The Better Burger Segment Ascends on Wall Street: Next Up is Danny Meyer's Shake Shack

Fast casual as a whole is the fastest growing segment in the restaurant industry. However, the better burger concepts within the segment are not only growing rapidly across the nation, but they expanding to Wall Street. The Habit Burger Grill went public at the end of 2014. Also in 2014, another gourmet burger success, Shake Shack alluded to an IPO event and it is now official with the brand filing for an initial public offering.

2014 was a big year for the better burger segment. This begs the question: was this just the beginning? or will 2015 be the year that the success of these concepts fizzle out? Nonetheless, Shake Shack is moving full speed ahead.

A Humble Beginning Backed By New York’s Greatest Restaurateur

The Shake Shack story starts in one of the best culinary cities in the world, New York City. You know those food carts on every block? From 2001-2003, Shake Shack was a hot dog stand in Madison Square Park . The concept was created by Danny Meyer’s Union Square Hospitality Group (USHG.) Meyer is a recipient of the James Beard Foundation’s Restaurateur and some of his concepts include Union Square Tavern, Gramercy Tavern, and Eleven Madison Park.

Back in the early 2000s, the lines of Shack fans for the cart were so long that someone even made a Shake Shack app that allowed the user to watch a live video feed of the line. After three summers of long lines, the USHG won a bid to open a permanent kiosk in the park. Ten years later, the brand has over 56 store locations worldwide in the US, UK, Turkey, Russia, and the Middle East. In 2013, the company brought in $82.5 million in sales.

The Concept

Like most gourmet burger joints, the food focus is on higher quality ingredients. This is primarily what sets them apart from the quick-serve burger moguls. The Shake Shack burger meat is 100% all-natural Angus Beef, with no hormones or antibiotics. The brand’s menu is simple with five or so burger options including the Shackburger, a cheeseburger topped with lettuce, tomato and their famous Shacksauce and the vegetarian Shroom burger, a crisp-fried portobello mushroom filled with melted muenster and cheddar cheeses, topped with lettuce, tomato and ShackSauce.

Besides the burger offerings– the brand serves hot dogs and crinkle cut fries. Their frozen custard features shakes, floats, and concretes. Each month a new frozen custard flavor is offered. The brand also serves their own ShackMeister Ale, Shack red wine and Shack White wine by Frog’s Leap– along with hand picked local brews and wines tailored for each location.

What the Future Holds

As a whole, gourmet burger concepts are outperforming in the category in terms of sales. So if you pair a better burger concept with the strategy of a successful restaurateur who really understands how to create a thriving restaurant– is the potential limitless?

The recent Habit Burger Grill IPO has probably created some pressure on the brand. However, Meyer is known for thoroughly thinking through his business decisions and being selective when hiring brand executives. It took him nine years to open his second restaurant success after his first. He learned from his father’s mistake, who was bankrupt from his hotel business by age 42.

Another factor that has attributed to the brand’s success is each store has a local focus and fits into the community. This is not done by accident. “It’s treating each Shake Shack as its own business. The bigger we get the smaller we need to act,” said Randy Garutti, CEO of Shake Shack

No one can truly predict what the future holds for Shake Shack and other better burger concepts. Skeptics are saying that the consumer’s love of the better burger joints are going to start fleeting and that after initial success in the marketplace, they will lose their appeal due to the soon to be overly crowded marketplace. Even with that in mind, 2015 may be the year that Shake Shack and gourmet burger joints conquer Wall Street.