Shake Shack 2016 Annual Report Download - page 20

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Table of Contents
Item 1A. Risk Factors.
Described below are certain risks that we believe apply to our business and the industry in which we operate. You should carefully consider each of the following
risk factors in conjunction with other information provided in this Annual Report on Form 10-K and in our other public disclosures. The risks described below
highlight potential events, trends or other circumstances that could adversely affect our business, financial condition, results of operations, cash flows, liquidity or
access to sources of financing, and consequently, the market value of our Class A common stock. These risks could cause our future results to differ materially
from historical results and from guidance we may provide regarding our expectations of future financial performance. The risks described below are those that we
have identified as material and is not an exhaustive list of all the risks we face. There may be others that we have not identified or that we have deemed to be
immaterial. All forward-looking statements made by us or on our behalf are qualified by the risks described below.
RISKS RELATED TO OUR GROWTH STRATEGIES AND OPERATIONS
Our long-term success is dependent on the selection, design and execution of appropriate business strategies.
We operate in a highly competitive and ever-changing environment. Our long-term success is dependent on our ability to identify, develop and execute appropriate
business strategies within this environment. Our current strategies include:
▪ opening new domestic company-operated Shacks;
▪ capitalizing on our outsized brand awareness;
▪ growing same-Shack sales; and
▪ opportunistically increasing our licensed Shacks, both domestically and abroad.
We may experience challenges in achieving the goals we have set and we may be unsuccessful in executing on our strategies once identified. Conversely, we may
also execute on poorly designed strategies that prove to be ineffective or require us to make substantial changes to our strategy in order to produce the desired
results. Our strategies may expose us to additional risks and strategies that have been successful for us in the past may fail to be so in the future. We may incur
significant costs and damage our brand if we are unable to identify, develop and execute on appropriate business strategies, which could have a material adverse
impact on our business and results of operations.
Our primary growth strategy is highly dependent on the availability of suitable locations and our ability to develop and open new Shacks on timely basis and on
terms attractive to us.
One of the key means of achieving our growth strategies will be through opening and operating new Shacks on a profitable basis for the foreseeable future. We
must identify target markets where we can enter or expand, taking into account numerous factors such as the location of our current Shacks, the target consumer
base, population density, demographics, traffic patterns, competition, geography and information gathered from our various contacts. We may not be able to open
our planned new Shacks within budget or on a timely basis, if at all, given the uncertainty of these factors, which could adversely affect our business, financial
condition and results of operations. As we operate more Shacks, our rate of expansion relative to the size of our Shack base will eventually decline.
The number and timing of new Shacks opened during any given period may be negatively impacted by a number of factors including:
▪ the identification and availability of attractive sites for new Shacks;
▪difficulty negotiating suitable lease terms;
▪ shortages of construction labor or materials;
▪ recruitment and training of qualified personnel in the local market;
▪ our ability to obtain all required governmental permits, including zonal approvals, on a timely basis;
▪ our ability to control construction and development costs of new Shacks;
▪ competition in new markets, including competition for appropriate sites;
Shake Shack Inc. Form 10-K | 18