Shake Shack 2016 Annual Report Download - page 16

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Table of Contents
Distribution
We contract with one distributor, which we refer to as our "broadline" distributor, to provide virtually all of our food distribution services in the United States. As
of December 30, 2015 , approximately 88% of our core food and beverage ingredients and 100% of our paper goods and chemicals, collectively representing
approximately 45% of our purchases, were processed through our broadline distributor for distribution and delivery to each Shack. As of December 30, 2015 , we
were utilizing 10 affiliated distribution centers to supply our domestic company-operated Shacks. We recognize that the safety and consistency of our products
begins with our suppliers. Suppliers must meet certain criteria and strict quality control standards in the production and delivery of our food and other products. We
regularly evaluate our broadline distributor to ensure that the products we purchase conform to our standards and that the prices they offer are competitive.
Food Safety and Quality Assurance
Food safety is a top priority and w e are committed to serving safe, high quality food. We have rigorous quality assurance and food safety protocols in place
throughout our supply chain. We have a comprehensive supplier and ingredient selection process and maintain a limited list of approved suppliers. We thoroughly
review the results of suppliers' internal and external quality audits, insurance coverage and track record on an ongoing basis. We have a food safety site inspection
process and periodically perform supplier site visits, as well as mock food recalls. We have developed and implemented training and operating standards related to
the food preparation, cleanliness and safety in the Shacks. We also have a dedicated Quality Assurance team to ensure food safety across all domestic company-
operated Shacks.
Site Selection
Shake Shack is ultimately about the guest experience and our site selection focuses on choosing great sites where people want to be together. Our site selection
process is actively led by our Real Estate Committee, which meets regularly and follows a detailed approval process to ensure quality, fiduciary responsibility and
overall adherence to the Company's strategic growth goals. We invest in analytical tools for extensive demographic analysis and data collection for both existing
and new potential sites. In addition to our in-house team of experienced real estate professionals, we use a national real estate broker to manage a network of
regional brokers in order to leverage external resources in pursuit of pipeline development and consistent deal flow.
Construction
A typical Shack takes between 14 and 16 weeks to build. We expect that the cost to build a new Shack will range from approximately $1.2 to $2.7 million, with an
average near-term build cost of approximately $2.0 million, excluding pre-opening costs. We use a number of general contractors on a regional basis and employ a
mixed approach of bidding and strategic negotiation in order to ensure the best value and highest quality construction.
Management Information Systems
Our domestic company-operated Shacks use computerized point-of-sale and back-office systems created by NCR Corporation, which we believe are scalable to
support our growth plans. These point-of-sale systems are designed specifically for the restaurant industry and we use many customized features to increase
operational effectiveness, internal communication and data analysis. This system provides a touch screen interface, graphical order confirmation display, touch
screen kitchen display and integrated, high-speed credit card and gift card processing. The point-of-sale system is used to collect daily transaction data, which
generates information about daily sales, product mix and average transaction size.
Our back-office computer systems are designed to assist in the management of our domestic company-operated Shacks and provide real-time labor and food cost
management tools. These tools provide the home office and operations management quick access to detailed business data and reduces the amount time spent by
our Shack-level managers on administrative needs. The systems provide our Shack-level managers the ability to submit orders electronically with our distribution
network. The system also supplies sales, bank deposit and variance data to our accounting department on a daily basis. We use this data to generate daily sales
information and weekly consolidated reports regarding sales and other key measures, as well as preliminary weekly detailed profit and loss statements for each
Shack with final reports following the end of each period.
Shake Shack Inc. Form 10-K | 14