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Shake Shack Inc Class A (NYSE:SHAK)
Q3 2021 Earnings Call
Nov 4, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Shake Shack Third Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now turn the conference over to your host, Annalee Leggett, Senior Manager of Investor Relations and FP&A for Shake Shack. Thank you. You may begin.

Annalee Leggett -- Investor Relations

Thank you, and good evening, everyone. Joining me for Shake Shack's conference call is our CEO, Randy Garutti; and CFO, Katie Fogertey. During today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release and the financial details section of our supplemental materials. Some of today's statements may be forward-looking, and actual results may differ materially due to a number of risks and uncertainties, including those discussed in our annual report on Form 10-K filed on February 26, 2021.

Any forward-looking statements represent our views only as of today, and we assume no obligation to update any forward-looking statements if our views change. As a reminder and as we have discussed and disclosed for several quarters now, 2020 included a 53rd week. And to normalize for a consistent like-for-like comparison, our comparable periods for both 2020 and 2019 have been shifted forward one week from the fiscal calendar. We've included an example calendar on page 19 of the supplemental materials. By now, you should have access to our third quarter 2021 earnings release, which can be found at investor.shakeshack.com in the News section. Additionally, we have posted our third quarter 2021 supplemental earnings materials, which can be found in the Events & Presentations section on our site or as an exhibit to our 8-K for the quarter.

I will now turn the call over to Randy.

Randy Garutti -- Chief Executive Officer and Director

Thanks, Annalee. Good evening, everyone. I want to start off this call, as I often do, by thanking our teams. There simply has never been a more challenging but simultaneously more rewarding time to be working in the restaurant industry and in our Shack family. Our teams continue to lead the dynamic sales recovery we're experiencing across the globe while navigating some real pressures in the constantly changing environment. Opportunity abounds for this team, and I'm proud of them for always standing for something good. This quarter represented the highest total revenue quarter in our company's history. With all the noise, it's easy to overlook that revenue is up 49% this quarter versus the same time last year. In October, we had our highest ever company-operated Shack sales day, hitting just under $3 million. And in the fourth quarter, we expect to surpass $1 billion in systemwide sales for the year, a first for us. That is quite a comeback our team is making. Our Same-Shack sales compares continue to improve and are nearly back to 2019 levels on average, most notably exiting fiscal October at down just 1%. Our hometown of New York and our hardest-hit urban Shacks are leading the way, building every day as the energy of offices, events, commuters and eventually, tourists slowly return. For Shake Shack long term, we believe the balance of urban renewal and the strength and focus of our suburban models will build a solid foundation for the future.

None of us knows what's ahead in this environment, but we're hopeful this momentum continues. Yet, as sales keep climbing back, we acknowledge profitability challenges remain, and there's a fair amount of uncertainty for the world in the coming quarters. As many industries have shared, we, too, are experiencing a swift and broad acceleration in the cost of goods and labor pressures facing our business. In the third quarter, this coincided with a high number of Shack closure days related to COVID and other weather events, which impacted our sales. Katie will dive more into the detailed numbers in a moment, but I want to name a few highlights. As seen in nearly every industry and especially in hospitality, staffing our Shacks remains challenging. But it will always be our top priority as we strive to deliver and lighten hospitality at every one of our touch points. In July, we made significant investments in higher wages, retention bonuses and leadership development initiatives. Still at times and in some Shacks, we remain below optimal staffing levels and are working harder than ever to attract and retain the strongest teams. You can count on us to invest in wages, bonuses and incentives that take care of our teams and offer the kind of career opportunities our teams need. All of this will come at a cost, and you've seen this in our Q3 numbers, and you should expect this impact to remain a pressure near term as we work to elevate our people. In addition, we're seeing inflation throughout the supply chain.

Most of the premium ingredients we buy, such as the no-hormone, no-antibiotic proteins that separate us from traditional fast food, have seen significant increases in a very short period of time. As just one example, beef, the largest part of our basket, was up approximately 30% in the third quarter compared to the same period last year and up high single digits from just the second quarter. With supply chain inflation and disruptions being felt across the globe, we're expecting our cost of goods to remain elevated over our historical levels for the foreseeable future. To offset some of this pressure, in mid-October, we took an additional 3% to 3.5% in price across our regional price tiers. This is ahead of our normal annual price raise of roughly 1% to 2%. We've remained conservative on price at Shake Shack for the 17 years we've been in business and believe we have continued pricing power should we need to exercise that further next year. So with sales coming back, accelerated growth ahead and margins pressured, where are we looking around the corner? Well, as we wrap up 2021 and plan for the next few years, here's where we're focused. First, we're elevating our people. You've heard me talk a bit about this today, but we're going to do even more to build a diverse and winning team to meet the growth ahead. We expect to continue to invest in higher wages for our teams and programs that fuel their growth opportunity. In '22, we intend to host our biennial leadership retreat where we'll bring together leaders at every management level across the country and the globe to align, inspire and plan for the growth ahead.

Second, we're in the midst of a digital transformation, investing deeply in the omnichannel guest experience that will lead our future. We've unveiled a brand-new website focused on the guest ordering experience. We're launching new menu items exclusively in our app, driving sharp increases in digital guest acquisition, engagement and sales. We're investing in data infrastructure to better know and connect with our guests more personally, whether through our digital channels, email and potential offers and rewards. And in every way, we're working to make the digital hospitality of our company an even better guest experience than we've ever had. Count on us to continue to make material investments in our digital transformation in the coming years. As of fiscal September, we had retained nearly 80% of our digital channel sales compared to fiscal January '21 even as in-Shack sales return. So it's clear these investments are paying off. Third, we're working hard to build a better Shack. You've heard us talk a lot about our excitement for our first-ever drive-thru opening this year and our commitment for up to 10 through next year. Construction is coming together for our first few drive-thrus located across suburban locations in Kansas City, Minneapolis, Orlando and Detroit.

These are drive-thru-heavy markets where we can optimize our learnings, adapt, pivot and add to the dialogue of this evolving new format for us. We're also working to optimize our other core Shack formats, learning and adding to our drive-up window Shacks, most recently opening our newest in Oak Lawn in the Chicago area, and all the while focusing our long-term work on smarter designs, capital allocation and 4-wall metrics that will drive the rapid growth we have ahead. As of fiscal October end, we've opened 25 company-operated Shacks this year with five of those in the third quarter. And the fourth quarter will be a busy one as we look to open between 10 to 13 more restaurants. Our new Shacks this year continue to outperform the overall company average, strengthening our brand across the country. 2022 class will be 45 to 50 Shacks, our largest class ever. About 25% of the class will have Shack Track Drive Up or walk-up windows, and we expect up to 10 drive-thru formats. As is often the case and maybe even more so next year due to supply chain disruptions, we expect the class of '22 to be heavily back-weighted to the latter part of the year. It's also important to spend some time talking about the incredible growth in our license business. We've opened 21 new licensed Shacks so far this year through fiscal October and remain on track to open up to 25 total this year. During the third quarter, we welcomed new Shacks in Singapore at Gardens by the Bay; in Monterrey, Mexico; and in Hangzhou, China.

Next year, we'll be going even deeper in these regions as we expand into brand-new markets such as Chengdu in Central China. On the domestic licensed side, we remain committed to growing our presence across airports, event venues and Roadside Shacks in the coming years. We also want to congratulate our friends at the Houston Astros who once again brought Shack burgers to fans all season and all the way to a great World Series. We're proud to partner with them and some of baseball's best as we bring Shake Shack to sports fans in stadiums around the country. While our licensed business continues to benefit from the overall global recovery, conditions do remain volatile and ever-changing. As a reminder, as of fiscal October six -- excuse me, as of fiscal October end, six of our airport locations around the world were still temporarily closed. Many of the pressures we feel here exists similarly across the globe, and we're working hard with our licensed partners to keep sharing and building Shacks that sustain the test of time in some of the world's greatest locations. Finally, we are working continuously to create an uplifting guest experience by elevating everything we do. We're focused on gathering communities, enriching our neighborhoods, launching great products and driving our brand in new and innovative ways. On the menu front, we're really excited about our latest LTOs, the Black Truffle Burger and Parmesan Black Truffle Fries, which began as an app-only option to drive digital engagement.

This burger features sauce made with real black truffle oil and is layered with crispy shallots and Gruyere cheese. At $8.99 in most Shacks in our urban markets, this item also pushed the upper envelope of pricing tiers for us, and it's going to teach us a lot about our opportunities to offer even more premium items down the road. On the beverage front, we remain focused on growing our beverage attach rate. In the quarter, we saw continued strong performance from our cold beverage innovation of cocktail-inspired Summerades, followed by our October launch of our new Winterades, featuring seasonal flavors of Cran Citrus Punch, Pomegranate Yuzu Lemonade and Apple Ciderade. In the quarter, we also teamed up with our friend, Christina Tosi of Milk Bar for a limited time offering Birthday Cake and Cornflake Chocolate Drizzle Shakes, which we featured in special promotions through our digital channels. Menu innovation continues to be an important part of our strategy to drive traffic to our owned digital channels and increase engagement when guests trade up to our exciting LTO offerings and menu add-ons.

On the brand side of Shake Shack, we're doing more fun work than ever. Recently, as one example, as part of Adweek here in New York, we teamed up with Snapchat and turned our Hudson Yards Shack into the Snap Shack with a full takeover, where the Snap team launched their new augmented reality products inside the Shack itself. You could download special filters, experience virtual world of characters partying in the Shack upon arrival and snag exclusive merch through your Snap app. These are the focuses where we need to be spending our time and investing our capital right now: people, digital, new Shack growth and the guest experience. Our team is excited for what's ahead.

I'll hand it off to Katie to share more about the details of the quarter and expectations moving forward.

Katie Fogerty -- Chief Financial Officer

Thank you, Randy, and good evening, everyone. I want to begin with a big thank you to our team and expressing my appreciation for all that they do. Even though this environment has its challenges, it is our people and our immense dedication to creating uplifting guest experiences that is truly laying the building blocks of what is to come. It is our teams that make Shake Shack such an incredible place for all of us to work. In the third quarter, we reported total revenue of $193.9 million, marking the highest revenue in the company's history, with year-over-year growth of 49%. We landed at the bottom end of our guided total revenue range of $194 million to $200 million that we provided you in August. And I want to provide some more context and discuss the puts and takes of our Shack sales this quarter. So the negative impacts of COVID-related and extreme weather across our business in the quarter resulted in about 100 days of temporary closures, which totaled an approximate $850,000 in lost sales. Despite this, our third quarter average weekly sales, and that's a figure that normalizes for closures, was $72,000. That exceeded our historical seasonality expectations by coming in flat quarter-over-quarter. While our October average weekly sales have historically declined month-on-month, we were pleased to have generated $70,000 in average weekly sales for the month, which was above September levels.

We provide further detail of monthly and quarterly average weekly sales performance on page six of the supplemental materials. Same-Shack sales rose 24.8% year-over-year in the third quarter, driven by strong recovery in traffic, offset slightly by mix as more guests came to dine in our restaurants. As a reminder, our in-Shack check is lower than our digital check. As we have shown throughout the year, the combination of our in-Shack recovery and our strong digital retention has helped us to continue to narrow the gap to our 2019 sales. We have done so even as many of our highest performing individual Shacks have not fully recovered. In the quarter, our Same-Shack sales were about 7% below 2019 levels, an improvement to the approximate 12% gap we reported in the second quarter. We are proud to report that October Same-Shack sales were just 1% below 2019 levels, and momentum in October was fairly broad-based across regions and formats. We continued to benefit from a steady urban recovery led by the early signs of return to office, event, commuting and travel. Sales in some of our Shacks that were our strongest before COVID, including those in New York City, Los Angeles, Chicago and Boston, contributed to the majority of our sales recovery in the quarter. While our diverse restaurant base has a wide range of performance today, on average, urban Same-Shack sales were down 11% from 2019 levels in September and improved to down just 8% from 2019 levels in October.

This marks strong growth from down 23% we realized in the second quarter. As of October, Same-Shack sales in all regions outside of New York City has more than fully recovered to their 2019 levels. We saw a particular strength in Texas, in certain markets in the Northeast, where our Same-Shack sales are now high single digit to low double digit above 2019 levels. Our suburban Shacks also showed strong improvement in the quarter. And we are pleased to report that in the month of October, we recorded suburban Same-Shack sales 7% above 2019 levels. We have built our suburban Shacks in high-traffic locations, some of which have been impacted more by COVID than others. We show several different examples of our suburban Shacks on page eight of the supplementals to provide a little bit more color on these different types of formats. We operate a number of Shacks in premium malls and outlet shopping centers. These are Shacks like in The Westchester Mall and Orlando Premium Outlets. Mall traffic broadly still has not recovered to pre-COVID levels, but we are encouraged by the results we have seen this quarter. Given our smaller footprint, build costs for these units are usually notably lower than our freestanding units.

And even at today's sales, we are pleased with many of the margins and returns in these small-format Shacks, and we're bullish on the potential for our Shacks to continue to recover sales. We also operate a number of more accessible and convenient suburban locations such as the freestanding buildings and those in open air shopping centers where our recovery has been materially better than the suburban Shacks that are more reliant on mall traffic. In our supplementals, we show our recently opened Shack in Oak Lawn that is freestanding and offers a Shack Track Drive Up window. We also show our Shack in Suburban Square, Pennsylvania, which we opened earlier this year as an example of a Shack in an outdoor shopping center. It's important to note when thinking about our suburban and urban recoveries, we are reporting on Same-Shack sales relative to 2019 for the Shacks that we include in our comp base, and we only include Shacks that have been opened for two years or more in our comp base. The majority of the suburban Shacks that we have opened since 2019 are the suburban freestanding and outdoor shopping center formats, similar to Oak Lawn and Suburban Square.

And looking forward to 2022, we are targeting 45 to 50 new openings, with more of half of that to come in the suburban market, principally being the freestanding and shopping center locations with enhanced convenience options such as drive-thru and drive-up. That being said, our robust development pipeline is comprised of many formats, both urban and suburban, and spans a variety of regions. And we view our broad and diverse portfolio of Shacks as critical to our growth strategy going forward. Even as our in-Shack sales grew about 120% year-over-year in the third quarter, we are pleased to still grow our digital sales versus 3Q 2020 and retained nearly 80% of our digital business in fiscal September versus fiscal January 2021 when digital sales hit its peak. Since just last quarter, we have grown our first-time app and web purchasers by 14%, and this brings the total acquired to 3.2 million since mid-March 2020. We remain encouraged by our digital retention and acquisition even as our in-Shack sales have led a recovery. We are committed to the digital transformation of our business, and our continued efforts to bring more of our traditional in-Shack guests into our growing omnichannel will allow us to engage across multiple touch points. We're also going to invest more next year in building upon our in-Shack digital ecosystem.

Our plans include many initiatives from drive-thru menu boards to pickup screens and enhancing our in-Shack kiosks. Investing in digital remains critical, and we aim to continually build on this by developing an improved level of access, convenience and connection with a strong priority on welcoming more guests into our owned channels. Our kiosk program is just one example of our digital initiatives in our Shack. Although not all of our Shacks have kiosks today, in those that do, we generate more than 75% of our sales through our kiosk and our digital channels. Our digital team has developed a kiosk experience that leaves guests delighted as well as helps them navigate our simple menu and premium add-ons. In fact, kiosk orders have higher checks than those that are taken at the cash register. Kiosks also help our team members be more efficient and simplify their work and, over the long term, allow us to expand our digital and omnichannel ecosystem. Now on to the license business that generated total revenue of $6.9 million this quarter. Our sales benefited from many regions relaxing COVID-related restrictions in addition to strong performance of our class of 2021. While our license business could continue to benefit from lessening domestic and international travel restrictions, we do remain subject to global headwinds and uncertainty due to COVID.

Moving on to sales guidance, which we outlined in more detail on page 17 of the supplemental materials. Assuming no major new COVID-related disruptions, we are guiding to total revenue in the fourth quarter of $193.5 million to $200 million with Shack sales of $187 million to $193 million. We expect 4Q Same-Shack sales to grow mid to high teens. While we remain confident in the investments we are making in our digital business, new Shack pipeline and new formats, we remain cautious on the continued pressures resulting from the state of the labor market, potential supply chain disruptions, volatility in the commodity markets and continued uncertainty around COVID as we approach the colder months. In addition, our sales guidance is based on our expectation that we are opening 12 to 15 new Shacks in the fourth quarter that is inclusive of the two that we have already opened in fiscal October. Based on the widespread delays and material shortages that we are seeing across the construction industry, it's possible that we open some Shacks later than our guidance reflects. It's also possible that some of these openings in which we expect to happen in 2021 will slip into 2022.

The current state of the global supply chain and labor market is just presenting an above-average level of uncertainty around our opening calendar, and we want to highlight this as a potential risk around our ability to meet our 4Q Shack sales and total revenue guidance. We expect 4Q licensed revenue to be between $6.5 million and $7 million based on a recovery in certain regions, balanced with continued global uncertainty. Within this guidance is a view that COVID-related pressures in our restaurants and in our supply chain will persist, but will not materially worsen. In the quarter, we generated a 15.8% Shack-level operating margin, and that was within our guided range of 15% to 17%. I'll go through the details in a moment, but we saw 330 basis points of margin dilution related to our investments in our team members as well as chicken and beef inflation. This is the swift and broad acceleration of costs that Randy referenced to earlier. The guidance we provide for next quarter anticipates that these cost pressures will persist. We are highly focused on working with our suppliers, many of which we have had strategic relationships with over the history of our company, to help navigate these pressures and believe we are in a relatively strong position.

However, it's likely we will continue to feel the impacts from our distributors and supply chain's ability to staff and fulfill orders. Food and paper costs in the third quarter were 31% of total Shack sales as higher commodity inflation across chicken and beef resulted in approximately 130 basis point headwind to our Shack-level operating margin. We are hopeful protein costs will continue to stabilize throughout the fourth quarter. And at the same time, we do not anticipate cost returning to similar levels that we realized in 2019 and 2020. We also anticipate freight, paper and packaging expenses will rise in the fourth quarter and remain elevated for the foreseeable future, contributing to the inflationary pressures our business is likely to face into 2022. Labor costs in the third quarter were 31.1% of total Shack sales as we made investments in wages and bonuses to both retain and welcome new team members. We expect continued pressure across our labor lines for the foreseeable future as we navigate industrywide staffing challenges. But it is important to note that we view this challenging time for the industry as an important opportunity for us as a company to still attract best-in-class talent.

We offer competitive pay with an average team member's starting wage of about $15 per hour. That is 13% higher than what we offered in 4Q last year. We also offer a generous bonus program, paid time off and flexible schedules in addition to healthcare, vision and dental insurance as well as an opportunity for our team members to build on their retirement savings with our 401 k plan. These are just some of the ways that we say thank you to our teams each and every day. Our robust unit growth pipeline and strong balance sheet as well as our long-standing investments in leadership and development allow us to be in a fortunate position to offer our team members meaningful career trajectories. In our Shift Up program, we invest in training our hourly team members to move up into various management positions and be part of our growth story for many years to come. And the bottom line here is we believe we offer candidates a compelling opportunity to join our Shack family. Investing in our teams remains a priority for us, and we are committed to ensuring that we have the best team members to execute on our strategic growth plan and develop the next generation of future leaders here at Shake Shack.

Other operating expenses were 14.2% of total Shack sales, an 80 basis point increase over the second quarter, as more of our guests dined in our restaurants, prompting higher maintenance costs. We also realized elevated costs from the continued strength of our delivery business. Occupancy costs in the third quarter were 7.8% of total Shack sales, a 40 basis point decrease over the second quarter. This is a function of our restaurant footprint and development pipeline. We expect our occupancy costs in the fourth quarter to be slightly elevated relative to the third quarter. Overall, we are focused on a long-term margin recovery, and we're working hard on every line item. Our business is dependent on the recovery of sales across some of our most impacted Shacks, which remain below 2019 levels. And as we look forward to the remainder of the year, we'll be focusing on continued initiatives to offset some of these pressures on top of price increases that we rolled through the system in October. That being said, we expect our overall sales recovery and the inflationary impact from fluctuations in commodity prices, in addition to our ongoing investment in team members, to persist for the foreseeable future and well into 2022.

We, therefore, expect Shack-level operating margins to be between 14% and 16% in the fourth quarter. We'll outline -- we outlined this in more detail on page s 16 and 17 of our supplemental materials. G&A expense in the third quarter was $20.5 million, including $2.3 million of equity-based compensation and other noncash items, as we continued to invest in marketing, technology and the digital evolution of our business. These strategic priorities are integral to the future of Shake Shack, and we anticipate using our strong balance sheet to build upon these key elements of our business going forward. We remain committed to make -- what makes Shake Shack so unique, our people, and are viewing this moment as an opportunity to build our team and the future of the company, rooted in our strong and differentiated culture as well as our robust growth trajectory. And as we move into the fourth quarter and into 2022, we expect our G&A to increase in order to support our long-term growth initiatives. We also reiterate our full year guided range for fiscal '21 of $86 million to $88 million. Preopening expenses in the third quarter were $2.9 million, an increase from $2.3 million in the second quarter. At this point in the year and as we execute on our development pipeline, we expect full year 2021 preopening expenses to be between $13 million and $14 million, consistent with last quarter's guidance.

As a reminder, we're experiencing increased material and labor costs as we look into our Shack build-outs over the next 18 months, and we're committing extra investments into our drive-up formats as well as our first-ever drive-thru. With up to 10 drive-thrus planned through 2022 as well as the material and labor inflation that we've discussed, we're anticipating historical build-out costs to increase 10% to 15% on average for the class. We've got a lot to learn here, and we're committed to investing in these new formats that we can believe can deliver strong sales and returns over the long term. On an adjusted pro forma basis, we reported a net loss of $2 million or $0.05 per fully exchanged and diluted share. Excluding the tax impact of stock-based compensation, our adjusted pro forma tax rate during the third quarter was 30.7%. A full reconciliation of our tax rate can be found in the financial detail section of our supplemental materials. Similar to previous quarters, we will not issue specific 2021 tax guidance range at this time, given the continued uncertainty for the rest of the year and the timing of our recovery. However, in a normal operating environment, our adjusted pro forma tax rate, excluding the impact of stock-based compensation, is expected to be between 26% and 28%.

This is in line with 2020 levels. The balance sheet remains in a strong position, ending the quarter with $401.5 million in cash and marketable securities. We'll be using this to support our continued investments and initiatives across our business as we look to move into the next exciting chapter of the Shake Shack story. We're not immune to the challenges that continue to impact the overall hospitality industry landscape. Although we are likely to continue to face headwinds as we move into next year, we are confident that our investments across our business and our people position us well as we move toward a more normal operating environment. As mentioned before, we continue to be thankful to our employees and their families for their hard work and dedication during this unprecedented time. As always, we hope that everyone continues to remain safe and healthy as we move into the holiday season.

And with that, I'll turn it back to Randy.

Randy Garutti -- Chief Executive Officer and Director

Thanks, Katie. It's really encouraging to see our teams capitalize on the broad-based sales recovery and renewed momentum we're seeing across the country. Shake Shack was built as a community gathering place, and it's gratifying to again see our Shacks filled with friends, colleagues and visitors. There's no doubt a number of macro factors are impacting our business at the moment. We expect much of that uncertainty to remain through this year and well into 2022. I've been working in restaurants since I was 13 years old. It's never been an easy business, and I believe most would agree that this is a particularly challenging time with so many persistent pressures hitting all at once. But history tells us that there are seasons to these challenges, and great teams and great brands endure. None of us knows exactly what's coming next. And what we do know is that our team is working harder than ever to take care of each other, bring hospitality to our neighborhoods, transform our Shack formats, invest in critical digital infrastructure and uplift everyone in our Shack community along the way. We look forward to sharing a Shack Burger with you soon. And as always, I hope you and your family stay safe and healthy.

With that, operator, go ahead and open up the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Jim Sanderson with Northcoast Research.

Jim Sanderson -- Northcoast Research -- Analyst

Hey, thanks for the question and Congratulations on an improving quarter. I wanted to dig into your commentary about some temporary operational delays in the third quarter and how that impacted average weekly sales. Are you experiencing any reduction in average weekly sales in the current quarter related to staffing challenges?

Randy Garutti -- Chief Executive Officer and Director

From time to time -- Jim, thanks. Yes, we named a couple of things in the third quarter, right, about 100 days of full closures, right? Now the average weekly sales adjust for that, OK? So that is not included in those. But what we saw in the third quarter, obviously, we had hurricanes in the South, we had some pretty dynamic weather in the Northeast as well, but a lot of those were COVID-related closures. From time to time, as Katie noted, we do see either shortened hours or sometimes some small disruptions from staffing. It's not broad, but it is from time to time and in certain Shacks. We also see certain things with supply chain, right? We've had moments, like every company has talked about, where certain things we need to operate on a given day don't arrive on the truck. It's frustrating for our team. It's not foreseeable in most cases and it's hard, and that does, at times, impact our sales. Again, it is not broad-based. It is more here and there. But there's some small impact in this quarter, and we would expect, for some time to come, that's going to continue.

Jim Sanderson -- Northcoast Research -- Analyst

All right. And a quick follow-up question on pricing. I think you mentioned low single-digit pricing. A lot of your peers are taking their prices up mid- to high-single digits. In some instances, we're seeing menu prices increase 10%. Given the cost inflation pressures on food and labor, wondering how you're looking at menu pricing going into the fourth quarter and into 2022, meaning can we expect maybe a few more menu price adjustments over the next several quarters in addition to what you've already proposed?

Randy Garutti -- Chief Executive Officer and Director

Yes, we're going to look at it really closely. Look, we have a history of 17 years of basically taking 1% to 2% a year. We have been at or below CPI increases forever. We don't love taking more price. We want to be a brand that sustains the test of time. Even now with these pressures, we may be taking less price than we could. However, we are going to be patient about it. So we've taken roughly 3% to 3.5%. We've done some of that in our digital channels where we've increased. We talked about this last quarter, on our third-party delivery, we have a 10% upcharge in there. So we're doing it more surgically. Should we continue to see rapid inflationary costs on any part of the P&L, we may consider taking more price earlier next year than we planned. Today, we don't have a plan on that. We got our -- sort of toward the end of October, we got our 3% to 3.5% price flowing through the system. We feel good about that. That's hitting now. And again, it's not going to offset all of the pressures we see at the moment. But for Shake Shack, we take a long view on these things, and we'll keep an eye on it closely.

Katie Fogerty -- Chief Financial Officer

And just building on that point there, when you think about how early we are on our growth potential, I think that's something that's really important to keep in mind. We still have many more Shacks to build and to open, many new markets to enter and many new formats. And so echoing on Randy's point here, being mindful of that as we think about price will be absolutely essential.

Jim Sanderson -- Northcoast Research -- Analyst

All right, thank you very much. I'll pass it along.

Operator

Our next question is from Jared Garber with Goldman Sachs.

Jared Garber -- Goldman Sachs -- Analyst

Hi, thanks for the question. Lots of great details to digest. I wanted to dive into the suburban trends that you guys disclosed. In October, the trends are particularly encouraging, that plus 7%, but there seem to be a pretty meaningful step-up versus September. And I just wanted to know if there's anything specific that's driving that. Is there a seasonality impact there, something in the consumer or something more granular to your strategy that drove that?

Katie Fogerty -- Chief Financial Officer

Jared, yes, I mean October, really across the board for us, was just very broad-based. There was a small benefit from the price that we took in the month. We took it mid-month. But what we're seeing here is a strong rebound in traffic across the board. We thought -- we outlined and gave a little bit more detail around our different type of suburban formats. And really it was -- all of those improved. And the important thing here is that we're beating seasonality. So typically, you would expect a more muted October. And across the board, we outperformed that. I'd really also highlight here, we have a pretty strong performing LTO right now with Black Truffle. We launched that through our app-only channel to begin with and then rolled it out to our stores and just recently through a third party. I've been seeing a lot of strong reception there on that front. And on that point, we talked about a little bit in the script, but we're charging $8.99 for that, for the Black Truffle Burger in our core urban markets, and we're really learning a lot about our ability to kind of pass on a really premium elevated product to our guests.

Randy Garutti -- Chief Executive Officer and Director

And Jared, I would also just note, if you're talking about suburban, I think one of the notes that is a good vital sign is urban continues to improve and with that, suburban improved. So that was encouraging. Now look, we've said it, we've shared it, we still have a long way to go in our urban business, especially in New York City and other large metropolitan areas still not fully recovered and have great impact on the company overall. But it's encouraging to see the continued recovery in all of those markets.

Jared Garber -- Goldman Sachs -- Analyst

Yes, that's great. And if I can just quickly follow up on -- just a quick question on beef prices. I know you noted that beef was up 30% year-over-year in the third quarter. I'm not sure if I missed it, but did you give an update on what the fourth quarter was looking like so far? Are you seeing that measure accelerate, decelerate, kind of hold in that 30%? Any color would be really helpful.

Katie Fogerty -- Chief Financial Officer

Yes, sure. So beef prices, again, as we talked about, really kind of spiked up in the second -- or in the third quarter. We've seen them come down a little bit, but they are still at elevated levels. And we're seeing them hold a little bit, come down from the high highs, but we're definitely still in an inflationary environment.

Jared Garber -- Goldman Sachs -- Analyst

Great, thank you.

Operator

Our next question is from Nicole Miller with Piper Sandler.

Nicole Miller -- Piper Sandler -- Analyst

Thanks, good afternoon. Two quick ones. The first is just a numbers question. When you think about October and November and December in the prior year, was there anything notable in -- well, maybe a 2-year trend, anything notable in same-store sales adjustments that we would want to know, like it's an easing comparison or a more challenging comparison? And then just making sure October would be the lowest average weekly sales month of the quarter, is that the right way to think about it?

Randy Garutti -- Chief Executive Officer and Director

Well, there's a couple of things. There's some calendar shifts and some other things. Generally, in '19, if you look back at that quarter, we talked about sort of a decelerating trend and being a little bit weaker toward the end of the year. Now we've got -- because of the week shift and also there's a little call-out, which matters for Shake Shack, when holidays and where they fall. So if you look at the calendar, we're going to have a few days of that Christmas holiday in this year of 2021 and others going into the first quarter. That will have a negative impact on our P12 upcoming. Additionally, Christmas is on a Saturday. We will lose that day of sales. That is worse than in years past when you lose a Thursday or a Friday day of sales. So that's a little bit of a pressure for us as we look at P12 pressure.

Nicole Miller -- Piper Sandler -- Analyst

And then just a high-level question. Like super appreciative of the color and commentary around the different venues that you have going forward, like I'm thinking about drive-thrus, and there was some commentary around the kiosks and the employees' efficiency there. But the fact of the matter is the friction point changes as you change your channels and modes of operation. And so I don't really -- or a customer doesn't walk in and get that necessarily Shack hospitality at the point of sale. And so I can understand everything you're doing from a sales and marketing and consumer-facing perspective. But the question is, what are you doing from an employee training perspective to align yourselves in that way to still produce like the hospitality that you're known for?

Randy Garutti -- Chief Executive Officer and Director

Yes. That's where you heard me, Nicole, say so many things about our focus on the guest experience, specifically to your question because we think about your question a lot. And I noted, I've been working in restaurants my whole life, like I can remember the days when we switched our reservation systems at Union Square Cafe from a pencil and paper to open table, right? And these things that you said, geez, this could kind of hurt hospitality. If we do it right, and we will, technology should enable hospitality. Digital hospitality should exist in the way that our products work, in the way that they should be on your side, make the experience easier. I can tell you as a consumer, I don't ever want to wait in line. I haven't ordered with a human being myself at Shake Shack in years, right? Because the experience I want is the digital hospitality for the stuff that is more annoying, that is ordering and paying. However, when I get to my Shack, I still want to talk to a nice person. I want it to be well-prepared. I want my food hot and cold where it belongs. And I want that to be seamless, whether I'm staying or leaving. And we're going to have to continue to work on that as we add convenience factors such as drive-thru, drive-ups and all these other things. What we generally see is that people are very pleased when we do those things. And as in-Shack sales has returned, people will still love coming to Shake Shack. And as this COVID recovery we hope continues in the right trend, people are coming back. They are coming back. And they're also coming back but preordering on the app or ordering with our kiosk, as Katie talked a lot about in there.

Katie Fogerty -- Chief Financial Officer

Yes. And on that point, too, there is just such an increased opportunity. There's such a strong opportunity to continue to invest in digital in the Shack to provide an even better guest experience. I know many of -- everybody on the line has probably been into a Shake Shack. And one of the things that we are investing in next year even more on, and I talked about this in the script, is just really a pickup screen to help direct people to where they should be waiting for their order. Now it might seem like that might not be that big of a deal, but what that does for the guest experience is helping them be able to figure out where to go and, in some cases, how long their wait time will be. That, we think, will leave them delighted and better understand where their ordering process will play out. And then from just a staffing perspective alone, freeing up people from taking cash -- orders at the cash register and actually greeting guests and making sure that they're keeping the dining rooms fresh, that is all a great opportunity to enhance our guest experience. And so when we -- as Randy said, we closely look at our guest experience scores all the time. And we are very pleased with what we see from kiosk versus our in-Shack at the register transaction.

Nicole Miller -- Piper Sandler -- Analyst

Great. Context. Thank you so much. Our next question is from Michael Tamas with Oppenheimer & Co.

Michael Tamas -- Oppenheimer & Co -- Analyst

Thanks, good afternoon, everyone. You've always talked about how important menu innovation is to your business. So is the current environment with commodities, supply chain and staffing limiting your ability in any way to sort of test this menu innovation and roll it out at the pace and with the items you'd like to? Meaning that as the environment improves, does that actually give you an opportunity to sort of drive your sales in a way you may not be able to do so today?

Randy Garutti -- Chief Executive Officer and Director

Yes, a little bit of balance on that. Yes, there's definitely disruptions we have from time to time. Certain things like already -- things we have planned just getting caught up in supply chain challenges. There's also things that can seem small, but basic paper goods that we may not be able to get, and you're seeing this across every industry, every retailer where different things are popping up. That's happening with us, too. So sometimes that is happening, but it isn't really a material distraction for us. Look, we simplified the menu a bit during COVID, right? We removed Chicago-style hotdogs, which had a high number of items. We removed concretes, which had a high number of items. Some of those things we may test bringing back again, but now is not the environment. When you have both supply chain and labor disruption challenges, we really want to be as focused as possible. And when we do LTOs, like we're doing now, we want them to be run for a significant period of time so we can work through some of that disruption and to be impactful. That's so far what we're seeing with Black Truffle, and we'll have a fun slate of LTOs that we hope can be impactful next year.

Michael Tamas -- Oppenheimer & Co -- Analyst

And then on your '22 development, are all those sites sort of signed and locked and ready to go and maybe just sort of construction and the equipment you're waiting on? And then just maybe on the equipment side of things, can you buy stuff today that you may not need for a little while, but just so it's ready to go so you minimize your interruptions?

Randy Garutti -- Chief Executive Officer and Director

Yes, as much as possible. Not every one of those 45 to 50 is signed, but they're certainly identified, right? And we have more than that, that we identified this far out in a class where we're looking at what that class could be with the goal and target of 45 to 50. But we named this and it's really important to name it, you're seeing more disruption than ever in the development side, right? Whether it is a landlord who can't get materials and, therefore, cannot deliver the space to us, permitting supply chain challenges, local governments, I mean it's just a series of cascading items that you hear about every day, you listen to the news. Now we still believe we can deliver on the 45 to 50. We think it will be more back-weighted, as often happens, but certainly going to happen next year. We know this. And where we can either prebuy or pre-prepare, we'll do that. And certain things -- you may have American-made items that are waiting for a part that couldn't -- that needs to go somewhere. You may have things as basic as some of our kitchen equipment, some of our WiFi equipment. From time to time, you're just having funky disruptions. And we expect that stuff is going to be choppy for a bit, and I don't think we're alone in that.

Michael Tamas -- Oppenheimer & Co -- Analyst

Thank you. Our next question is from Lauren Silberman with Credit Suisse.

Lauren Silberman -- Credit Suisse -- Analyst

Thanks for the question. So culture is core to how you operate the company. In the face of current challenges, can you talk about what you're seeing with turnover as well as just overall sentiment among your teams and managers? Are there any markets or regions where you've seen outside pockets of labor challenges?

Randy Garutti -- Chief Executive Officer and Director

Yes. Well, OK, a couple of ways to answer that. Yes, I would say turnover is generally elevated this year than in years past. We expect that. You're seeing that everywhere. That's true of our industry right now. And I expect that will continue for a while. And we're hopeful that people continue to come back to the workforce and that they make the choice to work with Shake Shack. We're doing more than ever in our recruiting and our investments there. And then -- I'm sorry, remind me the second part of your question.

Lauren Silberman -- Credit Suisse -- Analyst

If you're seeing -- yes, so well, one, which is overall sentiment among your team. And then I guess the second part was any markets or regions where you're seeing outside pockets...

Randy Garutti -- Chief Executive Officer and Director

Oh, yes. Sorry, yes. Sorry, Lauren, yes. I've said this before, where it was hard before COVID, it's hard. And where it was easier, it's easier. And that just kind of exists. I think you see that in certain markets around the country that have always been hard, especially in some of our, further out, some of our suburban markets where you have younger workforce generally working. And you may not have as many of them whose parents don't want them to work during the time of COVID, right, or small examples like that, that get bigger over time. But look, this is going to be an ongoing journey. It's hard, it's been hard, it's going to be hard, and we're going to continue to focus to take care of our team.

Lauren Silberman -- Credit Suisse -- Analyst

If I could just ask a quick one on commodity costs. So how are you thinking about the sustainability of elevated commodity costs? I understand sort of the near-term dynamics, high-demand labor shortages due to that labor cost increasing across the supply chain. So trying to feel or understand how you're thinking about that in the context of willingness to take price if more of this is a bit structural in nature.

Katie Fogerty -- Chief Financial Officer

Yes. So on that point, we expect to be in this inflationary environment for the foreseeable future. And while we might be seeing moderation at elevated levels in beef, we're starting to see, and we've called this out, that paper packaging and freight are moving up. So we're just in a very -- a pretty inflationary time and certainly not immune from the effects of the broader industry here. And as Randy said, we are pleased so far with the price increase that we put through in October, but we're going to wait and see how that plays out. And we could take more price next year, but it's not something that we have committed to at this point in time.

Lauren Silberman -- Credit Suisse -- Analyst

Thank you.

Operator

Our next question is from Andrew Charles with Cowen.

Andrew Charles -- Cowen -- Analyst

Great, thank you. I had a question for both of you. So first, just Randy, on the October price increase, if I recall, I think you guys were running 5% pricing premium on third-party delivery. You mentioned you're now 10%. Was that price increase you took in October, was that exclusively on marketplace channels? Or can you tell us how much is balanced between marketplace as well as in-store, if that's possible?

Randy Garutti -- Chief Executive Officer and Director

Yes, so it's a balance. It's regional also netting out to 3% to 3.5%, we think, over the whole system, OK? We moved from 5% to 10% in July on our third-party delivery services, OK? So obviously, that -- you can work that out. It was less than that in the overall regular pricing of in-Shack pricing.

Andrew Charles -- Cowen -- Analyst

Got it. Okay, that's helpful. And then, Katie, I totally get the industry staffing commodity challenges that weighed on 3Q margins or guide to persist in 4Q. And it sounds like, unfortunately, they will be around for a good portion of 2022. And I know you're not ready to formally guide 2022 restaurant margins, but I think investors are looking for some guardrails. So is it fair to say 2022 margins will be able to trend above 18%, the low end of the long-term guidance?

Katie Fogerty -- Chief Financial Officer

We're not giving guidance at this point. What we've tried to do is just kind of highlight the pressures that the business is facing.

Randy Garutti -- Chief Executive Officer and Director

And we expect these pressures that you're seeing now to continue. I think that's the punchline. On COGS, labor and the main pressures that we have, we expect to continue into '22. Now again, we look at the vital signs of our business right now in a long-term basis, and that looks like the continued straight-line recovery of our sales that we've talked about for the last year. And that's where we are really focused. There's going to be some things out of our control right now. There are some things that we can do about those elevated costs that are hurting our margins. But in general, we are expecting margins to be pressured for some time.

Andrew Charles -- Cowen -- Analyst

Thanks for the color.

Operator

Our next question is from Jeffrey Bernstein with Barclays.

Jeffrey Bernstein -- Barclays -- Analyst

Great, thank you very much. Two questions. The first one, on the pipeline for next year, the 45 to 50 U.S. company operated, I think you mentioned already, you've already got the sites chosen. You're still working on some of the paperwork. But it seems like people would be more of the issue based on the conversations thus far. I know some of your peers are talking about having a tough time recruiting and retaining managers. And it would seem like it will be more of an issue for a brand that's actually adding 50 units above and beyond the hiring just to fill the existing posts. So I'm just wondering if you can give any qualitative color or some metrics to demonstrate your confidence in the people pipeline that you're opening up these stores, but they're set up for success with however many hundreds of managers you've got lined up and ready to run their own restaurant. And then I had one follow-up.

Randy Garutti -- Chief Executive Officer and Director

Yes. That is exactly what we talk about every day and making sure that we are recruiting, retaining and developing. Katie talked about Shift Up, our program where right now, we have nearly 60 of our shift managers who are going through a leadership development program in order to work their way up to exempt salary level managers. We also are strategically, it's an important thing we're doing here, not going to too many new markets next year, right? That helps you when you need to grow teams from within and not have to move people, that helps. But you're hitting on the right pressure. It's not going to be easy, and that is hard work. Now if you look at our percentage growth, we have strong percentage unit growth, call it, roughly 25-plus percent next year just in our company-operated domestic. Those are the kind of numbers we've looked at year-on-year, and that's some impressive growth, and we believe we can hit it. And again, if we -- if for some reason we see that we need to slow those down, we would. But that's the bench we're building. It's the opportunities we're giving. It's why we're going to spend money. If you follow the story for a long time on our leadership retreat, which will be next year in first quarter, we expect to spend a lot of time and money developing the nearly 1,100 managers that we have across all of our restaurants across the country.

Jeffrey Bernstein -- Barclays -- Analyst

Understood. And then the follow-up is just on the restaurant margin. And I know you said there's no specific guardrails that you're providing for 2022 at this point other than the puts and takes. I'm just wondering if there's a certain level over time that you'd say here's a line in the sand where we will take incremental pricing because this business needs to hold a certain margin, whether or not it's via incremental cost savings that you might have or I know a lot of people are pushing on the incremental menu pricing opportunity. But is there a level where you say these pressures are just too much, and therefore, that would dictate a certain minimum amount of price increase just to hold that certain margin level, whether it's in 2022 or beyond?

Randy Garutti -- Chief Executive Officer and Director

We've never thought about it that linearly. I would say we've always thought about it as what is the point where the guest is having a great experience and this restaurant is going to be here for many years to come. We don't run our restaurants by percentages. We run them by guests and human beings and people who need to come in and love our product. If we sense that we continue to have added pressures and it would -- it is -- would be accepted and well received by that community, then we may certainly choose to take more price in those. But we're long-term thinkers. We're not going to overreact because we are having -- we are all as a world. Shake Shack is not unique in this conversation. The world is experiencing very high inflationary pressure. And let's be patient and let's see where that goes in the coming quarters.

Jeffrey Bernstein -- Barclays -- Analyst

Understood. Thank you.

Operator

Our next question is from John Glass with Morgan Stanley.

John Glass -- Morgan Stanley -- Analyst

Thanks very much. Randy, I just want to come back to the development question. And I guess, given the pressures on labor, given the pressures on costs which you have to live with in development forever, have you ever contemplated that this is a time to maybe go slower, get them right? And if not, why not? And maybe how do you pro forma a new store now, right? I mean what margin assumption do you want to use? What cost assumption? It would seem like that's a harder thing to do than it used to be. And I just wonder if you changed your assumptions based on that.

Randy Garutti -- Chief Executive Officer and Director

Yes. Lots of good questions in there. I think getting it right is not necessarily about the number, the quantity or the speed. Getting it right is choosing a great site with the right format for its community. Now we have some major changes in that, right? The evolution of this brand is going to do 10 drive-thrus. Between now, we've never done one. We're doing that in the next 15 months. It's going to be super exciting. Different levels of convenient formats with Shack Track windows, drive up and walk-ups. So we are really, really excited about that. So I think, John, we have always believed that we're going to grow to the extent we can continue to develop great sites and great teams that can execute them. When you think about the returns, yes, look, we've obviously outperformed any targeted returns we've shared since the day of our IPO, right? And we're not changing any long-term metrics at this time. We're not reiterating anything other than to say, of course, when your margins are pressured and you're spending a little bit more as we are to develop larger units that have a higher investment cost, our returns in the near term will likely be impacted. There's no question about that, right? It's simple math. But the long-term return to the total addressable market opportunity that we can get from getting these formats right and continuing to grow is what we're after. And look, if we need to slow down for any number of reasons, we've been through that over the last couple of years, we'll certainly react. But we feel like that's an appropriate development schedule for this next 15 months.

John Glass -- Morgan Stanley -- Analyst

I appreciate the answer. And just you did comment on new store productivity. Last quarter, I think the -- or I can't remember, was it trailing 12-month class or whatever it was, was up 20%. I think either -- and I can't remember what it was versus something, it was good. What is that now? Is that still trending in that similar direction?

Randy Garutti -- Chief Executive Officer and Director

Yes. You're commenting on -- we talked about the new Shack class for the year, this year so far, versus the total company average being at those elevated numbers. Those remain elevated. We're not breaking out the numbers every quarter, but we did reiterate the comment that they remain higher than our classes. A couple of things to note. We only opened five restaurants this quarter. We're going to open 10 to 13 next. Shake Shacks, as you know, tend to open big. We had a number of new market openings, which we've commented on and how strong they were. Indianapolis, Hoboken, the Bronx, Portland, Oregon and some other really high volume ones. Tampa was our first there in that area of Florida. So again, those moderate. Those come down over time. And we have a new class of the next 10 plus that will likely open in this quarter. So that's a number that will go back and forth. The whole point of giving that number is to say, even during COVID, even during our sales recovery time, our new Shacks were and are continuing to perform.

John Glass -- Morgan Stanley -- Analyst

Great, thank you.

Operator

Our next question is from Jake Bartlett with Truist Securities.

Jake Bartlett -- Truist Securities -- Analyst

Thanks for taking the question. I just want to clarify on the menu pricing, the 3% to 3.5%. I believe you typically take it in December. So is that the total pricing that's in the menu right now? Or is there more until you lap what you had taken last December? I'm just trying to make sure we understand what the effective pricing is in the first quarter -- in the fourth quarter.

Katie Fogerty -- Chief Financial Officer

Yes. No, that's exactly right. So we took in total 3% to 3.5% this -- in October, inclusive of the 10% delivery premiums that we're charging, and that's on top of the price that was taken last year. So now you're looking at kind of a mid-single-digit price right now.

Randy Garutti -- Chief Executive Officer and Director

Yes, we took about 2% in December -- end of December last year, so that will roll off at that time next year.

Jake Bartlett -- Truist Securities -- Analyst

Great. That's really helpful. And then just looking at G&A, the guidance for the fourth quarter is significantly higher than you saw in the third quarter. What is the right kind of level to -- I don't know if there's any -- anything abnormal in the fourth quarter in terms of a catch-up or accrual or something. I'm just trying to really make sure we understand or I understand what to grow from, what's the right kind of quarterly run rate from which to grow in 2022.

Randy Garutti -- Chief Executive Officer and Director

Yes, we're going to keep growing, and here's how you should think about it. We're going to keep growing in the fourth quarter. We are working -- our guidance implies and our -- and you will see through 2022, we intend to hire. We intend to build our teams. We intend to make big digital and tech and marketing investments as well as in the development schedule. We're about to build the largest class of restaurants we've ever had. We're also beginning to travel more, right? There's G&A costs. Our international team, in some cases, has not been able to travel. We intend to get back at that in 2022. We intend to really continue to just make deep investments in the long term. So to the point of, are we going to leverage G&A anytime soon, that's not our -- you're not going to hear us use those words. So you're going to hear us say we're going to continue to invest in the people, infrastructure, marketing and all the things that will build this brand. We have just over 200 company-operated Shacks. We've got a lot of opportunity out there, and we're going to keep investing in it.

Jake Bartlett -- Truist Securities -- Analyst

Great. And then last quick question. The digital sales mix, it's really held in, I think, more than most just on a kind of a monthly basis and an absolute kind of average weekly sales. But how incremental is that? It's a little different with other concepts as we think about off-premise being really totally incremental. Is this just -- I mean this could just be a shift from people using that channel and doing the same behavior that they did before. So how do you think on -- about how that increases your opportunity, the digital mix here and really the incrementality of it?

Katie Fogerty -- Chief Financial Officer

Yes. I mean one of the stats that I find to be really helpful when understanding what that digital mix to us is, is when we talked about how we grew our first-time app and web purchasers by 14% in the quarter. And we have seen and when we study our data, when we bring a guest into our digital ecosystem, we see higher frequency, we see a higher lifetime value of that guest. And so it's kind of that true omnichannel guest that we're looking to get here. So we are really encouraged and excited about the fact that we were able to retain about 80% of the digital business that we have built in the peak of the pandemic and that our mix remains strong even though in-Shack is growing much faster than our digital business right now. All of that aside, this is just, we think, kind of planting the seeds of a greater frequency from our core guests in years to come.

Jake Bartlett -- Truist Securities -- Analyst

Great, thanks a lot. Appreciate it.

Operator

Our next question is from Chris O'Cull from Stifel.

Patrick -- Stifel -- Analyst

Great, thank you, guys. This is Patrick on for Chris. I wanted to ask a quick follow-up on John's question. But is the new store curve that you're seeing today and the new openings and the way they're outperforming the system, is that similar to what you saw pre-COVID? Or do you still have room there for the honeymoon period to recover relative to what you saw before the pandemic? And then I had one follow-up.

Randy Garutti -- Chief Executive Officer and Director

We haven't -- we never really talked about those numbers in the past. So it's hard to get into that today other than to say in the past, we have talked for many years about how Shake Shacks, especially in new markets, generally performed strong out of the gate and then come down to some extent in year two and then generally come back out. But it's hard. They're all different. Every class is different, every Shack is different. So that comment was really about this year as we look at recovery and our overall sales having been remained down a bit.

Katie Fogerty -- Chief Financial Officer

And I think just piling on here, it's really hard to make kind of broad sweeping generalizations here, given we are still recovering and in the midst of COVID. So...

Patrick -- Stifel -- Analyst

Got it. That's helpful. And then just a quick longer-term question on the international business and the license segment. As you continue to grow there and your partners do, obviously, there's the near-term challenges with COVID. But is there a point in the longer term where you see density get to a point where you can actually have a step change in the level of development, particularly in markets where you have a lot of white space like China?

Randy Garutti -- Chief Executive Officer and Director

Yes. We're obviously really excited about Asia generally, especially China. We've had just incredible starts there. I noted that Hangzhou, which is a new city, which is a smaller -- I mean smaller by China relative terms, but a very major city in the world outside of Shanghai, where we've had a tremendous start. And we have still just very few Shacks in China, but we're going to keep growing there. So look, we want to focus on the most important markets. And we're also really proud of our mature markets like the Middle East where we have a huge business, like the U.K. where we have a number of great restaurants that are still recovering. So look, we got our eyes on a big global license opportunity and domestic license opportunity that we noted. And we love this part of our business. It's really asset-light, cash accretive and brand exciting. So everything about it is an important and exciting piece of our business. We can't wait to keep growing it.

Patrick -- Stifel -- Analyst

Great, thanks guys.

Operator

Our next question is from David Tarantino with Baird.

David Tarantino -- Baird -- Analyst

Hi, good afternoon, Katie, just a quick clarification on the guidance for the fourth quarter comps. Can you give some perspective on what that would imply for a two year comp or, I guess, a comp versus 2019? I guess the number I would calculate would be different given the fiscal period shift. So just wondering what that would be.

Katie Fogerty -- Chief Financial Officer

Yes, we're not going to go into that again. 4Q '19 had a lot of different -- it had a lot of noise in it, and we have the 53rd week adjustment we've made here. So I feel very good about the guidance that we've given you, and that's as much detail as we're going to get into. On the back of that comment, though, I do want to clarify, the guidance that we're providing you for 4Q on Shack sales and on our same-store sales guidance, that is using the trends that we are seeing today and expecting that those trends will continue with normal historical seasonality patterns to help kind of address that point.

David Tarantino -- Baird -- Analyst

Okay. That essentially answers the question. And then, Randy, I just wanted to ask, what do you think the ultimate solution is for the staffing issues? Do you think it's just much higher wage rates? Or do you think, I guess, something else related to the employment proposition is necessary? I guess what -- as you think about your long history in the industry, I'd be curious to get your thoughts on that question.

Randy Garutti -- Chief Executive Officer and Director

That is such a deep -- we're going to need a lot more time for that one. And I think I'm not sure I'm going to answer that for the world's challenges right now. Look, there's such a host of things that are causing this, and I think it's probably nine or 10 different things. I'm not going to name one or the other. They're all included, all leading toward, I believe, ultimately, we have to be the best employer in our industry. I do believe the restaurant business is an incredible occupation. I've lived it my whole life, and I have seen how many people we have lifted from entry-level jobs into leadership jobs across the country. And the restaurant business is not for everyone, but it is for a lot of people. And we've got to keep focusing on that. I do think time will be a heal for this as well. I do think we have to get people. I do think we'll continue to return to the workforce. I believe we've got to be leaders there. And we've got to give people reasons to join Shake Shack instead of somewhere else. Part of that is pay, part of that is leadership development, and all of it is pride in the place that you work. So well, it's a great question. It's a host of things. I wish I had the silver bullet. And I think it's just going to be heads down a ton of work for our operators and our people teams for a while as we get back to optimal staffing labors, and I believe we will, and I believe the industry will and will probably move forward.

David Tarantino -- Baird -- Analyst

Thank you for that.

Operator

Our next question is from Peter Saleh with BTIG.

Peter Saleh -- BTIG -- Analyst

Great, thank you. I wanted to ask about the menu price, and I know you guys have taken some recently. But I guess if you look back in the last maybe couple of menu prices that you've taken, have you seen any resistance from the customer on the menu pushback? And how have you guys measured that in the past?

Randy Garutti -- Chief Executive Officer and Director

I mean not really. I mean you obviously see it through sales and traffic. I mean that's the best measure of anything in this regard. I think it's hard to answer that definitively. But no, look, that's why we've always been cautious. It's always been in that 1% to 2% range. So -- and we've talked a lot about on this call tonight the different pieces of that and how we see it now.

Katie Fogerty -- Chief Financial Officer

Yes. And another point to add here because we just have a little bit more time of observation here is with the now 10% that we're charging through our third-party delivery channels, we're still seeing our guests favor that look and willing to -- they're willing to pay for that convenient channel. So that gives us a little bit of hope there, too.

Peter Saleh -- BTIG -- Analyst

Got it. And then I know this one may be a little bit more difficult to answer. But as you talk to your suppliers and your partners on the supply chain, is there any sort of sense on how much of this inflation may be transitory in nature? Clearly, I think everybody is struggling with the same thing, but nobody is really sure how much of the commodity inflation is transitory. I think that the labor component is likely not at this point.

Randy Garutti -- Chief Executive Officer and Director

Yes, I think that's probably fair. I'm not a big agreer with transitory inflation at the moment. I think, of course, everything is supply and demand curve, and we're going to swing very far in one direction here during this tough time. And then I believe that will ultimately swing back. Certain commodities will swing back sooner than others, some might never. And I think we're going to live in a high-cost environment for a while, and that's going to translate into inflation. So I don't think anyone knows. I think every quarter has been more surprising than the last for everyone involved in the discussion. And we're just going to keep watching, reacting as we can and making sure we give a good, great guest experience in the meantime.

Peter Saleh -- BTIG -- Analyst

Thank you very much.

Operator

Our next question is from Brett Levy with MKM Partners.

Brett Levy -- MKM Partners -- Analyst

Thanks for taking the question. I'm going to try one I know you might not want to answer. With all of the different performances you're seeing now across your different segments, would you care to either share a little bit more margin color on segments or top and bottom quartiles? Just how far down the bottom have fallen or how well the top are holding up?

Randy Garutti -- Chief Executive Officer and Director

Yes, that's OK. I mean I'm not going to answer it with exact numbers other than to say it's the same theme we've talked about. There are restaurants in high urban density areas that are significantly down from their highs. It's very far down. That remains. If you are in Midtown Manhattan, while things continue to get better every day, and you've seen that through our numbers quarter after quarter, they remain deeply impacted. And there are some Shacks in high-traffic suburban areas that continue to win. By the way, there are some urban Shacks that continue to win for various reasons. So it's balanced. It's balanced, and you can see it in our numbers. Look at period 10, look at the third quarter, every region continued to grow and improve, and we're still down in the deep urban regions. And that's just what's going to be for a while. There's high highs, low lows, and we still believe -- we haven't closed a single Shack during all of this, except for Penn Station that we were forced to close because of a construction project. So if that gives you an indication how we feel about the Shack's ability to recover, there you have it.

Operator

Our next question is from John Ivankoe with JPMorgan.

John Ivankoe -- JPMorgan -- Analyst

Hi. I'll try to be quick. I thought during this call how -- if some of your employees aren't necessarily benefiting directly from customer tips where some of your service providers actually are, do you think -- and to some extent, this is back to David Tarantino's question, can we solve some of the pay issue of just giving customers more of an opportunity to tip maybe through some of the new next-generation point-of-sale systems, whether in your kiosks or through your app? If you think pay is part of the problem, could you put it to some extent in the customers' hands?

Randy Garutti -- Chief Executive Officer and Director

John, you're always ahead of the curve as usual, and I appreciate that. We've talked about tips for a long time. And I'll tell you how we think about it. For many, many years, our guests have said, can I give you a tip? And we've always said, no, no, no, we're good. We don't do that here. It's something we're talking about a lot and mostly because our guests have asked for it and, of course, for -- to ultimately hopefully have higher pay. We're actually testing right now in just two Shacks, and it's a test that literally began weeks ago, just weeks ago. So we're going to test that. We're going to see various versions of that. And we want to make sure that we don't ever want to be the brand that people feel compelled or guilty about it, like they have to do it. It should only be for superior service and hospitality. And if we can set up a system where that could work in some of our channels and that could then benefit our team, that would be great. But again, really new, really new and just testing that too. So this is a long, long-term project, so don't expect to see a massive rollout anytime soon here. But thank you for asking. Okay. So starting with staffing, no, it wasn't materially better staffing-wise, but it also wasn't materially worse. It was still challenging, let's start there. So we certainly were not optimized at every Shack every day to capture the best sales, and that remains a challenge. When it comes to LTOs, we love this truffle burger. It's something we tested last year just in a couple of markets to see, and it's hitting. And people love it and they're willing to spend. So that gives us a lot of confidence in potential premium LTOs or also not just LTOs, John, but you're seeing us more and more look to the premiumization of current items. If you actually pay attention in our app, you'll see bacon avocado, which was an LTO and is not anymore, but you can still get it, right? You can see more easily able to add on features like adding bacon, like adding avocado on a burger. Those are things that we're really excited about being able to do. So the truffle didn't really launch until mid to end of October, so it wasn't a huge part of the October performance, but certainly had some fun involved in it. We also, last comment, we did that digitally only in that first couple of weeks. So there was time when it was only available in our app, then there was a time where we didn't have it on third-party channels, and it finally did. And we think it's going to be a fun item to run for a couple of months. So we'll see where that goes, and we've got our eye on other exciting LTOs for next year.

Operator

Our next question is from Brian Vaccaro with Raymond James.

Brian Vaccaro -- Raymond James -- Analyst

Thanks for squeezing me. Just a real quick one. I wanted to circle back on the suburban trends. I always really appreciate the monthly total AWS that you provide in the presentation. But could you speak to what you're seeing sort of from a suburban AWS standpoint, specifically? I'm just trying to work through any noise in that improvement you're seeing in October that might be seasonality, COVID world versus pre-COVID. And also trying to get a read beyond just the comp base a bit since you're growing so rapidly. So any additional color there would be great.

Katie Fogerty -- Chief Financial Officer

Yes, Brian. I mean what we've shown here and what we're going to share with you is just the same-store sales trends. So if you go to page seven of the supplementals, we outlined the urban versus the suburban and the overall blend. Just to give you some more color there, we saw a broad-based improvement across the board, and it was across a variety of the different mix of formats in suburban that we talked about.

Brian Vaccaro -- Raymond James -- Analyst

Okay. Would you say that AWS in the suburban markets were higher in October than they were September and August?

Katie Fogerty -- Chief Financial Officer

We're not commenting on AWS for October.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Randy Garutti for closing remarks.

Randy Garutti -- Chief Executive Officer and Director

Thanks, everybody. I appreciate the long hour plus here, and look forward to getting a Shack burger with you soon. Thanks for joining. Take care.

Operator

[Operator Closing Remarks]

Duration: 80 minutes

Call participants:

Annalee Leggett -- Investor Relations

Randy Garutti -- Chief Executive Officer and Director

Katie Fogerty -- Chief Financial Officer

Jim Sanderson -- Northcoast Research -- Analyst

Jared Garber -- Goldman Sachs -- Analyst

Nicole Miller -- Piper Sandler -- Analyst

Michael Tamas -- Oppenheimer & Co -- Analyst

Lauren Silberman -- Credit Suisse -- Analyst

Andrew Charles -- Cowen -- Analyst

Jeffrey Bernstein -- Barclays -- Analyst

John Glass -- Morgan Stanley -- Analyst

Jake Bartlett -- Truist Securities -- Analyst

Patrick -- Stifel -- Analyst

David Tarantino -- Baird -- Analyst

Peter Saleh -- BTIG -- Analyst

Brett Levy -- MKM Partners -- Analyst

John Ivankoe -- JPMorgan -- Analyst

Brian Vaccaro -- Raymond James -- Analyst

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