Samantha Chang

Samantha Chiang asked about the margin and cash-on-cash return profile of Shake Shack's growth regions (South, West, and Midwest) compared to its legacy coastal core, and how this regional mix shift might influence system-wide margins over the next three to five years.

Answer

CEO Rob Lynch explained that while new markets might have smaller populations and lower average unit volumes (AUVs), this is mitigated by opening higher-revenue drive-throughs. He noted that real estate and labor costs are lower in these growth regions compared to legacy markets like New York City and Los Angeles. He anticipates continued margin expansion, guided at 50 basis points per year, driven by operating excellence, supply chain optimization, and the diversification of the company's footprint, which should positively impact margins.

Samantha, on behalf of Christine Cho, asked about the margin and cash-on-cash return profile of Shake Shack's new growth regions, which are tilted away from the Northeast, compared to its legacy coastal core markets. She also inquired how this regional mix shift might influence system-wide margins over the next three to five years.

Answer

CEO Rob Lynch explained that while new markets in regions like the South, West, and Midwest may have lower forecasted revenues due to smaller populations and fewer tourists, any potential AUV compression is mitigated by opening drive-thrus, which tend to have higher revenues. He noted that these new markets offer lower real estate and labor costs compared to challenging legacy markets like New York City and Los Angeles. Mr. Lynch anticipates that holding AUVs through format mix improvement, combined with lower operating costs in new regions, should contribute to continued margin expansion, reiterating the guidance of at least 50 basis points per year.

Samantha Chang asked for an update on Jack in the Box's breakfast daypart performance, especially given competitors making breakfast optional for franchisees, and how it has performed relative to other dayparts following the "Munch Better Deals" launch.

Answer

CEO Lance Tucker stated that breakfast has been consistent and a significant part of Jack's all-day offerings, performing consistently with other dayparts in Q1, except for late night which saw gains. Chief Customer and Digital Officer Ryan Ostrom emphasized that all-day breakfast is a core brand element that the company takes seriously.

Samantha Chiang asked for an update on breakfast performance, noting it's an economically sensitive daypart and some competitors are making it optional for franchisees. She specifically asked how Jack's all-day breakfast has performed relative to other dayparts, especially following the 'Munch Better Deals' lineup.

Answer

CEO Lance Tucker stated that breakfast has been consistent for Jack in the Box, performing similarly to other dayparts in Q1, with the exception of late night which saw gains. He acknowledged competitors' optionality but noted no impact on Jack's business yet. Chief Customer and Digital Officer Ryan Ostrom emphasized that all-day breakfast is a core, long-standing part of the brand.