Shake Shack faces challenge from strict NYC indoor dining rules: CEO
New York enacted a host of guidelines that restaurants must follow when indoor dining resumes on Sept. 30
Top Shake Shack executives expressed confidence that the fast-casual restaurant chain is poised for a comeback in the coming weeks despite strict guidelines for indoor dining in New York and other key locales during the coronavirus pandemic.
Several of Shake Shack’s top-earning stores are located in Manhattan, where restaurants will soon be permitted to reopen at 25 percent capacity after a months-long shutdown. New York Gov. Andrew Cuomo enacted a host of guidelines that restaurants must follow when indoor dining resumes on Sept. 30, including temperature checks for all customers and enhanced air filtration systems.
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The safety requirements add another layer of challenges for Shake Shack and other restaurants that were forced to revamp their operations to allow for social distancing. Speaking at Goldman Sachs’ virtual Global Retailing Conference last week, Shake Shack CEO Randy Garutti acknowledged “details are limited” on how indoor dining will look in New York City in its early stages.
“I think the challenging pieces of it will be, we have to now take temperatures at the front door and we also have to get all your contact information for contact tracing,” Garutti said. “Now, that kind of makes sense if you are Gramercy Tavern and you take a reservation. That makes less sense when you are a fast-casual restaurant like ours who will have hundreds of people a day coming through.”
Like many restaurant chains, Shake Shack has struggled to generate revenue during the coronavirus pandemic. The company’s same-store sales plunged 49% in the second quarter. Overall revenue plunged nearly 40% to $91.8 million.
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The reopening of the chain’s New York-based locations for indoor dining, even on a limited basis, should help to stem its losses. Shake Shack’s company-owned restaurants in New York City accounted for 20 to 25 percent of its overall revenue before the pandemic, according to a recent analysis by Truist Securities.
Shake Shack shares are up more than 5 percent since New York officials announced indoor dining could return.
“We’ll get it worked out and we’ll get those dining rooms reopened,” Garutti said. “I’m hopeful that will just be another sign of New York getting back on its feet."