Question

Case 1: Shake Shack

When famed fine-dining restaurateur Danny Meyer opened a hot dog cart in New York City’s Madison Square Park in 2001, the venture drew legions of customers curious to experience Meyer’s take on all-American street food. The curious became the committed and Meyer’s little experiment acquired a permanent structure in the park – the Shake Shack. The Shack regularly drew long lines, leading Meyer to build a company around the concept. In a few years, Shake Shack expanded to a chain of burger restaurants in the United States and licensed outlets internationally.

Meyer sought to differentiate Shake Shack from the long tradition of burger joints and chains that dotted the American landscape. First, Shake Shack was committed to high quality ingredients and efficient operations in each of its eateries. Secondly, the company selected high traffic locations and designed each outlet to fit into its chosen locale. Finally, Meyer wanted Shake Shack employees to create culture of hospitality that welcomed each customer as if Shake Shack was a fine-dining establishment, rather than a burger joint. As of 2015, the formula seemed to be working. Shake Shacks developed a devoted fan base in each of their locations. New Shake Shack locations were greeted by enthusiastic fans who cheered the opening of the operations in their neighborhoods. But the fine casual dining market space in which Shake Shack was operating was becoming increasingly crowded. Competition was fierce among the various chains and concepts. Could Shake Shack hold its own against this legion of rivals?

At least initially, investors seemed to believe that Shake Shack could. The company went public on January 30, 2015 with shares listed on the New York Stock Exchange (NYSE). Opening day investors bid up the $21 per share offering price by 118% to reach $45.90 at closing bell. By the end of May, investors were paying $92.86 per share. But observers wondered if this price represented a realistic valuation of the enterprise.

Questions :

What do you think major succeed factors helped Shake Shack to grow rapidly?

Explain in depth the international strategy that used by Shake Shack?

Total: 400 words.

Answer 1

Solution -

The major success factors of Shake Shack are as follows-

• New Offering - Shake Shack brought in a new offering in the market interns of quality and sevice that was their point of difference.
• High Quality - Shake Shack was sensitive about quality and ensured that only the best quality ingredients were put to use
• Fine Dining experience in street food - Shake Shack worked towards its service and provided their customers with unexpected service culture
• Location - Shake Shack ensured to place their outlets in favorable locations with high footfall.

The above factors ensured that Shake Shack proved a major success with the customers. Its brand image ensured successful expansion. The trust of its promoters and shareholders also ensured that Shake Shack continued on the path of expansion.

Shake Shack used the licensing strategy for international expansion. This strategy allowed Shake Shack to expand seamlessly by extending their brand to different entities so that they can use the brand of Shake Shack and expand in different geographies. As per the licensing agreement Shake Shack does not have to extend its management intelligence to its licensee entities nor do they have to coach such entities. This allows Shake Shack to concentrate on its self controlled business. The international strategy in my opinion is effective as Shake Shack's business model is of casual fine dining which has some quality features and all that they have to ensure is that the licensee entities fullfill certain requirements that can assist in running such a business model. This would be enough to safeguard their brand and also allow them to enhance their control on the market along with a tight grip on their self managed outlets.