2022FY0001620533FALSE00016205332021-12-302022-12-2800016205332022-06-29iso4217:USD0001620533us-gaap:CommonClassAMember2023-04-19xbrli:shares0001620533us-gaap:CommonClassBMember2023-04-19
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
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| ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 28, 2022
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _______ to ______
Commission file number: 001-36823
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SHAKE SHACK INC.
(Exact name of registrant as specified in its charter)
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Delaware | | | 47-1941186 |
| (State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) |
225 Varick Street, Suite 301, New York, New York 10014
(Address of principal executive offices and Zip Code)
(646) 747-7200
(Registrant's telephone number, including area code)
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| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class | Trading symbol(s) | Name of exchange on which registered |
| Class A Common Stock, par value $0.001 | SHAK | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes o No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☑ | | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes þ No
The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant, as of June 29, 2022, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $1,495,217,173, computed using the closing price on that day of $40.21. Solely for purposes of this disclosure, shares of common stock held by members part of the Voting Group pursuant to the Stockholders Agreement, as amended, of the Registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of affiliates is not necessarily a conclusive determination for any other purposes.
As of April 19, 2023, there were 39,405,023 shares of Class A common stock outstanding and 2,844,513 shares of Class B common stock outstanding.
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Auditor Name: Ernst & Young LLP | Auditor Location: New York, New York | Auditor Firm ID: 42 |
Explanatory Note
Shake Shack Inc., a Delaware corporation (“Shake Shack” or the “Company”), is filing this Amendment No. 1 to its Annual Report on Form 10-K (this “Amendment”) to amend the Annual Report on Form 10-K for the fiscal year ended December 28, 2022 (the “Original Filing”), as filed by the Company with the Securities and Exchange Commission (the “SEC”), on February 23, 2023.
The purpose of this Amendment is to include the information required by Items 10 through 14 of Part III on Form 10-K. This information was omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits such information to be incorporated by reference from a registrant's definitive proxy statement, if filed with the SEC no later than 120 days after the end of the fiscal year covered by a Form 10-K. The Company will not have filed its definitive proxy statement within the 120 day period and is therefore amending and restating in their entirety Items 10 through 14 of Part III of the Original Filing. The reference on the cover page of the Original Filing to the incorporation by reference of portions of its definitive proxy statement into Part III of the Original Filing is hereby deleted.
In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), certifications by Shake Shack's principal executive officer and principal financial officer are filed as exhibits to this Amendment under Item 15 of Part IV hereof. Because no financial statements have been included in this Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4, and 5 of the certifications have been omitted. The Company is not including certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 as no financial statements are being filed with this Amendment.
Except as described above, no other changes have been made to the Original Filing. Except as otherwise indicated herein, this Amendment continues to speak as of the date of the Original Filing, and the Company has not updated the disclosures contained therein to reflect any events that occurred subsequent to the date of the Original Filing. This Amendment should be read in conjunction with the Original Filing and the Company’s other filings with the SEC.
Cautionary Note Regarding Forward-Looking Information
This report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact included in this report and the Company's Annual Report on Form 10-K for fiscal year ended December 28, 2022 ("Form 10-K") are forward-looking statements, including, but not limited to, statements about our growth, strategic plan, and our liquidity. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions.
All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Some of the factors which could cause results to differ materially from the Company's expectations include the continuing impact of the COVID-19 pandemic, including the potential impact of any COVID-19 variants, the Company's ability to develop and open new Shacks on a timely basis, increased costs or shortages or interruptions in the supply and delivery of our products, increased labor costs or shortages, the Company's management of its digital capabilities and expansion into delivery, as well as its kiosk, drive-thru and multiple format investments, the Company's ability to maintain and grow sales at our existing Shacks, and risks relating to the restaurant industry generally. You should evaluate all forward-looking statements made in this report and the Form 10-K in the context of the risks and uncertainties disclosed in Part I, Item 1A of the Form 10-K under the heading "Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations".
The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.
Shake Shack Inc. 
Form 10-K | 1
SHAKE SHACK INC.
TABLE OF CONTENTS
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| Item 16. | Form 10-K Summary | |
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
DIRECTORS AND EXECUTIVE OFFICERS
Below is a list of the names and ages as of April 27, 2023 of our directors and executive officers and a description of the business experience of each of them.
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| Name | Age | Position |
| Randy Garutti | 48 | Chief Executive Officer and Director |
| Katherine I. Fogertey | 39 | Chief Financial Officer |
| Zachary Koff | 43 | Chief Operating Officer |
| Daniel Meyer | 65 | Chairman of the Board of Directors |
| Sumaiya Balbale | 42 | Director |
| Lori George Billingsley | 59 | Director |
| Anna Fieler | 51 | Director |
| Jeff Flug | 60 | Director |
| Jenna Lyons | 54 | Director |
| Joshua Silverman | 54 | Director |
| Jonathan D. Sokoloff | 65 | Director |
| Robert Vivian | 64 | Lead Director |
| Tristan Walker | 38 | Director |
Information regarding Ms. Fogertey and Mr. Koff can be found in Part I of the Original Filing under "Information About Our Executive Officers".
Randy Garutti has served as Shake Shack’s Chief Executive Officer and on the Board of Directors since April 2012. Prior to becoming Chief Executive Officer, Mr. Garutti served as Chief Operating Officer of SSE Holdings since January 2010. Prior to leading Shake Shack, Mr. Garutti was the Director of Operations for Union Square Hospitality Group ("USHG"), overseeing the operations for all its restaurants. In addition, Mr. Garutti served as General Manager of Union Square Cafe and Tabla, both of which won numerous accolades in the hospitality industry. Mr. Garutti graduated from Cornell University’s School of Hotel Administration in 1997. Mr. Garutti currently serves on the board of directors of Block, Inc. Mr. Garutti also is a member of the board of directors of the Columbus Avenue Business Improvement District, a not-for-profit organization. Mr. Garutti served as a member of the board of directors of USHG Acquisition Corp from 2020 through 2022.
Key Skills and Experience: Mr. Garutti brings to his service on our Board of Directors his experience in the leadership, development and growth of our business, and his particular knowledge and broad experience in the hospitality industry.
Daniel Meyer has served as the Chairman of the Board of Directors of Shake Shack since January 2010. Mr. Meyer is the Founder and Executive Chairman of USHG, which owns and operates the following restaurants: Union Square Cafe, Gramercy Tavern, Blue Smoke, The Modern, the Cafes at MOMA, Maialino, Studio Cafe, Porchlight, Marta, Daily Provisions, Ci Siamo and Manhatta; and an event services business, Union Square Events. The restaurants have earned 28 James Beard Awards among them. Mr. Meyer co-authored the best-selling Union Square Cafe Cookbook and authored the New York Times bestseller Setting the Table: The Transforming Power of Hospitality in Business. Mr. Meyer is currently the Chairman of the board of directors of USHG Acquisition Corp. and a member of the board of directors of Olo, as well as the not-for-profit Madison Square Park Conservancy. Mr. Meyer previously served as a member of the board of directors of The Container Store from 2013 to 2017,
Sotheby’s from 2011 to 2015 and OpenTable from 2000 through 2014, as well as the following not-for-profit organizations: City Harvest, New Yorkers for Parks, Union Square Partnership and NYC & Co.
Key Skills and Experience: Mr. Meyer brings to his service on our Board of Directors a deep understanding of our business derived from his leadership role in our founding and our subsequent growth, his long career in hospitality, and a particular knowledge and experience in strategic planning and leadership of complex organizations, hospitality businesses and board practices of other major corporations.
Sumaiya Balbale has served on the Board of Directors of Shake Shack since March 2019. Ms. Balbale currently serves as the Chief Marketing Officer for Sequoia Capital, which she joined in June 2020. Ms. Balbale previously served as the Vice President of E-commerce, Mobile and Digital Marketing for Walmart US, from February 2017 until her resignation from the company in February 2019. At Walmart she led e-commerce marketing and transformed the digital media, social media, marketing analytics and marketing technology capabilities of the company. Ms. Balbale joined Walmart after the retailer purchased Jet.com in 2016. At Jet.com she served as the Vice President of Marketing from September 2014 through October 2017, where she led all consumer marketing including brand, acquisition and retention efforts. During the first year of the acquisition, Ms. Balbale continued to operate in a dual capacity for both Jet.com and Walmart. From 2010 through 2014, Ms. Balbale worked for Quidsi, a collection of specialty e-commerce verticals that was acquired by Amazon during her tenure. Ms. Balbale graduated with a B.A. degree in History from Brown University in 2002, and received her MBA from Harvard Business School in 2009. In 2018, Ms. Balbale was named to Fortune’s 40 under 40 list.
Key Skills and Experience: Ms. Balbale brings to her service on our Board of Directors particular knowledge and experience in e-commerce, mobile and digital marketing, as well as digital and social media brand management.
Lori George Billingsley joined the Board of Directors of Shake Shack in October 2022 and is the former Global Chief Diversity, Equity and Inclusion ("DEI") Officer for The Coca-Cola Company ("TCCC"), a role in which she served from October 2018 until March 2022. In that role, Ms. Billingsley led TCCC’s DEI Center of Excellence, directed to enable a more engaged global workforce, mirror the markets served, and support a more inclusive culture to best position the employees of TCCC to drive growth. Prior to this role, Ms. Billingsley served as the Vice President of Community and Stakeholder Relations for TCCC’s North America Operating Unit from January 2018 through September 2018. Since 2002 when she joined TCCC, Ms. Billingsley served in a number of roles at TCCC relating to public affairs, global issues communications, shareowner affairs, community and stakeholder relations, social impact and diversity, equity and inclusion with increasing responsibility. Prior to joining TCCC, Ms. Billingsley led her own public relations consultancy, LG Communications; was a vice president at Porter/Novelli, a leading public relations firm where she founded their Multicultural Communications and Alliance Building practices; and a senior public affairs specialist for the District of Columbia Government’s Office of Human Rights and Minority Business. Ms. Billingsley received her Bachelor of Arts in public relations from Howard University and her Master of Arts in public communications at American University. In 2019, Ms. Billingsley completed a 13-month Executive Leadership Experience Program at Harvard Business School and in 2021, Ms. Billingsley completed Stanford University Graduate School of Business Directors’ Consortium. Ms. Billingsley currently serves on the board of directors of Pioneer Natural Resources (NYSE: PXD), NAACP Foundation and Arete Executive Women of Influence. She is a founding member of TCCC’s Equity Accountability Councils, and a member of the National Association of Corporate Director’s Center for Inclusive Governance Advisory Council, Howard University’s School of Communications Board of Visitors, Executive Leadership Council, OnBoard, International Women’s Forum, Extraordinary Women on Boards, Leadership Atlanta, Black Women on Boards, Public Relations Society of American and The Links, Inc.
Key Skills and Experience: Ms. Billingsley brings to her service on our Board of Directors experience in leadership, growth and strategic planning in complex organizations and in developing and implementing breakthrough programs, including DEI programs, that meet organizational goals.
Anna Fieler has served as a member of the Board of Directors of Shake Shack since December 2017. Ms. Fieler has served as a member of the board of directors of QuinStreet (NASDAQ: QNST) since July 2020, where she serves as a member of the audit committee. Ms. Fieler has also served on the board of J.Crew Group since January 2021. Ms. Fieler’s additional governance expertise includes having earned the CERT Certificate in Cybersecurity Oversight for public company board directors. Ms. Fieler is currently Founder & Partner of Madison Park Ventures, an investment and advisory firm focusing on seed to Series B technology companies that advance well-being, connection and productivity. Ms. Fieler served as Chief Marketing Officer of
PopSugar Inc., a leading digital lifestyle media company, from 2014 to 2018. Prior to PopSugar, Ms. Fieler served as the Chief Marketing Officer of Stella & Dot LLC, an online social selling company, from 2011 to 2012. Prior to Stella & Dot, Ms. Fieler served as Vice President of Marketing for Tiny Prints, Inc., a digital commerce platform for invitations and greeting cards that was acquired by Shutterfly, Inc. in March 2011, from 2009 to 2011. Ms. Fieler also served in various leadership roles at eBay Inc. from 2001 to 2007. Ms. Fieler began her career in traditional advertising at Ogilvy & Mather. Ms. Fieler received an MBA from Harvard Business School in 2000 and graduated magna cum laude from Brown University in 1995. She has been appointed by the President of Brown University to serve on its Women’s Leadership Council, and she also serves on the San Francisco Opera Board of Directors Marketing Committee.
Key Skills and Experience: Ms. Fieler brings to her service on our Board of Directors public company board experience, executive experience and in-depth knowledge regarding digital marketing and digital customer experience.
Jeff Flug has served on the Board of Directors of Shake Shack since January 2010. Mr. Flug has over 25 years of leadership and management experience primarily in the financial industry, as well as in the non-profit sector. After graduating from the University of Massachusetts/Amherst in 1984, with a B.B.A. in Accounting, summa cum laude, Mr. Flug began his career as an accountant at PricewaterhouseCoopers, where he attained his C.P.A. in 1986. Mr. Flug attended Columbia Business School, where he received his M.B.A. in Finance in 1988. In 1988, Mr. Flug joined Goldman, Sachs & Co., and ultimately served as a Managing Director and Head of Fixed Income Financial Futures and Options Sales. In 2000, Mr. Flug became the Head of North America Fixed Income Institutional Sales for JPMorgan Chase & Co. In 2006, Mr. Flug served as CEO and Executive Director for Millennium Promise, a not-for-profit organization whose mission is to end extreme poverty and malaria in Africa. Mr. Flug served as USHG’s Chief Financial Officer and Chief Operating Officer from December 2009 until January 2011, and as USHG’s President from January 2011 until his retirement from the company in June 2015. Mr. Flug currently serves as the Chairman of the Board of Tender Green, and a board member of Pennant Park Investment Corporation, Pennant Park Floating Rate Capital Limited, and Momentous. Mr. Flug previously served as a member of the board of directors of USHG from 2009 until his retirement from the company in June 2015 and Sears Hometown & Outlet Stores and the Mountain School of Milton Academy, both from 2012 until 2015.
Key Skills and Experience: Mr. Flug brings to his service on our Board of Directors a broad-base of financial experience and particular knowledge and experience in strategic planning and leadership of complex organizations, as well as risks facing public companies.
Jenna Lyons has served on the Board of Directors of Shake Shack since December 2014. Ms. Lyons served as the President, Executive Creative Director of J.Crew Group, Inc. from July 2010 until her resignation from the company in April 2017, and before that served as Executive Creative Director since April 2010. Prior to that, she was Creative Director since 2007 and, before that, was Senior Vice President of Women’s Design since 2005. Ms. Lyons joined J.Crew Group, Inc. in 1990 as an Assistant Designer and has held a variety of positions within J.Crew Group, Inc., including Designer from 1994 to 1995, Design Director from 1996 to 1998, Senior Design Director in 1999, and Vice President of Women’s Design from 1999 to 2005. Ms. Lyons is currently a member of the board of directors of the Council of Fashion Designers of America, a not-for-profit organization.
Key Skills and Experience: Ms. Lyons brings to her service on our Board of Directors deep knowledge and experience in leadership of and branding in complex organizations and retail businesses, as well as a deep understanding of the consumer markets.
Joshua Silverman has served on the Board of Directors of Shake Shack since November 2016. Mr. Silverman currently serves as CEO of Etsy, Inc., a position he has held since May 2017. Mr. Silverman served as Executive in Residence for Greylock Partners, a venture capital firm, from October 2015 to April 2017. He previously held this position from October 2010 through June 2011. From June 2011 to December 2015, Mr. Silverman served as President of Consumer Products and Services at American Express. Prior to joining American Express, Mr. Silverman served as CEO of Skype from February 2008 until September 2010. From July 2006 until March 2008, Mr. Silverman served as CEO of Shopping.com, an eBay company, and, from December 2003 until June 2006, Mr. Silverman served as Managing Director of Markplaats.nl & eBay NL, a Dutch subsidiary of eBay. Mr. Silverman is the co-founder of Evite, Inc., and served as its CEO from December 1998 until its sale in May 2001. Mr. Silverman received his B.A. in Public Policy from Brown University in 1991 and his M.B.A. from Stanford
University Graduate School of Business in 1997. Mr. Silverman currently serves on the board of directors of Etsy, Inc., as well as the following not-for-profit organizations: Code Nation, which equips students in under-resourced schools with both fundamental coding skills and professional experiences, and Clubbed Thumb Theater. He also served on the Consumer Advisory Board of the Consumer Financial Protection Bureau from 2012 to 2015.
Key Skills and Experience: Mr. Silverman brings to his service on our Board of Directors particular knowledge and experience in strategic planning and leadership of complex organizations, including risk and financial management. He also brings meaningful experience in cybersecurity and sustainability.
Jonathan D. Sokoloff has served on the Board of Directors of Shake Shack since December 2012. Mr. Sokoloff is currently a Managing Partner with LGP, which he joined in 1990. Before joining LGP, he was a Managing Director in Investment Banking at Drexel Burnham Lambert since 1985. Mr. Sokoloff serves as a member of the board of directors of the following companies or their parent holding companies: Advantage Solutions, Jetro Cash & Carry, The Container Store, USHG, Jo-Ann Stores and Mariner Wealth Advisors. He is a trustee of his alma mater, Williams College, as well as a trustee of the Los Angeles County Museum of Art and a director of the Melanoma Research Alliance.
Key Skills and Experience: Mr. Sokoloff brings to his service on our Board of Directors particular knowledge and experience in finance and capital market transactions, as well as his broad-based experience in the leadership of retail businesses and the board practices of other major corporations.
Robert Vivian has served on the Board of Directors of Shake Shack since June 2010. Mr. Vivian served as the Co-Chief Executive Officer of P.F. Chang’s China Bistro from January 2009 until his retirement from the company in December 2011. Prior to that time, he served as P.F. Chang’s President from December 2000 through January 2009 and as its Chief Financial Officer from 1996 through December 2000. Mr. Vivian is currently a member of the board of directors of Bonci USA. Mr. Vivian previously served as a director of Cheddar’s from December 2011 until April 2017 and P.F. Chang’s China Bistro from January 2009 through April 2011. Before joining P.F. Chang’s, Mr. Vivian served in a variety of positions with Brinker International, Inc.
Key Skills and Experience: Mr. Vivian brings to his service on our Board of Directors a breadth of financial and operational leadership experience in the hospitality industry, including global licensing. Mr. Vivian also brings experience in board practices of other major corporations.
Tristan Walker has served on the Board of Directors of Shake Shack since June 2020. Mr. Walker is the Founder and Chief Executive Officer of Walker & Company Brands, which Mr. Walker founded in 2013 and which merged with Procter & Gamble in December 2018. Prior to founding Walker & Company Brands, Mr. Walker was an Entrepreneur-in-Residence at Andreessen Horowitz from 2012 to 2013. From 2009 to 2012, Mr. Walker served as the Director of Business Development for Foursquare, where he oversaw strategic partnerships and monetization. In this role, Mr. Walker managed integrations with large brands and media companies including American Express, The New York Times, CNN, MTV, Starwood Hotels & Resorts, and Starbucks. In 2019, Mr. Walker was named one of Fortune Magazine’s 50 “World’s Greatest Leaders.” Mr. Walker has also been named a USA Today Person of the Year, TIME 100 Next, Ebony Magazine’s 100 Most Powerful People, Vanity Fair’s “Next Establishment,” Fortune Magazine’s “40 Under 40,” AdAge. “Creative 50,” and Black Enterprise’s “40 Next.” Mr. Walker is a member of the board of directors of Footlocker, Inc. and the Founder of CODE2040, a program that matches high performing Black and Latino undergraduate and graduate coders and software engineering students with Silicon Valley start-ups for summer internships. Mr. Walker holds a bachelor’s degree in economics from Stony Brook University, where he graduated as valedictorian in 2005, and obtained an MBA from the Stanford University Graduate School of Business in 2010.
Key Skills and Experience: Mr. Walker brings to his service on our Board of Directors a broad-based experience and deep knowledge of strategic planning in complex organizations, as well as detailed understanding of brand and marketing strategies.
AUDIT COMMITTEE
The Audit Committee operates under a written charter adopted by the Board of Directors. The charter contains a detailed description of the scope of the Audit Committee’s responsibilities and how they will be carried out. The Audit Committee’s charter is available on our website at investor.shakeshack.com, under “Governance Documents.” In accordance with its charter, the Audit Committee, among other responsibilities, (i) engages and oversees our independent registered public accounting firm; (ii) reviews and discusses with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC and the other financial information presented to our stockholders; (iii) reviews with our independent registered public accounting firm the scope and results of their audit; (iv) approves all audit and permissible non-audit services to be performed by our independent registered public accounting firm; (v) reviews and monitors our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; (vi) reviews our responsibilities with respect to risk assessment and risk management; (vii) establishes procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; (viii) reviews risk assessments from management with respect to our information technology systems and procedures, including cybersecurity, and oversees our cybersecurity risk management processes; and (ix) reviews risk assessments from management with respect to our food safety and quality assurance practices, and must oversee our food safety and quality assurance risk management processes.
Our Audit Committee consists of Robert Vivian, Sumaiya Balbale, Jeff Flug, and Joshua Silverman, with Mr. Vivian serving as chair. As required by Rule 10A-3 of the Exchange Act and the New York Stock Exchange rules, each of Messrs. Vivian, Flug and Silverman and Ms. Balbale meets the definition of “independent director” for purposes of serving on an audit committee. In addition, the Board of Directors has determined that each of Messrs. Vivian and Silverman qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee operates under a written charter adopted by the Board of Directors. The charter contains a detailed description of the scope of the Nominating and Corporate Governance Committee’s responsibilities and how they will be carried out. The Nominating and Corporate Governance Committee’s charter is available on our website at investor.shakeshack.com, under “Governance Documents.” The primary responsibilities of the Nominating and Corporate Governance Committee are to (i) identify individuals qualified to become members of our Board of Directors, consistent with criteria approved by our Board of Directors and in accordance with the terms of the Stockholders Agreement; (ii) develop and recommend to our Board of Directors a set of corporate governance guidelines and principles; (iii) oversee the evaluation of the Board of Directors; (iv) review the overall adequacy and provide oversight with respect to the Company’s environmental, social and related governance strategy, initiatives and policies; and (v) review and provide oversight of the Company’s commitment to corporate social responsibility and diversity, equity and inclusion matters and the Company’s strategies, initiatives and policies for the same.
Our Nominating and Corporate Governance Committee consists of Lori George Billingsley, Jeff Flug, Jenna Lyons, Joshua Silverman, and Tristan Walker, with Mr. Flug serving as chair. As required by the New York Stock Exchange rules, each of Messrs. Flug, Silverman and Walker and Mses. Billingsley and Lyons meets the definition of “independent director” for purposes of serving on a nominating and corporate governance committee.
Recommendations for Director Candidates
The Nominating and Corporate Governance Committee, in recommending director candidates, and the Board, in nominating director candidates, will evaluate candidates in accordance with the qualification standards set forth in our Corporate Governance Guidelines, available on our website, investor.shakeshack.com. In addition, the Nominating and Corporate Governance Committee and the Board may also consider the additional selection criteria listed in the Corporate Governance Guidelines. These qualification standards and additional selection criteria are summarized below.
Director Qualification Standards
The Nominating and Corporate Governance Committee, in recommending director candidates for election to the Board, and the Board, in nominating director candidates, will consider candidates who have a high level of personal and professional integrity, strong ethics and values and the ability to make mature business judgments.
Additional Selection Criteria
In evaluating director candidates, the Nominating and Corporate Governance Committee and the Board may also consider the following criteria as well as any other factor that they deem to be relevant:
•Experience in corporate management, such as serving as an officer or former officer of a publicly held company;
•Experience as a board member of another publicly held company;
•Experience as an executive of a publicly held retail restaurant company;
•Professional and academic experience relevant to the Company’s industry;
•Diversity (race, ethnicity, gender, geography, sexual orientation, age, nationality, religious beliefs, socio-economic status, physical and/or mental capabilities);
•Strength of the candidate’s leadership skills;
•Experience in finance and accounting and/or executive compensation practices;
•Experience in successfully scaled technology business(es);
•Whether the candidate has the time required for preparation, participation and attendance at Board meetings and committee meetings;
•Appreciation/understanding of the values of Daniel Meyer’s vision of “Enlightened Hospitality”/culture/brand strength;
•International business experience, in particular with respect to franchising or licensing;
•Understanding of technologies pertinent to the Company’s business;
•Experience with raising and deploying capital; and
•Experience in addressing sustainability priorities.
In addition, the Board considers whether there are potential conflicts of interest with the candidate’s other personal and professional pursuits.
The Board also monitors the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure.
Diversity
The Company values diversity on a Company-wide basis and seeks to achieve a mix of Board members that represent a diversity of background and experience, including with respect to race, ethnicity, gender, geography, sexual orientation, age, nationality, religious beliefs, and occupation. Although the Board does not establish specific goals with respect to diversity, the Board’s overall diversity is a significant consideration in the director nomination process. The Company’s Corporate Governance Guidelines provide that our Nominating and Corporate Governance Committee is to take into account the overall diversity of the Board when identifying possible nominees for director. The Nominating and Corporate Governance Committee implements that policy, and assesses its effectiveness, by examining the diversity of all the directors on the Board when it selects nominees for directors. The diversity of directors is one of the factors that the Nominating and Corporate Governance Committee considers, along with the other selection criteria described above. The Nominating and Corporate Governance Committee assesses the effectiveness of its efforts at pursuing diversity through its periodic evaluation of the Board’s composition.
The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders in the same manner it considers other candidates, but it has no obligation to recommend such candidates. A stockholder that wants to recommend a candidate for election to the Board of Directors should send a recommendation in writing to Shake Shack Inc., c/o Corporate Secretary, 225 Varick Street, Suite 301, New York, New York 10014. Such recommendation should describe the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as director.
COMPENSATION COMMITTEE
The primary responsibilities of the Compensation Committee are to (i) review and approve the Company’s executive compensation strategy and in connection with such review, identify and approve the Company’s peer group companies and to establish appropriate targets, as well as the level and mix of compensation elements for executive compensation; (ii) review and approve the corporate goals and objectives with respect to the compensation of the Chief Executive Officer, evaluate the performance of the Chief Executive Officer in light of these goals and objectives, and determine the compensation of the Chief Executive Officer based upon that evaluation; (iii) review and set or make recommendations to the Board of Directors regarding the compensation of other executive officers; (iv) review and make recommendations to the Board of Directors regarding director compensation; (v) review and approve or make recommendations to the Board of Directors regarding the Company’s incentive compensation and equity-based plan and arrangements; (vi) ensure an appropriate management development and succession strategy with respect to the Chief Executive Officer, the other executive officers, and senior management; and (vii) review risk assessments from management with respect to the Company’s people practices, including without limitation, recruiting and retention, culture and labor.
Our Compensation Committee consists of Sumaiya Balbale, Anna Fieler, Jenna Lyons, Jonathan D. Sokoloff, and Robert Vivian, with Ms. Balbale serving as chair. As required by the New York Stock Exchange rules, each of Messrs. Sokoloff and Vivian and Mses. Balbale, Fieler, and Lyons meets the definition of “independent director” for purposes of serving on a compensation committee. The Compensation Committee operates under a written charter adopted and approved by the Board.
FAMILY RELATIONSHIPS
There are no family relationships among any of our directors or executive officers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and SEC rules require our directors, executive officers and persons who own more than 10% of any class of our common stock to file reports of their ownership and changes in ownership of our common stock with the SEC. Based solely on our review of the reports filed with the SEC and written representations from such reporting persons, we determined that all Section 16 reports were timely filed in fiscal 2022 by our directors, executive officers and beneficial owners of more than 10% of any class of our common stock.
CODE OF ETHICS
We have adopted a written Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the code on our website, investor.shakeshack.com. In addition, we intend to post on our website all disclosures that are required by law or the New York Stock Exchange listing standards concerning any amendments to, or waivers from, any provision of the code.
Item 11. Executive Compensation.
DIRECTOR COMPENSATION
The Compensation Committee periodically reviews the director compensation program and its competitiveness relative to the compensation peer group as well as other industry peers. In 2022, it was determined that the Company's director compensation was within the bottom quartile relative to the compensation peer group across cash compensation, equity compensation, total compensation, and committee specific compensation. As a result, the Compensation Committee approved and recommended that the Board approve, and the Board approved increases in cash, equity, and committee specific compensation payable to directors, as well as providing the directors the option to elect to receive all or a portion of cash compensation in the form of restricted stock units.
Effective April 2022, our non-employee director compensation policy awards each non-employee director a combination of cash and restricted stock units in consideration for his or her service on our Board of Directors as follows: (A) (1) annual cash compensation equal to $62,500, payable in four equal installments following each of the Board's quarterly meetings and (2) for the chairperson of each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, additional annual cash compensation equal to $10,000, $7,500, and $5,000, respectively, payable in four equal installments following each of the Board's quarterly meetings; and (B) (1) an annual equity award in the form of restricted stock units with an aggregate grant date fair value of $62,500 granted immediately following the annual meeting of stockholders and (2) for the chairperson of each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, an additional annual equity award in the form of restricted stock units with an aggregate grant date fair value of $10,000, $7,500, and $5,000, respectively, granted immediately following the annual meeting of stockholders. With respect to the annual cash compensation, each director may elect to receive all, 75%, or 50% of his or her annual cash compensation in the form of additional restricted stock units.
The terms of each such annual equity award described above is set forth in a written award agreement between the applicable non-employee director and us, which provides for vesting after one year of continued service as a director, subject to acceleration upon a change of control.
The non-employee director compensation policy may be further amended, modified or terminated by our Board of Directors at any time in its sole discretion.
In addition to the non-employee director compensation policy, we adopted a director stock ownership policy encouraging non-employee directors to hold shares of our Class A common stock and/or LLC Interests with a value equal to or in excess of the fair value of the restricted stock units or other equity award that the non-employee director received as an annual equity award on or following the most recent annual meeting.
The following table sets forth the compensation for each of our non-employee directors in fiscal 2022. The awards below were made in accordance with the above compensation amounts.
| | | | | | | | | | | |
| Name | Fees paid in cash ($)(1) | Restricted Stock Units ($)(2)(3) | Total ($) |
| Daniel Meyer | 18,750 | | 125,012 | | 143,762 | |
| Sumaiya Balbale | 21,250 | | 140,026 | | 161,276 | |
Lori George Billingsley | 7,813 | | 46,914 | | 54,727 | |
| Anna Fieler | 18,750 | | 125,012 | | 143,762 | |
| Jeff Flug | 71,875 | | 67,504 | | 139,379 | |
| Jenna Lyons | 65,625 | | 62,526 | | 128,151 | |
| Joshua Silverman | 18,750 | | 125,012 | | 143,762 | |
| Jonathan D. Sokoloff | 65,625 | | 62,526 | | 128,151 | |
| Robert Vivian | 75,625 | | 72,522 | | 148,147 | |
| Tristan Walker | 65,625 | | 62,526 | | 128,151 | |
(1)In fiscal 2022, each non-employee director received cash compensation under the non-employee director compensation policy. A portion of this was the cash compensation for the annual service period that began in the second quarter of 2021 which included cash compensation earned for the fourth quarter of 2021 but not paid until 2022 as well as the final quarterly payment earned and paid in the first quarter of 2022. The remainder of this was the cash compensation for the annual service period that began in the second quarter of 2022. Messrs. Meyer and Silverman and Ms. Fieler elected to receive the $62,500 cash compensation in the form of equity compensation and Ms. Balbale elected to receive both the $62,500 cash compensation and the $7,500 as Compensation Committee chair in the form of equity compensation. Ms. Billingsley elected to receive 50% of her cash compensation of $31,250, prorated due to her appointment during the service year, in the form of equity compensation.
(2)In fiscal 2022, each non-employee director was awarded equity compensation in consideration for his or her time of service on the Board of Directors consistent with the non-employee director compensation policy. Fiscal 2022 awards were granted to Board members as of the date of the 2022 annual meeting held on June 15, 2022. Ms. Billingsley's awards were granted as of October 17, 2022 and prorated due to her appointment during the service year.
(3)As of December 28, 2022, the following non-employee directors held restricted stock units as follows: Mr. Meyer - 3,089 unvested restricted stock units; Ms. Balbale - 3,460 unvested restricted stock units; Ms. Billingsley - 943 unvested restricted stock units; Ms. Fieler - 3,089 unvested restricted stock units; Mr. Flug - 1,668 unvested restricted stock units; Ms. Lyons - 1,545 unvested restricted stock units; Mr. Silverman - 3,089 unvested restricted stock units; Mr. Sokoloff - 1,545 unvested restricted stock units; Mr. Vivian - 1,792 unvested restricted stock units; and Mr. Walker - 1,545 unvested restricted stock units.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This section provides a detailed description of our compensation philosophy and practices; our compensation-setting process; our executive compensation program components; and the rationale for compensation decisions made in 2022 with respect to our Named Executive Officers (“NEOs”). For the fiscal year ended December 28, 2022, our NEOs were:
| | | | | |
| NEO | Title |
| Randy Garutti | Chief Executive Officer |
| Katherine Fogertey | Chief Financial Officer |
| Zachary Koff | Chief Operating Officer |
Executive Summary
Throughout 2022, we diligently worked toward the strategic plan we laid out for ourselves and showed steady improvement throughout the year. We finished 2022 with strong momentum with system-wide sales growing to $1.4 billion for the year. We were also pleased to see urban same-Shack sales increasing mid-teens from the prior year. The fourth quarter was particularly busy as we opened 35 Shacks system-wide, including 22 Company-operated Shacks.
We had to manage several challenges throughout the year, from the Omicron outbreak in early 2022 to persistent inflationary pressures, a compressed supply chain, construction delays and a tough labor market. Despite these challenges, we remained focused on the strategic plan and welcomed a growing number of guests back to our Shacks. We also invested in our team members, improved the guest experience across our channels, continued our digital evolution and continued learning from our drive-thru business. Please refer to our fiscal 2022 Annual Report on Form 10-K for a discussion of our business, operations and development, including our digital evolution, new Shack openings, and financial statements, as well as a discussion of our human capital management.
Financial Highlights
▪Total revenue for fiscal year 2022 increased 21.7% to $900.5 million versus the prior year.
▪Shack sales for fiscal year 2022 increased 21.6% to $869.3 million versus the prior year.
▪Same-Shack sales(1) increased 7.8%, for fiscal year 2022 versus the prior year.
▪Licensing revenue for fiscal year 2022 increased 25.3% to $31.2 million versus the prior year.
▪Shack system-wide sales(2) increased 22.7% to $1,378.5 million, versus the prior year.
▪Operating loss for fiscal year 2022 was $26.9 million compared to operating loss of $15.9 million versus the same period last year.
▪Shack-level operating profit(3), a non-GAAP measure, increased 26.7% to $151.0 million, or 17.4% of Shack sales in fiscal year 2022.
▪Net loss was $26.0 million in fiscal year 2022 compared to net loss of $10.1 million in the same period last year.
•Adjusted EBITDA(4), a non-GAAP measure, was $70.5 million in fiscal year 2022, compared to adjusted EBITDA of $56.0 million in the same period last year.
▪Net loss attributable to Shake Shack Inc. was $24.1 million, or a loss of $0.61 per share in fiscal year 2022, compared to Net loss attributable to Shake Shack Inc. of $8.7 million, or a loss of $0.22 per share in the same period last year.
•Adjusted pro forma net loss(5), a non-GAAP measure, was $12.9 million, or a loss of $0.31 per fully exchanged and diluted share in fiscal year 2022, compared to adjusted pro forma net loss of $2.6 million, or a loss of $0.06 per fully exchanged and diluted share, in the same period last year.
▪We opened 67 net system-wide Shacks, comprised of 36 net domestic Company-operated Shacks, and 31 net licensed Shacks, which is net of two licensed Shack closures.
The charts below demonstrate our performance over the last six years.
(1)Same-Shack sales represents Shack sales for the comparable Shack base, which is defined as the number of domestic Company-operated Shacks open for 24 full fiscal months or longer. For consecutive days that Shacks were temporarily closed, the comparative period was also adjusted. Same-Shack sales percentage reflects the change in year-over-year Shack sales for the comparable Shack base.
(2)Shack system-wide sales is an operating measure and consists of sales from our domestic Company-operated Shacks, domestic licensed Shacks and our international licensed Shacks. We do not recognize the sales from our licensed Shacks as revenue. Of these amounts, our revenue is limited to Shack sales from domestic Company-operated Shacks and licensing revenue based on a percentage of sales from domestic and international licensed Shacks, as well as certain up-front fees such as territory and opening fees.
(3)We define Shack-level operating profit as Shack sales less Shack-level operating expenses including Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.
(4)Adjusted EBITDA is defined as Net income (loss) before Interest expense (net of interest income), Income tax expense (benefit) and Depreciation and amortization expense and excluding equity-based compensation expense, deferred lease costs, Impairment and loss on disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that we do not believe directly reflect our core operations and may not be indicative of our recurring business operations. Please refer to the "Non-GAAP Financial Measures" section on pages 65-69 of our Annual Report on Form 10-K filed on February 23, 2023 for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.
(5)Adjusted pro forma net income (loss) represents Net income (loss) attributable to Shake Shack Inc. assuming the full exchange of all outstanding SSE Holdings, LLC membership interests (“LLC Interests”) for shares of Class A common stock, adjusted for certain non-recurring items that we do not believe are directly related to our core operations and may not be indicative of our recurring business operations. Please refer to the “Non-GAAP Financial Measures” section on pages 65-69 of our Annual Report on Form 10-K filed on February 23, 2023 for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.
Say-on-Pay and Stockholder Engagement
At our 2022 annual meeting, we asked our stockholders to vote to approve, on an advisory basis, the compensation of our NEOs. Our stockholders overwhelmingly approved the compensation paid to our NEOs, with over 97.7% of votes cast in favor of our say-on-pay resolution. We value this positive endorsement by our stockholders of our executive compensation policies. As we evaluated our compensation practices for fiscal 2022, we were mindful of the strong support our stockholders expressed for our pay-for-performance philosophy, and the Compensation Committee and the Board considered the outcome of the vote when setting our compensation policies for 2022. The Board and the Compensation Committee will consider the future stockholder advisory votes of our stockholders, including the vote that will take place at the 2023 Annual Meeting, when we make compensation decisions for our NEOs in the future.
Executive Compensation Practices—Governance
Below are our current practices and policies that guide our executive compensation program. We believe the following items promote good corporate governance and are in the best interests of our stockholders and NEOs:
▪Our Compensation Committee is comprised of fully-independent directors
▪We cap short-term cash incentive award payouts to mitigate risk
▪We maintain stock ownership guidelines for our Directors and Executive Officers
▪We do not provide significant perquisites
▪We prohibit hedging and pledging of Company stock
▪We hold an annual say-on-pay vote.
What Guides Our Program
Compensation Philosophy and Objectives
Our executive talent and executive compensation philosophy enables us to attract well-qualified executives and to motivate and reward them for business results and leadership behaviors that drive our business strategy. We are committed to a pay-for-performance culture that includes high standards of ethical behavior and corporate governance.
The objective of our executive compensation program is to attract, retain, and motivate individuals who share in our dedication to our community and are committed to our mission, Stand for Something Good. We believe that competitive executive compensation packages that consist of both fixed and variable pay in the form of base salaries, short-term cash incentive opportunities, and long-term equity incentives that vest over a multi-year period enable us to achieve those objectives and align the compensation of our executive officers with our performance and long-term value creation for our stockholders.
Elements of Compensation
Our compensation philosophy is supported by the following principal elements of pay:
| | | | | | | | |
| Element | How It’s Paid | Purpose |
| Base Salary | Cash (Fixed) | Provides a competitive fixed rate of pay relative to similar positions in the market, and enables the Company to attract and retain critical executive talent |
| Short-Term Cash Incentive | Cash (Variable) | Focuses executives on achieving short-term financial and annual goals that drive long-term stockholder value |
| Long-Term Incentives | Mix of Equity (Variable) | Provides incentives for executives to execute on longer-term financial/strategic growth goals that drive stockholder value creation and support the Company’s leadership retention objectives |
How We Make Compensation Decisions
The Compensation Committee oversees the executive compensation program of our NEOs and is made up of independent, non-employee directors of the Board. The Compensation Committee works very closely with management to evaluate the effectiveness of the Company’s executive compensation program throughout the year. The Committee’s specific responsibilities are set forth in its charter, which can be found on the Company’s website at investor.shakeshack.com, under “Governance Documents.”
Role of the Compensation Committee
The Compensation Committee makes all final compensation and equity award decisions regarding our NEOs. In setting compensation for our NEOs, the Compensation Committee considers the relative amount of compensation that is delivered on a current and long-term basis and in the form of cash and equity. The combination of performance measures for annual bonuses and the equity compensation programs for executive officers, as well as the multi-year vesting schedules for equity awards, encourage key employees to maintain both a short-term and a long-term view with respect to Company performance. The compensation arrangement for each of our NEOs is intended to encourage performance and growth and to align the NEOs’ interests with those of our stockholders. The Compensation Committee’s primary responsibilities include:
▪Reviewing and approving incentive plans and performance objectives;
▪Assessing each NEO’s performance relative to these targets and objectives;
▪Evaluating the competitiveness of each NEO’s total compensation package;
▪Approving changes to a NEO’s compensation package, including base salary, and short-term and long-term incentive opportunities and awards; and
▪Designing executive compensation plans and programs.
Role of the CEO
Our CEO plays a significant role in reviewing the performance of our executive officers (other than his own) and making compensation recommendations to the Compensation Committee. The CEO’s responsibilities include:
▪Reviewing the performance of other executive officers and making recommendations to the Compensation Committee with respect to their compensation; and
▪Working closely with members of senior management to provide input to the Compensation Committee on performance goals and compensation and benefit program design and development.
The CEO does not participate in the deliberations of the Compensation Committee regarding his own compensation. Independent members of the Board make all final determinations regarding CEO compensation.
Competitive Positioning
The Company competes with business entities across multiple industries for executive-level talent. To this end, the Compensation Committee periodically evaluates industry-specific and general market compensation practices and trends to ensure that our program and NEO pay opportunities remain appropriately competitive. The Compensation Committee compares each component of the total compensation package to the compensation components of comparable executive positions of a peer group of publicly traded companies (the “Peer Group”). The companies comprising the Peer Group were selected based on the following considerations:
▪Business dynamics;
▪Geographic dispersion;
▪Workforce dynamics; and
▪Brand equity and company culture.
The Compensation Committee selected the following 11 companies for the 2022 Peer Group because they are of similar size and scope based on measures of total revenues, enterprise values and market capitalization:
| | | | | |
| 2022 Peer Group |
| Canada Goose Holdings Inc. | Texas Roadhouse, Inc. |
| Churchill Downs Incorporated | The Cheesecake Factory Incorporated |
| Etsy, Inc. | Vail Resorts, Inc. |
| Floor & Décor Holdings, Inc. | Wingstop Inc. |
| Planet Fitness, Inc. | YETI Holdings, Inc. |
| Ruth’s Hospitality Group, Inc. | |
| | | | | | | | | | | |
Peer Data ($M)(1) |
| Total Revenue | Enterprise Value | Market Cap |
| Median | $ | 1,809 | | $ | 6,680 | | $ | 6,090 | |
| SHAK | $ | 900 | | $ | 2,010 | | $ | 1,630 | |
| Estimated Percentile Rank of SHAK within Peer Group | 25th | 17th | 17th |
(1)Total Revenue, Enterprise Value and Market Cap are as of 12/31/2022 or most recent fiscal year.
Consideration of competitive compensation data is one of several factors that the Compensation Committee takes into account when making its decisions with respect to the compensation of our NEOs. For purposes of gauging market position, the Compensation Committee reviews information and data obtained from publicly available information such as the proxy statements of publicly traded companies, compensation survey data and other published reports on executive compensation, and the general knowledge of the Compensation Committee with regard to the market for executive-level positions.
We believe that market data should be interpreted within the context of other important factors and should not solely be relied upon in setting the pay levels of our NEOs. As a result, in setting the target pay level of our NEOs, the Compensation Committee reviews the market data along with a variety of other factors including individual performance, competencies, skills, future potential, prior experience, scope of responsibility and accountability within the organization.
As noted above, the Compensation Committee periodically evaluates industry-specific and general market compensation practices and trends to ensure that our program design and NEO pay opportunities remain appropriately competitive. In the third and fourth quarters of 2022, our Compensation Committee conducted a comprehensive analysis to ensure that the Peer Group is aligned with our geographic distribution, workforce dynamics, brand equity, industry sector and operational and financial growth trajectory. Upon review of the 2022 Peer Group, our Compensation Committee determined that most of our 2022 peers were no longer comparable to the Company due to prevalence of peers with strong brand recognition and growth, but operating in Leisure, Product and Apparel, Retail and Marketing sectors. As such, our Compensation Committee approved changing the
compensation peer group for purposes of evaluating and benchmarking plan design and NEO compensation levels in 2023. The Compensation Committee selected the following 12 companies for the 2023 Peer Group because they are of similar size and scope based on measures of current and projected total revenues, enterprise values, market capitalization, brand equity, industry and operating alignment.
| | | | | |
| 2023 Peer Group |
| Bloomin Brands, Inc. | Ruth's Hospitality Group, Inc. |
| Brinker International | Sweetgreen |
| Chipotle Mexican Grill, Inc. | Texas Roadhouse |
| Dave & Buster's Entertainment | The Cheesecake Factory Inc. |
| Planet Fitness, Inc. | Vail Resorts, Inc. |
| Portillo's | Wingstop Inc. |
2022 Executive Compensation Program in Detail
Base Salary
We provide competitive base salaries to our NEOs to compensate them for services rendered to the Company. Base salaries provide a fixed component of compensation reflecting the executive’s skills, expertise, leadership contributions and day-to-day performance. In the annual review of NEO compensation for fiscal 2022, the Compensation Committee reviewed total compensation for each NEO versus Peer Group NEO compensation as well as other competitive benchmark detail. This review revealed the base pay value for Messrs. Garutti and Koff was below the competitive benchmark of the Peer Group. Accordingly, the Compensation Committee approved market adjustments to their base pay.
| | | | | | | | | | | |
| NEO | 2021 Base Pay | 2022 Base Pay | % Change |
| Randy Garutti* | $ | 630,250 | | $ | 750,000 | | 19 | % |
| Katherine Fogertey | 450,000 | | 472,500 | | 5 | % |
| Zachary Koff | 330,750 | | 375,000 | | 13 | % |
*During the fourth quarter of 2022 and first quarter of 2023, the Compensation Committee reviewed the competitive position of our executive compensation and approved award values based on these benchmarks, performance and contributions. Mr. Garutti requested the Compensation Committee not consider, or award, any increase to his compensation for 2023. Based on Mr. Garutti's recommendation, the Compensation Committee did not approve an increase to Mr. Garutti's base salary, short- and long-term incentives for 2023.
Short-Term Cash Incentive Plan Design
The NEOs are entitled to receive short-term performance-based cash bonuses, the amount of which is based on satisfaction of Company objectives that are approved by the Board of Directors. Cash incentives reward both the achievement of short-term financial goals, as well as the execution of activities to advance our strategic and operational priorities, which support near-term financial performance and long-term strategic objectives.
For fiscal 2021, the Compensation Committee determined it was in the best interest of the Company to adjust the financial performance measurement period and goals from an annual to a quarterly basis primarily due to the uncertainty caused by the COVID-19 pandemic. For fiscal 2022, the Compensation Committee approved the continuation of the financial performance measurement period and goals on a quarterly basis primarily due to the uncertainty of the macroeconomic environment.
Target award opportunities are expressed as a percentage of base salary, earned during the applicable performance period and are based on the individual NEO’s level of responsibility and ability to impact the business results. In the annual review of NEO compensation, the Compensation Committee also determined the short-term incentive targets for Messrs. Garutti and Koff were below the competitive benchmark of the Peer Group. Accordingly, the Compensation Committee approved increases in their target award opportunities. Below are the threshold, target and maximum award levels approved by the Compensation Committee.
| | | | | | | | | | | | | | | | | | | | | | | |
| Target Cash Award Opportunity (as % of Base Salary) |
| | | 2021 | | 2022 |
| NEO | Threshold | | Target | Maximum | | Target | Maximum |
| Randy Garutti | 0% | | 75 | % | 150 | % | | 100 | % | 200 | % |
| Katherine Fogertey | 0% | | 50 | % | 100 | % | | 50 | % | 100 | % |
| Zachary Koff | 0% | | 35 | % | 58.5 | % | | 40 | % | 66.8 | % |
The Compensation Committee approved Total Revenue and Adjusted EBITDA, which are key drivers of our business, as the 2022 Short-Term Cash Incentive Plan performance metrics. The measurement of the performance metrics for Mr. Garutti and Ms. Fogertey were based 100% on Company-wide, quarterly performance. For fiscal 2022, the Compensation Committee approved the alignment of Mr. Koff's 2022 Short-Term Cash Incentive Plan measurement with that of Mr. Garutti and Ms. Fogertey. Therefore, the 2022 Short-Term Cash Incentive Plan is tied entirely to Company financial performance for all NEOs.
| | | | | |
| 2022 Weighting |
| Performance Metrics | All NEOs |
| Quarter Total Revenue vs Budget* | 50% |
| Quarter Adjusted EBITDA vs Budget** | 50% |
*For purposes of the Short-Term Cash Incentive Plan, the Company defines Total Revenue as revenue, inclusive of revenue from Company-operated Shacks and licensing revenue from international and domestic licensed Shacks.
**For purposes of the Short-Term Cash Incentive Plan, the Company defines Adjusted EBITDA as net income before (A) interest expense, (B) income tax expense or benefit, (C) depreciation expense and (D) amortization expense, and excluding certain non-cash and other items not considered in the Company’s evaluation of ongoing operating performance, including equity-based compensation expense, deferred lease costs, impairment and loss on disposal of assets, amortization of cloud-based software implementation costs and certain non-recurring charges. Adjusted EBITDA performance (both budget and actual performance) excludes bonuses.
2022 Short-Term Cash Incentive Plan Payout
The Short-Term Cash Incentive Plan payout is determined by the achievement of the performance metrics approved quarterly by the Board of Directors. The table below summarizes the threshold, target, and maximum performance achievement levels and the respective payout results for fiscal 2022.
| | | | | | | | | | | |
| Range of Performance Achievement |
| Financial Performance Metric | Threshold | Target | Maximum |
| Total Revenue | 90% | 100% | 105% |
| Adjusted EBITDA | 90% | 100% | 115% |
Note: If performance is achieved at a level between the threshold and target or between target and maximum, the payout level is determined through straight-line interpolation.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q1(1) | | Q2(2) | | Q3(3) | | Q4(4) |
Financial Performance Metric | Target Performance Goal | Actual Achievement | | Target Performance Goal | Actual Achievement | | Target Performance Goal | Actual Achievement | | Target Performance Goal | Actual Achievement |
| Total Revenue | $ | 208,669,439 | | 96.9 | % | | $ | 238,294,220 | | 96.8 | % | | $ | 234,487,120 | | 97.2 | % | | $ | 240,271,648 | | 99.3 | % |
| Adjusted EBITDA | $ | 9,677,443 | | 128.9 | % | | $ | 19,020,039 | | 131.7 | % | | $ | 20,285,695 | | 113.1 | % | | $ | 17,254,725 | | 136.2 | % |
(1)The actual achievement corresponds to a payout of the target value of 134.28% for the CEO and CFO and 117.78% for the COO.
(2)The actual achievement corresponds to a payout of the target value of 134.18% for the CEO and CFO and 117.68% for the COO.
(3)The actual achievement corresponds to a payout of the target value of 129.57% for the CEO and CFO and 115.12% for the COO.
(4)The actual achievement corresponds to a payout of the target value of 146.37% for the CEO and CFO and 129.87% for the COO.
The total amounts of the short-term cash incentives paid to each NEO for fiscal 2022 performance are shown in the table below:
| | | | | | | | | | | | | | |
| NEO | Target Annual Award
(% of Base Salary) | Target Annual Incentive Value ($) | Total Payout Based on Financial
Performance Actual Achievement | Total Award Payout
Value |
| Randy Garutti | 100 | % | $ | 731,577 | | 136.1 | % | $ | 996,013 | |
| Katherine Fogertey | 50 | % | $ | 234,519 | | 136.1 | % | $ | 319,213 | |
| Zachary Koff | 40 | % | $ | 147,277 | | 120.2 | % | $ | 176,960 | |
Note: Target annual incentive value is prorated according to base salary.
2023 Short-Term Incentive Plan Design
For fiscal 2023, NEOs will continue to be measured and awarded cash bonuses based on the achievement of quarterly Total Revenue and Adjusted EBITDA.
Long-Term Incentives
We provide our NEOs with long-term incentive awards under our 2015 Incentive Award Plan (as amended, the “2015 Plan”). Awards under the 2015 Plan are intended to align the interests of our NEOs with those of our stockholders and to create a link between executive pay and long-term stockholder value creation. Awards earned by our NEOs in connection with the 2015 Plan are subject to a service condition and, at times, also subject to performance conditions. For awards with both service and performance conditions, the Compensation Committee approved Total Revenue and Adjusted EBITDA, which are key drivers of our business, to measure performance.
2022 Long-Term Incentive Plan Design
In November 2021, the Compensation Committee engaged with management to design a special, one-time equity award for certain of our management team, including our NEOs, to recognize achievements, retain services, and motivate our management team by way of a long-term performance incentive to ensure alignment with our growth targets while creating value for our stockholders. After thorough discussion and analysis, the Committee approved the grant of a special, one-time performance-based restricted stock units ("November 2021 PSU Award") to retain and motivate the management team to achieve strategic, long-term financial goals. The grant date fair value of the November 2021 PSU Award was approximately $2.6 million for our NEOs and is earned based on the achievement of Total Revenue and Adjusted EBITDA performance measures, measured over a three-year, cumulative period through fiscal 2024. This award has an opportunity to achieve a maximum payout of 200% through the applicable vesting date.
In March 2022, the Compensation Committee granted restricted stock units (“RSUs”) to each of our NEOs which vest ratably over a four year period and are subject to the NEO’s continued employment with us through the applicable vesting date. As the November 2021 PSU Award has considerable long-term performance goals and a three-year cumulative performance period, the Compensation Committee determined an annual award in the form of time-based RSUs was an appropriate award design for fiscal 2022.
2023 Long-Term Incentive Plan Design
For 2023 we are continuing our compensation philosophy that seeks to balance performance-based and time-based long-term equity incentive awards. Therefore, the Compensation Committee approved an annual award of time-based RSUs for fiscal 2023. As the November 2021 PSU Award has considerable long-term performance goals and a three-year cumulative performance period, the Compensation Committee determined an annual award in the form of time-based RSUs was an appropriate award design for fiscal 2023 as NEO compensation is sufficiently aligned with our long-term performance goals.
Other Compensation and Governance Programs, Policies and Guidelines
Stock Ownership Policy
We have an executive stock ownership policy requiring Mr. Garutti, as of January 15, 2020, Ms. Fogertey as of June 14, 2027 and Mr. Koff, as of June 9, 2025, to hold shares of our Class A common stock or membership interests of SSE Holdings ("LLC Interests") with a value equal to two times for Mr. Garutti and one times for Ms. Fogertey and Mr. Koff of their respective annual base salaries. Securities that qualify in determining whether Mr. Garutti, Ms. Fogertey and Mr. Koff have satisfied the shareholding requirements include (i) issued and outstanding shares of Class A common stock held beneficially or of record, (ii) issued and outstanding LLC Interests held beneficially or of record, (iii) issued and outstanding shares of Class A common stock or LLC Interests held by a qualifying trust (i.e., a trust created for the benefit of the executive officer, his or her spouse or members of his or her immediate family), (iv) issued and outstanding shares of Class A common stock or LLC Interests held by a 401(k) or other qualified pension or profit-sharing plan for the benefit of the executive officer, and (v) shares of Class A common stock underlying vested Shake Shack time-based stock options and restricted stock units deliverable upon exercise or settlement in full, less tax withholdings and, in the case of stock options, a number of shares of Class A common stock with a value equal to the exercise price thereof.
Hedging Policy
We have a policy that precludes all of the Company’s employees, including our NEOs, along with our directors, from engaging in hedging transactions involving the Company’s equity securities, including short selling, buying exchange-traded put options or call options associated with our stock, transactions relating to zero-cost collars, forward sales contracts, purchases of the Company’s securities on margin, and pledging the Company’s securities as collateral to secure loans. We aim to restrict these transactions because they could serve to “hedge” the risk of owning our stock and otherwise can be highly speculative transactions with respect to our stock.
Employment Agreements
We entered into an amended and restated employment agreement with Mr. Garutti, effective as of October 25, 2018; an employment agreement with Ms. Fogertey, effective as of June 14, 2021; and an amended and restated employment agreement with Mr. Koff, effective as of January 5, 2017. The material terms of such agreements are summarized below.
Pursuant to advice of a tax advisor retained by the Company, effective as of the start of fiscal 2018, Mr. Garutti ceased to be treated as an employee of the Company for tax purposes, while remaining a partner of SSE Holdings. So that he is not adversely impacted by the cessation of his status as an employee of the Company for income tax purposes, pursuant to his amended and restated employment agreement, Mr. Garutti is entitled to an annual gross-up payment that will leave Mr. Garutti in the same economic position as if he had been classified as an employee for income tax purposes. The gross-up arrangement has had and is expected to have a minimal impact on the Company. The Company also will reimburse Mr. Garutti for any expenses he incurs in connection with calculating his tax obligations pursuant to the amended and restated employment agreement.
Position and Employment Term
Under the applicable employment agreements, during their respective terms of employment, Mr. Garutti, Ms. Fogertey, and Mr. Koff will serve as Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, respectively, of Shake Shack, SSE Holdings and all of its affiliates. The current employment terms are as follows: (i) for Mr. Garutti, through October 25, 2024 (the term was automatically extended on October 25, 2021 for an additional three years) with automatic three (3)-year renewal terms thereafter, unless either party provides written notice of non-extension within 90 days of the expiration of the then-current term; (ii) for Ms. Fogertey, through June 14, 2024, with automatic one (1)-year renewal terms thereafter, unless either party provides written notice of non-extension within 90 days of the expiration of the then-current term; and (iii) for Mr. Koff through January 5, 2024 (the term was automatically extended on January 2, 2023 for an additional year), with automatic one (1)-year renewal terms thereafter unless either party provides written notice of non-extension within 90 days of the expiration of the then-current term.
Base Salary, Annual Bonus and Equity Compensation
The annual base salary for fiscal 2022 for each of Mr. Garutti, Ms. Fogertey and Mr. Koff was increased to $750,000, $472,500 and $375,000, respectively.
In addition, pursuant to their employment agreements, Mr. Garutti, Ms. Fogertey, and Mr. Koff are eligible to receive short-term cash incentives upon the attainment of Company performance goals established by the Compensation Committee. The amount of the annual performance-based cash bonus that may be received by Mr. Garutti, Ms. Fogertey and Mr. Koff upon attainment of target performance for the 2022 fiscal year was 100% of base salary, 50% of base salary, and 40% of base salary, respectively, and the maximum amount of the annual performance-based cash bonus that may be received by Mr. Garutti, Ms. Fogertey, and Mr. Koff for the 2022 fiscal year was 200% of base salary, 100% of base salary, and 66.8% of base salary, respectively.
Under the employment agreements, Mr. Garutti, Ms. Fogertey, and Mr. Koff are also eligible for annual equity awards, the form and terms of which will be determined by the Compensation Committee in its discretion.
Severance
The employment agreement for each of Mr. Garutti, Ms. Fogertey and Mr. Koff provides for severance upon a termination by us without cause or by Mr. Garutti, Ms. Fogertey and Mr. Koff for good reason, in each case, subject to the execution and non-revocation of a waiver and release of claims by Mr. Garutti, Ms. Fogertey or Mr. Koff, as applicable.
Upon such a termination, each of Mr. Garutti, Ms. Fogertey and Mr. Koff is entitled to severance consisting of (a) continued base salary (i) for Mr. Garutti, for 18 months following the date of termination, (ii) for Ms. Fogertey, during the severance period, which is three months if Ms. Fogertey has completed six months of service, six months if Ms. Fogertey has completed one year of service, and thereafter, one additional month for every twelve months of service, up to 12 months of severance, and (iii) for Mr. Koff, for 12 months following the date of termination, (b) a prorated annual cash bonus for the year of termination based on actual Company performance, and (c) reimbursement of COBRA premiums such that the cost of coverage is equal to the cost for then current employees for up to the applicable severance period described in subpart (a) of this sentence.
Upon such a termination, Mr. Garutti is entitled to accelerated vesting of a prorated portion of all of the annual equity awards that would have vested within 18 months following the date of termination absent such termination, and Mr. Koff is entitled to accelerated vesting of a prorated portion of the annual equity award in any event, that would next vest following the date of termination, such amount to be based on the number of full fiscal months elapsed during the twelve month period between the previous vesting date or, if none, the award date, and the date of termination.
For purposes of the employment agreements, the Company will have “cause” to terminate each of Mr. Garutti’s, Ms. Fogertey’s or Mr. Koff’s employment upon (a) his or her willful misconduct, gross negligence or act of dishonesty with regard to the Company or any of its affiliates, which in either case, results in or could reasonably be expected to result in material harm to the Company or such affiliate, (b) his or her willful and continued failure to attempt to perform his or her duties with the Company or any of its affiliates (other than any such failure resulting from disability), which failure is not remedied within 30 days after receiving written notice thereof, (c) his or her conviction of (or his or her plea of guilty or nolo contendere to) any felony involving moral turpitude (other than traffic related offenses or as a result of vicarious liability), or (d) his or her material breach of any material provision of the employment agreement, which breach is not remedied within 10 days after receiving written notice thereof.
For purposes of the employment agreements, each of Mr. Garutti, Ms. Fogertey and Mr. Koff will have “good reason” to terminate his or her employment after the occurrence, without his or her consent, of (a) any material adverse change in base salary, position, duties, responsibilities, authority, title or reporting obligations, or the assignment of duties that are materially inconsistent with his or her position, (b) a relocation of principal business location by more than (i) 25 miles, in the case of Mr. Garutti, and (ii) 50 miles, in the case of each Ms. Fogertey and Mr. Koff, from its then current location, or (c) any other material breach by the Company of the employment agreement or any other agreement with him or her. However, no termination for good reason will be effective unless (i) Mr. Garutti, Ms. Fogertey or Mr. Koff, as applicable, provides the Company with at least 30 days' prior written notice of his or her intent to resign for good reason (which notice must be provided within 60 days following the occurrence of the event(s) purported to constitute good reason); (ii) the Company has not remedied the alleged violation(s) within the 30-day period; and (iii) Mr. Garutti's, Ms. Fogertey's or Mr. Koff’s resignation, as applicable, becomes effective no later than 30 days after the Company has either failed to cure such event or indicated that it will not cure such event.
Restrictive Covenants
Pursuant to their respective employment agreements, Mr. Garutti, Ms. Fogertey and Mr. Koff are subject to certain non-competition and non-solicitation restrictions during employment and for a(n) (a) 18-month period, in the case of Mr. Garutti, and (b) 12-month period, in the case of each Ms. Fogertey and Mr. Koff, after termination of employment. During the restricted period, Mr. Garutti may not compete, directly or indirectly, with the Company in the business of developing, managing, and/or operating of (a) “better burger” restaurants, (b) “quick service” or “fast food” restaurants with an emphasis on hamburgers, and (c) restaurants that derive 50% or more of their revenues from the sale of hamburgers, hot dogs, chicken, french fries, and/or frozen desserts. Each of Five-Guys and In-N-Out Burger are included in the competitive restrictions described above. Each of Ms. Fogertey and Mr. Koff may not compete, directly or indirectly, with the Company in the business of developing, managing, and/or operating of (a) “better burger” restaurants, (b) “quick service” or “fast food” restaurants with an emphasis on hamburgers, or (c) “fast casual” restaurants.
No severance payments or benefits described above shall be paid following the first date that any of Mr. Garutti, Ms. Fogertey or Mr. Koff violates his or her restrictive covenants. However, if the employment of Mr. Koff is terminated by the Company without cause or by Mr. Koff for good reason, Mr. Koff, as applicable, may compete in the “fast casual” restaurant business during the restricted period without violating his employment agreement but he will not receive any severance after the date he begins to compete in the “fast casual” restaurant business.
Other Benefits
Our NEOs, like our other employees, participate in health and welfare benefit plans, subject to satisfying eligibility requirements. We believe the benefits described above are necessary and appropriate to provide a competitive compensation package.
Health & Wellness
All of our full-time employees, including our NEOs, are eligible to participate in health and welfare plans maintained by the Company, including:
▪Medical, dental and vision benefits;
▪Medical care flexible spending accounts;
▪Short-term and long-term disability insurance; and
▪Life insurance.
Our NEOs participate in these plans largely on the same basis as other eligible employees. Beginning in July 2018, Shake Shack obtained supplemental individual long-term disability plans for each of the NEOs to provide the same level of coverage provided to all other eligible participants in the group long-term disability plan.
Retirement Plan
The Company’s employees, including our NEOs, participate in the Company’s 401(k) retirement savings plan (the “401(k) plan”), subject to satisfying eligibility requirements. The Internal Revenue Code ("IRC") allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. The Company does not currently match contributions made under the 401(k) plan by our NEOs and other highly compensated employees. We believe that providing a vehicle for tax deferred retirement savings through the 401(k) plan adds to the overall desirability of our executive compensation package.
Limited Perquisites and Other Personal Benefits
We have not provided significant perquisites to our NEOs that are not generally available to other employees. From time to time, we may provide such benefits for recruitment or retention purposes.
Tax Considerations
Deductibility of Executive Compensation
We may be entitled to a tax deduction in connection with the vesting, settlement, or exercise of an award in an amount equal to the ordinary income realized by a participant at the time the participant recognized such income. However, we are subject to IRC Section 162(m), which places a limit of $1 million on the amount of compensation that we may deduct as a business expense in any year with respect to certain executive officers. While the Compensation Committee considers the deductibility of compensation as one factor in determining the overall level of compensation and the mix of compensation among individual elements, the Compensation Committee also looks at other factors in making its decisions and will retain the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if such compensation is not deductible for tax purposes.
Accounting Considerations
The Compensation Committee recognizes accounting implications that may impact executive compensation. For example, we recognize expense related to salaries and performance-based cash compensation when earned in our financial statements. U.S. GAAP also requires us to record an expense in our financial statements for equity awards, even though equity awards are not paid as cash to employees.
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.
Risk Considerations in our Compensation Program
We conducted an assessment of our compensation policies and practices and concluded that these policies and practices are not reasonably likely to have a material adverse effect on the Company. The Company’s compensation program and policies mitigate risk by combining performance-based, long-term compensation elements with payouts that are highly correlated to the value delivered to stockholders. The combination of performance measures for annual bonuses and the equity compensation programs for executive officers, as well as the multi-year vesting schedules for equity awards, encourage employees to maintain both a short- and long-term view with respect to Company performance.
COMPENSATION COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” required by Item 402(b) of Regulation S-K. Based on such review and discussions, our Compensation Committee recommended to our Board of Directors that the “Compensation Discussion and Analysis” be included in this Amendment and to be included in the Company's Proxy Statement relating to the 2023 Annual Meeting of Stockholders.
This report has been furnished by the members of the Compensation Committee.
THE COMPENSATION COMMITTEE
Sumaiya Balbale, Chair
Anna Fieler
Jenna Lyons
Jonathan D. Sokoloff
Robert Vivian
FISCAL 2022 COMPENSATION TABLES
Summary Compensation
The following table sets forth our NEO’s total compensation for fiscal 2022, 2021 and 2020.
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Named Executive Officer and Principal Position | | Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | Total |
| Year | ($)(1) | ($)(2) | ($)(3) | ($) | ($)(1) | ($) | ($)(4) | ($) |
Randy Garutti Chief Executive Officer | 2022 | 731,577 | | — | | 1,500,022 | | — | | 996,013 | | — | | 118,224 | | 3,345,836 | |
| 2021 | 630,250 | | — | | 3,549,992 | | — | | 623,103 | | — | | 663,217 | | 5,466,562 | |
| 2020 | 611,552 | | 30,000 | | 1,500,013 | | — | | 94,538 | | — | | 494,684 | | 2,730,786 | |
Katherine Fogertey Chief Financial Officer | 2022 | 469,038 | | — | | 750,048 | | — | | 319,213 | | — | | 6,265 | | 1,544,564 | |
| 2021 | 238,846 | | — | | 2,650,010 | | — | | 165,824 | | — | | 1,015 | | 3,055,695 | |
Zachary Koff Chief Operating Officer | 2022 | 368,192 | | — | | 750,048 | | — | | 176,960 | | — | | 3,106 | | 1,298,306 | |
| 2021 | 328,024 | | — | | 1,350,071 | | — | | 130,503 | | — | | 1,977 | | 1,810,575 | |
| 2020 | 305,655 | | 15,000 | | 400,056 | | — | | 22,050 | | — | | 1,631 | | 744,392 | |
(1)For Ms. Fogertey, the amount in this column is prorated to reflect time served in the position for fiscal 2021.
(2)The amounts in this column represent a one-time discretionary, spot bonus awarded in fiscal 2020.
(3)The amounts in this column represent the aggregate grant date fair value of RSUs and performance-based restricted stock units ("PSUs") granted to our NEOs in fiscal 2022, fiscal 2021 and fiscal 2020. The fair value of RSUs and PSUs is based on the market value of the Company’s Class A common stock on the date of grant computed in accordance with Accounting Standards Codification Topic 718 ("ASC Topic 718"). Amounts disclosed for PSUs granted are based upon the most probable outcome of performance conditions on the grant date, which were 100% and 100%, respectively for fiscal 2021 and fiscal 2020, of the target performance goals. The fair value of PSUs granted in fiscal 2021 assuming achievement of the maximum performance level of 125% for the PSU granted in March 2021 and 200% for the PSU granted in November 2021 would be $4,125,147, $1,125,051, and $1,687,700 for Mr. Garutti, Ms. Fogertey, and Mr. Koff, respectively. The fair value of PSUs granted in fiscal 2020 assuming achievement of the maximum performance level of 125% would have been $937,508 and $250,036 for Mr. Garutti and Mr. Koff, respectively. For Ms. Fogertey, the awards granted in fiscal 2021 include a one-time RSU award with a grant date fair value equal to $2,000,000 pursuant to the terms of her employment agreement.
(4)For Mr. Garutti, these amounts represent gross up and tax equalization payments of $105,683 and the $12,541 premium paid under our executive disability insurance plan in 2022, gross up and tax equalization payments of $650,790 and the $12,427 premium paid under our executive disability insurance plan in 2021, gross up and tax equalization payments of $482,338 and the $12,346 premium paid under our executive disability insurance plan in 2020; for Ms. Fogertey, this amount represents the premium paid under our executive disability insurance plan in 2022 and 2021; for Mr. Koff, these amounts represent the premiums paid under our executive disability insurance plan in 2022, 2021, and 2020.
Grants of Plan-Based Awards
The following table sets forth information with respect to plan-based awards made to our NEOs in fiscal 2022.
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| Named Executive Officer | Type | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Grant Date Fair Value of Stock and Option Awards |
| Threshold | Target | Maximum | Threshold | Target | Maximum |
| ($) | ($) | ($) | (#) | (#) | (#) | (#)(1) | (#) | ($/Sh) | ($)(2) |
| Randy Garutti | Cash Incentive | 12/30/2021 | — | 731,577 | 1,463,154 | — | — | — | — | — | — | — |
| RSUs | 3/1/2022 | — | — | — | — | — | — | 19,971 | — | — | 1,500,022 |
Katherine Fogertey | Cash Incentive | 12/30/2021 | — | 234,519 | 469,038 | — | — | — | — | — | — | — |
| RSUs | 3/1/2022 | — | — | — | — | — | — | 9,986 | — | — | 750,048 |
| Zachary Koff | Cash Incentive | 12/30/2021 | — | 147,277 | 245,952 | — | — | — | — | — | — | — |
| RSUs | 3/1/2022 | — | — | — | — | — | — | 9,986 | — | — | 750,048 |
(1)Reflects RSUs granted under the 2015 Incentive Award Plan.
(2)Amounts represent the grant date fair value determined in accordance with ASC Topic 718. For stock awards, the grant date fair value is based on the closing market price of our Class A Common Stock on the grant date.
Outstanding Equity Awards
The following table sets forth certain information with respect to outstanding equity awards of our NEOs as of December 28, 2022.
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| Option Awards | | Stock Awards |
| Named Executive Officer | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested |
| ($) | | (#) | ($)(1) | (#) | ($)(1) |
| Randy Garutti | | | | | | 44,515 | 1,894,113(2) | 17,701 | 753,178(3) |
| Katherine Fogertey | | | | | | 27,184 | 1,156,679(4) | 8,851 | 376,610(5) |
| Zachary Koff | 15,100 | — | 21.00 | 1/29/2025 | | 18,159 | 772,666(6) | 8,851 | 376,610(7) |
(1)Based on the closing price on December 28, 2022.
(2)Consists of (i) 1,787 RSUs granted on March 1, 2019 that vest on March 1, 2023; (ii) 2,020 PSUs granted on March 1, 2019 which were earned based on the achievement of the 2019 performance criteria established by the Compensation Committee as certified by the Compensation Committee in February 2020 and which vest on March 1, 2023; (iii) 6,556 RSUs granted on March 2, 2020 that vest equally over two installments on March 2, 2023 and March 2, 2024; (iv) 4,338 RSUs granted on March 15, 2021 that vest equally over three installments on March 15, 2023, March 15, 2024 and March 15, 2025; (v) 9,843 PSUs granted on March 15, 2021 which were earned based on the achievement of the 2021 performance criteria established by the Compensation Committee as certified by the Compensation Committee in February 2022 and which vest equally over three installments on March 15, 2023, March 15, 2024 and March 15, 2025; and (vi) 19,971 RSUs granted on March 1, 2022 that vest equally over four installments on March 1, 2023, March 1, 2024, March 1, 2025 and March 11, 2026;
(3)Consists of 17,701 PSUs, at target, granted on November 15, 2021 that cliff vest on March 1, 2025. The PSUs earned are based on the achievement of the 2022-2024 cumulative performance criteria established by the Compensation Committee as certified by the Compensation Committee in February 2025.
(4)Consists of (i) 17,198 RSUs granted on July 15, 2021 when Ms. Fogertey joined the Company, which vest in four equal installments on July 15, 2023, July 15, 2024, July 15, 2025 and July 15, 2026. and (ii) 9,986 RSUs granted on March 1, 2022 that vest equally over four installments on March 1, 2023, March 1, 2024, March 1, 2025 and March 11, 2026;
(5)Consists of 8,851 PSUs, at target, granted on November 15, 2021 that cliff vest on March 1, 2025. The PSUs earned are based on the achievement of the 2022-2024 cumulative performance criteria established by the Compensation Committee as certified by the Compensation Committee in February 2025.
(6)Consists (i) 953 RSUs granted on March 1, 2019 that vest on March 1, 2023; (ii) 1,075 PSUs granted on March 1, 2019 which were earned based on the achievement of the 2019 performance criteria established by the Compensation Committee as certified by the Compensation Committee in February 2020 and which vest on March 1, 2023; (iii) 1,748 RSUs granted on March 2, 2020 that vest equally over two installments on March 2, 2023 and March 2, 2024; (iv) 1,446 RSUs granted on March 15, 2021 that vest equally over three installments on March 15, 2023, March 15, 2024 and March 15, 2025; (v) 2,951 PSUs granted on March 15, 2021 which were earned based on the achievement of the 2021 performance criteria established by the Compensation Committee as certified by the Compensation Committee in February 2022 and which vest equally over three installments on March 15, 2023, March 15, 2024 and March 15, 2025; and (vi) 9,986 RSUs granted on March 1, 2022 that vest equally over four installments on March 1, 2023, March 1, 2024, March 1, 2025 and March 11, 2026;
(7)Consists of 8,851 PSUs, at target, granted on November 15, 2021 that will cliff vest on March 1, 2025. The PSUs earned are based on the achievement of the 2022-2024 cumulative performance criteria established by the Compensation Committee as certified by the Compensation Committee in February 2025.
Option Exercises and Stock Vested
The following table sets forth information with respect to the exercise of stock options by our NEOs during fiscal 2022 and the vesting of the RSUs held by the NEOs during fiscal 2022.
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| Option Awards | | Stock Awards |
| Number of Shares Acquired on Exercise |
Value Realized on Exercise | | Number of Shares Acquired on Vesting |
Value Realized on Vesting |
| Named Executive Officer | (#) | ($) | | (#) | ($) |
| Randy Garutti | — | — | | 11,810 | 822,931 |
Katherine Fogertey | — | — | | 4,299 | 199,732 |
Zachary Koff | 8,900 | 161,330 | | 4,371 | 308,654 |
Nonqualified Deferred Compensation
The following table sets forth our nonqualified deferred compensation as of December 28, 2022.
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Named Executive Officer | Named Executive Officer Contributions in Fiscal 2022 | Registrant Contributions in Fiscal 2022 | Aggregate Earnings in Fiscal 2022 | Aggregate Withdrawals/ Distributions | Aggregate Balance at December 28, 2022 |
($) | ($) | ($) | ($) | ($) |
Randy Garutti | — | — | — | — | — |
Katherine Fogertey | — | — | — | — | — |
| Zachary Koff | — | — | — | — | — |
Potential Payments Upon Termination
The following table presents the amount of compensation payable to each of our NEOs as if the triggering termination event had occurred on the last day of our most recently completed fiscal year, December 28, 2022 (with annual bonuses based on actual performance through December 28, 2022). The actual amounts that would be paid to any NEO can only be determined at the time of an actual termination of employment and may vary from those listed below. Generally, in the event of a termination for cause, or resignation without good reason, our NEOs are entitled only to earned but unpaid salary, vested benefits under any applicable benefit plans, reimbursement of incurred expenses, and all accrued but unused paid time off.
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Potential Payments Upon Termination without Cause or Resignation with Good Reason(1) |
| Compensation Element | Mr. Garutti(2) | Ms. Fogertey | Mr. Koff |
| Accrued and Unpaid Salary and Other Benefits ($) | 44,733 | | 17,628 | | 34,607 | |
| Short-term Bonus ($) | 187,500 | | 59,063 | | 37,500 | |
| Salary through Employment Term ($) | 1,125,000 | | 118,125 | | 375,000 | |
| Total Cash Payments ($) | 1,357,233 | | 194,816 | | 447,107 | |
Acceleration of Unvested Equity Awards ($)(3) | 1,268,118 | | — | 219,079 | |
| COBRA ($) | 25,863 | | — | 26,135 | |
| TOTAL | 2,651,214 | | 194,816 | | 692,321 | |
Potential Payments Upon Termination Due to Death or Disability(4) |
| Compensation Element | Mr. Garutti | Ms. Fogertey | Mr. Koff |
Acceleration of Unvested Equity Awards ($)(3) | 251,059 | | 125,537 | | 125,537 | |
| TOTAL ($) | 2,902,273 | | 320,353 | | 817,858 | |
(1)Amounts listed in this table are calculated in accordance with the terms of the applicable employment agreement.
(2)Pursuant to the gross-up arrangement in Mr. Garutti’s employment agreement, a true up payment may be required to be made, but no amount has been included here since the information required to calculate any amount that would be due is not available nor reasonably estimable.
(3)Amounts listed in this table are calculated in accordance with the terms of the applicable employment agreement, equity award agreement and governing equity plan documents, as applicable. Equity values are determined based on the closing price of our Class A common stock on December 28, 2022 and equity holdings as of that date.
(4)If an NEO dies or becomes Disabled (as the term is defined in the applicable PSU award agreement) in the period a PSU is subject to performance criteria, a portion of that tranche will vest, pro rata, based on service provided.
Equity Compensation Plan Information Table
The following table sets forth our shares authorized for issuance under our equity compensation plans as of December 28, 2022.
| | | | | | | | | | | |
| Number of securities to be issued
upon exercise of outstanding
options,
warrants and rights | Weighted-average exercise price
of outstanding options,
warrants and rights | Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a) |
| (a) | (b) | (c)(2) |
Equity compensation plans approved by security holders(1) | 134,031 | | $ | 21.88 | | 2,758,726 | |
Equity compensation plans
not approved by security
holders | — | | — | | — | |
| Total | 134,031 | | $ | 21.88 | | 2,758,726 | |
(1)Includes awards granted and available to be granted under our 2015 Incentive Award Plan.
(2)This amount represents shares of common stock available for issuance under the 2015 Incentive Award Plan, which include stock options, PSUs and RSUs.
CEO PAY RATIO
Overview
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of the individual identified as our median compensated employee and the annual total compensation of Mr. Garutti, our Chief Executive Officer.
For the fiscal year ended December 28, 2022, our last completed fiscal year, the annual total compensation of the individual identified as the median compensated employee of the Company (excluding our CEO) was $16,388. The annual total compensation of our CEO, as reported in the Summary Compensation Table, above, was $3,345,836. Pursuant to Item 402(u) of Regulation S-K the resulting ratio to the compensation of our median compensated employee is 204 to 1.
Methodology and Key Assumptions
To identify the median compensated employee and to determine the annual total compensation of the median compensated employee, we used the following assumptions and methodology:
▪We prepared a list of all of Shake Shack’s 10,937 employees (excluding the CEO) as of November 23, 2022.
▪The consistently applied compensation measure ("CACM") we used was taxable income (Internal Revenue Service Form W-2, Box 1) for 2022 and annualized the CACM, if available, for individuals employed less than a full year.
▪The median employee identified was a team member in one of our locations.
▪After identifying the median employee, we calculated annual total compensation for this employee using the same methodology we use for calculating the total compensation of our CEO as set forth in the Summary Compensation Table.
PAY VERSUS PERFORMANCE
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K ("Item 402"), we are providing the following information about the relationship between executive "compensation actually paid" ("CAP") and certain financial performance measures of the Company. Neither the Compensation Committee nor the executives of our Company directly used the information in this table or the related disclosures when making compensation decisions for 2022.
You should refer to the "Compensation Discussion and Analysis" for a complete description of how executive compensation relates to Company performance and how the Compensation Committee makes its decisions. The following table shows the total compensation for our CEO and other NEOs as set forth in the Summary Compensation Table, the CAP to our CEO and other NEOs, our total shareholder return ("TSR"), the TSR of the S&P 600 Restaurants Index, our net income, and our Company-select Performance measure, Adjusted EBITDA, over the last three fiscal years.
Pay Versus Performance Table
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Value of Initial Fixed $100 Investment Based On: | | |
| Fiscal Year | Summary Compensation Table for CEO | Compensation Actually Paid to CEO (1) | Average Summary Compensation Table Total for other NEOs(2) | Average Compensation Actually Paid to Other NEOs(2) | Total Shareholder Return (3) | Peer Group Total Shareholder Return (3) | Net Income
(in millions) | Adjusted EBITDA (in millions) (4) |
| 2022 | $ | 3,345,835 | | $ | 1,435,005 | | $ | 1,421,436 | | $ | 407,308 | | $ | 70.98 | | $ | 97.44 | | $ | (25.97) | | $ | 83.97 | |
| 2021 | 5,466,562 | | 4,472,993 | | 2,263,343 | | 1,389,545 | | 116.95 | 122.76 | (10.11) | | 67.53 |
| 2020 | 2,730,786 | | 3,480,311 | | 1,286,133 | | 2,057,727 | | 141.55 | 126.09 | (45.53) | | 28.80 |
(1)Item 402 requires certain adjustments to be made to the Summary Compensation Table totals to determine CAP for reporting in the Pay versus Performance Table. CAP is a value calculated under Item 402, but does not necessarily represent cash and/or equity transferred to the NEO without restriction. As required by Item 402, the following table details adjustments made to Summary Compensation Table total compensation values to arrive at CAP values (Note that NEOs do not participate in a defined benefit plan so there are no adjustments for pension benefits, and similarly, there are no adjustments made for dividends):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Year | Named Executive Officers | Summary Compensation Table Total | Grant Date Value of New Awards | Year End Value of New Awards | Change in Value of Unvested Awards | Change in Value of Vested Awards | Total Equity Compensation Actually Paid | Compensation Actually Paid |
| 2022 | CEO | $ | 3,345,835 | | $ | (1,500,022) | | $ | 849,766 | | $ | (1,255,404) | | $ | (5,170) | | $ | (410,808) | | $ | 1,435,005 | |
| Other NEOs | 1,421,436 | | (750,048) | | 424,904 | | (639,163) | | (49,821) | | (264,080) | | 407,308 | |
| 2021 | CEO | 5,466,562 | | (3,549,992) | | 2,566,569 | | (257,369) | | 247,223 | | 2,556,423 | | 4,472,993 | |
| Other NEOs | 2,263,343 | | (1,883,432) | | 1,416,528 | | (487,841) | | 80,947 | | 1,009,634 | | 1,389,545 | |
| 2020 | CEO | 2,730,786 | | (1,500,013) | | 1,112,684 | | 330,282 | | 806,572 | | 2,249,538 | | 3,480,311 | |
| Other NEOs | 1,286,133 | | (800,054) | | 908,268 | | 655,518 | | 7,862 | | 1,571,648 | | 2,057,727 | |
(2)The other NEOs include Ms. Fogertey and Mr. Koff. Ms. Fogertey's compensation totals reflect amounts based on her time served in the position of Chief Financial Officer which began in June of fiscal 2021.
(3)TSR is based on the value of an initial fixed investment of $100. The TSR peer group consists of the S&P 600 Restaurants Index.
(4)The Company defines Adjusted EBITDA as net income before (A) interest expense, (B) income tax expense or benefit, (C) depreciation expense and (D) amortization expense, and excluding certain non-cash and other items not considered in the Company’s evaluation of ongoing operating performance, including equity-based compensation expense, deferred lease costs, impairment and loss on disposal of assets, amortization of cloud-based software implementation costs and certain non-recurring charges. Adjusted EBITDA (both budget and actual performance) excludes bonuses.
Relationship Between "Compensation Actually Paid" and Performance Measures
The charts below show, for the past three fiscal years, the relationship of the Company’s TSR relative to its peers as well as the relationship between the CEO and other NEO CAP and (i) the Company’s TSR; (ii) the Company’s net income; and (iii) the Company's Adjusted EBITDA.
Important Performance Measures
As required by Item 402, the Company's important performance measures for linking CAP to Company performance are Adjusted EBITDA, Total revenue and Shack-level operating profit.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
EQUITY COMPENSATION PLAN INFORMATION TABLE
The following table provides information about our compensation plans under which our Class A common stock is authorized for issuance, as of December 28, 2022:
| | | | | | | | | | | | | | | | | | | | |
| Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuances under equity compensation plans(2) |
Equity compensation plans approved by security holders(1) | | 134,031 | | | $ | 21.88 | | | 2,758,726 | |
| Equity compensation plans not approved by security holders | | — | | | — | | | — | |
| Total | | 134,031 | | | $ | 21.88 | | | 2,758,726 | |
(1)Includes awards granted and available to be granted under our 2015 Incentive Award Plan.
(2)This amount represents shares of common stock available for issuance under the 2015 Incentive Award Plan, which include stock options, performance stock units and restricted stock units.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information about the beneficial ownership of our Class A common stock and Class B common stock, as of the close of business on April 19, 2023, for:
▪each person known by us to beneficially own more than 5% of our outstanding Class A common stock or Class B common stock;
▪each of our directors and NEOs; and
▪all of our directors and executive officers as a group.
The number of shares beneficially owned by each stockholder is determined under rules promulgated by the SEC under which beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, or other rights held by such person that are currently exercisable or will become exercisable within 60 days of April 19, 2023, are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. However, in computing the number of shares of Class A common stock beneficially owned by an individual or entity, we do not include LLC Interests, which are exchangeable into Class A common stock, held by such individual or entity because the voting rights represented by the LLC Interests are reflected in the shares of Class B common stock reported for such individual or entity. Unless otherwise indicated, the address of all listed stockholders is c/o Shake Shack Inc., 225 Varick Street, Suite 301, New York, New York 10014. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officers and Directors | | Shares of Class A Common Stock Beneficially Owned | | Shares of Class B Common Stock Beneficially Owned | | Combined Voting Power(1) |
| Number | Percentage | | Number | Percentage | |
Daniel Meyer(2) | | 1,895,997 | | 4.8 | % | | 1,861,057 | | 65.4 | % | | 8.9 | % |
Randy Garutti(3) | | 63,060 | | * | | 310,023 | | 10.9 | % | | * |
| Katherine Fogertey | | 4,260 | | * | | — | | — | % | | * |
Zachary Koff(4) | | 26,615 | | * | | — | | — | % | | * |
Sumaiya Balbale(5) | | 6,106 | | * | | — | | — | % | | * |
| Lori George Billingsley | | — | | — | % | | — | | — | % | | — | |
Anna Fieler(6) | | 6,501 | | * | | — | | — | % | | * |
Jeff Flug(7) | | 7,628 | | * | | — | | — | % | | * |
Jenna Lyons(8) | | 11,157 | | * | | — | | — | % | | * |
Joshua Silverman(9) | | 8,168 | | * | | — | | — | % | | * |
Jonathan D. Sokoloff(10) | | 15,065 | | * | | — | | — | % | | * |
Robert Vivian(11) | | 32,553 | | * | | — | | — | % | | * |
Tristan Walker(12) | | 3,277 | | * | | — | | — | % | | * |
| All directors and executive officers as a group (thirteen persons) | | 2,080,387 | | 5.4 | % | | 2,171,080 | | 76.3 | % | | 10.1 | % |
| Other 5% Stockholders | | | | | | | | |
BlackRock, Inc.(13) | | 6,193,007 | | 15.7 | % | | — | | — | % | | 14.7 | % |
The Vanguard Group(14) | | 4,114,443 | | 10.4 | % | | — | | — | % | | 9.7 | % |
*Represents beneficial ownership of less than 1%.
(1)Includes the voting power of each owner based on the voting power held through both the owner’s Class A common stock and Class B common stock. Represents percentage of voting power of the Class A common stock and Class B common stock of Shake Shack voting together as a single class.
(2)Includes (i) 577,347 shares of Class A common stock held by the Investment Trust, of which Mr. Meyer is the grantor, trustee and beneficiary, (ii) 10,254 shares of Class A common stock that Mr. Meyer currently has the right to acquire through the exercise of stock options, (iii) 3,089 shares of Class A common stock that Mr. Meyer will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units, (iv) 1,861,057 shares of Class B common stock held by the Gift Trust, of which Mr. Meyer’s spouse is a trustee and beneficiary, and (v) 1,305,306 shares of Class A common stock held by the Gift Trust. Mr. Meyer disclaims beneficial ownership of all of the shares held by the Gift Trust.
(3)Includes 55,972 shares of Class B common stock held by The Randall J. Garutti 2014 GST Trust, of which Mr. Garutti’s spouse is a trustee and beneficiary. Mr. Garutti disclaims beneficial ownership of all of the shares held by The Randall J. Garutti 2014 GST Trust.
(4)Includes 10,100 shares of Class A common stock that Mr. Koff currently has the right to acquire through the exercise of stock options.
(5)Includes 3,460 shares of Class A common stock that Ms. Balbale will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units.
(6)Includes 3,089 shares of Class A common stock that Ms. Fieler will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units.
(7)Includes 1,668 shares of Class A common stock that Mr. Flug will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units.
(8)Includes (i) 3,689 shares of Class A common stock that Ms. Lyons has the right to acquire through the exercise of stock options, and (ii) 1,545 shares of Class A common stock that Ms. Lyons will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units.
(9)Includes (i) 1,108 shares of Class A common stock that Mr. Silverman has the right to acquire through the exercise of stock options, and (ii) 3,089 shares of Class A common stock that Mr. Silverman will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units.
(10)Includes (i) 10,254 shares of Class A common stock that Mr. Sokoloff has the right to acquire through the exercise of stock options, and (ii) 1,545 shares of Class A common stock that Mr. Sokoloff will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units.
(11)Includes (i) 17,431 shares of Class A common stock that Mr. Vivian has the right to acquire through the exercise of stock options, and (ii) 1,792 shares of Class A common stock that Mr. Vivian will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units.
(12)Includes 1,545 shares of Class A common stock that Mr. Walker will have the right to acquire within 60 days of April 19, 2023 through the vesting of restricted stock units.
(13)Based on a Schedule 13G filed by BlackRock, Inc. on February 10, 2023. According to the Schedule 13G, BlackRock, Inc. has sole voting power, shared voting power, sole dispositive power and shared dispositive power over 6,090,507 shares, 0 shares, 6,193,007 shares, and 0 shares, respectively, of Class A common stock. The principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
(14)Based on a Schedule 13G filed by The Vanguard Group on February 9, 2023. According to the Schedule 13G, The Vanguard Group has sole voting power, shared voting power, sole dispositive power and shared dispositive power over 0 shares, 63,898 shares, 4,012,741 shares and 101,702 shares, respectively, of Class A common stock. The principal business office of the Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Union Square Hospitality Group
The Chairman of the Board of Directors serves as the Chief Executive Officer of Union Square Hospitality Group, LLC. As a result, Union Square Hospitality Group, LLC and its subsidiary, set forth below, are considered related parties.
Hudson Yards Sports and Entertainment
In fiscal 2011, Shake Shack entered into a Master License Agreement (as amended, the “MLA”) with Hudson Yards Sports and Entertainment LLC (“HYSE”) to operate Shake Shack branded limited menu concession stands in sports and entertainment venues within the United States. In February 2019, the agreement was assigned to Hudson Yards Catering ("HYC"), the parent of HYSE. The agreement expires in January 2027 and includes five consecutive five-year renewal options at HYC’s option. As consideration for these rights, HYC pays the Company a license fee based on a percentage of net food sales, as defined in the MLA. HYC also pays a percentage of profits on sales of branded beverages, as defined in the MLA. For the fiscal year ended December 28, 2022, HYC paid $802,000 in license fees pursuant to the MLA.
Madison Square Park Conservancy
The Chairman of the Board of Directors serves as a director of the Madison Square Park Conservancy (“MSP Conservancy”), with which Shake Shack has a license agreement and pays license fees to operate the Madison Square Park Shack. Amounts paid to Madison Square Park Conservancy amounted to $1,224,000 for fiscal 2022.
Olo, Inc.
The Chairman of the Board of Directors serves as a director of Olo, Inc. (“Olo”), formerly known as “Mobo Systems, Inc.”, a platform the Company uses in connection with its mobile ordering application. Amounts paid to Olo for fiscal 2022 amounted to $431,000.
Block, Inc.
The Company's Chief Executive Officer is a member of the board of directors of Block, Inc. (“Block”), formerly known as “Square, Inc.”. The Company currently uses certain point-of-sale applications, payment processing services, hardware and other enterprise platform services in connection with its kiosk technology sales for certain off-site events and the processing of a limited amount of sales at certain locations. Amounts paid to Block for fiscal 2022 amounted to $4,337,000.
USHG Acquisition Corp.
The Company's Chief Executive Officer served on the board of directors of USHG Acquisition Corp. in 2022. Additionally, Company's Chairman of the Board of Directors serves as the chairman of the board of directors of USHG Acquisition Corp. USHG Acquisition Corp. is a blank check company incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. No amounts were paid to USHG Acquisition Corp. during fiscal 2022.
The IPO and Other Organizational Transactions
Shake Shack Inc. was formed for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of SSE Holdings, LLC and its subsidiaries (“SSE Holdings”). Shake Shack is a holding company with no direct operations and our principal asset is our equity interest in SSE Holdings. We have a majority economic interest in, the sole voting interest in, and control the management of, SSE Holdings.
In connection with the IPO, which closed on February 4, 2015, we engaged in transactions with certain of our directors, executive officers and other persons and entities which are or became holders of more than 5% of our Class A common stock or Class B common stock upon the consummation of the IPO and other transactions completed in connection with the IPO (collectively, the “Organizational Transactions”), including entry into the SSE Holdings LLC Agreement, the Stockholders Agreement, the Tax Receivable Agreement, and the Registration Rights Agreement, each of which is discussed below.
SSE Holdings LLC Agreement
We operate our business through SSE Holdings and its subsidiaries. We and the owners of SSE Holdings at the time of the IPO entered into SSE Holdings’ third amended and restated limited liability company agreement (as amended, the “SSE Holdings LLC Agreement”), effective February 4, 2015. The operations of SSE Holdings, and the rights and obligations of the holders of LLC Interests, are set forth in the SSE Holdings LLC Agreement.
The SSE Holdings LLC Agreement provides the owners of SSE Holdings following the IPO with the right to have their LLC Interests redeemed for, at our election, either newly-issued shares of our Class A common stock on a one-for-one basis or a cash payment equal to a volume weighted average market price of one share of Class A common stock for each LLC Interest redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications).
Share settlement will be the default for settlement unless and until a majority of the members of our Board of Directors who do not hold any LLC Interests elect cash settlement. In the event of cash settlement, we would issue new shares of Class A common stock and use the proceeds from the sale of these newly-issued shares of Class A common stock to fund the cash settlement which, in effect, limits the amount of the cash payment to the redeeming member. If we decide to make a cash payment, an owner of SSE Holdings has the option to rescind its redemption request within a specified time period.
Upon the effective date of redemption, the redeeming member will surrender its LLC Interests to SSE Holdings for cancellation. Concurrently, we will contribute either cash or shares of Class A common stock to SSE Holdings, which will then distribute such cash or shares of Class A common stock to the redeeming owner of SSE Holdings to complete the redemption. In addition, SSE Holdings will issue to us an amount of newly-issued LLC Interests equal to the number of LLC Interests redeemed from the owner of SSE Holdings.
In the event of a redemption request by an owner of SSE Holdings, we may, alternatively and at our option, effect a direct exchange of cash or our Class A common stock for such LLC Interests with such owner of SSE Holdings in lieu of a redemption.
Whether by redemption or exchange, we are obligated to ensure that at all times the number of LLC Interests that we own equals the number of shares of Class A common stock issued by us (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities).
In fiscal 2022, redemptions were executed for the following directors, executive officers and beneficial owners of more than 5% of our Class A common stock or Class B common stock (and family members of the foregoing) on the following dates, in the following amounts:
| | | | | | | | |
| Redeeming Owners of SSE Holdings |
Effective Dates of Redemption | Shares of Class A Common Stock Issued upon Redemption |
| David A. Swinghamer | February 25, 2022 | 5,000 | |
| David A. Swinghamer | March 29, 2022 | 5,000 | |
| David A. Swinghamer | April 25, 2022 | 5,000 | |
| Laura Sloate | June 25, 2022 | 20,074 | |
| Richard Coraine | June 25, 2022 | 5,000 | |
| Richard Coraine 2012 Family Trust | June 25, 2022 | 10,000 | |
| Beth Stephens | September 25, 2022 | 2,000 | |
Stockholders Agreement
We entered into the stockholders agreement (as amended, the “Stockholders Agreement”) with each member of the Voting Group, effective February 4, 2015. USHG, of which Mr. Meyer serves as Executive Chairman, is a party to the Stockholders Agreement. The Voting Group refers collectively to (i) Daniel Meyer, (ii) the Daniel H. Meyer Investment Trust dated 5/15/92, of which Mr. Meyer is the sole beneficiary (the “Investment Trust”), (iii) the DHM 2012 Gift Trust, formerly known as the Daniel H. Meyer 2012 Gift Trust (the “Gift Trust”), of which Mr. Meyer’s spouse is a trustee and beneficiary, which, together with Mr. Meyer and the Investment Trust, we refer to collectively as the “Meyer Group”, and (iv) certain other owners of SSE Holdings at the time of the IPO who are parties to the Stockholders Agreement, as amended, as described herein. Until June 20, 2016, the Voting Group held Class A common stock and Class B common stock representing in the aggregate a majority of the combined voting power of our common stock.
The Stockholders Agreement, as further described below, contains specific rights, obligations and agreements of these parties as owners of our Class A common stock and Class B common stock.
Voting Agreement. Under the Stockholders Agreement, the members of the Voting Group agree to take all necessary action, including casting all votes to which such members are entitled to cast at any annual or special meeting of stockholders, so as to ensure that the composition of our Board of Directors and its committees complies with the provisions of the Stockholders Agreement related to the composition of our Board of Directors and its committees.
In addition, the members of the Voting Group agree to vote their shares of Class A common stock and Class B common stock in favor of the election of the nominees of certain members of the Voting Group to our Board of Directors and committees upon their nomination by the Nominating and Corporate Governance Committee of our Board of Directors.
Meyer Group Approvals. Under the Stockholders Agreement, the actions listed below by us or any of our subsidiaries require the approval of the Meyer Group for so long as the Meyer Group collectively owns at least 10% of the total shares of Class A common stock and Class B common stock owned by it immediately following the consummation of the IPO. The actions include:
▪change in control transactions;
▪the sale, lease or exchange of all or a substantial amount of the property and assets of Shake Shack, SSE Holdings or any of SSE Holdings’ subsidiaries, taken as a whole;
▪initiating any liquidation, dissolution, bankruptcy or other insolvency proceeding involving Shake Shack, SSE Holdings or any of their respective subsidiaries;
▪terminating the employment of our Chief Executive Officer or hiring a new Chief Executive Officer;
▪any authorization or issuance of equity securities of Shake Shack or its subsidiaries other than (i) pursuant to any equity incentive plans or arrangements approved by our Board of Directors or (ii) upon an exchange of shares of Class B common stock together with SSE Holdings Units for shares of Class A common stock;
▪increasing or decreasing the size of our Board of Directors; and
▪any amendment or amendments to the organizational documents of Shake Shack or SSE Holdings.
Tax Receivable Agreement
We entered into the tax receivable agreement (the “TRA”), effective February 4, 2015, with the owners of SSE Holdings at the time of the IPO. The TRA provides for the payment by us to such persons of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the “TRA Payments”). The TRA Payments are not conditioned upon any continued ownership interest in either SSE Holdings or us by any owner of SSE Holdings following the IPO. The rights of each owner of SSE Holdings following the IPO under the TRA are assignable to transferees of its LLC Interests (other than Shake Shack as transferee pursuant to subsequent redemptions (or exchanges) of the transferred LLC Interests). We expect to benefit from the remaining 15% of tax benefits, if any, that we may actually realize.
No payments were made to the members of SSE Holdings subject to the provisions of the TRA in fiscal 2022. As of December 28, 2022, the total amount of TRA Payments due under the TRA was $234,893,000.
Registration Rights Agreement
We entered into the registration rights agreement (as amended, the “Registration Rights Agreement”), effective February 4, 2015, with the owners of SSE Holdings at the time of the IPO. The Registration Rights Agreement provides such owners certain registration rights whereby they can require us to register under the Securities Act of 1933, as amended (the “Securities Act”), shares of Class A common stock issuable to them upon redemption or exchange, at our election, of their LLC Interests, and certain affiliates of former indirect members of SSE Holdings can require us to register under the Securities Act the shares of Class A common stock issued to them in connection with the Organizational Transactions. The Registration Rights Agreement also provides for piggyback registration rights for the owners of SSE Holdings prior to the IPO.
Indemnification Agreements
Our bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the General Corporation Law of the State of Delaware (the “DGCL”), subject to certain exceptions contained in our bylaws. In addition, our certificate of incorporation, provides that our directors will not be liable for monetary damages for breach of fiduciary duty.
We entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, and expense advancement and reimbursement, to the fullest extent permitted under the DGCL, subject to certain exceptions contained in those agreements. There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending litigation that may result in claims for indemnification by any director or officer.
Policies and Procedures for Related Person Transactions
Our Board of Directors recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof). Our Board of Directors adopted a written policy on transactions with related persons that is in conformity with the requirements for issuers listed on the New York Stock Exchange. Under the policy:
▪any Related Person Transaction (as defined below), and any material amendment or modification to a Related Person Transaction, must be reviewed and approved or ratified by the Audit Committee, which is composed solely of independent directors who are disinterested, or by the disinterested members of the Board of Directors; and
▪any employment relationship or transaction involving an executive officer and any related compensation must be approved by the Compensation Committee or recommended by the Compensation Committee to the Board of Directors for its approval.
A Related Person Transaction is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are or will be a participant and the amount involved exceeds $120,000 in any one fiscal year, and in which any Related Person (as defined below) had, has or will have a direct or indirect material interest. Further, if a Related Person enters into transactions, arrangements or relationships in which we were, are or will be a participant and the aggregate amount involved in such transactions, arrangements or relationships exceeds $120,000 in any one fiscal year, and in which any Related Person had, has or will have a direct or indirect material interest, each of such transactions, arrangements or relationships, in conformity with SEC rules, shall be deemed to be a Related Person Transaction for purposes of this policy.
A “Related Person” is each of the following: (i) any person who has served as a director or executive officer since the beginning of our last completed fiscal year; (ii) any nominee for director at the Annual Meeting; (iii) any person who beneficially owns more than 5% of our outstanding Class A common stock or Class B common stock; and (iv) any immediate family member, or other person (other than a tenant or employee), sharing the household of any person identified in part (i), (ii) or (iii).
Identification of Related Party Transactions
Our Legal department, in consultation with our Accounting/Finance department, is primarily responsible for developing and implementing processes and procedures to obtain information regarding related persons with respect to potential Related Person Transactions and then determining, based on the facts and circumstances, whether the potential Related Person Transactions do, in fact, constitute a Related Person Transaction. In addition, any potential Related Person Transaction that is proposed to be entered into by us must be reported to our Chief Legal Officer by both the related person and the person at the Company responsible for such potential Related Person Transaction.
Audit Committee Pre-Approval
If the Company’s Legal department determines that a transaction or relationship is a Related Person Transaction, then each such transaction will be presented to the Audit Committee of the Board of Directors. The Audit Committee will (i) review the relevant facts and circumstances of each Related Person Transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and the extent of the Related Person’s interest in the transaction, (ii) take into account the conflicts of interest and corporate opportunity provisions of our Code of Business
Conduct and Ethics, and (iii) either approve, ratify or disapprove the Related Person Transaction. If advance committee approval of a Related Person Transaction requiring the Audit Committee’s approval is not feasible, then the transaction may be preliminarily entered into by management upon prior approval of the transaction by the chairperson of the Audit Committee, subject to ratification of the transaction by the Audit Committee at the Audit Committee’s next regularly scheduled meeting.
Management will update the Audit Committee as to any material changes to any approved or ratified Related Person Transaction and shall provide a status report at least annually at a regularly scheduled meeting of the Audit Committee of all then current Related Person Transactions.
No director may participate in approval of a Related Person Transaction for which he or she is a related person.
Disclosure
All Related Person Transactions are to be disclosed in the Company’s applicable filings as required by the Securities Act and the Exchange Act, and related rules. Furthermore, any Related Person Transaction must be disclosed to the full Board of Directors.
Other Agreements
Management must assure that all Related Person Transactions are not in violation of and are approved in accordance with any requirements of the Company’s financing or other material agreements.
DIRECTOR INDEPENDENCE
We believe the following directors are independent as determined by the rules of the New York Stock Exchange: Sumaiya Balbale, Lori George Billingsley, Anna Fieler, Jeff Flug, Jenna Lyons, Joshua Silverman, Jonathan D. Sokoloff, Robert Vivian, and Tristan Walker. Daniel Meyer, Anna Fieler, Jeff Flug, and Lori George Billingsley are the Class I directors and their terms will expire in 2025. Randy Garutti, Joshua Silverman, Jonathan D. Sokoloff and Tristan Walker are the Class II directors and their terms will expire in 2023. Sumaiya Balbale, Jenna Lyons and Robert Vivian are the Class III directors and their terms will expire in 2024. The division of our Board of Directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.
Item 14. Principal Accountant Fees and Services.
Audit and Related Fees
The following table sets forth the aggregate fees billed for various professional services rendered by EY:
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| 2022 | 2021 |
Audit Fees(1) | $ | 1,613,454 | | $ | 1,473,169 | |
Audit Related Fees(2) | — | | 24,000 | |
Tax Fees(3) | — | | 27,500 | |
All Other Fees(4) | — | | 126,000 | |
| Total Fees | $ | 1,613,454 | | $ | 1,650,669 | |
(1)Consists of fees for professional services rendered for the audits of the Company’s consolidated financial statements included in its Annual Reports on Form 10-K for fiscal years 2022 and 2021 and for the review of the Company’s interim condensed consolidated financial statements included in its Quarterly Reports on Form 10-Q for fiscal years 2022 and 2021.
(2)Consists of fees for agreed upon procedures required for the filing of a registration statement on Form S-3.
(3)Consists of fees incurred in conjunction with the 2021 debt offering.
(4)Consists of fees for agreed upon services related to comfort letters in conjunction with the 2021 debt offering.
Pre-Approval Policy
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by EY. These services may include audit services, audit-related services, tax services and all other services. Proposed services may either be pre-approved without consideration of specific case-by-case services by the Audit Committee or require the specific pre-approval of the Audit Committee. Unless a type of service has received general pre-approval, it will require specific pre-approval if it is to be provided by EY.
All of the services described above were approved by the Audit Committee.
Part IV
Item 15. Exhibits and Financial Statement Schedules.
(1)Financial Statements and schedules
No financial statement or supplemental data are filed with this report on Form 10-K/A. See Index to Financial Statements and Supplemental Data of the Original Form 10-K.
(2)Exhibits
The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this report and such Exhibit Index is incorporated herein by reference.
EXHIBIT INDEX
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| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| Shake Shack Inc. |
| (Registrant) |
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| By: | /s/ Randy Garutti |
| | Randy Garutti |
Date: April 27, 2023 | | Chief Executive Officer and Director |
