Shake Shack Inc. (SHAK)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements including, but not limited to, statements about our growth, including our long-term growth goals, strategic priorities and initiatives, and liquidity. Forward-looking statements discuss our current expectations, targets and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "likely," "outlook," "potential," "preliminary," "project," "projection," "plan," "seek," "target," "may," "could," "would," "will," "should," "can," "can have," the negatives thereof and other similar expressions.

Forward-looking statements reflect our current views with respect to future events and are based on certain assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from trends, plans, or expectations set forth in the forward-looking statement, as set forth in this Form 10-Q. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 ("2025 Form 10-K"), our subsequent Quarterly Reports on Form 10-Q, and our other filings with the SEC.

The forward-looking statements included in this Form 10-Q are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

The following discussion should be read in conjunction with our 2025 Form 10-K, our subsequent Quarterly Reports on Form 10-Q, the Condensed Consolidated Financial Statements and notes thereto included in Part I, Item 1 of this Form 10-Q, and our other filings with the SEC. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years.

OVERVIEW

Shake Shack serves elevated versions of American classics using only the best ingredients. We're known for our delicious made-to-order Angus beef burgers, crinkle cut fries, crispy chicken, hand-spun milkshakes, house-made lemonades, and more. With our high-quality food at a great value, warm hospitality, and a commitment to crafting uplifting experiences, Shake Shack has become a cult-brand with widespread appeal.

The following definitions apply to these terms as used herein:

"Average weekly sales" is calculated by dividing total Shack sales by the number of operating weeks for all Shacks in operation during the period. For Shacks that are not open for the entire period, fractional adjustments are made to the number of operating weeks open such that it corresponds to the period of associated sales.

"Same-Shack sales" represents Shack sales for the comparable Shack base, which is defined as the number of Company-operated Shacks open for 24 full fiscal months or longer. For consecutive days that Shacks were temporarily closed, the comparative period was also adjusted.

“System-wide sales” is an operating measure and consists of sales from Company-operated Shacks and licensed Shacks. The Company does not recognize the sales from licensed Shacks as revenue. Of these amounts, revenue is limited to licensing revenue based on a percentage of sales from licensed Shacks, as well as certain up-front fees, such as territory fees, opening fees, and termination fees.

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Key Operating Metrics

Same-Shack sales for the thirteen weeks ended July 1, 2026 increased 3.5% compared to the same period last year, driven by a 2.0% increase in guest traffic and a 1.5% increase in price mix. Same-Shack sales for the twenty-six weeks ended July 1, 2026 increased 4.0% compared to the same period last year, driven by a 2.3% increase in price mix and a 1.7% increase in guest traffic. For the purpose of calculating same-Shack sales for the thirteen and twenty-six weeks ended July 1, 2026, Shack sales for 296 Shacks were included in the comparable Shack base.

Average weekly sales were $78,000 for the thirteen weeks ended July 1, 2026, which was flat compared to the same period last year, primarily driven by higher menu prices, partially offset by menu mix. Average weekly sales were $75,000 for the twenty-six weeks ended July 1, 2026, which was flat compared to the same period last year, primarily driven by higher menu prices, partially offset by menu mix.

System-wide sales for the thirteen weeks ended July 1, 2026 increased 13.8% to $625.8 million compared to the same period last year. System-wide sales for the twenty-six weeks ended July 1, 2026 increased 13.9% to $1,184.1 million compared to the same period last year.

Digital sales for the thirteen weeks ended July 1, 2026 increased 34.3% to $164.5 million compared to the same period last year. Digital sales for the twenty-six weeks ended July 1, 2026 increased 27.1% to $305.6 million compared to the same period last year. Digital sales includes orders placed on the Shake Shack app, website and third-party delivery platforms, which represented 40.8% and 40.3%, respectively, of Shack sales during the thirteen and twenty-six weeks ended July 1, 2026.

Development Highlights

The following tables summarize the Shacks opened and closed during the thirteen and twenty-six weeks ended July 1, 2026.

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RESULTS OF OPERATIONS

The following table summarizes our results of operations for the thirteen and twenty-six weeks ended July 1, 2026 and June 25, 2025:

(1)As a percentage of Shack sales.

Shack Sales

Shack sales represent the aggregate sales of food, beverages and Shake Shack branded merchandise at our Company-operated Shacks and gift card breakage income. Shack sales in any period are directly influenced by the number of operating weeks in such period and the total number of open Shacks.

Shack sales for the thirteen weeks ended July 1, 2026 increased 17.5% to $403.4 million versus the same period last year. The increase was primarily due to the opening of 61 new Company-operated Shacks between June 25, 2025 and July 1, 2026, which contributed $47.2 million, as well as a 3.5% increase in same-Shack sales.

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Shack sales for the twenty-six weeks ended July 1, 2026 increased 16.0% to $757.5 million versus the same period last year. The increase was primarily due to the opening of 61 new Company-operated Shacks between June 25, 2025 and July 1, 2026, which contributed $76.4 million, as well as a 4.0%

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about our growth, including our long-term growth goals, strategic priorities and initiatives, and liquidity. Forward-looking statements discuss our current expectations, targets and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "likely," "outlook," "potential," "preliminary," "project," "projection," "plan," "seek," "targets," "may," "could," "would," "will," "should," "can," "can have," the negatives thereof and other similar expressions.

Forward-looking statements reflect our current views with respect to future events and are based on certain assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from trends, plans, or expectations set forth in the forward-looking statement, as set forth in this Form 10-K. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this Form 10-K in the context of the risks and uncertainties disclosed in Part I, Item 1A of this Form 10-K under the heading "Risk Factors," in this Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in Item 7A "Quantitative and Qualitative Disclosures About Market Risk."

The forward-looking statements included in this Form 10-K are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

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OVERVIEW

Shake Shack serves modern, fun and elevated versions of American classics using only premium ingredients. We are known for our made-to-order 100% Angus beef burgers, crispy chicken, hand-spun milkshakes, house-made lemonades, beer, wine, and more. With our fine-dining roots and a commitment to crafting uplifting experiences, Shake Shack has become a cult-brand and created a new category, fine-casual.

We operate on a 52/53 week fiscal year ending on the last Wednesday of December. Fiscal 2025 included 53 weeks and fiscal 2024 included 52 weeks. The additional operating week of fiscal 2025 is referred to as the "53rd week."

For discussion of our results of operations and changes in financial condition for fiscal 2024 compared to fiscal 2023 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended December 25, 2024, filed on February 21, 2025.

The following definitions apply to these terms as used herein:

"Average unit volume" is calculated by dividing total Shack sales by the number of Shacks open during the period. For Shacks that are not open for the entire period, fractional adjustments are made to the number of Shacks in the denominator such that it corresponds to the period of associated sales.

"Average weekly sales" is calculated by dividing total Shack sales by the number of operating weeks for all Shacks in operation during the period. For Shacks that are not open for the entire period, fractional adjustments are made to the number of operating weeks open such that it corresponds to the period of associated sales.

"Same-Shack sales" represents Shack sales for the comparable Shack base, which is defined as the number of Company-operated Shacks open for 24 full fiscal months or longer. For consecutive days that Shacks were temporarily closed, the comparative period was also adjusted.

“System-wide sales” is an operating measure and consists of sales from Company-operated Shacks and licensed Shacks. The Company does not recognize the sales from licensed Shacks as revenue. Of these amounts, revenue is limited to licensing revenue based on a percentage of sales from licensed Shacks, as well as certain up-front fees, such as territory fees, opening fees, and termination fees.

Key Operating Metrics

Same-Shack sales1 for the fiscal fourth quarter ended December 31, 2025 increased 2.1% compared to the same period last year, driven by a 1.6% increase in price mix and a 0.5% increase in guest traffic. Same-Shack sales1 for the fiscal year ended December 31, 2025 increased 2.3% compared to the same period last year, driven by a 3.1% increase in price mix, partially offset by a 0.8% decline in guest traffic. For the purpose of calculating same-Shack sales growth for the fiscal fourth quarter and fiscal year ended December 31, 2025, Shack sales for 278 Shacks were included in the comparable Shack base.

Average weekly sales1 were $77,000 for the fiscal fourth quarter ended December 31, 2025, compared to $79,000 for the same period last year, primarily driven by a decline in guest traffic and menu mix, partially offset by higher menu prices. Average weekly sales1 were $76,000 for the fiscal year ended December 31, 2025, which was flat compared to the same period last year, primarily driven by a decline in guest traffic, offset by higher menu prices.

System-wide sales increased 23.4% to $618.0 million for the fiscal fourth quarter ended December 31, 2025, versus the same period last year. System-wide sales increased 15.9% to $2,228.8 million for the fiscal year ended December 31, 2025, versus the same period last year. The 53rd week contributed $47.3 million to System-wide sales in fiscal 2025. Average unit volume for Company-operated Shacks was $4.0 million for the fiscal year ended December 31, 2025, which was flat compared to the same period last year.

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Digital sales for the fiscal fourth quarter ended December 31, 2025 increased 30.0% to $150.7 million compared to the same period last year. Digital sales for the fiscal year ended December 31, 2025 increased 20.3% to $515.4 million compared to the same period last year. The 53rd week contributed $13.3 million to digital sales in fiscal 2025. Digital sales includes orders placed on the Shake Shack app, website and third-party delivery platforms, which represented 39.1% and 37.0%, respectively, of Shack sales during the fiscal fourth quarter and fiscal year ended December 31, 2025.

(1)For fiscal fourth quarter and fiscal year ended December 31, 2025, same-Shack sales and average weekly sales were calculated excluding the 53rd week.

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Development Highlights

During fiscal 2025, we opened 45 new Company-operated Shacks and 40 new licensed Shacks. There were four permanent licensed Shack closures and one permanent Company-operated Shack closure in fiscal 2025. Below are Shacks opened during the fourth quarter of 2025.

As of December 31, 2025, there were 659 Shacks in operation system wide, of which 373 were Company-operated Shacks and 286 were licensed Shacks.

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RESULTS OF OPERATIONS

The following table summarizes our results of operations for fiscal 2025 and fiscal 2024:

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