Shake Shack 2016 Annual Report Download - page 56

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Table of Contents
sales, food and paper costs increase d to 31.2% for fiscal 2014 compared to 30.4% for fiscal 2013 . This increase was due to an increase in the cost of certain food
items, primarily beef, which was partially offset by menu price increases and purchasing efficiencies of other items.
Labor and Related Expenses
Labor and related expenses include domestic company-operated Shack-level hourly and management wages, bonuses, payroll taxes, workers’ compensation
expense and medical benefits. As we expect with other variable expense items, we expect labor costs to grow as our Shack sales grow. Factors that influence labor
costs include minimum wage and payroll tax legislation, health care costs and the performance of our domestic company-operated Shacks.
Labor and related expenses were $44.8 million for fiscal 2015 compared to $29.3 million for fiscal 2014 , an increase of $15.5 million or 52.7% . This increase was
primarily due to the opening of 13 new domestic company-operated Shacks during fiscal 2015 . As a percentage of Shack sales, labor and related expenses
decrease d to 24.4% in fiscal 2015 compared to 26.2% in fiscal 2014 . This decrease was due to the benefit from higher Shack sales and the reduced labor
requirements from the return of crinkle-cut fries, offset by the increase in the starting wage for Shack team members at the start of fiscal 2015 .
Labor and related expenses were $29.3 million for fiscal 2014 compared to $20.1 million for fiscal 2013 , an increase of $9.2 million or 45.9% . This increase was
primarily due to the opening of 10 new domestic company-operated Shacks during fiscal 2014 . As a percentage of Shack sales, labor and related expenses increase
d to 26.2% in fiscal 2014 compared to 25.6% in fiscal 2013 . This increase was due to a decision by the Company to increase the starting wage for Shack team
members at the start of fiscal 2014 , as well as the impact of target-volume Shacks opening and the impact of fixed management labor at these Shacks.
Other Operating Expenses
Other operating expenses consist of marketing expenses, utilities and other operating expenses incidental to operating our domestic company-operated Shacks,
such as non-perishable supplies, credit card fees, property insurance and repairs and maintenance.
Other operating expenses were $16.3 million for fiscal 2015 compared to $11.2 million for fiscal 2014 , an increase of $5.1 million or 45.7% , primarily due to the
opening of 13 new domestic company-operated Shacks in fiscal 2015 . As a percentage of Shack sales, other operating expenses decrease d to 8.9% in fiscal 2015
compared to 10.0% in fiscal 2014 . This decrease was due to the benefit from higher Shack sales and the impact of fixed operating expenses on the higher sales
levels.
Other operating expenses were $11.2 million for fiscal 2014 compared to $7.3 million for fiscal 2013 , an increase of $3.9 million or 53.0% , primarily due to the
opening of 10 new domestic company-operated Shacks in fiscal 2014 . As a percentage of Shack sales, other operating expenses increase d to 10.0% in fiscal 2014
compared to 9.3% in fiscal 2013 . This increase was due to the opening of more target-volume Shacks and the impact of fixed operating expenses at these Shacks.
Occupancy and Related Expenses
Occupancy and related expenses consist of Shack-level occupancy expenses (including rent, common area expenses and certain local taxes), excluding pre-opening
costs, which are recorded separately.
Occupancy and related expenses were $15.2 million for fiscal 2015 compared to $9.8 million for fiscal 2014 , an increase of $5.4 million or 55.9% , primarily due
to the opening of 13 new domestic company-operated Shacks in fiscal 2015 . As a percentage of Shack sales, occupancy and related expenses decrease d to 8.3% in
fiscal 2015 compared to 8.7% in fiscal 2014 , primarily due to increased amortization of tenant improvements.
Occupancy and related expenses were $9.8 million for fiscal 2014 compared to $6.9 million for fiscal 2013 , an increase of $2.9 million or 41.5% , primarily due to
the opening of 10 new domestic company-operated Shacks in fiscal 2014 . As a percentage of Shack sales, occupancy and related expenses decreased to 8.7% in
fiscal 2014 compared to 8.8% in fiscal 2013 , primarily due to the opening of non-Manhattan Shacks, where occupancy and related expenses are typically lower.
Shake Shack Inc. Form 10-K | 54