Conference Transcript - SHAK 2026-06-02

Andrew Charles, Analyst — TD Cowan

Okay, great. All right, we're going to get started. So I'm Andrew Charles. I'm TD Cowan's restaurant analyst, and we're thrilled to host Shake Shack CEO Rob Lynch and new CFO Michelle Hook. Shake Shack was born in New York City in 2004 and has since grown to 440 U.S. locations and 245 international locations. The business is known for fresh, never-frozen burgers, hand-breaded chicken sandwiches, crinkle-cut fries, and creamy milkshakes. What I think we'll do this morning, Rob or Michelle, I'll turn it over to you guys to address this morning's release, and we'll take it from there.

Rob Lynch, CEO

Great. Thank you, Andrew. So, I'll just start by saying that, you know, we have a ton of confidence in the Shake Shack model. I mean, we are delivering double-digit revenue growth, you know, operating margins between 22 and 23 percent, and double-digit new store sales growth. So, those foundational principles put you in some pretty rarefied air in this industry. We are seeing some challenges, short to midterm challenges on the cost side. Obviously, I think everyone is aware of the beef prices that we're battling. They've continued to escalate. And we are also seeing, you know, fuel surcharge prices on some of our distribution and some of the other input costs in the middle of the P&L. So we felt like it was prudent today to reflect that in our margin guidance, both for the quarter, there's only four weeks left in the quarter, and then for the year. So, you know, we have done a lot to mitigate a lot of inflation over the last two years. We've significantly improved our operations in our restaurants, and we've done a lot of work in our supply chain to mitigate our costs of goods sold. We've also done our best to hold on pricing. We've taken less pricing over the last year than we've taken in any of the three years prior. So those efforts have resulted in, once again, you know, 22-plus percent restaurant margins and double-digit revenue growth. But obviously, it's not what we communicated at the beginning of the year. And so we wanted to make sure that the investment community had the most updated information as we've gotten it. And, you know, Michelle coming on three weeks ago has been a godsend for our team. She's come in with a lot of energy, has really dug into the business, and, you know, we talked a lot about what the right opportunity was for us to, you know, share the updated information, and that's why we chose to do that today.

Michelle Hook, CFO

Yeah, and I think to Rob's point, Andrew, you know, just as we are two-thirds into the quarter, to Rob's point, we have four weeks left. And so I know we gave an update to everyone a month ago, but, you know, updates are good. And, you know, what we're seeing in the business today is what was reflected in the updated guidance that we delivered. And so to Rob's point, you know, when I look at the health of this business and you look at three straight quarters of positive traffic growth, 21 straight quarters of positive comp growth when you look at how we're opening our new shacks i think the returns on those shacks are are very healthy we're opening more shacks uh than we have in the past and i think you know when you look at just the core fundamentals of the business uh very strong and to rob's point there's going to be some headwinds in the macro and we acknowledge that and that's part of what you see in the updating guidance today reflecting our views on the current cost structure and you know what our views are just given the competitive landscape and all the things that we know of today.

Andrew Charles, Analyst — TD Cowan

Very good. Michelle, I believe this is your first public appearance that's taking the role. So maybe talk a little bit more about, you know, what brought you into the role and your, you know, not observations so far, but more so your priorities.

Michelle Hook, CFO

Yeah, obviously the brand is amazing. And so to join a brand such as Shake Shack was, you know, something I'm just grateful for the opportunity that Rob gave me and just the faith in, you know, stepping into this seat. And, you know, my background is in restaurants, and so having spent, you know, quite a number of years at Domino's and the last five and a half years at Portillo's, you know, I just, I live and breathe this industry, and just when I think about an iconic brand in this industry, Shake Shack is at the top of the list. And when I look at just the growth potential of this brand, it's tremendous. And, you know, I know we put out the 1,500 Shaq number, you know, but when you look at that coupled with just the international growth that we've seen and the opportunities there, it's just a tremendous brand, tremendous opportunity. Culture is also important to me. So, you know, when I met Rob and the rest of the team and, you know, the core of this culture built on our founder, Danny Meyer, and, you know, the concept of enlightened hospitality and, you know, just resonates very strongly with me. And so all of that weighed into, you know, me sitting here today, and I'm happy to be a part of the team and look forward to being part of the growth in the future.

Rob Lynch, CEO

And we're super thankful to have her. I mean, having somebody with her experience come in, I mean, she's hit the ground running. I think you took, what, three days off from roles? Has dug in on every facet of the business and is adding value right out of the gate.

Andrew Charles, Analyst — TD Cowan

That's great to hear. Rob, I want to talk about some of your priorities. You know, it started with marketing. You've made a lot of investments around this the past few years, really doing a nice job making sure there's no holes in the menu innovation calendar over the last 12 months. But, you know, I'm curious about as we go from here, second half of this year, you're going to lap over some successful menu innovation for the back half of the year. And so what do you think are going to be the most meaningful sales drivers as we go forward?

Rob Lynch, CEO

Yeah, I mean, we're going to have great innovation this year as well. So it always starts with culinary. You have to have something to sell. And we have the best culinary in the business. So we're excited about what's coming both this quarter and in the back half. And, you know, on the marketing front, what I would tell you is the first time we ever bought a paid media ad was Q3 last year. And, you know, we were really excited about the initial results, right? We saw 5% comp growth in Q3 last year with 3% traffic, and that was our first positive traffic quarter in quite some time. So it really emboldened us, and then we continued to invest in Q4 and delivered positive comp and positive traffic in Q4 as well. And that continued in the last quarter. You know, last quarter we delivered 4.6% comp and 1.4% traffic growth. So really great numbers in the context of the industry in which we're competing. Three straight quarters of traffic growth. So we're really excited about our ability to drive the top line, particularly on the comps. And then on our new shacks, I mean, we are delivering, you know, really strong returns. we've obviously managed the cost of opening those and building those and and we're seeing with our you know 22% margins and continued revenue growth like the returns on those are really promising and we'll open up more this year than we've ever opened up in history so we think we're getting a great return on our on our capital so we in the back half of this year we will continue to make investments and what I get really encouraged about is we didn't know what we didn't know in q3 last year i mean it was the first time we'd ever bought media on this brand so i think over the last nine months we've gotten a lot more proficient we've brought in some really good talent to lead a lot of our marketing efforts jim taylor who was the president of sonic prior to this this role has come in as our chief commercial officer we've got some great talented people on our media side and so i think the returns that we're going to see from our media investments are going to outpace what we saw last year. So even though on a relative spend level, we're going to see pretty consistent, I do think that we're going to continue to see improved performance of those investments.

Andrew Charles, Analyst — TD Cowan

My follow-up question is around, given the current macro, if there is a desire to deviate from that 2-3% that you guys have outlined as long-term opportunity, sounds like that's still the right range, just better opportunity that you guys are seeing to improve the return on ad spend, though.

Rob Lynch, CEO

Yeah, I think we're going to keep in that range because I'm highly focused on our G&A. Our marketing is funded by our G&A. We have made big investments over the last two years to build the supply chain capability, the operations infrastructure, our tech capabilities, and then our marketing investments. So all of those capabilities are in place now, and now we need to start driving leverage. So I don't have an appetite for increasing our G&A investment. If anything, we're going to start ratcheting it down. I've committed to G&A leverage in 2027. I'm already pushing those buttons in 2026. So, you know, there won't be a significant infusion of investment into the marketing budget.

Andrew Charles, Analyst — TD Cowan

Very good. We'll talk a little bit more about menu innovation. It seems like the cadence obviously has gotten a bit faster as you guys have found more opportunity and just more things that you can explore since the third quarter of last year. So what do you find to be kind of the right cadence of the new menu launches? I feel like you've kind of gone from this crawl, walk, run strategy, but you tell me if you kind of think of it a little bit differently from a cadence perspective.

Rob Lynch, CEO

Yeah, what I would tell you is we're pretty consistent with the way Shake Shack has delivered innovation over the last number of years. I mean, we kind of have one big platform innovation every quarter or, you know, either every three or four months. And so, you know, we do a lot of work to build a platform. It's not just a sandwich. It's a sandwich. It's, you know, the toppings that we put on the fries. It's other sides that could tie into that, what I would say, is a story, right? I mean, we start with our guests, and we identify what type of flavor profiles, what type of things they're going to love, and then we build a story around that. So right now, we've got barbecue, right? We've got a barbecue burger. We've got a barbecue chicken sandwich. We've got a barbecue rib, but we also have barbecue fries. So we try to build that story, and that big story is going to happen three to four times a year. Believe it or not, it's pretty consistent with what has been in the past year. But in between those big quarterly initiatives, we're going to have other things that we believe are compelling and can drive news and virality. You know, that's where Dubai Shake, you know, kind of fit in last year. And, you know, we did something around the Masters or around, you know, pimento cheese and timed it with the Masters this year. Obviously, we're not a sponsor, so we couldn't call that out. But, you know, I think a lot of folks know that. So we just want to insert ourselves into culture with our culinary. We want to be the culinary leaders in this industry. And so we're going to continue to leverage innovation to insert ourselves in when the story makes sense. And that's going to complement the big kind of platform innovation we launch three or four times a year.

Andrew Charles, Analyst — TD Cowan

And let's talk about the loyalty program. You know, launching later this year, you talked a lot about how the vision for the program goes beyond typical points and discounts-based program that's common in the industry. Can you provide an example or two of how the program is going to be different than what consumers are used to at other fast, casual concepts?

Rob Lynch, CEO

Yeah, I mean, our aspiration is that when you walk into a Shake Shack and you're a loyalty program member, the person standing behind the counter is going to know your name and is going to know what you order regularly. Like, that's the vision. I mean, if you go back to our roots and you go back to Danny and Union Square Hospitality Group, like, that's what differentiated USHG. I mean, great food, great chefs, I'm not taking anything away from that, but what really differentiated that company was the hospitality, and that means you know what's important to your guest. And so that's our aspiration. It's not just, hey, we can send them emails or SMS with discounts or offers, or they can just accrue points. Like, those are components of every loyalty program, right? The goal of a loyalty program is to drive frequency. But we aspire to do much more than that. We want to drive true brand love, not just frequency. Loyalty, you can define as, like, okay, how often do they come back? Or loyalty, you can define as, like, this is a brand I love. And our aspiration is to make sure that we accomplish both of those objectives.

Andrew Charles, Analyst — TD Cowan

You know, the kiosks right now, they record phone numbers for users. Is that an opportunity to kind of blast text that, hey, we have the numbers, you have my name, can you tell me that you're launching a loyalty program?

Rob Lynch, CEO

Yeah, we absolutely do. I mean, all of those folks, you know, are tied into our guest recognition platform. So we know by your phone number, if you're coming in to order the kiosk or if you're ordering on our app. So we, you know, we manage kind of our current guest recognition program. We don't have a points-based loyalty, but we do have that facet of a loyalty program where we know what people are buying, how often, and we can reach out to them either through email or phone numbers.

Andrew Charles, Analyst — TD Cowan

World Cups start next week. Obviously, you guys are excited about what's to come there. You know, can you talk about kind of what, you know, the activations you guys have planned in place, you know, as New York City is going to see a lot of tourism and a lot of other major metros for you guys?

Rob Lynch, CEO

Yeah, I mean, look, we have been really bullish on the World Cup. I will tell you that some of our guidance today was impacted by some of the tourism trends we're seeing, particularly in New York City. You know, tourism has softened over the last three or four weeks. So we've been tracking that. We've been monitoring that. But we still think there's going to be a big benefit to our business. But we've actually removed any of that from our guidance going forward. So we believe that, you know, Shake Shack is a destination restaurant, right? When people come to these cities from not just internationally, But from the surrounding metros that people will be driving in to watch these matches because it's a once-in-a-generation opportunity, when they come in and they have opportunities to eat, they're going to go to the special place. And we are the special place in this industry. We've always been kind of a destination special place. So we feel like we should benefit disproportionately from the World Cup. We have a, for the size of our company, we have a big global footprint, and a lot of these countries that are coming to visit, we're in those countries. So we're really excited about the World Cup, and we're activating both primarily on social media, but also at our shacks. You know, we're preparing. Obviously, once again, we're not a sponsor of the World Cup, so we can't highlight FIFA or highlight the World Cup. But we can definitely make sure that, you know, our team members, you know, know that it's going on or representing the fact that it's going on. We can make sure that our restaurants highlight the fact that it's going on, even if it just says we love soccer. You know, something as simple as that. So, yeah, we think it's going to be a disproportionate benefit relative to the industry for us.

Andrew Charles, Analyst — TD Cowan

Very good. I want to talk about the operations summit you guys hosted back in 1Q. What were the takeaways from this event, both in terms of what has seen the most success so far and opportunities as well on the horizon within operations?

Rob Lynch, CEO

Yeah, you know, we have become significantly better operators. We are measuring everything, and we are managing everything. And we're supporting our team members, supporting our GMs, but also holding them accountable to deliver on our targets. So what that's led to is a significant improvement in productivity on the labor line, right? And so despite continued, I mean, labor inflation, we don't talk about it that much anymore because it's not 10%, 15%, but it's still going up 3%, 4% a year. And we've been able to mitigate that. We've been able to deliver margin growth despite inflation both on the COGS line and the labor line. So, you know, we've optimized our labor based on the way we deploy it. And our focus is on labor attainment, right? It's not just pure labor hours. So based on the number of hours that you've been given allocated based on your sales forecast, are you hitting the number? And attainment is how close you get to that number because sometimes people will cut too deep, and then that causes all kinds of problems. So it's not just about being under what you've been allocated. It's about being close to what you've been allocated. So we've seen a much higher level of performance. And when you build an operating model like that that's efficient and productive, other things start to happen. Like team members stay longer because they can count on, you know, the hours that they're getting. Overtime goes down because now you're not plugging holes, right? So all of those things have come to fruition in our operations. It doesn't mean that we can't continue to get better. It doesn't mean that we're not searching every day for ways that we can get more productive. But, you know, we have done the heavy lifting there. When you talk about our cost structure, like where we are really focused right now is on the supply chain. And, you know, there's no better time to be focused on the supply chain given where the cost structure is and how it's impacting our P&L and our determination to take as little price as possible to make sure we can offer value to our guests. So it becomes super critical that we have a productive supply chain. And our team has really worked on that. And, you know, we have gone out and RFP'd a lot of our businesses. And, you know, even where we have kept our business with the incumbent supplier, it's made them better, right? It's forced them to really look at their process, to look at their cost structure, to get better to maintain the business. And so lots of benefits coming out of that. We're probably, you know, in inning four of that with a lot of opportunity left to go. But both of those initiatives, supply chain and operations slash labor management, have really improved kind of the middle of the P&L.

Michelle Hook, CFO

And I think when you look at, just to jump in, where margins have gone over the last two years, there's been 170 basis points of restaurant-level margin expansion over the past two years. And I think that speaks to exactly what Rob said, is just operationally the efficiencies that the team's been able to generate, whether it's in supply chain or on the labor front. You see it.

Andrew Charles, Analyst — TD Cowan

For sure. I want to dig into margins in a little bit. Maybe just, you know, as we think about more operations, you know, on the top line, though, you've seen a significant improvement in speed of service from seven minutes to just under six minutes over the last few years, you know, since you've been here, Rob. You know, what are the key drivers of that? And, you know, is there opportunity for, you know, say another minute? Or how do you think about kind of the opportunity going forward for speed of service?

Rob Lynch, CEO

Yeah, you know, I'm just going to be transparent. I don't think that we're trying to get another minute out. Like, we're never going to be fast food. you know we cook everything to order and that takes time and i think what we need to do is make sure that our guests expectations are set accordingly right so it's really not an issue in the dining room um people come into our dining room there's music playing it's always clean our our team members are hospitable so coming in and waiting for six or seven minutes in the dining room, not a problem. Drive-thru, you know, the guest has been conditioned that a drive-thru, especially an empty drive-thru, should be a one-minute, you know, model, and that's never going to be our model. So we're working to test and optimize the way that we can appropriately set the expectations for the guest in the drive-thru so that we're not disappointing. I mean, someone who comes to us for the first time who's used to going to fast food who pulls up and puts their order in and pulls around to the window and has to wait five minutes, it's going to leave a dissatisfied customer. You know, like, satisfaction is a function of expectations. And, I mean, we all know that based on guidance and things like that, right? So that is what we need to do better in the drive-through. And then I think we do a really nice business in our digital channels and on delivery. We have a big, healthy delivery business. but you know the one thing I would say is that we are absolutely focused on not disappointing the guests so like I want to eliminate it's not about moving from six to five minutes it's about eliminating like nine and ten minute occasions so that's really the metric that I'm watching like what percent of our transactions are above eight or nine minutes and is that happening in a core shack is that a new shack is it a drive-through is it um you know suburbs urban so all those things i watch and if i see things kind of start to go sideways and i pull in our operators and i say what's going on here and we fix it so i want to eliminate the really disappointing instances but i don't know that we're going to get down you know below five minutes or that we have a goal too

Andrew Charles, Analyst — TD Cowan

yep no super level level set there on eliminating the outliers rather than get the whole base faster so appreciate that uh congruence you know with operations i want to talk about technology and the opportunity there with Project Catalyst. It's a consortium of technology initiatives that you guys are undertaking. I guess for the outside world, if you had to break it down, what are the one or two ways you expect this to have the impact to either same-store sales growth or to improving restaurant level margins?

Rob Lynch, CEO

I've always been the youngest executive in the room and the youngest CEO and all that stuff, so I kind of thought I was on the cutting edge of technology, but I totally am not. This stuff that our team has put together on the AI front, I honestly can't believe it. You know, from an operations standpoint, we've developed tools for our operators, both store level and above store level, that are going to make them significantly more productive. So our operators today, our GMs, store level management, they're going to be able to go on their phone and ask any question about anything going on in their restaurant and get a real answer grounded in real data. Every piece of data we have in our company is in our data stack, and so all of our AI platforms tap into that. So when they ask a question, they're getting the best answer they could possibly get. That never used to be the case. So this is broken. What do I do about this? Or I'm having trouble with inventory. How do I manage this? and they're going to get direction that is going to be best in class. Above restaurants, you know, a lot of time for our ADs who run about anywhere between 8 and 10 restaurants, a lot of their times are pulling the analytics of the business so that they can get that information to go and sit down with their GMs and walk through the business. And so you're thinking about if it's like a five-day week, like one of those days is spent really just getting all the data. Today, with the tools that we've built, they're going to be able to get all that data in minutes. And so that's going to be time that they're then going to be able to go and spend in the restaurants with the GMs, hands-on, coaching, developing. And so that's just going to make them way more productive. And ideally, long-term, that should help increase their ability to manage and improve the spans of our restaurants, right? So that should add productivity to our above restaurant levels. At the corporate level, I don't know if we ever have a meeting anymore where we have a question. I mean, you remember when Google was the first thing and everyone would have a debate, and you're like, well, let's ask Google. I mean, now on really detailed kind of analytical stuff, we're having a discussion at the executive team level, and two or three people are typing into Shack AI, like, hey, we're thinking about this, And literally, you know, a minute later, we've got all this insight and all this perspective that's grounded in our data stack. So that's going to help us make more informed decisions. It's going to help us make faster decisions, which is definitely going to drive productivity.

Andrew Charles, Analyst — TD Cowan

Less more kind of top lines, ties a little bit to cap allocation, but just Remodels has come up the last two conference calls. Can you just give us a sense of the scope of this initiative in terms of the number of restaurants to expect? I mean, you do have some restaurants now that are starting to eclipse 15 years or so. So how should we expect this to unfold over the coming years?

Rob Lynch, CEO

You know, our remodel decisions are very different than what you would see in a scaled franchise where they're contractually obligated to remodel. Like, we, I talk about, you know, we don't need new restaurants to be great restaurants. Some of my favorite shacks are some of our 15-, 20-year-old shacks. I mean, both in the city, but, like, there's one down in Orlando, in Winter Park, Orlando. I don't know if you've ever been there. but it was like one of the first 20 shacks. You walk in and it's warm, it's inviting. So what I tell the team is like, look, I want our shacks to look cared for and I want them to be comfortable, right? And so if we get to a point where that's not the case, then yeah, we got to make sure and we're not going to wait 10 or 15 years to do that, right? We're going to do that in real time if we have some of these super high volume shacks here in the city, a lot of people, a lot of traffic, so they may need a touch-up every year or every two years, but our plan does not have a significant number of full remodels in place, and when we talk about remodels, it may be a tenth of the cost of a full QSR obligated remodel program so it's not a significant use of of our capital I don't know and to speak

Michelle Hook, CFO

to capital allocation as we think about that you know the cash that we're generating obviously you know we're putting primarily back into our new shacks that we're opening and you're always going to have some capital that you're allocating to existing restaurants or shacks right and so as we think about that you know how we rate and pace that to Rob's point over the course of the years will be decided on, you know, maybe, you know, these five need a little bit more love and this year and then you move on. But, you know, you have a plan, right? And when you think about capital allocation, it's still primarily going to be into our new shack openings because we're getting great returns, right, on that capital. But there's always going to be sort of that repair and maintenance capital and then investments that you're making in other, call it corporate initiatives, and we think about project catalysts and the investments we're making on the tech side, that plays into capital allocation, too. So all that weighs into how we view capital allocation. But the good news is we generate plenty of cash flow, and then how we deploy that, I think, is in those three buckets.

Andrew Charles, Analyst — TD Cowan

Let's touch on margins for a minute. We talked a lot about it already, but just, you know, Rob, take us through the process of, okay, beef obviously is higher for longer. It's an industry challenge. Talk us through the process, though, around the supply chain efficiencies and the guardrails you put in place. say there's opportunities that we can take what was previously under professionalized put it in you know opportunities today but kind of what are the guardrails as you kind of go through this

Rob Lynch, CEO

process particularly israelis to beef yeah i mean i don't so first and foremost we will not negatively impact the quality of any of our ingredients we will either maintain or improve it and that goes for our ingredients that also goes for our recipes we're not shrinking the amount of anything on on our products so we're actually looking at like and we have a couple examples of where we actually have increased some of our costs to try to make our food better so the the real guardrails are simply like quality and we're either going to meet or beat the quality in any change that we're looking at from a supply chain standpoint that's really the only guardrail i mean Other than that, you know, we need high-quality suppliers that we can count on, that we know have a reputation of delivering service levels commensurate with our needs. But, you know, we've RFP'd almost every ingredient. We're now going non-direct on some of our cleaning supplies and some of our other, you know, things that show up in our restaurants. We've just done some work on the packaging side. So we're looking at every facet of the business and making sure we've got the right supplier who can deliver the quality that we need in a sustainable and confident way at a cost that makes sense.

Andrew Charles, Analyst — TD Cowan

I want to turn and spend some time on development. You know, after three years of opening around 40 to 45 company-operated shacks, you know, a big step up this year to 60 to 65, you know, these decisions obviously were made in arrears, presumably back in 2024. And so I'm kind of curious, you know, what gave you the confidence to make that kind of a stair step higher rather than just kind of ratchet it up to kind of that level?

Rob Lynch, CEO

Yeah, you know, the number of openings is really a function of the size of the pipeline. And we've never had a bigger pipeline at Shake Shack. So I got to hand it to our real estate team and our development group for finding great real estate. You know, we have a ton of white space and a ton of markets that we're already in, as well as new markets that we have yet to open up. So real estate is not the limiting factor. So we've been able to go and find a lot of great sites. We've also gotten a lot better at construction. You know, when we were opening up 40 to 45 units a year, when that pipeline was built, our construction costs were about $2.5 million. Today, our construction costs are right around $2 million. So that gives you a lot more confidence to go and open more because you know the returns are going to be better. In addition to that, when that pipeline was built, our restaurant operating margins were probably three years ago right around 19, 20, 19, under 20%. And today, you know, what we got it to today is 22 to 23%. You know, it's, once again, it's all a function of expectations because when you think about restaurant operational margin, 22 to 23 percent is best in industry. Most concepts are operating around 15, 16 percent, right? So now there's royalties baked in there. So, you know, make it 18 to 20 percent is kind of like what the best operators are doing. We're doing 22 to 23 percent. So I know, you know, we revised the guide today, but it's still a really healthy operating margin. So when you have lower costs, high operating margins, and better, you know, operators running your restaurants, that gives you the confidence that you can open more restaurants.

Andrew Charles, Analyst — TD Cowan

And, Rob, let's say a little bit of the denominator as well. I mean, building costs, you know, after so much inflation peaked at $2.6 million in 23. You're just under $2 million last year. You know, so some of that decline is driven by fewer drive-through shacks. But what else has been kind of the keys to reducing those build costs?

Rob Lynch, CEO

A little bit, particularly two years ago, or last year, was fewer drive-thru shacks, but we're going to open up a fair number of drive-thru shacks this year. I think it's really just, you know, we've leveraged our scale with our contractors and our suppliers the same way we're RFPing our beef or, you know, our French fries or, you know, our other ingredients. We're RFPing, you know, the input costs that go into our development platform. So, you know, we have been able to work with our suppliers and say, look, we're going to open up 30% more restaurants every year, or I'm sorry, 30% more restaurants this year than we did last year. And, you know, we've guided to low double digits, right? Low teens, restaurant growth. So that's about as fast as any individual entity is building restaurants in this industry, right? People with higher growth typically have large franchise systems where you have 100 different franchisees opening two or three restaurants. We're one entity opening 60 restaurants. Chipotle and Cava, they're probably the only two that are out there doing that. We have a lot of confidence in our ability to open the restaurants with excellence, and the flow-through is going to be there because of the lower build costs and the higher margins.

Andrew Charles, Analyst — TD Cowan

Yeah. And, you know, accelerating the drive-thrus this year, I know it's been, you know, a passion project of yours and Stephanie's. And so can you talk about what kind of gave you that confidence that you inherited some drive-thru sites, but obviously they need to be optimized. And so what was it that made you confident that, hey, now is the right time to step up the development of drive-thrus? And I'm curious as well if you've seen enough consistency to talk about the sales volumes and the margins you had drive-thrus relative to the overall base.

Rob Lynch, CEO

Yeah, I mean, what I would tell you is we are better at operating drive-thrus today than we were, you know, at any time in our past. We're still not all the way to bright. I mean, the point that I made with you about setting the appropriate expectations, you know, a drive-thru guest just has a different set of expectations on speed and on price. you know it's it's the highest value channel people are buying combos they want deals and they want it fast that's not our model so we have built these drive-thrus and we're going to continue to build drive-thrus to take advantage of great real estate but we have a lot of work to do to make sure that we are setting the expectation going through our drive-thru knowing that everything that they're ordering is made fresh knowing that everything they're ordering is the highest quality it can be and so we still have work to get there I mean we're going to build more drive-thrus this year than we did last year but we're still focused the bulk of our restaurant expansion is going to come from dining room, pickup window, real

Andrew Charles, Analyst — TD Cowan

estate. Okay, very good. I see you only have a couple seconds left so with that we're going to conclude the discussion. I want to thank Rob and Michelle for their time and insights and for institutional investors I want to end by asking for your support in the Extel poll. So thank you so much for coming today, and thank you both so much. Thank you. I appreciate it.