E Shake Shake Shake: The Shack Shack Metaphor

I was watching the recent action in Shake Shack (SHAK) and to put it bluntly, it has shaken my core beliefs in a rational market. Granted, most of this insanity is due to short covering yet the hype surrounding this fancy "hamburger joint" is shaking up an already jittery market. I half expected Janet Yellen last week to cite Shake Shack as the reason they are going to raise interest rates! 

Shake Shack jumped 30% following last week's better-than-expected earnings report. Then it jumped 8% last Wednesday as it announced the reopening of its Madison Park location in New York (and no, the salt shakers were NOT removed from the tables.)

Then it popped another 8% the next day because it filed an application to trademark the name "chicken shack". No one knows whether they will be opening new stores under that moniker or just adding chicken dishes to their current menu. If so, that should shake things up a bit at Chick-fil-A's corporate offices.

So now you know how to make $200 million in two days. Not bad for a place that makes artery clogging milk shakes (46 grams of fat per serving) and burgers (30 grams of fat per single burger). So much for the millennials' clarion cry for more healthy eating alternatives. Shake Shack clearly flies in the face of that trend. 

And so far it's working. The value of Shake Shack's shares keeps rising as the burger chain announces plans to open more restaurants yet it only plans on opening 10 locations this year. Right now, a single Shake Shack location is now worth nearly $50 million. Compare that to $10 million for a Chipotle (CMG) location and $3 million for a McDonald's (MCD). Shake Shack has only 63 current locations so it's not exactly leaving the competition shaking in their boots just yet.

Still, it's hard to ignore the company's market cap is now $3.42 billion. The company became public January 30, 2015 with an offering price of $21 and now trades above $90. These numbers are hard to shake off because they are symptomatic of a much larger problem we are in right now.

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Disclosure: I have no position in SHAK as of this writing.

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Mad About Money 5 years ago Member's comment

Great article. Thanks for sharing.

Carol W 5 years ago Author's comment

price per franchise: RRGB 2.2 million per store. JACK 1.2 million Burger King 535k per store...Habit 8 million SHAK 40 million -insane.

Roland Murphy 5 years ago Member's comment

"Shake Shack has only 63 current locations." Shocked it's so few. How does that compare to Chipotle?

Marcy Brown 5 years ago Member's comment

Over 1700 that I can find...

Carol W 5 years ago Author's comment

that sounds right..

Dr. Duru 5 years ago Contributor's comment

I love the thematic approach here. SHAK definitely makes those of us who have been around for a while think bubblicious. Next time Yellen complains about valuations, it won't be small caps and bio-tech, it will actually be about burgers and casual dining! :)

Carol W 5 years ago Author's comment


Carol W 5 years ago Author's comment

Hey comments are welcome!