Shake Shack 2016 Annual Report Download - page 53

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Table of Contents
We will continue to embrace our fine-dining heritage and, although our core menu remains focused, we plan to continue supplementing it with targeted innovation.
In January 2016, we launched the Chick'n Shack at all domestic company-operated Shacks. Since July 2015, this item was only offered in our three Brooklyn, NY
Shacks. The guest feedback was extremely positive and it became a top five selling menu item, which gave us the confidence to plan a wider rollout. Although the
Chick'n Shack sells at a premium, it requires more labor to produce and we expect our labor and related expenses to increase as a result. While the launch of
Chick'n Shack is still in its early stages, we believe it may ultimately prove accretive to sales, traffic, and food costs.
While we believe there are significant opportunities ahead of us, we also face many challenges. In fiscal 2016 and the next few years, we believe our primary
challenge will be rising labor costs. We believe that rising minimum wage legislation will affect the entire restaurant industry. S everal states in which we operate
have enacted minimum wage increases and it is possible that other states or the federal government could also enact minimum wage increases. In response, we
implemented a company-wide increase in the starting wage of all our hourly team members, effective January 1, 2016, which will cause an increase to our labor
and related expenses in 2016 and could cause Shack-level operating profit margins to decline. As more minimum wage increases are enacted, we may be required
to implement additional pay increases or offer additional benefits in the future in order to continue to attract and retain the most qualified people, which may put
further pressure on our operating margins.
With only 84 Shacks system-wide, as of December 30, 2015 , we still have significant whitespace opportunity ahead of us. Despite the challenges we face, we
believe that we are positioned well for future growth.
FISCAL 2016 OUTLOOK
For the fiscal year ending December 28, 2016, we currently expect the following:
▪ Total revenue to be between $237 million and $242 million.
▪ Same-Shack sales growth between 2.5% and 3.0%, with higher growth expected in the first half of fiscal 2016 due to the significant growth we
experienced in the second half of fiscal 2015.
▪ At least 13 new domestic company-operated Shacks to be opened in 2016 (of the previously stated guidance of 14 new domestic company-operated
Shacks, one was opened on the last day of fiscal 2015), with these new Shacks expected to have average annual sales volumes of at least $3.3 million and
Shack-level operating profit margins of at least 22%.
▪Seven licensed Shacks to be opened under the Company's current license agreements in the U.K., Middle East and Japan, as well as a new licensed Shack
in Las Vegas' T-Mobile Arena (of the previously stated guidance of eight international licensed Shacks, two opened ahead of schedule in December
2015).
▪ As a percentage of Shack sales, approximately 100 to 150 basis points of deleverage in labor and related expenses on a year-over-year basis.
▪ Adjusted pro forma effective tax rate between 43% and 44%
51 | Shake Shack Inc. Form 10-K