U.S.-based burger chain, Shake Shack has filed for an initial public offering (IPO) with the Securities and Exchange Commission regulators to raise $100 million. Post IPO, the company will trade on the New York Stock Exchange under the symbol “SHAK”. However, the number of shares on offer and the price range for the proposed offering have not yet been determined. Several noted investment bankers are joint underwriters on the deal.
Shake Shack is part of Danny Meyer's Union Square Hospitality Group (USHG) and was opened in 2001 at New York's Madison Square Park. Currently, this burger chain has 63 restaurants and operates mainly in the East Coast. However, it also has outlets overseas including London, Istanbul and Dubai. Half of these locations are company-owned while the rest are franchised operations.
The firm is famous for its ShackBurger, which is made with a special sauce, and its signature frozen-custard milkshakes. Shake Shack cooks its customized burgers and focuses on limited menus with quality ingredients, including hormone free and antibiotic-free beef. Moreover, its vibrating pagers inform customers when an order is ready.
In 2013, the company generated revenues of $84.5 million, up 45% year over year, while net income was $5.4 million, up 31% year over year. Comps grew 5.9% year over year in 2013. Through the first nine months of 2014, net income was $3.5 million and comps grew 3% year over year. Notably, revenues have jumped from $19.5 million to $82.5 million in a span of only four years. This justifies the firm's decision to file for an IPO.
Besides planning to use the proceeds of the IPO to open more restaurants and renovate existing ones, the firm intends to buy common membership interests of SSE Holdings LLC, a predecessor of Shake Shack, for financial purposes.
Of late, there have been quite a few fast-casual restaurant operator IPOs. These include El Pollo Loco Holdings Inc. (LOCO – Snapshot Report), Zoe's Kitchen Inc. (ZOES – Snapshot Report), The Habit Restaurants, Inc. (HABT – Snapshot Report) and Potbelly Papa Murphy's Holdings, Inc. (FRSH – Snapshot Report). We need to wait and see whether Shake Shack can emulate the success of these restaurant chains on their debut.
