Shake Shack (stock symbol SHAK) stock debuted on the New York Stock Exchange with a bang. Investors have taken the valuation of the company to $ 1.7 billion and market experts are seeing the company as a role model for the fast-food sector. While McDonald's is facing tough times and facing sales slump, Shake Shack CEO said that the fast-casual chain has planned expansion in new markets.
Many market analysts have compared Shake Shack with McDonald's. However, during the first nine months of year 2014, Shake Shack registered revenue of $ 79 million. McDonald's registers similar numbers in a single day. Surely, Shake Shack has a long way to go.
Shake Shack offered its stock at $ 21 and the Friday closing of $ 45.9 offered 120 percent returns to investors. Shake Shack founder Danny Meyer is confident that the chain which started as a hot dog cart 14 years back, will reward its investors with even better returns. The company currently operates 63 restaurants. It has presence in Istanbul, Moscow and London as well.
The company also pays its entry-level employees more than the industry average. Shake Shack owns most of the stores, instead of a franchisee model adopted by other fast food chains. Shake Shack has plans to increase its restaurant count to 450 over the next few years. The time will tell if the chain will be able to maintain its profitability at a larger scale.
Shake Shack average cost per client is higher at $ 11, almost double that of McDonalds. Chipotle is another competitor for Shake Shack and the company is also planning to introduce variation in its menu.
In a statement, Shake Shack said, “We believe that this enables us to attract a higher caliber employee and this translates directly to better guest service.”
The stock touched an intraday high of $ 52.5. Founder Danny Meyer's 21 percent stake in the company is currently valued at $ 340 million.
In 2012, Shake Shack registered revenue of $ 19.5 million in 2012. The company witnessed higher revenue at $ 82 million in 2013. During first three quarters of 2014, the revenue was stronger at $ 79 million.
