The newcomer burger chain Shake Shack, which has just 71 locations, is worth almost as much as Wendy’s.
The company’s shares are soaring on news that sales and revenue were better than expected.
The gains — after the close of regular trading — have brought Shake Shack’s market capitalisation to about $US2.8 billion, compared with the $US2.85 billion of Wendy’s or $US2.81 billion for Papa John’s.
But Wendy’s has 95 times as many stores, and 12 times Shake Shack’s annual sales, according to Nation’s Restaurant News.
A single Shake Shack location is worth nearly $US40 million. That compares with about $US10 million for a Chipotle location and $US3 million for a McDonald’s restaurant.
So why is Shake Shack’s valuation so high? Because investors believe it has huge growth potential – even if the company itself says it isn’t trying to become a massive chain. Executives say there are plans to open “at least 12 restaurants per year.” That rate of growth puts the company far behind competitors with thousands of locations.
“To be sure, investors are betting that Shake Shack will grow to become the size of a big chain someday — though the company itself says it plans to grow only to about 450 locations in the US, which will make it something of a destination fast-casual concept, rather than an everyday lunch place,” Jonathan Maze writes in Nation’s Restaurant News.
Still, Shake Shack’s high-quality, ethically sourced food and excellent customer service have drawn many comparisons between it and Chipotle, which has seen business explode in recent years. While McDonald’s and Wendy’s are trying to emulate Shake Shack’s strategy, they are a long way from being able to offer a similar experience.
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