Shake Shack (SHAK 0.76%) investors are probably familiar with its evolution from a hot dog cart in Madison Square Park to a worldwide chain with a market value of $1.3 billion. They also likely know that the bears think Shake Shack is a terribly overvalued stock.
But today, let's look beyond the headline numbers at six lesser-known facts about Shake Shack -- which might help you better understand New York's beloved "better burger" restaurant.
Image source: Shake Shack.
1. Its creation is rooted in Madison Square Park's rebirth
Shake Shack wouldn't exist if New York City hadn't decided to rebuild Madison Square Park, which had fallen into a state of disrepair, back in 2000. Restaurateur Danny Meyer helped launch the Madison Square Park Conservancy to redevelop the park, and one of its first promotional efforts was an art exhibit called "I <3 Taxi" in 2001.
Meyer's Union Square Hospitality Group (USHG) then opened a hot dog cart at the exhibit, which was run by its director of operations Randy Garutti. The cart delivered food from the kitchen of USHG's Eleven Madison, and it became extremely popular over the following three years. In 2004, New York started taking bids on running a kiosk-style restaurant in the park.
2. The first Shake Shack concept was sketched on a napkin
Meyer wanted to win that bid with a modernized version of the roadside burger stand. So he sat down with Garutti, who would later become Shake Shack's CEO, and sketched the concept and menu on a napkin.
The original menu included current staples like frozen custard, mix-ins, and crinkle cut fries, but it also included tuna burgers, donuts, chocolate fudge cookies, sundaes, custard in cones, floats, coffee, and various juices.
3. It wasn't supposed to be a chain
Meyer and Garutti didn't intend for Shake Shack to become a chain. Speaking to Forbes in early 2014, Garutti stated that the secret to Shake Shack's success was that "we didn't set out to design something that we would ever repeat." He pointed out that it was "designed for one purpose; to be part of a park and a community in New York."
Image source: Shake Shack.
That idea bears a strong resemblance to the McDonald brothers' earliest vision of McDonald's (MCD 0.20%). But just like McDonald's, the temptation of growth was hard to resist.
Last year, Garutti told The Street that when Shake Shack opened its second location on the Upper West Side, it only projected it to generate half the sales of the Madison Square Park location.
But after it surpassed that goal, Garutti said that the company realized that it had "a responsibility to check this out further." This led to its eventual evolution into a chain with 127 locations worldwide.
4. The curious case of the crinkle cut fries
The Madison Square Park Shake Shack originally served frozen crinkle cut fries, since it didn't have enough space to make fresh hand-cut fries. The frozen fries stood out like a sore thumb, since the rest of Shake Shack's menu emphasized fresh ingredients -- like all-natural 100% Angus beef without hormones and antibiotics.
So after Shake Shack expanded, it replaced the frozen fries with fresh hand-cut fries. But customers hated the new fries, and eventually Garutti brought back the frozen crinkle fries with a twist -- it worked with the supplier to make them healthier by removing the artificial ingredients and preservatives.
5. It customizes its menu for each new city
Shake Shack customizes its menu for each city by tossing in local flavors. In Florida, it adds a slice of key lime tart from Palm Beach's Sugar Monkey bakery to its "concrete" desserts. In Philadelphia, it adds crushed cannoli shells from the Termini Brothers pastry shop.
Some popular local recipes become staple items at all Shake Shacks. For example, The "Handsome Dog" from New Haven (a Vienna all-beef hot dog topped with cheddar and American cheese sauce and ale-marinated shallots), became the "Dapper Dog" at its other locations.
Even McDonald's is mimicking this strategy. Last year, it expanded the Gilroy Garlic Fries, a favorite Bay Area variation which uses locally sourced garlic, to hundreds of additional locations -- and they quickly sold out.
6. The company owes its name to Grease
Last but not least, Shake Shack got its name from the movie Grease. It's the name of the ride where Olivia Newton-John and John Travolta sing "You're the One that I Want" toward the end of the movie. It's a good thing that Meyer saw that movie -- since earlier names sketched on the famous napkin included Custard's First Stand, Dog Run, Custard Park, Madison Mixer, and even... Parking Lot.
