingly, management considers all available positive and negative evidence in our analysis. Although we are in a three-year cumulative loss position as of December 28, 2022, we have a recent history of earnings prior to the onset of the COVID-19 pandemic.
However, the three-year cumulative loss position is not solely determinative, and, accordingly, management considered all available positive and negative evidence in our analysis. Although we are in a three-year cumulative loss position as of December 27, 2023, we have a recent history of earnings prior to the onset of the COVID-19 pandemic.
For discussion of our results of operations and changes in financial condition for fiscal 2021 compared to fiscal 2020 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended December 29, 2021, filed on February 18, 2022.
For discussion of our results of operations and changes in financial condition for fiscal 2022 compared to fiscal 2021 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended December 28, 2022, filed on February 23, 2023.
Purchase obligations include all legally binding contracts, including commitments for the purchase, construction or remodeling of real estate and facilities, firm minimum commitments for inventory purchases, equipment purchases, marketing-related contracts, Shake Shack Inc. Form 10-K | 71 software acquisition/license commitments and service contracts. The majority of our purchase obligations are due within the next 12 months.
Purchase obligations include all legally binding contracts, including commitments for the purchase, construction or remodeling of real estate and facilities, firm minimum commitments for inventory purchases, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts. The majority of our purchase obligations are due within the next 12 months.
Shake Shack Inc. Form 10-K | 62 Pre-Opening Costs Pre-opening costs consist primarily of occupancy, manager and team member wages, cookware, travel and lodging costs for our opening training team and other supporting team members, marketing expenses, legal fees and inventory costs incurred prior to the opening of a Shack.
Pre-Opening Costs Pre-opening costs consist primarily of occupancy, manager and team member wages, cookware, travel and lodging costs for our opening training team and other supporting team members, marketing expenses, legal fees and inventory costs incurred prior to the opening of a Shack.
Liabilities Under Tax Receivable Agreement As described in Note 14, in the accompanying Consolidated Financial Statements included in Part II, Item 8, we are a party to the Tax Receivable Agreement under which we are contractually committed to pay the non-controlling interest holders 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of certain transactions.
Form 10-K | 72 Liabilities Under Tax Receivable Agreement As described in Note 15 to the Consolidated Financial Statements included in Item 8, we are a party to the Tax Receivable Agreement under which we are contractually committed to pay the non-controlling interest holders 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of certain transactions.
Net Loss Attributable to Non-controlling Interests We are the sole managing member of SSE Holdings and have the sole voting power in, and control the management of, SSE Holdings.
Form 10-K | 63 Net Income (Loss) Attributable to Non-controlling Interests We are the sole managing member of SSE Holdings and have the sole voting power in, and control the management of, SSE Holdings.
The increase was primarily due to 31 net new licensed Shacks opened during fiscal 2022, which contributed approximately $2.8 million to Licensing revenue, as well as higher sales at existing licensed Shacks, particularly domestic airports. Food and Paper Costs Food and paper costs include the direct costs associated with food, beverage and packaging of our menu items.
The increase was primarily due to 41 net new licensed Shacks opened during fiscal 2023, which contributed approximately $4.0 million, as well as higher sales at existing licensed Shacks, particularly domestic airports. Food and Paper Costs Food and paper costs include the direct costs associated with food, beverage and packaging of our menu items.
As of December 28, 2022, such obligations totaled $234.9 million. Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) future changes in tax laws.
As of December 27, 2023, such obligations totaled $235.6 million. Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) future changes in tax laws.
Summary of Cash Flows The following table presents a summary of our cash flows from operating, investing and financing activities.
Form 10-K | 69 Summary of Cash Flows The following table presents a summary of our cash flows from operating, investing and financing activities.
As of December 28, 2022, we recognized $234.9 million of liabilities relating to our obligations under the Tax Receivable Agreement, after concluding that it was probable that we would have sufficient future taxable income to utilize the related tax benefits.
As of December 27, 2023, we recognized $235.6 million of liabilities relating to our obligations under the Tax Receivable Agreement, after concluding that it was probable that we would have sufficient future taxable income to utilize the related tax benefits.
Other Income, Net Other income, net consists of interest income, adjustments to liabilities under our tax receivable agreement, dividend income and net unrealized and realized gains and losses from marketable securities.
Other Income, Net Other income, net consists primarily of interest income, adjustments to liabilities under the Tax Receivable Agreement, dividend income and net unrealized and realized gains and losses from marketable securities. Shake Shack Inc.
(4) As a percentage of Shack sales. EBITDA and Adjusted EBITDA EBITDA is defined as Net loss before Interest expense (net of interest income), Income tax expense (benefit) and Depreciation and amortization expense.
EBITDA and Adjusted EBITDA EBITDA is defined as Net income (loss) before Interest expense (net of interest income), Income tax benefit and Depreciation and amortization expense.
As of December 28, 2022, we maintained a Cash and cash equivalents balance of $230.5 million and a short-term investments balance of $80.7 million within Marketable securities. In March 2021, we issued 0% Convertible Senior Notes (“Convertible Notes”), and received $243.8 million of proceeds, net of discounts.
As of December 27, 2023, we maintained a Cash and cash equivalents balance of $224.7 million and a short-term investments balance of $68.6 million within Marketable securities. In March 2021, we issued 0% Convertible Senior Notes (“Convertible Notes”), and received $243.8 million of proceeds, net of discounts.
License fees are calculated as a percentage of sales and territory fees are payments for the exclusive right to develop Shacks in a specific geographic area.
Licensing Revenue Licensing revenue is comprised of license fees and opening and territory fees for certain licensed Shacks. License fees are calculated as a percentage of sales and territory fees are payments for the exclusive right to develop Shacks in a specific geographic area.
We do not recognize the sales from our licensed Shacks as revenue. Of these amounts, our revenue is limited to Shack sales from domestic Company-operated Shacks and licensing revenue based on a percentage of sales from domestic and international licensed Shacks, as well as certain up-front fees such as territory and opening fees.
Of these amounts, revenue is limited to licensing revenue based on a percentage of sales from domestic and international licensed Shacks, as well as certain up-front fees, such as territory fees and opening fees.
The increase was primarily due to a decline in net results compared to fiscal 2021 partially offset by a decrease in the non-controlling interest holders' weighted average ownership, which was 6.9% and 7.0% for fiscal 2022 and fiscal 2021, respectively.
The improvement was primarily due to an increase in net results compared to the same period last year, partially offset by a decrease in the non-controlling interest holders' weighted average ownership, which was 6.7% and 6.9%, respectively for fiscal 2023 and fiscal 2022.
You should evaluate all forward-looking statements made in this Form 10-K in the context of the risks and uncertainties disclosed in Part I, Item 1A of this Form 10-K under the heading "Risk Factors" and in this Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations".
You should evaluate all forward-looking statements made in this Form 10-K in the context of the risks and uncertainties disclosed in Part I, Item 1A of this Form 10-K under the heading "Risk Factors," in this Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in Item 7A "Quantitative and Qualitative Disclosures About Market Risk." The forward-looking statements included in this Form 10-K are made only as of the date hereof.
However, beef costs declined during fiscal 2022. Shake Shack Inc. Form 10-K | 60 Labor and Related Expenses Labor and related expenses include domestic Company-operated Shack-level hourly and management wages, bonuses, payroll taxes, equity-based compensation, workers' compensation expense and medical benefits. As we expect with other variable expense items, labor costs should grow as our Shack sales grow.
Labor and Related Expenses Labor and related expenses include domestic Company-operated Shack-level hourly and management wages, bonuses, payroll taxes, equity-based compensation, workers' compensation expense and medical benefits. As we expect with other variable expense items, labor costs should grow as our Shack sales grow.
(dollar amounts in thousands) 2022 2021 Pre-opening costs $ 15,050 $ 13,291 Percentage of Total revenue 1.7 % 1.8 % Dollar change compared to prior year $ 1,759 Percentage change compared to prior year 13.2 % Pre-opening costs for the fiscal year ended December 28, 2022 increased 13.2% to $15.1 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Pre-opening costs $ 19,231 $ 15,050 Percentage of Total revenue 1.8 % 1.7 % Dollar change compared to prior year $ 4,181 Percentage change compared to prior year 27.8 % Pre-opening costs for the fiscal year ended December 27, 2023 increased 27.8% to $19.2 million versus the prior year.
(9) For fiscal 2022, fiscal 2021 and fiscal 2020, amounts represent the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of 31.1%, 83.5% and 40.2%, respectively, which include provisions for U.S. federal income taxes, certain LLC entity-level taxes and foreign withholding taxes, assuming the highest statutory rates apportioned to each applicable state, local and foreign jurisdiction.
(7) For the fifty-two weeks ended December 27, 2023, December 28, 2022 and December 29, 2021, amounts represent the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of 24.5%, 31.0% and 83.5%, respectively, which include provisions for U.S. federal income taxes, certain LLC entity-level taxes and foreign withholding taxes, assuming the highest statutory rates apportioned to each applicable state, local and foreign jurisdiction.
Shack-Level Operating Profit Shack-level operating profit is defined as Shack sales less Shack-level operating expenses including Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.
Shack-Level Operating Profit Shack-level operating profit, also referred to as restaurant profit, is defined as Shack sales less Shack-level operating expenses which include Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.
(dollar amounts in thousands) 2022 2021 Impairment and loss on disposal of assets $ 2,425 $ 1,632 Percentage of Total revenue 0.3 % 0.2 % Dollar change compared to prior year $ 793 Percentage change compared to prior year 48.6 % Impairment and loss on disposal of assets for the fiscal year ended December 28, 2022 increased 48.6% to $2.4 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Impairment and loss on disposal of assets $ 3,007 $ 2,425 Percentage of Total revenue 0.3 % 0.3 % Dollar change compared to prior year $ 582 Percentage change compared to prior year 24.0 % Impairment and loss on disposal of assets for the fiscal year ended December 27, 2023 increased 24.0% to $3.0 million versus the prior year.
Valuation of Long-Lived Assets We assess potential impairments to our long-lived assets, which includes property and equipment and operating lease assets, at least annually or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.
Form 10-K | 71 Valuation of Long-Lived Assets We assess potential impairments to our long-lived assets, which includes property and equipment and operating and finance lease assets, at least annually or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability evaluation is first performed at the market service area level ("MSA").
(dollar amounts in thousands) 2022 2021 Interest expense $ (1,518) $ (1,577) Percentage of Total revenue (0.2) % (0.2) % Dollar change compared to prior year $ 59 Percentage change compared to prior year (3.7) % Interest expense for the fiscal year ended December 28, 2022 decreased 3.7% to $1.5 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Interest expense $ (1,717) $ (1,518) Percentage of Total revenue (0.2) % (0.2) % Dollar change compared to prior year $ (199) Percentage change compared to prior year 13.1 % Interest expense for the fiscal year ended December 27, 2023 increased 13.1% to $1.7 million versus the prior year.
As of December 28, 2022 and December 29, 2021, no amounts were outstanding under the Revolving Credit Facility. The obligations under the Revolving Credit Facility are secured by a first-priority security interest in substantially all of the assets of SSE Holdings and the guarantors.
Form 10-K | 70 depending on the net lease adjusted leverage ratio. As of December 27, 2023 and December 28, 2022, no amounts were outstanding under the Revolving Credit Facility. The obligations under the Revolving Credit Facility are secured by a first-priority security interest in substantially all of the assets of SSE Holdings and the guarantors.
Form 10-K | 61 (dollar amounts in thousands) 2022 2021 Occupancy and related expenses $ 68,508 $ 59,228 Percentage of Shack sales 7.9 % 8.3 % Dollar change compared to prior year $ 9,280 Percentage change compared to prior year 15.7 % Occupancy and related expenses for the fiscal year ended December 28, 2022 increased 15.7% to $68.5 million versus the prior year.
Form 10-K | 60 (dollar amounts in thousands) 2023 2022 Occupancy and related expenses $ 79,846 $ 68,508 Percentage of Shack sales 7.6 % 7.9 % Dollar change compared to prior year $ 11,338 Percentage change compared to prior year 16.5 % Occupancy and related expenses for the fiscal year ended December 27, 2023 increased 16.5% to $79.8 million versus the prior year.
(dollar amounts in thousands) 2022 2021 Food and paper costs $ 261,584 $ 218,262 Percentage of Shack sales 30.1 % 30.5 % Dollar change compared to prior year $ 43,322 Percentage change compared to prior year 19.8 % Food and paper costs for the fiscal year ended December 28, 2022 increased 19.8% to $261.6 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Food and paper costs $ 305,041 $ 261,584 Percentage of Shack sales 29.1 % 30.1 % Dollar change compared to prior year $ 43,457 Percentage change compared to prior year 16.6 % Food and paper costs for the fiscal year ended December 27, 2023 increased 16.6% to $305.0 million versus the prior year.
This decrease was primarily due to sales leverage, partially offset by more managers per Shack and increased wages and salaries. Other Operating Expenses Other operating expenses consist of delivery commissions, Shack-level marketing expenses, repairs and maintenance, utilities and other operating expenses incidental to operating our domestic Company-operated Shacks, such as non-perishable supplies, credit card fees and property insurance.
Other Operating Expenses Other operating expenses consist of delivery commissions, Shack-level marketing expenses, repairs and maintenance, utilities and other operating expenses incidental to operating our domestic Company-operated Shacks, such as non-perishable supplies, credit card fees and property insurance.
Shack system-wide sales increased 22.7% to $1,378.5 million for the fiscal year ended December 28, 2022, versus the same period last year. Average unit volume for domestic Company-operated Shacks was $3.8 million for the fiscal year ended December 28, 2022 compared to $3.7 million in the same period last year.
System-wide sales increased 23.5% to $1,702.1 million for the fifty-two weeks ended December 27, 2023, versus the same period last year. Average unit volume for domestic Company-operated Shacks was $3.9 million for the fifty-two weeks ended December 27, 2023 compared to $3.8 million in the same period last year.
(dollar amounts in thousands) 2022 2021 Depreciation and amortization expense $ 72,796 $ 58,991 Percentage of Total revenue 8.1 % 8.0 % Dollar change compared to prior year $ 13,805 Percentage change compared to prior year 23.4 % Depreciation and amortization expense for the fiscal year ended December 28, 2022 increased 23.4% to $72.8 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Depreciation and amortization expense $ 91,242 $ 72,796 Percentage of Total revenue 8.4 % 8.1 % Dollar change compared to prior year $ 18,446 Percentage change compared to prior year 25.3 % Depreciation and amortization expense for the fiscal year ended December 27, 2023 increased 25.3% to $91.2 million versus the prior year.
The increase was primarily due to incremental depreciation of capital expenditures related to the opening of 36 net new domestic Company-operated Shacks during fiscal 2022 as well as additional depreciation related to the home office expansion and technology projects placed in service.
The increase was primarily due to incremental depreciation of capital expenditures related to the class of 2022 Shacks being open for a full year and the opening of 41 new domestic Company-operated Shacks during fiscal 2023, as well as additional depreciation related to technology projects placed in service. Shake Shack Inc.
(dollar amounts in thousands) 2022 2021 Licensing revenue $ 31,216 $ 24,904 Percentage of Total revenue 3.5 % 3.4 % Dollar change compared to prior year $ 6,312 Percentage change compared to prior year 25.3 % Licensing revenue for the fiscal year ended December 28, 2022 increased 25.3% to $31.2 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Licensing revenue $ 40,714 $ 31,216 Percentage of Total revenue 3.7 % 3.5 % Dollar change compared to prior year $ 9,498 Percentage change compared to prior year 30.4 % Licensing revenue for the fiscal year ended December 27, 2023 increased 30.4% to $40.7 million versus the prior year.
These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions. All forward-looking statements are expressly qualified in their entirety by these cautionary statements.
You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "likely," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," the negatives thereof and other similar expressions.
(dollar amounts in thousands) 2022 2021 Labor and related expenses $ 257,358 $ 215,114 Percentage of Shack sales 29.6 % 30.1 % Dollar change compared to prior year $ 42,244 Percentage change compared to prior year 19.6 % Labor and related expenses for the fiscal year ended December 28, 2022 increased 19.6% to $257.4 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Labor and related expenses $ 304,254 $ 257,358 Percentage of Shack sales 29.1 % 29.6 % Dollar change compared to prior year $ 46,896 Percentage change compared to prior year 18.2 % Labor and related expenses for the fiscal year ended December 27, 2023 increased 18.2% to $304.3 million versus the prior year.
(dollar amounts in thousands) 2022 2021 Other operating expenses $ 130,869 $ 103,232 Percentage of Shack sales 15.1 % 14.4 % Dollar change compared to prior year $ 27,637 Percentage change compared to prior year 26.8 % Other operating expenses for the fiscal year ended December 28, 2022 increased 26.8% to $130.9 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Other operating expenses $ 149,449 $ 129,650 Percentage of Shack sales 14.3 % 14.9 % Dollar change compared to prior year $ 19,799 Percentage change compared to prior year 15.3 % Other operating expenses for the fiscal year ended December 27, 2023 increased 15.3% to $149.4 million versus the prior year.
There were two permanent international licensed Shack closures and no permanent domestic Company-operated Shack closures in fiscal 2022. Below are Shacks opened during the fourth quarter of 2022.
Form 10-K | 56 Development Highlights During fiscal 2023, we opened 41 new domestic Company-operated Shacks and 44 new licensed Shacks. There were three permanent international licensed Shack closures and no permanent domestic Company-operated Shack closures in fiscal 2023. Below are Shacks opened during the fourth quarter of 2023.
(dollar amounts in thousands) 2022 2021 Shack sales $ 869,270 $ 714,989 Percentage of Total revenue 96.5 % 96.6 % Dollar change compared to prior year $ 154,281 Percentage change compared to prior year 21.6 % Shack sales for the fiscal year ended December 28, 2022 increased 21.6% to $869.3 million versus the prior year.
(dollar amounts in thousands) 2023 2022 Shack sales $ 1,046,819 $ 869,270 Percentage of Total revenue 96.3 % 96.5 % Dollar change compared to prior year $ 177,549 Percentage change compared to prior year 20.4 % Shack sales for the fiscal year ended December 27, 2023 increased 20.4% to $1,046.8 million versus the prior year.
All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts.
All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about the Company's growth, strategic plan, and liquidity. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business.
For consecutive days that Shacks were temporarily closed, the comparative period was also adjusted. Same-Shack sales percentage reflects the change in year-over-year Shack sales for the comparable Shack base. "Shack system-wide sales" is an operating measure and consists of sales from our domestic Company-operated Shacks, domestic licensed Shacks and our international licensed Shacks.
For consecutive days that Shacks were temporarily closed, the comparative period was also adjusted. “System-wide sales” is an operating measure and consists of sales from the Company's domestic Company-operated Shacks, domestic licensed Shacks and international licensed Shacks. The Company does not recognize the sales from licensed Shacks as revenue.
The increase was primarily due to the opening of 36 net new domestic Company-operated Shacks during the fiscal year. As a percentage of Shack sales, the decrease in Occupancy and related expenses for fiscal 2022 was primarily due to sales leverage partially offset by increases in variable rent from higher sales.
As a percentage of Shack sales, the decrease in Labor and related expenses for fiscal 2023 was primarily due to sales leverage and labor efficiencies, partially offset by the opening of 41 new domestic Company-operated Shacks during fiscal 2023 and increased wages and salaries at remaining Shacks.
(2) Fiscal 2022 included a non-cash impairment charge of $0.1 million related to one Shack and fiscal 2020 included a non-cash impairment charge of $7.6 million related to two Shacks and our home office. (3) For fiscal 2022, Shack-level operating profit margin included a $1.3 million cumulative catch-up adjustment for gift card breakage income, recognized in Shack sales.
(2) For the fifty-two weeks ended December 28, 2022, this amount includes a non-cash impairment charge of $0.1 million related to one Shack. (3) For the fifty-two weeks ended December 28, 2022, Shack-level operating profit margin includes a $1,281 cumulative catch-up adjustment for gift card breakage income, recognized in Shack sales. (4) As a percentage of Shack sales.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe are also exposed to interest rate risk through fluctuations of interest rates on our cash balances and investments. Our equity securities primarily consist of fixed-income and equity instruments. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations.
Biggest changeWe are also exposed to interest rate risk through fluctuations of interest rates on our cash and cash equivalent balances. Our cash and cash equivalents consist primarily of money market funds and short-term, highly liquid investments that have original maturities of three months or less.
Factors that affect the price of commodities are generally outside of our control and include foreign currency exchange rates, foreign and domestic supply and demand, inflation, weather, and seasonality. For the majority of our major ingredients, we enter into supply contracts, obligating us to purchase specified quantities.
Factors that affect the price of commodities are generally outside of our control and include foreign and domestic supply and demand, inflation, weather, seasonality and foreign currency exchange rates. For the majority of our major ingredients, we enter into supply contracts, obligating us to purchase specified quantities.
The effect of a uniform movement of all currencies by 10% is provided to illustrate a hypothetical scenario and related effect on operating income. Actual results will differ as foreign currencies may move in uniform or different directions, magnitudes, and timing. INTEREST RATE RISK We are exposed to interest rate risk through fluctuations in interest rates on our debt obligations.
The effect of a uniform movement of all currencies by 10% is provided to illustrate a hypothetical scenario and related effect on operating income. Actual results will differ as foreign currencies may move in uniform or different directions, magnitudes, and timing. INTEREST RATE RISK We are exposed to interest rate risk through fluctuations in interest rates on certain debt obligations.
Our Revolving Credit Facility carries interest at a floating rate. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities. As of December 28, 2022, we had no outstanding borrowings under the Revolving Credit Facility.
Our Revolving Credit Facility carries interest at a floating rate. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities. As of December 27, 2023, we had no outstanding borrowings under the Revolving Credit Facility.
Loss from operations would have decreased or increased by approximately $2.5 million and $2.1 million in 2022 and 2021, respectively, if all foreign currencies uniformly weakened or strengthened 10% relative to the U.S. dollar, holding other variables constant, including sales volume.
Income (loss) from operations would have decreased or increased by approximately $3.0 million and $2.5 million, respectively, in 2023 and 2022 if all foreign currencies uniformly weakened or strengthened 10% relative to the U.S. dollar, holding other variables constant, including sales volume.
INFLATION Inflation has an impact on food, paper, construction, utility, labor, rent, and other costs which materially impact operations. Severe increases in inflation could have an adverse impact on our business, financial condition and results of operations.
Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations. INFLATION Inflation has an impact on food, paper, construction, utility, labor, rent, and other costs which materially impact operations. Severe increases in inflation could have an adverse impact on our business, financial condition and results of operations.

Other SHAK 10-K year-over-year comparisons