Like its peers in the industry, Shake Shack has been hit from all sides by higher operating costs including higher food prices and steep delivery commission fees. But the core principals on which Shake Shack has built its brand — high-quality food, avoiding a value-driven approach to selling — are the same sticking points that could make it tougher to navigate the industry’s rising costs compared to the competition.
In the first quarter, every store operating expense at domestic, company-operated stores rose as a percentage of revenue. Food and paper costs were up by 41 percent compared to the same period last year. Other operating expenses, which include delivery commission fees, were up by nearly 45 percent. The line item now accounts for 12.1 percent of revenue as compared to 11.2 percent of revenue in the first quarter of last year.
…While others have negotiated lower fees with delivery partners by forming exclusive deals, Shake Shack is still testing potential partnerships with several delivery services. Given the increased consumer demand for the service, the company is considering raising prices specifically on delivery menus to counteract higher operational costs.