Published On: Tue, Dec 30th, 2014

Danny Meyer’s Shake Shack to Serve IPO Feast to Investors

Tribute Dinner Honoring Danny Meyer And Chuck Wagner With Master Of Ceremonies Jonathan Tisch Presented By Bank Of America Part Of The New York Times Dinner Series - Food Network South Beach Wine & Food Festival

Shake Shack Inc. is going public and may be worth as much as $1 billion — not bad considering New York restaurateur Danny Meyer started the joint as a public service, Bloomberg said.

Founded more than a decade ago to help support the restoration of Manhattan’s Madison Square Park, Shake Shack was an instant success, drawing long lines of urbanites attracted by Meyer’s modern spin on a roadside burger stand. Today, Shake Shack has more than 63 outlets in 30-plus cities from London to Dubai, the report said.

Meyer’s timing with Shake Shack was auspicious. Shake Shack joined a “better burger” boom as foodies from Los Angeles to New York began clamoring for food that tasted good and used sustainably raised ingredients. Much like many fast casual joints these days, Shake Shack advertises “100% all-natural Angus beef, vegetarian fed, humanely raised and source verified, ” Bloomberg said.

Now, the company is approaching public investors with its growth rate slowing and profitability falling, the IPO filing reveals. Even as sales rose 41 percent to almost $84 million in the 39 weeks through Sept. 24, net income fell amid a rise in expenses that included a more than doubling of pre-opening costs, according to the report.

The company also said its “shack-level” profit margins edged lower while “same-shack” sales growth slowed to 3 percent in the period through September, from 5.5 percent year earlier and 7.1 percent in fiscal 2012, Bloomberg said.

In the U.S., Shake Shack plans to open 10 new company-operated stores each year starting in 2015, and expects it could grow from 31 company-operated stores to 450 over the long-term, it said in the filing. The company didn’t say how long it will take to reach that target, the report said.

Outside the U.S., the company has 20 stores in the Middle East, four in Turkey, two in Russia and one in the U.K.
The company, which will list early next year on the New York Stock Exchange, is aiming for a $1 billion valuation in the initial public offering, people familiar with the matter said in September, according to Bloomberg.

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Shake Shack used a $100 million placeholder for the IPO, a figure to calculate fees that may change.

In addition to making a payment to Meyer and early backers including Leonard Green Partners & Partners LP, the company plans to use its IPO proceeds to repay debt, open new Shake Shack restaurants and renovate existing ones, the report said.

In offering shares, Shake Shack hopes to tap into the investor appetite for new stock listings that has allowed 293 companies to raise a collective $96 billion through U.S. IPOs this year — the highest amount since the dotcom boom according to Dealogic data, the Financial Times said.

Shake Shack’s filing highlights the strength of “the quintessential American meal”, saying burger sales are twice those of pizzas, the restaurant industry’s next largest category, at more than $72 billion in the US in 2013 and over $135 billion globally, the Times said.

 

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