BUSINESS
12/29/2014 02:15 pm ET Updated Dec 06, 2017

Shake Shack IPO Proves It's Possible To Make Money And Pay Your Workers Well

Shake Shack

Here's proof that it’s possible for a burger joint to both pay its workers well and still make money.

Shake Shack on Monday declared its intention to go public, filing the necessary paperwork with the Securities and Exchange Commission. In those documents, the New York-based burger chain reported blockbuster growth in recent years, even as it pledged to keep paying its workers better than the industry standard.

If the Shake Shack model continues to thrive as the company grows, it could provide fodder for workers and protesters who say fast-food giants can afford to pay their low-wage employees more and still reap huge profits.

Shake Shack workers in Manhattan make a starting wage of $10 an hour, according to Shake Shack's filing. That’s higher than both New York’s current minimum wage of $8 an hour and the $8.75 an hour that will become the state’s base wage starting on January 1 -- though it is still less than the $12.75 it takes for a single person to get by in New York City, according to MIT's living wage calculator.

That starting wage makes Shake Shack an exception in the fast-food industry, where workers' median pay hovers between $8 and $9 an hour. Unlike the typical fast-food chain, Shake Shack suggests this is good for business.

“We believe that this enables us to attract a higher caliber employee and this translates directly to better guest service,” Shake Shack wrote in its filing.

So far, the strategy seems to be working. Shake Shack’s system-wide sales grew from $21 million in 2010 to $140 million last year. That growth bucks a broader trend in the burger industry, which is shrinking slightly, according to August data from Technomic, a food research firm. Shake Shack hasn’t closed or relocated any of its 63 eateries since opening its first restaurant in 2004.

shake shack
This chart from Shake Shack's S-1 filing shows the company's sales growth over the past few years.

It might not be a simple thing for traditional fast-food restaurants to adopt Shake Shack’s model. For one, most of Shake Shack’s U.S. stores are company-owned. By contrast, most McDonald’s and Burger King locations are owned by franchisees, who operate with tight margins.

Shake Shack’s reputation for quality food, with burgers and fries that have a cult following, also gives it room to charge more. That makes keeping labor costs low less of a priority.

But fast-food joints are starting to follow the lead of Shack Shack and other “better burger” restaurants that feature limited menus with quality ingredients. McDonald’s recently announced it would expand its “Create Your Taste” program, which lets diners customize burgers with fancy toppings like guacamole and creamy garlic sauce.

CONVERSATIONS