Chowing Down at Shake Shack

Restaurants tend to put a lot of stock in founding stories. And while Shake Shack, the luxe-burger phenom, has a great backstory, it didn’t start with burgers. It didn’t even start with a restaurant.

In 1999, Danny Meyer was already among the most acclaimed culinarians in America. His Union Square Hospitality Group counted Union Square Cafe and Gramercy Tavern among its holdings. Another heralded restaurant, Eleven Madison Park, overlooked Manhattan’s Madison Square Park. That’s where the trouble began.

Once a Gilded Age oasis, the park was a dump, a weedy tract of broken benches only recently cleansed of drug dealers. Meyer, a big proponent of urban parks, cofounded a conservancy to restore the grounds and opened a hot dog cart to help with fundraising. Meyer ran the cart from the kitchens of Eleven Madison Park, which proved a fateful decision. The chance to get artisanal fare in the form of cheap comfort food drew lines—long ones. Sensing a good thing, Meyer traded the cart for a freestanding kiosk in 2004. He called it Shake Shack, his take on a roadside burger stand.

Today, Shake Shack is a publicly traded company in aggressive growth mode, with locations in 26 states and 12 foreign countries. It enjoys a cult following rooted in its original premise: to make classic American roadside fare with premium ingredients—all natural and locally sourced. The signature Shack Burger is a four-ounce, cheese-topped patty of Black Angus, centered on a buttered-then-toasted Martin’s potato roll with fresh lettuce and slabs of tomato. The beef is vegetarian-fed and humanely raised; the chicken is cage-free; and the custards are made from no-hormone dairy, sweetened with sugar instead of corn syrup.

“In this economy,” Meyer told CNBC in 2010, “we’ve become a nation that aspires to the best version of anything you can find and afford—a watch, an automobile, fried chicken or a burger.”

Those aspirations have since sent droves of consumers—skewed heavily to urban millennial foodies—to Shake Shack locations everywhere. And little wonder. Shake Shack “hits on all the hot consumer buttons—fun, with flavors,” notes Robert Byrne, senior manager of consumer insights for restaurant consultancy Technomic. “It’s indulgent. It’s cravable. And all these things align in a terrific way.”

So much so that Shake Shack’s fast-casual formula even transcends Shake Shack, as New York Times restaurant critic Pete Wells noted in 2012: “Its legacy can be seen not just in the stampede of good, cheap burgers, but in the growing recognition that certain fine-dining values, like caring service and premium ingredients, can be profitably applied outside fine dining all the way down the scale to the most debased restaurant genre of all, the fast-food outlet.”

The only trouble, Byrne observes, is that while Shake Shack is growing (sales were up over 28 percent in the second quarter), its appeal may not be. With an average check of $16, Shake Shack is on the pricey side, which may account for shrinking unit volumes that Technomic has charted. The Shack “is terrific for young millennials who don’t have to feed a family,” Byrne said. “But they’re not providing me, the father of two kids, with a terrifically tempting option.” Byrne notes that his money goes further at In-N-Out, whose burgers Ranker rated as the best in America last year.

But time will tell. Meanwhile, when you spot a non-GMO, all-natural, free-range, grass-fed gourmet burger on the menu of your favorite fast-food joint, you can probably thank Shake Shack for making it fashionable.