Shake Shack Marketing Report

MKTG 5007 OLB - Major Group Assignment Report

Marketing Plan for Launching

In Toronto, Canada

Report Prepared By: Harmandeep Singh | Paramveer Singh | Devam Hirpara | Varnika Kochar | Savneet Singh | Chandni Patel N01192238 | N01191897 | N01165287 | N01131374 | N01196266 | N01186185

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Table of Contents

Executive Summary................................................................................................ 3 Overview of the Company....................................................................................... 4 Market Overview..................................................................................................... 6 Situation Analysis.................................................................................................. 11 Product Offering.................................................................................................... 13 Channel Strategy................................................................................................... 15 Marketing Objective.............................................................................................. 19 Marketing Strategy................................................................................................ 19 Mission Statement................................................................................................. 21 Marketing Mix........................................................................................................ 23 Communications Mix............................................................................................. 24 Sales Promotions................................................................................................... 25 Financial Analysis.................................................................................................. 26 References........................................................................................................... 29

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Executive Summary This report highlights how the objective of entering Canada is going to be a beneficial step for Shake Shack Inc. and how they can leverage upon their identity and offerings to capture a sizeable part of the Canadian market especially in the category of fats casual. The report draws attention towards the current scenario in the fast food market in Canada and how the major competitors for Shake Shack are performing in the sense of the market share each of them acquire. The report also throws light on what strategies Shake Shack can adopt to emerge as a major player in the market and to present itself to the target market as well as the potential targets. In the light of above mentioned, the critical success factor for Shake Shack Inc. in the Canadian market would be to leverage on the product line it has to offer as it differentiates them from the competitors in a significant way. Furthermore the business conduct and the ethical procedures followed by the company gives them a huge advantage vis-à-vis how they can immediately make place in the hearts of the Canadian consumers. The proposed implementation is to expand in the Canadian market by opening a store in the heart of downtown Toronto as it has high population density making it easier for the brand to penetrate the market.

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Overview of the Company 

About Shake Shack

Shake Shack is a popular American fast casual restaurant chain which is based in New York City. It was founded by Danny Meyer Chief Executive Officer of the Union Square Hospitality Group (USHG). From, its humble beginning in 2001 in a hot dog cart located in the heart of Madison Square Park in New York City, Shake Shack today has grown to over 100 locations and over half a dozen countries worldwide (SHAKE SHACK, 2016). Shake Shack is known to serve the modern day “Roadside” burgers, the menu apart from delicious burgers also include hot dogs, frozen custards, shakes, in-house beer & wine and more (SHAKE SHACK, 2016). 

History

It all began in 2000 when, New York City began the process of rebuilding of Madison Square Park. Danny Meyer was involved in the creation of the Madison Square Park Conservancy to redevelop it. The first project which the redeveloped conservancy did was to host an art exhibit. To cater to the visitors of the art exhibit, Danny set up a hot dog cart, which was operated out of the kitchen of one of Danny's Union Square Hospitality Group (USHG) operations, ‘Eleven Madison’. The idea of the cart was hugely successful and it stayed in operation for over 3 years (SHAKE SHACK, 2016). The next step came in 2004, when the city decided to invite for a kiosk-style restaurant inside the park. Danny saw this as a great business opportunity and thus began the first Shake Shack (SHAKE SHACK, 2016).

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   

Management Team Danny Meyer, Chairman of the Board of Directors Randy Garutti, Chief Executive Officer Zach Koff, Vice President, Operations

(SHAKE SHACK, 2016) 

Tag Line

“Stand for something good” 

Product Line

Shake Shack product line includes the following products:  Burgers: 100% all natural angus beef, 100% all natural cage free chicken  Flat Top Dogs: 100% all natural Vienna beef  Fries: Crinkle cut Yukon fries and cheese fries  Frozen Yogurt: Rich and dense frozen custard  Drinks: Shack-made lemonade, fresh brewed iced tea, Fifty/Fifty (Half lemonade-Half Iced tea), in-house beer wine  Dog Food: Shake Shack has a special menu which includes biscuits and creams (SHAKE SHACK, 2016) (Kramer, 2010)

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Market Overview Our research and study concludes that Tim Hortons and McDonald’s currently have a major share of the Canadian Fast Food Market in Canada. Tim Hortons leads all charts with over 26.8% of market share in 2015. It is closely followed by McDonald’s with a market share of around 14.6%. The next category of brands with a significant share are Subway with 6.8%, A&W with 4.4% and KFC with 2.6%.

Tim Hortons had a yearly sale of 6,667.20 (CAD Million) in 2015. McDonald’s recoded the second highest sales in terms of CAD Million in Canada in 2015. Its sales were almost half of the leader Tim Hortons with sales of 3,627.10 (CAD Million). This shows us the huge lead Tim Hortons enjoys when it comes to sales in Canada. Reports suggest that Canadians spent almost 8398.1 (CAD Million) in 2015 on Burger fast food chains in Canada. 1064.0 (CAD Million) was also spent the same year on independent burger fast food joints in Canada

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

Current Market Share of Fast Food Chains in Canada

S. No 1 2 3 4 5 6 7 8

Brand

2010

2011

2012

2013

2014

2015

Tim Hortons McDonal d's Subway A&W KFC Wendy's Burger King Harvey's

-

-

-

-

26.50

26.80

15.50

15.10

15.00

15.10

14.60

14.60

6.20 3.90 3.30 -

6.30 3.80 2.80 2.50 -

6.40 3.90 2.80 2.50 -

6.60 4.00 2.70 2.40 -

6.80 4.10 2.60 2.40 1.40

6.80 4.40 2.60 2.30 1.40

0.90

0.80

0.80

0.80

0.80

0.80

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Canada Current Market Share of Fast Food Chains in Canada (In Percentage) 30 25 20 15 10 5 0

2010

2011

2012

2013

2014

2015

(Passport GMID)

 S.N o 1

Yearly sales of popular fast food chains (In CAD MN) Brand

2010

2011

2012

2013

-

-

-

-

3

Tim Hortons McDonal d's Subway

4

A&W

5

KFC

6

Wendy's

7

Burger King

2

2014

6,339. 40 3,153.6 3,242. 3,324. 3,463. 3,502. 0 00 90 40 90 1,262.8 1,352. 1,420. 1,518. 1,626. 0 20 50 70 90 804.70 823.90 867.7 913.30 985.6 0 0 669.10 604.70 613.7 613.30 621.4 0 0 539.40 551.0 558.10 571.9 0 0 340.1 0

2015 6,667. 20 3,627. 10 1,684. 60 1,081. 80 637.5 0 583.7 0 341.6 0

8

8

Harvey's

184.70

179.90 179.2 0

178.80 182.2 0

190.8 0

Yearly Sales (In CAD MN) 8000 7000 6000 5000 4000 3000 2000 1000 0

2010

2011

2012

2013

2014

2015

(Passport GMID)



Average spending on American fast food in Canada

CATEGOR Y Asian Fast Food Bakery Product Fast Food Independ ent Bakery Burger Fast Food

Sales In Fast Food By Category (In CAD Millions) 2010 2011 2012 2013 2014 2015 599.4

644.5

667.3

702.3

750.0

773.9

8057.2

8721.0

9139.1

9573.7

9949.0

10335.0

863.6

912.6

949.4

961.6

987.9

993.9

6758.9

7045.9

7281.7

7569.4

7980.9

8398.1

9

Independ ent Burger Chicken Fast Food Convenie nce Store Fast Food Asian Fast Food Bakery Product Fast Food Independ ent Bakery

924.3

979.7

1000.2

1015.8

1046.7

1064.0

988.0

951.4

955.2

941.7

923.5

935.9

874.2

894.9

886.6

903.4

932.7

982.7

599.4

644.5

667.3

702.3

750.0

773.9

8057.2

8721.0

9139.1

9573.7

9949.0

10335.0

863.6

912.6

949.4

961.6

987.9

993.9

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SALES IN FAST FOOD BY CATEGORY (in CAD Millions) 12000

10000

8000

6000

4000

2000

0

2010

2011

2012

2013

2014

2015

Asian Fast Food

Bakery Product Fast Food

Independent Bakery

Burger Fast Food

Independent Burger

Chicken Fast Food

Convenience Store Fast Food

Asian Fast Food

Bakery Product Fast Food

Independent Bakery

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Situation Analysis SWOT Analysis Strengths  Brand awareness and recognition  Trendsetter in the ‘casual dining’ category  Excellent customer service  Fresh ingredients and food quality of products  Environment friendly brand image Opportunities  Offer more healthier products  Investing more in marketing  Leveraging the existing social media presence  Expanding to developing countries like India and China.

Weakness  Higher prices  Lack of outlets  Lack of outlets leads to long lines and consumer complaints  Associated with fast food industry  Lack of higher marketing budgets Threats  Growing competition in the fast casual category  Increase in commodities pricing gets passed on to the consumers

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PEST Analysis Political  Change in the government of US  Rapid increase in international trade agreements  Developing public health policies  Support from government for globalization  Stability in political environment in major markets Economical  Increase for the importance of sustainable business strategies  Growth in trade agreements  Growth of economy in developing markets  Stable US economy

Social  Change in the lifestyle of people  Increasing trends for health consciousness  Growth in the awareness of animal rights  Growth in consumer diversity

Technological  Boost in the sales by the use of mobile applications  An opportunity of increasing R&D  Growth in the availability of technology  Increase in the operational efficiency with new technological advances

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Product Offering The Shake Shack Product Line includes the following:

 Burgers Shake Shack is known world over for serving 100% all-natural Angus beef patties. No hormones and no antibiotics ever. Shake Shack has a proprietary Shack blend which is freshly ground. For the Vegetarians 'Shroom Burger’ - A Crisp-fried Portobello mushroom filled with melted Muenster and cheddar cheeses, topped with lettuce, tomato, ShackSauce™.  Flat Top Dogs: This is all where it began from. 100% all natural Vienna beef, these scrumptious hot dogs are hard to ignore.  Fries Crinkle cut Yukon fries. Add hot melting cheese to it to experience the signature Shake Shack cheese fries  Frozen Yogurt The rich and dense frozen custard is made fresh daily. ! Made with zero artificial flavours the fudge sauce and caramel sauce have zero shelf-life lengtheners. Some of the favourites are: o Shack Attack® 14

o Wall-nut Street (BPC) o Jelly’s Last Donut (TD) o Brooklyn Pie oh My (Brooklyn Shacks)

 Drinks Shack-made lemonade, fresh brewed iced tea, Fifty/Fifty (Half lemonade-Half Iced tea), in-house beer and wine  Dog Food

Select Shake Shack outlets have a special menu for man’s best friends which includes biscuits and creams Pooch-ini - ShackBurger® dog biscuits, peanut butter sauce and vanilla custard. Includes dairy, sugar and nut products. Bag O' Bones - 5 ShackBurger® dog biscuits (SHAKE SHACK, 2016)

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A sample menu from the Madison Square Park New York location.

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Service Offering 17

As quoted by Rob Brunner at the Fast Company, Shake Shack’s customer service is what makes it stand out as compared to its competitors in the industry. Since is first began operations in 2004, Shake Shack has kept its focus more on quality of the food being served and less on marketing. It has slowly and steadily changed the perceptions associated with traditional fast food with its excellent customer service. Shake Shack food preparation model has changed the opinions of the consumer, that fast food has to be served quickly and has to be precooked, as is the case with many current chains now. Consumers are willing of wait a bit more for their food if they know the food being served comes with excellent quality of ingredients and customer service (LUTZ, 2015) About the Décor

Shake Shack outlets are designed to look edgy. They have flat wooden tables and modern interiors. They offer one of the best dining experience in the category what has now come to be known as ‘fast casual’ (DUA, 2015).

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(Picture Courtesy: Joan Voight, Campaign US, May 19, 2015)

Channel Strategy Shake Shack today has over 100 locations worldwide. It is known for selling fresh, locally sourced food in sustainably operated kitchens. It prides itself on serving products made from all natural ingredients. Shake Shack has been successfully running an international operation sourcing ingredients from local farmers and artisans bakers. A major reason of the same is that it comes its menu small so that the company’s sourcing team can be actively and regularly engaged with local suppliers. The menu consists of 55 to 60 core ingredients items. (Milbergs, 2015) As a part of its current channel strategy Shake Shack only uses 5 different suppliers in the USA for its beef. Out of those 5, one supplier alone contributes 88% ground beef patties used in Shake Shack outlets in the world. The custard and potato bun are sourced from one single supplier each (Kell, 2015).

Suppliers and Vendors

Shake Shack Outlets

Consumers

Recent Update In order to efficiently manage its channel strategy, Shake Shack has licensed ArrowStream, Inc., for its OnDemand software to help it better manage food spend, inventory, limited-time-offer (LTO) tracking, auditing, and contract management with its suppliers and distributors. (QSR Magazine, September, 2016)

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Marketing Objective The main objective for shake shack to enter the Canadian market is expansion. Currently the company is serving in United States, Japan, Middle East, Russia, Turkey, United Kingdom and South Korea. But is yet to enter the immediate neighbor market of the place where it originated. Furthermore, statistics show that fast food has a good market in Canada. Shake Shack being a high-quality brand with offerings that are different from the competitors’ who are currently present in Canadian market, Shake Shack has good chances of acquiring of a big part of that ever-growing fast casual category. Another objective is to cater to the Canadian market is that many Canadians who have visited United States know about Shake Shack and like it as well, but do not have the means to quench that craving. This step would mark a stepping stone to make the entire Canadian market familiar with what Shake Shack is about and why it is so good.

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Marketing Strategy The key marketing strategy would be to capitalize on the fact that Shake Shack offers products that are all-natural and no artificial ingredients are used, given how the Canadian market is becoming health conscious with each passing day. Also, the famous curly fries which is one of the best-sellers can be used for effective marketing tool as it is something different which no competitor has to offer. Plus the uniqueness of the menu which also has a dog food segment can prove to be a great strategy to attract dog owners even if they are not fast food lovers themselves. Shake Shack has been amongst the top 10 fastest growing chains in America with 100 branches across the world in 2016. It is extensively known for premium quality burgers and delicious custards. The most interesting aspect about Shake Shack’s marketing is that they spend very little on advertising campaigns. They never had to spend huge amounts to develop brand’s strength through advertising. The company has achieved substantial followers on various social media networks, gathering their positive appraisals from their customers.

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Shake Shack does ‘No Traditional Marketing’, but has a very solid presence on social media which speaks to its significance amongst the millennials. Shake Shack’s social media game is on fleek. According to analyst, Shake Shack’s overall success is through its expertise in social media. We can follow the same concept at the time of launching shake Shack in Canada as people in Canada are active on social media. Shake shack’s marketing strategies are mainly online related to their social media and networks, online reviews and feedbacks and marketing though emails. Their attractive website having fascinating images of food is very appealing to the visitors. The design and the green color of website represents healthiness and a clean maintainable environment. In addition, it website also has customer winning gifts, coupons for students, keep updated about the latest events etc. All these features attract people to the website. These all factors could be used while getting Shake Shack to Canada. With the constant use of brand graphic, design, images, content and Ecommerce on its website, shake Shack strengthens its marketing message. It is very important to have customers that are satisfied with our food products and services, who will further be our advocates, recommending their family and friends to try them. With a strong social media strategy, Shake Shack 23

can enter Canada by finding the right audience, convert them into loyal customers and further get referrals. Thinking of social media as word of mouth-line will help us to expand our business. Shake Shack’s major marketing strategies which can be used while launching in Canada: 

Social media: Shake Shack manages its social media on various networks such as Facebook, Twitter, Instagram, Google plus, YouTube and Pinterest. It has large number of followers on various channels and engaged in terms of comments, likes and retweets. Shake Shack has achieved great success through social media.



Online reviews: Reviewing customers’ feedback matters to every business, because it is very important to know what customers feel about their products or service. Shake Shack manages its reviews on Yelp, Trip Advisor, Google plus and foursquare. Every location of Shake Shack has its own review channel which are spread across every locations and states. Shake Shack has reviews that are positive and negative as well but, on average it has incredible positive ratings with good comments.



Email marketing: Shake Shack has three major sections of their email marketing status: 1. The opt-in form they use 2. Email delivery to their subscribers 3. Email personalization for their customers

Mission Statement “We stand for something good” in everything we do. That is the mission statement Shake Shack holds for itself as it believes in having good standards not just of the quality of the food they provide but also of their behaviors and actions which they perform as a part of the community. 24

Shake Shack takes pride in using good ingredients in their products like 100% all natural Angus and Vienna beef and 100% all natural cage-free chicken and not using any artificial ingredients for their fries or frozen custards. Shake Shack strongly believes in doing good for the environment as they recycle all bottles and plastics and makes sure no recyclable material ends up in landfill. There are many other ways in which the company helps the environment like their 1% of all the Shack2O bottles supports the Waterkeeper Alliance which focuses on cleanup of water resources around the globe, the merchandise sold is made from organic cotton and recycled polyester, the chocolate bars are sold in recycled heavyweight paper wrapper, some of the shacks use solar roofs for electricity generation and many other initiatives. Shake Shack also achieves their mission of being ‘good’ members of the community by donating 5% of the sales to a local charity partner and they also have a Shack Gives Back program where they indulge in community service regarding animal welfare and education. They donate more than 2,000 hours a year to serve meals to the hungry, mentor kids in need, clean up parks and much more. The company also supports the No Kids Hungry campaign by providing incentives to those who donate for this cause. (Stand For Something Good, 2016)

Shake Shack is doing a great job vis-à-vis achieving its vision. By providing good quality of food and giving back and doing so much for the community they are truly accomplishing what they say they stand for and believe in. In the coming years, we can see them doing much more for the betterment of the community and justifying their mission statement of ‘Being Good’ in everything they do.

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Marketing Mix 4 P’s of marketing for Shake Shack Product



Never Pre-cooked -



The products sold at Shake Shack are always freshly made



Variety in menu like Yogurt, Burgers, Shakes, Drinks for kids, Dessert.



Option to customize each product



Menu includes in house wine and beer



A special menu for dogs

Place



Launch the first outlet on King St West and Spadina Avenue in the heart of Downtown



A major intersection in heart of downtown



Area visited by young adults and millennials



Downtown Toronto has high population density making it easier for the brand to penetrate the market

Promotion





Use outdoor media like billboards, to be placed across key locations in Toronto Social media channels like Facebook, Twitter and You Tub

Price



First Shake Shack to offer combo meals



Competitive pricing like of other fast casual restaurants in Toronto



Customised menu with a new product targeting the 26



Offer introductory discounts to customers



Sales Promotion



Direct Selling

Canadian market

Communications Mix Shake Shack as brand is known to spend little on advertising. As per reports, its advertising costs for the year 2013 were about US $794,000 and for 2012 I was $564,000. (Maureen Morrison, January 30, 2015) For its launch in Toronto, Canada, following mediums will be used to communicate the information of the launch. Advertising Advertising sets the foundation for communicating the brand to the target audience in a new market. It helps us to convey our message to the consumer. It is the starting point of creating a long term relationship with the consumers. The advertising techniques to be employed in Toronto are as follows:   

Print Media (boards and billboards) Electronic Media Social Media Campaigns

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Sales Promotions Introducing special limited time promotions to create a buzz in the market.

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Financial Analysis Market Analysis Our research and study concludes that the major risk for Shake Shack when entering the Canadian market is the existing competition. There are existing chains who already have a major share in this market. The chains include Tim Hortons, Mc Donalds and Subway who have constantly had a major market share in Canada for the years 2014 and 2015. S. No 1

Brand

2010

2011

2012

2013

2014

2015

-

-

-

-

26.50

26.80

2

15.50

15.10

15.00

15.10

14.60

14.60

3

6.20

6.30

6.40

6.60

6.80

6.80

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Contingency Plan The means to mitigate this problem is the unique selling proposition that Shake shack has. First being the classic items in their menu like the curly cheese fries and 100% Angus beef patties. The other unique selling point for them is the availability of in house beer and wine on their menu. Another important factor which makes Shake Shack different from its competitors is the menu it has for our furry friends as well. Shake Shack is a fast casual restaurant chain and offers a better environment for its customers to enjoy their food. Sales and Financial Result Analysis Shake Shack’s financial results for the year 2015 and fiscal year ended on December 31, 2015 are as follows: Financial Results (2015) 

Total revenue increased 60.8% to $190.6 million.



Shack sales increased 63.5% to $183.2 million.



Net Income was $2.9 Million. (SHAKE SHACK, 2016)

Shake Shack’s financial results for the fourth quarter and fiscal year ended Dec 30, 2015 are as follows: Financial Results (Fourth Quarter) 

Total Revenue increased 46.8% to $51.1 Million (US)



Shack Sales increased 49.2% to $49.3 Million (US)



Net income was $1.2 million

(SHAKE SHACK, 2016)

Financial results for the Second quarter ended June 29, 2016 (13 weeks) Financial Results (Second Quarter, 2016) 

Total Revenue increased 37.2% to $66.5 Million (US)



Shack Sales increased 38.3% to $64.4 Million (US)



Net Income was $3.3 Million. 30

(SHAKE SHACK, 2016)

From the report of the past sales we can observe a decline in the total revenue, the reason behind the decline is the large amount of Shake Shack shares which were available in the market as a part of its secondary offering. Shake Shack founder and CEO Danny Meyer was expected to reduced his lot of 1.3 Million shares to 30,000 shares, also Los Angeles based Private Equity Firm Leonard Green & Partners – filed to sell up to 5 million shares. But in the year 2016 we can observe an increase in sales by quite a significant amount. Total Revenue increased from $51.1 Million to $66.5 Million with sales increasing from $49.3 Million to $64.4 Million before the completion of the fiscal year.

Market Share Forecast From the observation of the past data we can surely forecast an increase in sales and total revenue for Shake Shack. The forecast is as follows: 

We can forecast an increase in Total revenue of at least $2 million dollars for a new store in Toronto.



We can surely assume the increment from $66.5 Million in 2016 by June to go as high as about $69.8 Million in their introductory year.

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References DUA, T. (2015, February 26). How Shake Shack won over millennials. Retrieved from digiday.com: http://digiday.com/brands/shake-shack-hit-among-millennials/ Kell, J. (2015, MAY 14). Why Shake Shack Will Never Be McDonald's. Retrieved from http://fortune.com/: http://fortune.com/2015/05/14/shake-shack-mcdonalds/ Kramer, K. (2010, october 15). Shake Shack Founder Expands His Empire. Retrieved from cnbc.com: http://www.cnbc.com/id/39679233 LUTZ, A. (2015, june 22). Shake Shack's biggest advantage has nothing to do with the food. Retrieved from businessinsider.com: http://www.businessinsider.com/shake-shacks-customer-service-policy-2015-6 Milbergs, M. S. (2015, MAY 22). Shake Shack's supply chain guru on sourcing better burgers. Retrieved from greenbiz.com: https://www.greenbiz.com/article/shake-shacks-supply-chain-guru-sourcingbetter-burgers SHAKE SHACK. (2016). Retrieved from www.shakeshack.com: https://www.shakeshack.com/food-and-drink SHAKE SHACK. (2016). SHAKE SHACK. Retrieved from investor.shakeshack.com: • http://investor.shakeshack.com/investors-overview/news/press-releasedetails/2016/Shake-Shack-Announces-Second-Quarter-2016-FinancialResults/default.aspx www.shakeshack.com. (n.d.).

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