What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-02-26 compared with 2020-02-24 · 419 added, 491 removed, 99 unchanged (90% of the section changed)

Shake Shack Inc.

was formed on September 23, 2014 as a Delaware corporation.

was formed on September 23, 2014 as a Delaware corporation 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").

We are the sole managing member of SSE Holdings and, as sole managing member, we operate and control all of the business and affairs of SSE Holdings.

As a result, we consolidate the financial results of SSE Holdings and report a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings.

Shake Shack Inc.

Class A common stock trades on the New York Stock Exchange under the symbol "SHAK." Unless the context otherwise requires, "we," "us," "our," "Shake Shack," the "Company" and other similar references refer to Shake Shack Inc.

and, unless otherwise stated, all of its subsidiaries, including SSE Holdings, LLC, which we refer to as "SSE Holdings."

INITIAL PUBLIC OFFERING AND ORGANIZATIONAL TRANSACTIONS

O n February 4, 2015, we completed an initial public offering ("IPO") of 5,750,000 shares of our Class A common stock at a public offering price of $21.00 per share, which includes 750,000 shares issued pursuant to the underwriters' over-allotment option.

We received $112.3 million in proceeds, net of underwriting discounts and commissions, which we used to purchase newly-issued membership interests from SSE Holdings at a price per interest equal to the initial public offering price of our Class A common stock of $21.00 .

Shake Shack is a holding company with no direct operations and our principal asset is our equity interest in SSE Holdings.

In connection with the IPO, we completed a series of organizational transactions, including the following:

We amended and restated the limited liability company agreement of SSE Holdings (as amended, the "SSE Holdings LLC Agreement") to, among other things, (i) provide for a new single class of common membership interests in SSE Holdings ("LLC Interests"), (ii) exchange all of the membership interests of the then-existing holders of SSE Holdings for LLC Interests and (iii) appoint Shake Shack as the sole managing member of SSE Holdings;

We amended and restated our certificate of incorporation to, among other things, (i) provide for Class B common stock with voting rights but no economic interests (where “economic interests” means the right to receive any distributions or dividends, whether cash or stock, in connection with common stock) and (ii) issue shares of Class B common stock to the then-existing members of SSE Holdings on a one-to-one basis with the number of LLC Interests they own;

We acquired, by merger, two entities that were owned by former indirect members of SSE Holdings, for which we issued 5,968,841 shares of Class A common stock as merger consideration (the "Mergers").

The above mentioned transactions as well as the other transactions completed in connection with the IPO are referred to collectively as the "Organizational Transactions."

Following the completion of the Organizational Transactions, we owned 33.3% of SSE Holdings.

The non-controlling interest holders subsequent to the Mergers owned the remaining 66.7% of SSE Holdings.

As a result of the Organizational Transactions, we became the sole managing member of SSE Holdings and, although we had a minority economic interest in SSE Holdings, we had the sole voting power in, and control the management of, SSE Holdings.

Accordingly, we consolidated the financial results of SSE Holdings and reported a non-controlling interest in our consolidated financial statements.

As the Organizational Transactions are considered transactions between entities under common control, the financial statements for periods prior to the IPO and Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes.

Secondary Offering

In August 2015, we completed a secondary offering of 4,000,000 shares of our Class A common stock at a price of $60.00 per share.

All of the shares sold in the offering were offered by certain non-controlling interest holders.

We did not receive any proceeds

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from the sale of shares of Class A common stock offered by the aforementioned non-controlling interest holders.

The shares sold in the offering consisted of (i) 844,727 existing shares of Class A common stock held and (ii) 3,155,273 newly-issued shares of Class A common stock issued in connection with the redemption of 3,155,273 LLC Interests by the non-controlling interest holders that participated in the offering.

Simultaneously, and in connection with the redemption, 3,155,273 shares of Class B common stock were surrendered by non-controlling interest holders and canceled.

Additionally, in connection with the redemption, we received 3,155,273 LLC Interests, increasing our total ownership interest in SSE Holdings.

USC and GTC Mergers

Pursuant to a Stockholders Agreement, dated as of February 4, 2015, as amended, by and among Daniel H.

Meyer and his affiliates (the "Meyer Group") and other parties thereto, the Meyer Group has the right to cause all of the stock of Union Square Cafe Corp.

("USC") and Gramercy Tavern Corp.

("GTC") to be converted into and exchanged for shares of our Class A common stock pursuant to a tax-free reorganization (each, a "Reorganization").

In December 2015, the Meyer Stockholders exercised their right with respect to USC.

The Reorganization of USC was structured as a two-step merger, whereby (i) a newly-formed wholly-owned subsidiary of the Company merged with and into USC, then (ii) USC merged with and into the Company (the foregoing transactions are collectively referred to as the "USC Merger").

Prior to the USC Merger, USC owned 1,727,804 LLC Interests and an equivalent number of shares of our Class B common stock.

In the USC Merger, (i) 1,727,804 shares of Class A common stock were issued to the stockholders of USC, with each stockholder receiving newly-issued shares of Class A common stock in an amount equivalent to the number of shares of USC held by such stockholders;

(ii) 1,727,804 shares of Class B common stock held by USC were canceled;

and (iii) 1,727,804 LLC Interests held by USC were transferred to us.

In August 2019, the Meyer Group exercised their right with respect to GTC (the "GTC Merger").

To effect the GTC Merger, a newly-formed wholly-owned subsidiary of Shake Shack Inc.

merged with and into GTC, with GTC as the surviving entity, which was then merged with and into Shake Shack Inc.

Prior to the GTC Merger, GTC owned 2,690,263 LLC Interests and an equivalent number of shares of our Class B common stock.

The stockholders of GTC, received on a one-for-one basis, 2,690,263 shares of Class A common stock based upon the amount of shares of GTC held by stockholders, all of the shares of Class B common stock held by GTC were canceled;

and all of the LLC Interests held by GTC were transferred to us.

As of December 25, 2019 , we owned 91.6% of SSE Holdings and the non-controlling interest holders own the remaining 8.4% of SSE Holdings.

Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, hot dogs, crispy chicken, frozen custard, crinkle cut fries, shakes, beer, wine and more.

Shake Shack began as a hot dog cart to support the rejuvenation of New York City's Madison Square Park through its Conservancy's first art installation, "I Y Taxi." The cart was an instant success, with lines forming daily throughout the summer months over the next three years.

and, unless otherwise stated, all of its subsidiaries, including SSE Holdings.

Equity Offering

On April 17, 2020, we announced an “at-the-market” equity offering program (the “ATM Program”), under which we may offer and sell shares of our Class A common stock having an aggregate price of up to $75.0 million from time to time.

On April 21, 2020, we completed the sale of 233,467 shares of our Class A common stock pursuant to the ATM Program and received $9.8 million of proceeds, net of commissions.

The proceeds were used to purchase newly-issued LLC Interests.

On April 21, 2020, we completed an underwritten offering of 3,416,070 shares of our Class A common stock, resulting in $135.9 million of proceeds, net of underwriting discounts and commissions.

The proceeds were used to purchase newly-issued LLC Interests.

COVID-19 was officially declared a global pandemic by the World Health Organization in March 2020.

The virus has impacted all global economies, and particularly in the United States, it has resulted in varying levels of restrictions and shutdowns implemented by national, state, and local authorities.

Although the pandemic has presented challenges to our global business, it has also caused us to accelerate a variety of existing strategic growth initiatives — including new digital capabilities.

By proactively taking steps to expand access, safety and convenience for our guests, we've positioned ourselves to return to growth, as described herein.

Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, chicken sandwiches, hot dogs, crinkle cut fries, shakes, frozen custard, beer and wine.

Originally founded in 2001 by Danny Meyer's Union Square Hospitality Group ("USHG"), which owns and operates some of New York City's most acclaimed and popular restaurants — such as Union Square Cafe, Gramercy Tavern and Maialino, to name a few — Shake Shack began as a hot dog cart to support the rejuvenation of New York City's Madison Square Park through its Conservancy's first art installation, "I Y Taxi." The cart was an instant success, with lines forming daily throughout the summer months over the next three years.

In response, the city's Department of Parks and Recreation awarded Shake Shack a contract to create a kiosk to help fund the park's future.

In 2004, Shake Shack officially opened.

Soon it became a gathering place for locals alike, and a beloved New York City institution, garnering significant media attention, critical acclaim and a passionately-devoted following.

Since its inception, Shake Shack has grown rapidly—with 275 Shacks, as of December 25, 2019 , in 15 countries and 30 states, as well as the District of Columbia—and we continue to expand globally bringing the Shake Shack experience to new guests around the world.

It soon became a gathering place for locals and visitors alike, and a beloved New York City institution, garnering significant media attention, critical acclaim and a passionately-devoted following.

Since its inception, Shake Shack has grown rapidly — with 311 system-wide Shacks as of December 30, 2020, in 15 countries and 30 states, as well as the District of Columbia — and we continue to expand globally bringing the Shake Shack experience to new guests around the world.

Shake Shack Inc.

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WE STAND FOR SOMETHING GOOD

At Shake Shack we Stand For Something Good® in everything we do—-every team member we hire, every community we serve, every experience we deliver to our customers and every strategy we develop to grow in the future.

Specifically, we demonstrate this vision by:

Putting Our People First.

At our core, we are a people-first company.

We believe that by taking care of our team members, developing leaders and forging a supportive culture, we create a better workplace and more successful company.

Creating a Winning Guest Experience .

At Shake Shack, we Stand For Something Good® in everything we do.

We are on an endless pursuit to create uplifting experiences through elevated, modern and fun versions of classic food.

Specifically, we are committed to seeing this vision executed across all aspects of the business, through the following actions:

• We elevate everything we do.

Shake Shack is about creating uplifting experiences and moments of pure satisfaction.

We aim to be thoughtful in every ingredient we buy, recipe we develop, Shack we design, team we build and community we support.

• We deliver Enlightened Hospitality at every touchpoint.

Shake Shack was founded on the idea of Enlightened Hospitality.

Today, we deliver on that vision’s promise by building new digital tools for our customers, offering them new and exciting menu innovations and engaging with them in unique, meaningful ways.

Engaging the Community .

From our very first Madison Square Park location, Shacks have always been an integral part of their community.

By designing Shacks that speak to the culture of specific areas and neighborhoods, and by giving back to the communities we serve, we stay true to our founding and offer something special to our customers.

Operating with Purpose.

As we grow, we will not lose sight of core values—we will scale smart and responsibly.

Putting Our People First

Danny Meyer's original vision of Enlightened Hospitality™ guided the creation of the unique Shake Shack culture.

Today, that culture is the single most important factor in our success.

We know that our people are our greatest asset, and so, we take care of each other first and foremost so that we can take care of our guests, our community, our suppliers and our investors.

We are committed to investing in our people so we can build the best teams and develop and retain our talent.

We aim to recruit people who have integrity, who are warm, friendly, motivated, caring, self-aware and int ellectually curious—what we call "51%'ers." We use the term "51%" to describe the interpersonal and emotional skills needed to thrive in the role and "49%" to describe the technical skills.

Our team is trained to understand and practice the values of Enlightened Hospitality:

caring for each other, caring for o ur guests, caring for our community, caring for our suppliers and caring for our investors.

We believe that this culture is fundamental to the way we operate our business, and a key driver of our ability to deliver a great guest experience and, therefore, successfully grow our footprint.

Leaders Training Future Leaders

We invest in extensive leadership development programs so that Shake Shack remains a great place to work and a compelling career choice for team members and managers at every level, through the entire life cycle of employment.

We have built a culture of active learning and believe that our culture of Enlightened Hospitality enables us to develop future leaders from within, and deliver a consistent Shack experience as our team continues to grow.

The Shacksperience and Steppin' Up Model

We call our team member life cycle and overall employment experience, The Shacksperience™.

A key element of The Shacksperience is the Steppin' Up Model, which defines the steps in the employment life cycle, beginning with the team member position and working up through the general manager position.

It clarifies the eligibility requirements and training necessary for each position, outlines the growth opportunities at all levels of the organization and furthers our philosophy of "leaders training future leaders."

We train new team members on our culture and guiding principles first, then move to menu knowledge, followed by operational training.

We know that everyone learns differently, and so our training programs use various formats:

online interactive, video, hands-on and paper-based.

For those online interactive training sessions, every team member has access to ShackSource™, our

Today, we deliver on that vision by building hospitality through all our guest touchpoints.

To us, hospitality is all about taking care of our team, our guests, our communities — and bringing those groups together.

• We gather communities and enrich our neighborhoods.

Across the globe, Shacks have been an integral part of their communities, and, we believe we have a role to play in supporting and revitalizing the neighborhoods where we work and serve.

• We do the right thing and hold ourselves accountable.

At Shake Shack, we've always believed in leading by example and making better possibilities come to life with our teams and community, beyond just making great food.

Our commitment to doing things differently includes a focus on exceptional career support for our teams, while creating meaningful impact in both our neighborhoods and the global industry.

• We empower our teams to act like entrepreneurs.

At the heart of a Shake Shack experience is our teams’ personal commitment to craft and hospitality.

As we grow, we are developing our leaders and building tools that empower our Shacks to better promote uplifting experiences.

GUEST EXPERIENCE

Danny Meyer's original vision of Enlightened Hospitality™ guided the creation of Shake Shack's unique culture.

We believe that culture is the single most important factor in our success.

To maintain this, we take care of our teams first and foremost, and this allows us to take care of our guests, our community, our suppliers and our investors.

With Enlightened Hospitality, we strive to create a personalized experience for our guests at each of our Shacks around the world.

We achieve this through innovations in service, trendsetting culinary innovation, and the design of warm community gathering places.

Digital Evolution

Our digital strategy makes it possible for us to offer Enlightened Hospitality to our guests at scale.

Through modern platforms, we continuously strive to build better and faster ways to deliver the unique Shake Shack experience with convenience and accessibility.

Our digital initiatives are defined by each of the following three themes:

▪ Enlightened Hospitality – Using our digital channels to bring guests an uplifted sense of hospitality.

This ranges from developing innovative digital pre-ordering and pick-up experiences, to meaningfully engaging with guests through our Company-owned app and web channels.

▪ Personal Guest Experience – Knowing, understanding, and creating a personal guest experience that drives loyalty, frequency, and brand engagement across multiple digital platforms and in the Shacks themselves.

▪ Smarter Every Day – Building and refining our data platform and overall approach so we can drive return on investment on marketing campaigns and technology spending, and improve our ability to make smart decisions that fuel growth.

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proprietary online training portal, which is used not only as a learning platform, but also as a communication tool.

ShackSource allows team members to send recognition messages, comments, praise and thanks to their fellow team members across the Company.

And for hands-on training sessions, we gather our teams around the country, as well as in our Leadership Center, located below our Home Office on the lower level of our West Village Shack.

The Leadership Center is a space dedicated to the training and development of both our Shack and Home Office teams, and we use it to host a number of New Leader Orientation sessions for new managers.

We care about our team and are committed to setting them up for success, both at Shake Shack and in their future careers.

In 2019, we promoted over 1,600 people throughout our company, of which 59% were women.

We are incredibly proud of our leaders who graduate from hourly roles to managers, managers to General Managers and General Managers to regional leadership.

This year, 60% of our newly promoted General Managers and 74% of our newly promoted Area Directors were promoted from within.

We are committed to retaining our leaders and will continue to evolve training, compensation and benefits to do so.

We want to incentivize our Shack leaders, give them the opportunity to feel like owners and reward them for their performance.

One way we try to achieve this is by extending our equity-based compensation program to all General Managers.

We Are All-In

We strive to build an inclusive workplace, made up of diverse talent throughout the company.

This year, we launched All-In, our diversity and inclusion program, across the entire organization.

With the support of executive leaders, All-In works to ensure Shake Shack is an employer of choice by providing equal opportunities for, and removing obstacles to, success, while also fostering a culture of diversity, inclusion and empowerment.

Our 2019 All-In program featured a number of new initiatives, including:

Mentorship Program — as part of our commitment to leadership development, we l aunched a mentorship program pilot across the company to further facilitate learning, growth and development from within.

Flexible Work Policy — our flexible work policy in the Home Office allows our team to adjust their schedules as needed, including options to work from home and job share.

4-Day Workweek — we piloted a 4-day workweek for Shack managers at 59 Shacks across the country.

As a result of this initiative, we have seen an increase in female applications.

We are continuing to assess the longer-term results of this program, particularly in recruitment and retention of a diverse talent pool.

We were proud to be named one of the "Best places to work for LGBTQ+ Equality" and earn a 100% score on the Human Rights Campaign's Corporate Equality Index for our support of the LGBTQ+ community in the workplace.

This designation highlights the core of our Enlightened Hospitality ethos and our commitment to create a great workplace for all.

The HUG Fund Mission

One of the ways we embrace Enlightened Hospitality internally is through the administration of our own HUG (Help Us Give) Fund, a 501(c)(3) organization that is available for all of our employees.

The HUG Fund provides a wonderful way for all Shake Shack employees to take care of each other through tax-deductible payroll and other one-time contributions.

The sole purpose of the HUG Fund is to provide timely financial assistance to employees impacted by financially devastating circumstances that are far beyond their control and their means.

Creating A Winning Guest Experience

Exceptional hospitality is in our DNA, and our 51%'ers are committed to delivering it at the highest possible level.

With our culture of Enlightened Hospitality, we strive to create a differentiated experience for our guests at each of our Shacks around the world.

In creating a winning guest experience, we seek to find innovative ways to serve our guests, deliver trendsetting culinary innovation and design warm community gathering places that connect with our guests on a personal level.

Digital Evolution

Integral to creating a winning guest experience, is offering convenient avenues for our guests to get their Shack, when, where and how they want it.

To this end, Shake Shack continues to innovate in order to create an active dialogue with our guests, drive higher

As we have evolved our physical Shack design to efficiently serve our guests, the continued development of our digital ordering tools has also been essential.

The pandemic has accelerated those plans, as we use these tools to connect with our guests directly, more frequently, and safely — while focusing on a return to growth in the process.

Our Company-owned web and app channels, when combined, continue to be the fastest growing channel on a year-on-year basis since the second quarter of 2020.

At the end of fiscal 2020, we had added 1.8 million first-time purchasers to those channels since early March 2020, and this has now grown to over 2 million by the end of fiscal January 2021.

This influx of new and returning guests has reinforced our commitment to optimizing these channels and has given us opportunities to capitalize on new marketing and targeting strategies, which could help drive both frequency and average check size.

During fiscal 2020, we innovated the order pickup experience and expanded the modes that customers could use to enjoy it.

This now includes in-Shack pickup, Shack Track, curbside pick-up, kiosk and delivery on certain platforms such as Uber Eats, Postmates, DoorDash, Caviar, and Grubhub.

To give our guests the flexibility they needed in 2020, we introduced Shack Track, as an enhanced digital pre-order and fulfillment solution that allows guests to order through our Company-owned app or web channels — and pick up however they like, whether through curbside, walk-up window, drive-up window or at an improved in-Shack pick-up area.

It allows for intentional, directional and friction-reduced order and pick-up, across all formats.

Shack Track is integrated in the design of the Shack, while remaining separate and distinct from the in-Shack guest experience — allowing any guest's journey to be intuitive and efficient.

Within Shack Track, our overarching goal is to bring together our physical and digital infrastructure to reduce friction at every step of Shake Shack experience.

As of December 30, 2020, we have added eight Shack Track pick-up windows to existing Shacks, as well as our first drive-up Shack Track.

For fiscal 2021, we expect most of our new Shacks to have some version of a Shack Track, whether a drive-up or walk-up window, or a combination of enhanced interior pick-up, curbside pick-up, and/or dedicated delivery courier pick-up areas.

Curbside Pick-up

In 2020, we also introduced curbside pick-up on our app at participating Shacks.

Guests can pre-order on the app, identify their car, and our team members will bring the order to them with contactless pay and hand-off.

This model was created to solve the need for safe, contactless pick-up, and we will continue to evolve and improve this model as we learn more — and we intend to add this option to future Shacks wherever the layout allows for it.

Shake Shack Drive-Thru

To further expand our guests' range of choices for pick-up, we plan to launch our first-ever drive-thru location in Orlando, Florida in 2021.

The Shake Shack drive-thru will be a modern version of the traditional drive lane experience, supported by technology-enhanced hospitality and innovative design – all while maintaining our core tradition of building community gathering places.

We view this as an opportunity to increase our addressable market.

We are targeting to launch between five and eight drive-thru locations by the end of 2022.

Delivery Service

Over the past several years, we executed various third-party delivery options in an effort to bring Shake Shack to our guests wherever they are and whenever they want.

Delivery is an essential part of how consumers order today, presenting an opportunity to reach more people and have them engage with Shake Shack on their terms.

With that in mind, we entered into an integrated delivery partnership with Uber Eats, expanded our existing integrated delivery partnerships with Postmates, DoorDash and Caviar and moved to a non-exclusive arrangement with Grubhub.

Additionally, we partnered with Goldbelly to offer cook-at-home Shackburger meal kits available through nationwide shipping.

We are also looking forward to an expanded rollout of delivery through our own channels, and as of December 30, 2020 had begun testing this functionality across three Shacks in Miami, Florida.

Through fiscal February 2021, this testing will have expanded to more than one hundred Shacks across multiple markets, and we expect a nationwide rollout to be largely completed by the end of the second quarter fiscal 2021.

Offering delivery through our own channels will help us create consistent and personal experiences, garner additional data and insights to allow for better service, and connect with guests more directly as part of our broader digital strategy.

We are also enhancing our

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engagement and raise the bar on operational excellence and overall guest experience.

Guests can now get their Shack:

(i) via mobile-ordering app;

(ii) kiosk-ordering at approximately one-third of our Shacks;

(iii) web ordering directly from their computer or mobile device;

(iv) delivery to their door;

and of course, (v) at their nearest Shack!

We are working hard to provide the hospitality of convenience.

An essential part of Shake Shack's digital strategy is the Shack App.

The Shack App was developed to elevate the in-Shack experience, aiming to provide shorter pick-up times and convenient mobile ordering.

Guests can order Shake Shack when they want it, right from their phone.

Then, it is cooked-to-order and timed to their arrival.

The Shack App features all our menu classics—beef burgers, flat-top dogs, chicken sandwiches, frozen custard, crinkle cut fries and more—and includes all the mobile ordering essentials:

guests can pick from their favorite orders;

keep track of food allergies;

access nutritional information;

see the latest events and promos;

connect to all Shake Shack social media channels and share feedback.

Knowing that consumers demand faster, easier and more personalized experiences, we enhanced and redesigned the Shack App to optimize the path to purchase.

These changes included:

(i) creating efficiencies in the checkout process;

(ii) anticipating guests needs and helping them through checkout;

(iii) providing a way to mark orders as favorites;

(iv) the ability to strategically message based on where the guest is in the order life cycle;

and (v) integrating enhanced location services like geo-tracking, allowing us to better time guests orders for pickup and deliver a superior product.

Approximately 60 Shacks across the country use a form of our kiosk ordering system.

The Shack kiosk was developed with an enhanced guest experience in mind, allowing us to serve more guests at peak times, with the goal of reducing lines, wait time and friction at every channel.

The Shack kiosk replicates the experience of the Shack App with a sharp aesthetic, an intuitive touch screen interface and an easy ordering process.

Guests simply select their food, place an order and choose to receive an alert via text or buzzer when their order is ready.

Hospitality Champs are stationed around the kiosks to assist guests and answer any questions.

Our web-ordering platform is available for the majority of our company-operated Shacks across the country.

Simply go to the Shake Shack website and place an order to be picked up later.

Guests follow the same pickup process as the Shack App.

With higher category limits (versus the Shack App) and the ability to check out as a guest, web-ordering offers yet another convenient order-ahead opportunity to our guests.

Over the past several years, we explored various delivery options in an effort to bring Shake Shack to our guests wherever they are and whenever they want.

Delivery is an essential part of how consumers eat today, presenting a unique opportunity to reach more people and have them engage with Shake Shack on their terms.

In 2019, we announced our national integrated partnership with Grubhub.

The partnership utilizes Grubhub's "Just In Time" technology aimed at providing faster delivery, fresher food and a winning guest experience.

We will also have access to enhanced tools to analyze performance and ordering trends, so we can engage with guests in new and more personalized ways.

Additionally, the partnership provides for joint marketing initiatives that will generate connections with new guests and drive order frequency for existing fans.

web and app functionality, with new and improved options, allowing for additional personalization and feedback, and offering new features like giving guests real-time order status.

Guest Insights

In an effort to better understand the preferences of our guests, in October 2020, we completed the first phase of an initiative to bring together disparate data and derive actionable insights through improved analytics and business intelligence.

The first phase was focused on supporting our digital strategies, with the aim of increasing sales across all channels, improving our transactional and marketing communications, and, most importantly, delivering an enhanced guest experience.

Going forward, our data initiative will focus on improvements to digital marketing and collecting guest feedback, allowing us to further refine our ability to serve our guests and create lasting experiences that attract new guests, keep existing guests coming back and ensure all guests return with increased frequency.

Contactless Mobile Payment Method

With the safety and convenience of our guests in mind, we started implementing a mobile contactless payment method in 2021, helping to make the in-Shack ordering experience safe and secure.

This new contactless payment method allows guests to pay through a secure payment device and utilize digital wallets on their own device.

This technology will give our guests an easier, faster and more convenient way to pay for their meals and is expected to be rolled out nationwide by the end of the second quarter 2021.

Our omnichannel approach has unlocked new opportunities for us to better understand and personalize both our menu offerings and preferred channels for guests.

We're continuing to explore the optimal balance of event-based marketing and targeted offerings to bring Shake Shack to anyone who wants it — whether our guests dine with us once a year or once a week.

We are in the process of ensuring all of our channels offer a uniform user experience so that a pickup order placed in the app looks and feels the same as a curbside order placed from a mobile browser.

No matter what channel or platform guests use, our goal is to bring them a customized and enhanced payment experience that suits their particular needs.

Our ongoing digital strategy in fiscal 2021 and beyond will continue to focus on these themes — safety, personalization and consistency — allowing us to expand on the omnichannel foundational work performed during fiscal 2020, and offer innovative digital interactions and dynamic personal relationships with our guests throughout every Shake Shack experience.

Site Selection

In choosing a new site, we focus first and foremost on the guest experience — so that each new location can be the ideal spot for people to gather together.

Our experienced development team actively leads the site selection process, and their recommendations are reviewed and approved by our Real Estate Committee, which follows a stringent approval process to ensure quality, fiduciary responsibility and overall adherence to our strategic growth goals.

Our analytical tools allow for extensive demographic analysis and data collection for both existing and new potential sites.

In addition to our in-house team of experienced real estate professionals, we also use a national real estate broker to manage a network of regional brokers in order to leverage external resources in pursuit of pipeline development.

Looking beyond, we are pursuing and developing sites where we can continue to implement our Shack Track concepts.

In a normal operating environment, a Shack will generally take between 14 and 22 weeks to build.

In fiscal 2020, the total investment cost of a new Shack — which includes costs related to items such as furniture, fixtures and equipment — ranged from approximately $1.4 million to $3.2 million, with an average investment cost of approximately $2.4 million, or approximately $2.0 million net of tenant improvement allowances received from our landlords.

We use a number of general contractors on a regional basis and employ a mixed approach of bidding and strategic negotiation in order to ensure the best value and highest quality construction.

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Engaging the Community

A Warm Community Gathering Place

Shacks are so much more than a place to get burgers, fries and shakes;

they’re places for the community to safely gather.

We place a high premium on connecting with our communities — whether through the physical design of our Shacks or by the local causes we support.

No matter the format or region, each Shack is specifically designed to be of its place and connect with its community.

The original Shake Shack in Madison Square Park, for instance, was designed to set the tone for a dynamic dialogue inside the park and the surrounding neighborhood.

Today, across our domestic and international locations, we secure vibrant sites and give them a hand-crafted, community-appropriate look by blending unique local features with our core Shake Shack design elements.

We have also developed a number of iconic brand identifiers, like wrap-around steel beams, open kitchens, large distinctive menu boards and comfortable, distinctive furniture that advances our sustainability initiatives.

We believe these identifiers are key components to the expression of the brand and the Shake Shack experience.

The overall atmosphere of our new Shacks evokes our original upbeat and relaxed park ambiance, combined with the fine dining experience that has become part of our brand's DNA.

We use high-quality tactile materials, warm lighting that highlights every table and textured wall, as well as seating layouts that encourage guests to relax and stay for a while.

Additionally, whenever possible, our Shacks feature either outdoor seating or easy access to a park or green space.

From time to time during the construction of certain new Shacks, we re-imagine the often-uninspiring plywood barriers that surround a construction site and use them as a canvas to introduce Shake Shack to the community prior to opening.

We also collaborate with local artists and designers to bring beautiful artwork and installations to our Shacks.

Each Shack is designed to convey a consistent brand message while also tailoring marketing efforts to its specific region.

We offer menu items that feature ingredients and beers specific to each Shack's community, and we often team up with local chefs and restaurants to offer our guests unique, collaborative menu items.

We participate in local celebrations and develop relationships within the community, helping position Shake Shack as a premium brand that is connected to its neighborhood.

Community and Charitable Partners

In addition to special events, we regularly serve our communities by hosting 25% Donation Days.

Supporters who participate in these fundraisers have 25% of their order totals donated to a local charitable non-profit.

In light of the impact the pandemic has had on our communities, in February and March of 2020, Shake Shacks across the country rallied to bring food donations to local hospitals and frontline workers.

Over the course of that two-month period, we provided over 11,000 meals to healthcare and frontline workers and nonprofits.

Additionally, as we have begun opening new domestic Company-operated Shacks, we have partnered with local charities in those areas to donate meals for every order placed on opening day.

In keeping with our commitment to give back to the communities we serve, we donated $100,000 to the Equal Justice Initiative in 2020, and we will continue to partner with them in 2021 as part of our evolving diversity, equity and inclusion initiatives as well as our employee engagement initiatives.

Engaging With our Guests

Shake Shack grew up alongside social media and we believe we have benefited from our close relationship with passionate fans who want to engage with us and share their real-time experiences.

We're proud to be recognized by media and influencers alike, garnering attention around the world.

Our positioning and brand voice, derived from the spirit, integrity and light-hearted nature of Shake Shack, are reinforced by our contemporary, responsible designs and hospitable team members who Stand For Something Good.

This identity also anchors our marketing efforts, with the heart of our marketing strategy to cultivate community and connect with guests both in our Shacks and through digital channels.

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Just as we design our Shacks as community gathering places, our social media strategy creates an online, on-brand community gathering place.

With our social media, we mirror the in-person hospitality a guest experiences when they visit a Shack.

We interact with fans primarily on Facebook, Instagram, Twitter and TikTok through comments, replies and the use of user-generated content;

a quick search of "#shakeshack" on Instagram reveals over 1 million organic posts from our fans.

In addition to social media, we also connect with our guests by sending out menu item alerts, local event invites, new Shack opening information and other relevant Shake Shack news through our email marketing program.

Promotions and Events

Throughout fiscal 2020 we continued to extend our brand by collaborating with celebrated chefs, developing new creative concepts, unveiling exciting promotions and participating in special events to drive brand awareness and engage with our guests.

These initiatives were key to harnessing the growing strength of the Shake Shack brand and helping it stand out through unique moments and activations.

Some notable collaborative promotions and events include:

▪ Brandon Maxwell Fashion Show — For the third time, we catered front and back of house for the Brandon Maxwell Spring Fashion Show at the American Museum of Natural History.

Shake Shack has become a staple at this event and saw engagement from top tier influencers such as Bella Hadid.

▪ Postmates x Couchella Delivery Promotion — After a postponement due to COVID-19, Coachella Valley Music and Arts Festival partnered with YouTube to stream a documentary called Coachella:

20 Years In The Desert .

During this festival weekend, we partnered with Postmates to offer a free ShackBurger with orders over $20 for guests to enjoy, while hosting their own watch party.

In addition, we offered our Shake Shack fans a free month of Postmates Unlimited.

▪ Goldbelly DIY Kits — We partnered with Goldbelly to bring cooking kits of Shake Shack’s ShackBurger and SmokeShack nationwide.

These offerings, which came in an 8 and 16 pack, marked the first time that fans could cook and enjoy Shack favorites from the comfort of their own home.

▪ Shack Camp — For the first time in 2020, we launched Shack Camp, providing families with our Shack Camp Box that included six weeks’ worth of activities to keep families entertained from home — with a portion of proceeds going to the Fresh Air Fund's virtual summer program.

The program also included six IGTV videos for families to follow each week.

▪ Shake Shake:

UberEats x Shake Shack — A campaign in partnership with UberEats, we created a new Tik Tok dance called “The Shake Shake” — a fun new way to shake hands during this “low contact” time.

To drive sales, we offered BOGO Shakes via UberEats, plus a free Shake for EatsPass members.

▪ Election Campaign — For this year’s election, we had a number of initiatives to help educate voters and support the electoral process.

We partnered with Vote.org on a content series to help inform and educate our social community on resources and voting options.

We also partnered with Uber Eats to distribute 5,000 ShackBurgers via Uber Eats Food Trucks to particularly crowded polling stations and gave guests free fries to celebrate early voting.

Additionally, for the first time ever, we offered our workers Voting PTO and Poll Worker PTO policies.

Capitalizing on Our Brand Awareness

Since 2004, we have become a globally recognized brand with significant consumer awareness relative to our current footprint of 311 Shacks.

Shake Shack has become a New York City institution, a vibrant and authentic community gathering place delivering an exceptional experience to our loyal guests.

One great advantage for Shake Shack has been our birthplace and headquarters in New York City, and our origination from a fine dining company.

This gives us tremendous media and brand power, often outweighing our relative size.

Shake Shack was awarded the Restaurant Business 2020 Pacesetter Award — an honor given to a growth chain with a sustained track record of success — and made Restaurant Business's Top 500 Chains.

Additionally, Shake Shack was named in Fast Casual's Top 100 Movers and Shakers, was among the finalists in the 2019 Shorty Awards' Best in Food & Beverage Sites and Apps, was on Nation's Restaurant News's 2018 Top 10 Fastest Growing Chains and was named on Foodable's "brand of the year" list as part of their 2018 Top Emerging Brands.

We believe this brand awareness will continue to fuel our growth in both new and existing markets.

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Media, Product Placement and Influencers

Shake Shack’s unique positioning has helped us garner robust media coverage across food, lifestyle, business and trade publications.

We have also been fortunate to receive considerable product placement in movies, TV shows and other media.

In addition, we have been featured across various media outlets, allowing us to increase brand awareness.

Shake Shack’s popularity and cultural relevance is reflected in our countless celebrity and influencer fans across Hollywood, music, fashion, sports and more.

Culinary Innovation

We embrace our fine-dining heritage and are committed to sourcing premium ingredients, such as all-natural, hormone and antibiotic-free beef, chicken and pork, while offering excellent value to our guests.

Our core menu is inspired by the best versions of the classic American roadside burger stand.

From time to time we supplement with limited-time offers while also looking ahead to potential new categories we may consider adding to the menu over time.

We are committed to culinary creativity and excellence, collaborating with award-winning chefs, talented bakers, farmers and artisanal purveyors who work with us in different and exciting ways.

As we grow across the country, we are excited to continue and grow these collaborations with the talented chefs and suppliers who are leading our industry.

While we’re extraordinarily proud of our legacy, and our position today, we will not rest on our laurels.

We will continue to look for the best ingredients and culinary partners, so we can exceed our guests' expectations in every aspect of their experience.

Shake Shack's unique value proposition is partially defined by our roots in fine dining.

We embrace that heritage and are committed to sourcing premium ingredients — such as all-natural, hormone and antibiotic-free beef, chicken and pork — while offering excellent value to our guests.

Our core menu is inspired by the finest versions of the classic American roadside burger stand.

Occasionally, we supplement our menu with limited time offers, and we experiment with potential new categories we may consider adding to the menu over time.

We are committed to culinary creativity and excellence, collaborating with award-winning chefs, talented bakers, farmers and artisanal purveyors, each of whom bring their unique skills and expertise to the Shake Shack experience.

As we grow across the country, we are excited to expand these collaborations with industry-leading chefs and suppliers.

While we’re extraordinarily proud of our legacy and current position, we will continue to look for the best ingredients and culinary partners, in an effort to exceed our guests' expectations in every aspect of their experience.

Our menu focuses on premium food and beverages, carefully crafted from a range of classic American foods at more accessible price points than full-service restaurants.

Burgers & Chicken

Our burgers are made with a proprietary whole-muscle blend of 100% all-natural, hormone and antibiotic-free Angus beef, ground fresh, cooked to order and served on a non-GMO potato bun.

We take great care in the preparation of our burgers—from sourcing, to handling, to cooking—to ensure that their taste and quality is second to none.

Our signature burger is the ShackBurger ® , which is a four-ounce cheeseburger topped with lettuce, tomato and ShackSauce™.

We take great care in the preparation of our burgers — from sourcing, to handling, to cooking — to ensure their taste and quality is second to none.

Our signature burger is the ShackBurger ® , a four-ounce cheeseburger topped with lettuce, tomato and ShackSauce™.

Our burger offerings also include the SmokeShack ® , 'Shroom Burger™ (a vegetarian burger), Shack Stack ® and Hamburger.

Our Chick’n Shack™ is a 100% all-natural, hormone and antibiotic-free cage-free chicken breast, slow cooked in buttermilk herbs, hand-battered, hand-breaded and crisp-fried to order.

Our Chick'n Bites—which we added to our core menu in 2019—are made with our with all-natural, antibiotic-free whole muscle that is sous-vide cooked for optimum flavor, moisture and texture, making them extra juicy and tender.

Our Chick’n Shack™ is a 100% all-natural, hormone-free, antibiotic-free and cage-free chicken breast, slow cooked in buttermilk herbs, hand-battered, hand-breaded and crisp-fried to order.

Our Chick'n Bites are made with all-natural, antibiotic-free whole muscle that is sous-vide cooked for optimum flavor, moisture and texture.

Crinkle Cut Fries

Our classic and passionately loved crinkle cut fries are made from premium Yukon potatoes and are prepared 100% free of artificial trans-fat.

The tactile pleasure and emotional attachment that our guests have to the crispiness and ridges of our crinkle cut fries is a nostalgic ode to the roadside burger stand of yesteryear.

Guests can also enjoy our Cheese Fries, which are our crinkle cut fries topped with a proprietary blend of cheddar and American cheese sauce.

Shake Shack was born as a hot dog cart in 2001and we’re proud to honor that legacy by offering a premium hot dog category.

Our classic, passionately beloved crinkle cut fries are made from premium Yukon potatoes and are prepared 100% free of artificial trans fats.

So many of our guests love the crispiness and ridges of our crinkle cut fries — a nostalgic ode to the roadside burger stand of yesteryear.

Guests can also enjoy our Cheese Fries;

our crinkle cut fries topped with a proprietary blend of cheddar and American cheese sauce.

Shake Shack was born as a hot dog cart in 2001 and we’re proud to honor that legacy by continuing to offer a premium hot dog category.

Both our beef hot dogs and our chicken dogs are made from 100% all-natural, hormone and antibiotic-free beef and chicken.

Our signature Shack-cago Dog ® is our nod to the classic Chicago-style hot dog, topped with Shack relish, onion, cucumber, pickle, tomato, sport pepper, celery salt and mustard.

Frozen Custard

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Shakes and Frozen Custard

Our premium, dense, rich and creamy ice cream, hand-spun daily on-site, is crafted from our proprietary vanilla and chocolate recipes.

We use only real sugar (no corn syrup) and milk from dairy farmers who pledge not to use artificial growth hormones.

Shakes remain our guests' favorite in this category and are scooped and spun to order.

Shakes remain our guests' favorite in this category, and they're scooped and spun to order.

Our concretes are made by blending frozen custard at high speed with premium mix-ins.

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Beer, Wine and Beverages

Our proprietary ShackMeister ® Ale, brewed by Brooklyn Brewery, was specifically crafted to complement the flavor profile of a ShackBurger.

At select locations, we also offer local craft beers tailored to each Shack's geography.

Our Shack Red ® and Shack White ® wines are sourced and produced exclusively by Gotham Project, which provides our guests with premium beverage options not commonly found in our industry—a nod to our fine dining heritage.

In 2019 we launched our canned red, white and rosé wines at our Shacks serving alcohol.

In addition, we serve Abita Root Beer, Shack-made Lemonade, organic fresh brewed iced tea, Fifty/Fifty™ (half lemonade, half organic iced tea), Stumptown cold brew coffee, Honest Kids organic apple juice and Shack| 2 0 ® bottled water, from which 1% of sales goes towards supporting the clean-up of water sources around the world.

Dogs Are Welcome Too

We know that many dog owners treat their four-legged friends as family members.

At our first Shack in Madison Square Park, we wanted to include dogs as part of the community gathering experience and developed the "Woof" section on our menu.

Since then, we’ve expanded the “Woof” menu to additional locations.

ShackBurger dog biscuits and vanilla custard make up our signature Pooch-ini®, which is available at Shacks with an outdoor space.

We also serve dog biscuits to-go, handcrafted exclusively for us by a New York-based bakery.

Our proprietary ShackMeister ® Ale, brewed by Brooklyn Brewery, was specifically crafted to complement the ShackBurger's flavor profile.

At select locations, we also offer local craft beers.

Our Shack Red ® and Shack White ® wines are sourced and produced exclusively by Gotham Project, providing our guests with premium beverage options not commonly found in our industry — a nod to our fine dining heritage.

We also serve canned red, white and rosé wines at our Shacks that serve alcohol.

In addition, we serve Abita Root Beer, Shack-made Lemonade, organic fresh brewed iced tea, Fifty/Fifty™ (half lemonade, half organic iced tea), Stumptown cold brew coffee, Honest Kids organic apple juice and Shack| 2 0 ® bottled water, from which 1% of sales help support the clean-up of water sources around the world.

The Innovation Kitchen

Our Innovation Kitchen is located on the lower level of the West Village Shack and connected to our Home Office, which is the hub of all menu development at Shake Shack.

This dedicated space allows our culinary team to get even more creative, dig deeper into our fine dining roots, collaborate with other chefs and explore new opportunities as we continue to scale.

The West Village Shack’s menu has all the classic items and also features a rotating list of items from the Innovation Kitchen, with guest-favorite test items potentially becoming permanent menu items.

This space also allows us to house our quality assurance and culinary teams together, ensuring that every single item on our menu meets our strict standards.

To explore exciting new menu options for our guests, our Innovation Kitchen is located on the lower level of the West Village Shack and connected to our home office — the hub of Shake Shack's menu development.

This dedicated space allows our culinary team to get even more creative, dig deeper into our fine dining roots, collaborate with other chefs and explore new opportunities as we continue to grow.

The West Village Shack’s menu has all of our classic items and also features a rotating list of items from the Innovation Kitchen, with guest-favorite test items potentially becoming permanent menu items.

This space also allows us to house our quality assurance and culinary teams together, ensuring that every item on our menu meets our strict standards.

Shack-Wide Limited Time Offerings ("LTO")

We continued our LTO program through fiscal 2019, and featured a new, premium burger or chicken menu item for varying time periods throughout the year.

In response to COVID-19, we briefly simplified our menu during the first half of fiscal 2020.

However, in the third quarter, we recommenced our rotating LTO calendar — with highlights including new chicken flavors, shakes and lemonades.

Our LTO program generally features a new, premium burger or chicken menu item for varying time periods throughout the year.

Some of our notable LTOs throughout 2020 were:

Game of Thrones – In honor of the final season of Game of Thrones, we launched a limited-edition #ForTheThrone menu.

As part of this promotion, we introduced our icy Dragonglass Shake (a minted white chocolate custard topped with shards of Dragonglass) and our Dracarys Burger (a double Monterey Jack cheeseburger, topped with a Shack Sauce and finished with slabs of bacon).

Our limited-time menu and Madison Square Park signage was translated in Valyrian, as well as offering limited edition shake cups at Shacks nationwide.

Shake of the Month — Throughout 2019 we offered our guests a new shake each month, which included flavors such as:

Tiramisu, Salted Vanilla Toffee, Cherry Blossom and Pumpkin, to name a few.

Additionally, and similar to past years, we featured our trio of holiday shakes during November and December, which included Christmas Cookie, Coconut Snowball and Chocolate Peppermint.

Lemonade — In addition to a variety of shakes offered throughout the year, we also featured new lemonades at various points in time.

Throughout 2019, these flavors included Coconut Mango, Strawberry Mint and Cranberry Apple Ginger Lemonade.

▪ Hot Chick’n, Bites, and Fries — In September 2020, we brought back Hot Chick’n, a perennial fan favorite, and added new Hot Spicy Fries and Hot Chick’n Bites to the menu with our new Ranch sauce.

These items were offered in three spice levels:

hot, extra hot and fire, with the latter exclusively available through our digital channels.

▪ Featured Shakes — Throughout 2020 we offered our guests a new shake corresponding to various time periods throughout the year, including flavors like Cookie Butter, Malted Milk Chocolate, Frozen Hot Chocolate, S’Mores, Cherry Blossom and Pumpkin and Winter Citrusade, to name a few.

Additionally, we featured our trio of holiday shakes during November and December, which included Christmas Cookie, Candy Cane and Chocolate Spice.

▪ Lemonade — In addition to a variety of shakes offered throughout 2020, we also featured new lemonades, including Cherry Blossom, Pink and Winter Citrusade Lemonade.

In the first quarter of fiscal 2021, we brought a regional favorite from our South Korean Shacks to the United States for the first time:

a Spicy Korean-Style Fried Chick'n sandwich featuring a Gochujang-glazed chicken breast topped with roasted sesame seeds, over white kimchi slaw.

A version of this menu item was on the LTO menu in our South Korean Shacks in 2020, and it demonstrates how our international presence can enhance and elevate our brand as we share exciting, innovative menu items across the world.

Although the pandemic resulted in a short-term focus on simplification during early 2020, we hope to return to more consistent limited time offerings in 2021, with a culinary calendar that introduces bold new chicken flavors, innovation around our beverage and custard program, and expanded testing of our new Veggie Shack.

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Exclusive Offerings

In addition to supplementing our menu with LTOs, we also seek to create new and exciting offerings that are inspired by local favorites or special events.

Some examples of our exclusive offerings from fiscal 2019 include:

Veggie Shack — Last year we launched our first veggie burger at select Shacks and continued its availability at those Shacks throughout 2019.

The Veggie ShackBurger is made with black beans, brown rice and roasted beets topped with provolone cheese, lettuce, tomato, onions, pickles and vegan mustard mayo.

It can also be made entirely vegan by removing the cheese and substituting a gluten free bun or lettuce wrap.

Additionally, we will be rolling out a new Veggie Shack blend in fiscal 2020.

Golden State Double — Available at our Shacks in the Bay Area, we offer the Golden Gate Double Shack, which features two grass-fed beef patties from Northern California’s Richards Grassfed Beef.

Manila Ube Shake — We opened our first Manila Shack at Central Square in the Philippines.

In addition to the Shack classics, we also offer the Manila exclusive Ube Shake — vanilla frozen custard blended with ube, and Calamansi Limeade, a local twist on a Shack fave.

We also offer Manila-only concretes, including:

Shack Attack — chocolate frozen custard, Buck’s original brownie, Auro chocolate chunks, fudge sauce, topped with chocolate sprinkles;

Calamansi Pie Oh My —v anilla frozen custard, blended with a slice of Wildflour calamansi pie;

and Uuube-by Baby — vanilla frozen custard, coconut marshmallow, ube cookie, toasted coconut, sago pearls, crispy pinipig and leche flan.

ATX Wagyu Burger — At our Austin Shacks, we teamed up with Crowd Cow and launched a special burger for the SXSW festival.

The ATX Wagyu featured a Crowd Cow Texas Wagyu blend topped with cheddar cheese, griddled shallots and grainy mustard mayo.

Collaborations and Partnerships

Our fine dining heritage gives us access to collaborations and partnerships with chefs and events at the forefront of the culinary world.

We devote significant resources to menu innovation and are frequently invited to participate and compete in chef events such as the South Beach Wine and Food Festival's Burger Bash, which allows us to test out new creations that can often lead to the introduction of new items.

Some of our more notable collaborations in fiscal 2019 include:

Egg Katsu Sando and Morning Maple Latte — We partnered with pastry chef Dominique Ansel in March 2019 and added two brand new limited-edition items to our West Village Shack.

Inspired by Japanese sandwiches, the Egg Katsu Sando featured a tender steamed egg, breaded in panko and crisp fried, served with miso-honey mayo on Dominique Ansel milk bread.

In addition to the sandwich, we featured the Morning Maple Latte—made with La Colombe medium roast coffee with steamed maple milk—served either hot or cold.

Oh Ma-Mey — In anticipation of our first Shack opening in Mexico City, we collaborated with local chef Elena Reygadas of the CDMX hotspot Rosetta to bring us the Oh Ma-Mey Concrete, made with flavors of candied lemon, spice cookies, and local mamey fruit.

The Chairman Shack — In celebration of our first anniversary in Hong Kong, we teamed up with chef Danny Yip, owner of The Chairman, and created the Chairman Shack, which featured an Angus beef patty topped with12-hour slow-cooked caramelized onion, griddled ox tongue, pickled radish, Sichuan pepper, fermented bean sauce and butter lettuce.

In addition to the burger, we also offered an ostmanthus and goji berry shake.

Engaging With Our Guests

Shake Shack grew up alongside social media and we believe we have benefited from our close relationship with passionate fans who want to engage with us and share their real-time experiences.

Shake Shack continues to be recognized by media and influencers alike, garnering attention around the world.

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This identity also anchors our marketing efforts.

We believe that our guests recognize Shake Shack as a community gathering place and, thus, the heart of our marketing strategy is to cultivate that community and connect with our guests both in our Shacks and through digital channels.

Digital and Social Media

Consistent with the ways in which we design our Shacks as community gathering places, we execute a digital media strategy that creates an online, on-brand community gathering place.

With our social media, we mirror t he in-person hospitality that a guest experiences when they visit a Shack.

We interact with fans on Facebook, Instagram and Twitter through comments, replies and the use of user-generated content;

a quick search of "#shakeshack" on Instagram reveals over 1 million organic posts from our fans!

In addition to social media, we also send out menu item alerts, local event invites, new Shack opening information and other relevant Shake Shack news through our email marketing program.

Promotions and Events

Throughout fiscal 2019 we continued to extend our brand through various innovations including:

collaborations with other chefs;

new creative concepts;

exciting promotions;

and participation in special events to drive brand awareness and engage with our guests.

These initiatives were a key part to harnessing the growing strength of the Shake Shack brand while also differentiating it through unique moments and activations.

Some notable collaborative promotions and events include:

EMP Winter House Pop-Up — In January 2019 we partnered with Eleven Madison Park for their Winter House in Aspen, Colorado to serve our alpine skier fans.

For these three days, we featured our Alpine Swiss Shack and truffle fries.

For our fans back in New York City, we brought back some ski vibes with our very own yurt that served as a warming hut near our Madison Square Park Shack.

National Custard Day — To celebrate National Custard Day on August 8th, we treated our guests to a scoop of custard on us with any $5+ order on the Shack App or via web ordering.

#SHACKUP — To mark the occasion of our nationwide delivery rollout with Grubhub, we launched our #SHACKUP campaign.

This campaign featured an elevated Shake Shack experience highlighting key delivery moments, such as treat yourself, family dinner, date night, celebrating with friends and ordering for the office team.

We partnered with various social influencers and offered our guests free delivery at our Shacks using Grubhub through the end of the year.

EEEEEATSCON — In October 2019 we attended the EEEEEASTSCON food festival and teamed up with Uncle Boons, the NoLiIta-based Thai restaurant.

We served up our take of a ShackBurger on Phat Bao Horapha—a ground beef patty topped with Thai bird's eye chili, Thai basil, griddled peppers and a crispy egg.

We also featured a coconut concrete sundae, which combined our signature concrete with Uncle Boon's toasted coconut ice cream.

Black Fryday Scratch-offs — From November 27th through December 1st, we gave out scratch-off tickets that were redeemable either on the Shack app or through Grubhub.

The various prizes included free Gruhub delivery, free fries, a free burger or a year of free Shake Shack (valued at a $2,500 Shake Shack gift card).

Engaging The Community

Shacks are so much more than a place to get a burger, some fries and a shake;

they’re places for the community to gather.

We place a high premium on connecting with our communities—whether through the physical design of our Shacks or by the local causes we support.

Today, we continue to evolve our timeless designs through the engagement of different designers from around the country.

We continue to develop our prototypes, “classic” Shack designs, free-standing, in-line and unique formats.

We are constantly pushing to be more creative and nimble, allowing us to ramp up our growth while making the Shack experience even more dynamic and accessible, as well as adapting to smaller footprints, proving our versatility and ability to enter and flourish in a variety of spaces.

In 2019 we entered more food courts, outlet malls and other formats, continuing to adapt our classic Shack design to new types of

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space while delivering the same winning guest experience.

Additionally, we further innovated our Shack design in the digital space by introducing a whole new guest flow with our kiosk ordering environment, which we continue to design new Shacks incorporating the kiosk into their layout.

We designed an optimized kitchen, using a split-kitchen format that aims to allow for greater output during peak times.

As we further immerse ourselves in the digital space and adapt to our delivery integration, we continue to evolve, experiment and innovate around order capabilities and guest flow.

Throughout fiscal 2019, and looking forward, we continued to enhance our design capability, simultaneously designing some of our most dynamic Shacks while gaining efficiency in the design process to prepare for the scalability of development ahead.

Designing A Warm Community Gathering Place

Although we have a variety of Shack formats, spread across a variety of regions, each is specifically designed to be of its place and connect with its community.

The original Shake Shack in Madison Square Park, for instance, was designed to set the tone for a dynamic dialogue inside the park and the surrounding neighborhood.

We have developed a number of iconic brand identifiers, including wrap-around steel beams, open kitchens, large distinctive menu boards and tables made from reclaimed materials.

We believe that these identifiers are key components to the expression of the brand and the experience of Shake Shack.

The overall atmosphere of our new Shacks evokes our original park kiosk, as well as the best of the fine dining experience.

We use high-quality tactile materials, warm lighting that focuses on every table and highlights the textured walls and seating layouts that encourage guests to relax and stay for a while.

A typical domestic company-operated Shack is generally between 3,000 and 4,000 square feet with interior seating for between 75 and 100 guests.

Additionally, whenever possible, our domestic company-operated Shacks feature either outdoor seating or easy access to a park or green space.

From time to time during the construction of certain new Shacks, particularly those in new markets, we re-imagine the often-uninspiring plywood barriers that surround a construction site and use them as a canvas to begin the process of introducing Shake Shack to the community prior to our opening.

We also collaborate with local artists and designers to bring beautiful artworks and installation to our Shacks, including our first Shacks in the Philippines and Mexico, which we opened this year.

Site Selection

In choosing a new site, we focus first and foremost on the guest experience—seeking to ensure that each new location will be the choice spot for people to gather together.

Our site selection process is actively led by our experienced development team, and its recommendations are reviewed and approved by our Real Estate Committee, which meets regularly and follows a stringent approval process to ensure quality, fiduciary responsibility and overall adherence to our strategic growth goals.

We use analytical tools for extensive demographic analysis and data collection for both existing and new potential sites.

In addition to our in-house team of experienced real estate professionals, we use a national real estate broker to manage a network of regional brokers in order to leverage external resources in pursuit of pipeline development and consistent deal flow.

A typical Shack takes between 14 and 20 weeks to build.

In fiscal 2019, the total investment cost of a new Shack, which includes costs related to items such as furniture, fixtures and equipment, ranged from approximately $1.5 million to $4.3 million, with an average investment cost of approximately $2.2 million, or approximately $1.9 million net of tenant improvement allowances received from our landlords.

We use a number of general contractors on a regional basis and employ a mixed approach of bidding and strategic negotiation in order to ensure the best value and highest quality construction.

We continue to evolve the Shack experience by partnering with different designers around the country.

From our “classic” Shack designs, to our free-standing and in-line designs, to our other unique formats, we are constantly pushing ourselves to be more creative and nimble.

This process has allowed us to ramp up our growth while making the Shack experience even more dynamic and accessible.

It’s also helped us adapt to smaller footprints and prove our ability to enter and flourish in a variety of spaces.

In 2019, we entered additional food courts, outlet malls and other formats, continuing to adapt our classic Shack design to new types of spaces.

Additionally, we designed an optimized kitchen, using a split-kitchen format that allows for greater output during peak times.

As we further immerse ourselves in the digital space and adapt to our delivery integration, we continue to evolve, experiment and innovate

In addition to supplementing our menu with Shack-wide LTOs, we also seek to create new, exciting offerings that are inspired by local favorites or special events.

Some examples of our exclusive offerings from 2020 include:

▪ New Veggie Shack — The Veggie Shack is made with greens, grains, and herbs, served on a wheat bun topped with avocado, roasted tomato, shredded lettuce and tangy lemon mayo.

The Veggie Shack was available for a limited time at select Shacks.

▪ Black Truffle Menu — In December, we paired up with specialty food purveyor Regalis Foods to bring a Black Truffle Menu to select Los Angeles and New York City Shacks for a limited time.

Our Black Truffle Menu featured new items made with Regalis’ USDA Organic Black Truffle Arbequina Oil — a natural truffle product, made from Spanish black truffles and California extra virgin olive oil.

▪ Bar Sardine Collab — We teamed up with NYC Restauranteur Gabriel Stulman to bring the return of the Bar Sardine Burger.

The one-day-only collab at the Madison Square Park Shack gave fans an early taste of the burger before it landed on the menu at Fairfax.

And as a way to give back to our hometown New York City ("NYC"), net proceeds benefited the NYC-based ROAR, Relief Opportunities for All Restaurants.

GROWTH STRATEGIES

Even amidst the challenges of fiscal 2020, we added 36 net new system-wide Shacks and reached 311 Shacks worldwide — and going forward, we believe we are well-positioned to continue significant, sustainable financial growth.

We plan to execute our growth strategies while remembering to Stand For Something Good in everything we do.

Opening New Domestic Company-Operated Shacks

We believe our greatest opportunity for growth lies in opening new, Company-operated Shacks.

We waited nearly five years to open our second Shack, and a little over a decade since then, we are still in the early chapters of our story.

We see a tremendous whitespace opportunity to expand in both new and existing U.S.

markets, and we will continue to invest in infrastructure with an eye toward growing rapidly, but with discipline.

In the long-term, we believe we have the potential to grow our current domestic Company-operated Shack footprint to at least 450 Shacks;

for comparison, we have only opened 41% of that number through the end of fiscal year 2020.

Of course, the rate of future Shack growth in any particular period is inherently uncertain and is subject to numerous factors beyond our control.

As a result, we do not currently have an anticipated timeframe for such expansion.

In response to COVID-19, new design and construction of future Shacks was temporarily suspended and openings were put on pause in early 2020.

With the gradual and sequential recovery of sales throughout the year, we restarted our new Shack development during the second quarter of 2020.

Domestically, we expanded our Company-operated footprint by opening 20 new Shacks in 2020 — a 12% increase in our domestic Company-operated Shack count from the prior fiscal year.

As of December 30, 2020, we had 183 domestic Company-operated Shacks.

We believe we have a versatile real estate model built for growth;

our disciplined expansion strategy is designed to leverage our business model's strength and our brand awareness.

We continue to be encouraged by the success of our multi-format strategy which includes but is not limited to free-standing pads, urban centers, food courts, shopping centers and more.

As we look to 2021, we intend to return to the full development schedule that was in place before COVID, and we are targeting between 35 and 40 new Company-operated Shacks.

We hope to launch in new cities like Portland, Tampa, Indianapolis and Boulder, while also developing a deeper presence in California, the Midwest and some of our other strong markets on the east coast.

We aim to build a balanced set of formats across our portfolio, and to keep diversifying across markets as we look to ramp up Shack unit development in 2022 and beyond.

To that end, we are planning to open a total of 45 to 50 new domestic Company-operated Shacks in fiscal 2022.

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around order capabilities and guest flow.

Throughout fiscal 2019, we enhanced our design capability, simultaneously designing some of our most dynamic Shacks while gaining efficiency in the design process to prepare for the scalability of development ahead.

Unique Touches

Each Shack focuses on conveying a consistent national brand message while also tailoring marketing efforts to its specific region.

We have menu items that feature ingredients and beers that are specific to each Shack's community.

We also tailor our marketing efforts by participating in local celebrations and developing relationships within the community, which helps position Shake Shack as a premium brand that is connected to its neighborhood.

Before the opening of a new Shack, we will sometimes construct hoarding around the location, and incorporating designs from local artists.

From a culinary perspective, we often team up with area chefs and restaurants to offer unique, collaborative menu items to our guests.

We also create signature concretes—dense frozen custard blended at high speed with mix-ins-distinct to the region, using locally—sourced mix-ins from artisanal producers whenever possible.

Community and Charitable Partners

Throughout the month of June, we celebrated the LGBTQ community, with team members marching in Pride parades across the country.

We also offered our Pride Shake, a cake batter shake topped with glitter sprinkles.

We released our limited-edition 2019 Pride capsule collection, which included a super soft tee, rainbow-striped crop top, rainbow burger cap, Bombas Pride socks and an ISLYNYC Burger Chain necklace.

And in keeping with our commitment to give back to the communities we serve, we also donated $25,000 to the Trevor Project, the national 24-hour, toll-free confidential suicide hotline for LGBTQ youth.

Outside of special events, each Shack has a local charity partner to which it donates 5% of the sales from its Pie Oh My concrete.

In addition, we regularly serve our communities by hosting 25% Donation Days—we designate a Monday or Tuesday for our partners to promote.

Then, supporters who attend the fundraiser will have 25% of their order totals donated back to their charitable organization.

Since 2012, Shake Shack has annually held The Great American Shake Sale™ to raise money and awareness for childhood hunger.

During The Great American Shake Sale, we encourage guests to donate $2 in exchange for a free shake (a $5 value) at their next visit.

100% of these donations go directly to Share Our Strength's No Kid Hungry campaign.

Operating With Purpose

With the level of growth we have experienced in the past years, and the increase in the number of our Shack openings annually, we recognize the importance of building to scale.

While we strive to simplify our operations, we will never sacrifice quality or our ability to innovate with regards to our products, experience and technology.

We are focused on standardizing processes while ensuring that we stay connected to our communities and that we deliver on our promise of a great guest experience.

In short, the bigger we get, the smaller we have to act.

Our Stand For Something Good vision guides us in how we source and develop our ingredients—working with best-in-class suppliers across our supply chain, and always looking for the best ways to provide top quality food at an excellent value.

We pride ourselves on sourcing premium ingredients from like-minded ranchers, farmers and food purveyors, using real premium ingredients like 100% all-natural proteins with no hormones or antibiotics, that are humanely raised and source-verified.

In 2018, we received an "A" grading from the Natural Resources Defense Council in their Chain Reaction Report for sourcing beef raised without any antibiotics (one of only two burger chains to have done so).

In addition, for the past three years, we have used cage-free eggs in all of our food.

For more information, our animal welfare policy can be found on our Shake Shack website.

We have a domestic regional strategy for ground beef production to ensure that we are always serving freshly ground and never frozen beef at our domestic Shacks.

As we've grown domestically, we have eight butchers spread throughout the country who produce our burgers on a daily basis.

We will continue to partner with regional suppliers in new markets as we grow.

Growing Our Licensed Shack Business

Beyond our Company-owned Shacks, we also hope to keep growing our licensed portfolio by expanding further domestically and internationally.

Historically, this strategy has been a low-cost, high-return method to grow our brand awareness and increase cash flow.

As of December 30, 2020 we had 128 licensed Shacks, of which 106 were international and 22 were domestic in the U.S.

International Licensed Operations

In fiscal 2020, we opened 22 international Shacks and closed six international Shacks.

The 22 new international Shacks included four Shacks in mainland China, two in Hong Kong, four in the United Arab Emirates, four in South Korea, four in Singapore, two in Mexico, one in Turkey, and one in the Philippines.

We believe our brand's strength continues to reinforce opportunities for global expansion.

In the near-term, a meaningful part of our international business strategy remains focused on the Chinese and broader Asian markets.

In fiscal 2020, we increased the Asian market Shack count by approximately 35%.

In fiscal 2020, we also expanded our partnership with licensee Maxim’s Caterers Limited which targets a development agreement of 15 Shacks in South China by 2030, including locations in Shenzhen, Guangzhou and more.

Through this expanded partnership, this agreement increases development targets for mainland China to 55 Shacks by 2030 — building upon the seven Shacks that were open as of December 30, 2020, including locations in Beijing and Shanghai.

These partnerships with our international licensed counterparts are great opportunities for our team to grow, learn and bring back insights to the broader Company.

Given our position in New York and the success of our existing licensed Shacks at home and abroad, we continue to attract interest from potential licensees around the world.

We see significant opportunities to expand our licensing footprint in existing and new international markets as our team and supply chain matures.

Domestic Licensed Operations

In fiscal 2020, we opened one domestic licensed Shack in the Salt Lake City Airport (in September) and closed one domestic licensed Shack.

Our licensed airport and stadium business continued to be deeply impacted by the pandemic through the end of fiscal 2020, with only 14 of the 22 domestic licensed Shacks open as of December 30, 2020.

In the meantime, we continue to work with domestic licensed operating partners to support new openings as they arise.

Growing Same-Shack Sales

In addition to opening new Shacks, we continue to focus on improving our same-Shack sales performance by providing a dynamic, personalized guest experience that includes new seasonal and Shack-specific offerings, technological upgrades like the Company-owned app and web ordering/delivery, thoughtful integration with local communities and excellent standards of hospitality.

We also continue to innovate our core menu to deliver fresh offerings, while maintaining the standard of our signature items.

At Shake Shack, we believe our success depends upon maintaining efficient and nimble operations.

Just as we invest in our menu options and in-Shack experience, we take special care to ensure our supply chain, distribution, quality assurance, and management information systems are constantly being evaluated and streamlined to deliver smooth results.

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We have a limited number of domestic suppliers for our major ingredients, including beef patties, chicken, potato buns, custard, Portobello mushrooms and cheese sauce.

In fiscal 2019 , we purchased all of our (i) ground beef patties from eight suppliers, with approximately 50% of our ground beef patties from one supplier;

(ii) chicken breast from one supplier ;

Sourcing and Supply Chain

Our Stand For Something Good vision isn't just a slogan — it indicates how we source and develop our ingredients.

We work with best-in-class suppliers across our supply chain, and we're always looking for the best ways to provide top quality food at an excellent value.

We pride ourselves on working with like-minded ranchers, farmers and food purveyors to source premium ingredients like 100% all-natural proteins with no hormones or antibiotics, that are humanely raised and source-verified.

In fact, we are committed to sourcing 100% cage-free eggs for our global supply chain by 2025, and we're already sourcing 100% cage-free eggs for both the US and UK supply chains.

We have also committed not to serve foie gras in our Shacks.

Another Shake Shack principle is that we aim to deliver menu items that are not only delicious, but nourishing.

In 2020, for example, we worked with our pickle suppliers to remove artificial preservatives from our pickle recipe.

Our domestic regional strategy for ground beef production ensures we consistently serve freshly ground beef at our domestic Shacks.

As we've grown domestically, we have eight butchers around the country who produce our burgers on a daily basis.

As we grow, we will continue to partner with regional suppliers in new markets.

To ensure dependable quality, we have a limited number of domestic suppliers for our major ingredients, including beef patties, chicken, potato buns, custard, portobello mushrooms and cheese sauce.

In fiscal 2020, we purchased all of our (i) ground beef patties from seven suppliers, with approximately 44% of our ground beef patties from one supplier;

(ii) chicken breasts from one supplier;

(iii) potato buns from one supplier;

3 unchanged sentences

and (vii) ShackSauce from two suppliers, with approximately 78% of ShackSauce supplied by one supplier.

We have developed a reliable supply chain and continue to focus on identifying alternative sources to avoid any possible interruptions of service and product.

We contract with one distributor, which we refer to as our "broadline" distributor, to provide virtually all of our food distribution services in the United States.

As of December 25, 2019 , approximately 84% of our core food and beverage ingredients and 100% of our paper goods and chemicals, collectively representing approximately 45% of our purchases, were processed through our broadline distributor for distribution and delivery to each Shack.

We believe we have developed a reliable supply chain, but we have also taken strides to identify alternative sources to avoid any possible interruptions of service and product.

We have pursued a centralized distribution process by contracting with one distributor, which we refer to as our "broadline" distributor, to provide virtually all of our food distribution services in the United States.

As of December 30, 2020, approximately 84% of certain food and beverage ingredients including chicken, fries and custard — collectively representing approximately 45% of our purchases — were processed through our broadline distributor for distribution and delivery to each Shack.

As of December 30, 2020, we were utilizing 20 affiliated distribution centers to supply our domestic Company-operated Shacks.

We recognize that the safety and consistency of our products begins with our suppliers.

Suppliers must meet certain criteria and strict quality control standards in the production and delivery of our food and other products.

We regularly evaluate our broadline distributor to ensure that the products we purchase conform to our standards and that the prices they offer are competitive.

We recognize that the safety and consistency of our products begins with our suppliers — so suppliers must meet certain criteria and strict quality control standards in the production and delivery of our food and other products.

Finally, we regularly evaluate our broadline distributor to ensure the products we purchase conform to our standards and that the prices they offer are competitive.

Food Safety and Quality Assurance

Food safety is our top priority.

We are committed to serving safe, high quality food.

As should go without saying, food safety is our top priority.

We have rigorous quality assurance and food safety protocols in place throughout our supply chain and in our Shacks.

Our two-prong approach involves third-party audits of our Shacks as well as a review of our suppliers.

We have a comprehensive supplier and ingredient selection process and maintain a limited list of approved suppliers.

We take a two-pronged approach:

we allow for quarterly third-party audits of our Shacks, as well as a review of our suppliers.

We have a comprehensive supplier and ingredient selection process, and we maintain a limited list of approved suppliers that meet our standards.

We thoroughly review the results of suppliers' internal and external quality audits, insurance coverage and track record on an on-going basis.

We perform food safety and brands audits, periodically audit our suppliers and perform supplier site visits.

We also conduct mock food recalls across a selection of our suppliers on a quarterly basis.

We have developed and implemented training and operating standards related to the food preparation, cleanliness and safety in the Shacks, as we ensure our team members go through crisis management training.

We have a dedicated Quality Assurance team and employ an external third-party to conduct audits of all Shacks on a quarterly basis.

SFSG for Supply Chain

In 2019, we continued our focus on delivering a winning guest experience with menu items that are not only delicious, but nourishing.

We worked with suppliers to remove high fructose corn syrup from substantially all of our ingredients, including using Simply Heinz, a high fructose corn syrup-free ketchup.

We executed on our mission to Stand For Something Good by eliminating the use of plastic straws and single-use plastic water cups in our Shacks.

Additionally, our canned wine, which we introduced this year, is more recyclable than the glass bottles we used previously, as well as lighter to ship.

We perform food safety and brands audits, and we also audit and visit our suppliers.

To stress test for exceptional scenarios, we conduct mock food recalls across a selection of our suppliers on a quarterly basis.

We have developed and implemented training and operating standards related to the food preparation, cleanliness and safety in each Shack, as we ensure our team members go through crisis management training.

And of course, we have a dedicated Quality Assurance team.

Management Information Systems

Our domestic company-operated Shacks use computerized point-of-sale and back-office systems that are designed specifically for the restaurant industry and we use many customized features to increase operational effectiveness, internal communication and data analysis.

This system provides a touch screen interface, graphical order confirmation display, touch screen kitchen display and integrated, high-speed credit card and gift card processing.

The point-of-sale system is used to collect daily transaction data, which generates information about sales, product mix and average transaction size.

Our back-office computer systems are designed to assist in the management of our domestic company-operated Shacks and provide real-time labor and food cost management tools.

These tools provide the Home Office and operations management quick access to detailed business data and reduces the amount of time spent by our Shack-level managers on administrative needs.

Enterprise-wide System Upgrade – Project Concrete

In June 2019 we completed the first phase of "Project Concrete", our enterprise-wide system upgrade.

In an effort to ensure our infrastructure and support systems are sufficiently robust and scalable enough to deliver upon our current and future growth opportunities, we made key investments in our core financial and operational systems.

Project Concrete is an enterprise resource planning (ERP) project to implement new systems and processes supporting our finance, procure-to-pay, inventory and human

Our domestic Company-operated Shacks use computerized point-of-sale and back-office systems designed for the restaurant industry;

we use many customized features to increase operational effectiveness, improve internal communication and enhance data analysis.

This system uses a touch screen interface, graphical order confirmation display, touch screen kitchen display and integrated, high-speed credit card and gift card processing.

The point-of-sale system collects daily transaction data, which generates information about sales, product mix and average transaction size.

From there, our back-office systems assist in the

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capital management areas.

Across Project Concrete, we focused on:

(i) streamlining and automating business processes within the aforementioned areas to establish a scalable foundation for robust growth;

management of our domestic Company-operated Shacks and provide real-time labor and food cost management tools.

These tools provide the home office and operations management quick, easy access to detailed business data, and allow Shack-level managers to spend less time addressing administrative needs.

We expect to continue improving our information technology infrastructure to better serve our business needs and accommodate growth.

Enterprise-wide System Upgrade – Project Concrete

In an effort to ensure our infrastructure and support systems are sufficiently robust and scalable enough to deliver upon our growth opportunities — in June 2020, we completed an enterprise-wide system upgrade, "Project Concrete." Project Concrete is an enterprise resource planning (ERP) project to implement new systems and processes that support our finance, procure-to-pay, inventory and human capital management areas.

Project Concrete focused on (i) streamlining and automating business processes to make robust future growth possible;

(ii) standardizing and centralizing business processes;

and (iii) implementing new software applications to enable the centralized business process in a controlled and efficient way.

Project Concrete will also replace our current back-of-house systems and reduce the administrative tasks in the Shacks as we continue to invest in our tools across the company.

GROWTH STRATEGIES

In fiscal 2019, we grew our Shack community by creating over 1,600 new jobs across the country.

We added 73 new Shacks and reached 275 Shacks worldwide.

We believe that we are well-positioned to achieve continued significant, sustainable financial growth.

We plan to execute upon our growth strategies while always keeping our goal to Stand For Something Good in the forefront.

We plan to continue to expand our business, drive Shack sales and enhance our competitive positioning by executing on the following strategies.

Opening New Domestic Company-Operated Shacks

Our greatest opportunity for growth lies in opening new, company-operated Shacks.

We waited nearly five years to open our second Shack, and we are still in the early chapters of our story.

In fiscal 2019, we significantly expanded our domestic company-operated footprint by opening 39 new Shacks, representing a 31.5% increase in our domestic company-operated Shack count.

As of December 25, 2019, we have 163 domestic company-operated and 22 domestic licensed Shacks in 30 states and Washington, D.C.

We see a tremendous whitespace opportunity to expand in both new and existing U.S.

markets, and we will continue to invest in the infrastructure that will enable us to continue to grow rapidly, but with discipline.

Over the long-term, we believe we have the potential to grow our current domestic company-operated Shack footprint to at least 450 Shacks, of which we have only opened 36% of that footprint through the end of fiscal year 2019.

The rate of future Shack growth in any particular period is inherently uncertain and is subject to numerous factors that are outside of our control.

As a result, we do not currently have an anticipated timeframe for such expansion.

We believe we have a versatile real estate model built for growth.

We have adopted a disciplined expansion strategy designed to leverage the strength of our business model and our significant brand awareness.

And we continue to be encouraged by the success of our multi-format strategy which includes but is not limited to:

urban centers, free-standing pads, mall locations, food courts, lifestyle centers, train hubs, airports, stadiums, outlets and more.

We intend to continue to expand in existing markets in 2020, in order to leverage the operational effectiveness of clustered Shacks, but we will also enter new markets, including Indianapolis and Sacramento.

With 275 Shacks around the world (as of December 25, 2019 ), we have identified many attractive and differentiated markets for the Shake Shack experience.

In major metropolitan areas, we seek locations where communities gather, often with characteristics such as high foot traffic, substantial commercial density, reputable co-tenants and other traffic drivers such as proximity to parks, museums, schools, hospitals and tourist attractions.

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Growing Our Licensed Shack Business

We will continue to grow our licensed portfolio by expanding further domestically, in the countries in which we currently have internationally licensed operations, and by entering new international markets.

Historically, this strategy has been a low-cost, high-return method of growing our brand awareness and increasing cash flow.

As of December 25, 2019 we had 112 licensed Shacks, of which 90 were international and 22 were domestic in the U.S.

and (iii) implementing new software applications to centralize our business in a controlled and efficient way.

Project Concrete replaced our current back-of-house systems, reduced administrative tasks in Shacks, and it reflects our broader mission of investing in tools across the Company.

HUMAN CAPITAL MANAGEMENT

We are committed to investing in our people so we can build, develop and retain the best teams.

We aim to recruit people who have integrity, who are warm, friendly, motivated, caring, self-aware and intellectually curious — what we call "51%'ers." We use the term "51%" to describe the interpersonal and emotional skills needed to thrive in the role, with the other "49%" representing the technical skills.

Our team is trained to understand and practice the values of Enlightened Hospitality:

caring for each other, caring for our guests, caring for our community, caring for our suppliers and caring for our investors.

We believe this culture is fundamental to the way we operate our business, and a key driver of our ability to deliver great guest experiences — and therefore, successfully grow our footprint.

Our Employee Value Proposition

Working at Shake Shack is about more than making a great burger — it's about creating elevated experiences for our team members and guests, and getting opportunities to build a rewarding career.

We want every team member at Shake Shack to be empowered to impact our Shacks and the communities around them.

We're a family of passionate, fun-loving and hardworking people who encourage and uplift each other.

We are committed to doing the right thing for our teams, guests and communities.

We challenge ourselves, hold each other accountable and take care of one another.

We Stand For Something Good.

Leaders Training Future Leaders

We invest in leadership development programs so that Shake Shack remains a compelling career choice for team members at every level, through their entire career.

As our team continues to grow, we believe that our culture of Enlightened Hospitality helps us deliver a consistent Shack experience, and to develop future leaders from within.

The Shacksperience and Steppin' Up Model

We call our team member life cycle and overall employment experience, The Shacksperience™.

A key element of The Shacksperience is the Steppin' Up Model, which defines the steps in the employment life cycle, from team member to general manager.

First and foremost, we train new team members on our culture and guiding principles.

From there, we move to menu knowledge, followed by operational training.

We know everyone learns differently, so our training programs use various formats:

online interactive, video, hands-on and paper-based.

For our online sessions, every team member has access to ShackSource™, our proprietary online training portal, which is used both as a learning platform and communication tool.

ShackSource gives team

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International Licensed Operations

Fiscal 2019 was a momentous year for our expansion internationally, particularly in new territories, with 24 international licensed Shack openings.

We opened Shacks in four new countries throughout the year, including:

three Shacks in mainland China, two Shacks in the Philippines, two Shacks in Mexico and one Shack in Singapore.

A meaningful part of our international business strategy remains focused in Asia.

With our expansion into new Asian markets coupled with our continued penetration into existing ones, 38% of our international licensed Shacks were located in Asia as of the end of fiscal 2019.

To further foster our growth in Asia, we opened our first international regional office in Hong Kong in 2019 to support the brand and day-to-day operations.

These partnerships with our international licensed counterparts are great opportunities for our team to grow, learn and bring back new insights to the broader company.

Given our position in New York and the success of our current licensed Shacks at home and abroad, we continue to attract substantial interest from potential international licensees around the world and we believe we have significant opportunities to expand our licensing footprint in existing and new international markets as our team, development opportunities and supply chain matures.

Domestic Licensed Operations

Domestically, we have continued to grow our licensed business, especially at airport locations around the country, which have been an exciting layer of growth to our licensed strategy.

This year we opened 10 domestic licensed locations, of which eight were in airports.

We also opened our first roadside Shack, located in New Jersey.

Growing Same-Shack Sales

Given the significant awareness of our brand and the excitement we have been able to generate for our market launches, our Shacks in newer markets have generally opened with higher volumes relative to their second year, following the strong initial honeymoon period.

We expect our Shacks to deliver low single digit same-Shack sales growth over the long term, but with some volatility as we fill in existing markets with new Shacks.

However, new Shack openings relative to our comparable Shack base remains our primary driver of growth in the near term.

We believe, based on our business strategy and various factors in and out of our control, that we will have quarters in which our same Shack sales may be negative.

We do, however, continually focus on improving our same-Shack sales performance by providing an engaging and differentiated guest experience that includes new seasonal and Shack-specific offerings, technological upgrades including the Shack App, web-ordering and delivery, unique and thoughtful integration with local communities and high standards of excellence and hospitality.

We also continue to innovate around our core menu to keep our offerings fresh, while remaining focused on our signature items.

Expanding And Enhancing Our Guest Experience

We have so much opportunity to learn and grow in a variety of formats.

As we unlock pieces of the country and world in different ways, we think about more ways that we can meet our guests.

In 2019, we opened in eight airports, new kinds of shopping

members a platform to send recognition messages, comments, praise and thanks to their fellow team members across the Company.

And for hands-on training sessions, we gather our teams around the country whenever possible, as well as in our Leadership Center, located below our home office on the lower level of our West Village Shack.

The Leadership Center is dedicated to the training and development of our Shack and home office teams;

we use it to host New Leader Orientation sessions for new managers.

We care about our team and we're committed to setting them up for success, at Shake Shack and in their future careers.

In 2020, we promoted over 1,500 people throughout our Company, 56% of whom were women and 76% were under-represented minorities.

We are proud of our leaders who graduate from hourly roles to managers, managers to General Managers and General Managers to regional leadership.

This year, 73% of our new General Managers and 75% of new Area Directors were promoted from within.

We are committed to retaining our leaders by continuing to evolve our training, development programs, compensation and benefits.

We want to incentivize our Shack leaders, give them the opportunity to feel like owners and reward them for their performance.

One way we try to achieve this is by extending our equity-based compensation program to all General Managers.

Shift-Up Program

As part of our long-term investment in our people, we began to pilot the Shift-Up program in December 2020, which is designed to provide skills that help accelerate shift managers' career paths within the Company.

This six-month program focuses on modules, like professional communication, public speaking and presentation skills, personal finance, management skills, and the ability to lead and participate in inclusion conversations.

Shift managers generally attend these sessions through live virtual classrooms, as well as in small group or peer learning settings.

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centers, food courts and our first roadside Shack.

In 2020 we plan to continue this expansion as well as capturing the associated market share.

Menu Innovation

When we look at our menu items we focus on three things:

continuing to create buzz-worthy LTOs, innovating our core menu and looking towards new menu categories for the future.

Kicking off our LTO's in fiscal 2020, we are bringing back the ShackMeister Burger to our Shacks across the country, which features crispy shallots and Shack sauce on a 100% Angus beef cheeseburger.

We also are planning to enhance the chicken category in fiscal 2020, bringing back a guest favorite, Hot Chick'n, as well as adding Hot Chick'n Bites.

To further broaden our menu, our new Veggie ShackBurger provides another vegetarian option, created with 13 vegetables, herbs and grains, which we will test in limited markets later in the year.

Digital Expansion

Hospitality is not a static concept;

it’s always evolving.

That’s why we’re continuing to invest in our digital strategy by providing the best app, kiosk and delivery experiences.

As part of our digital expansion, we are working to redesign the full web experience for 2020, which encompasses everything from ordering on the app or your desktop, at the Shack or via Grubhub.

What's more, our partnership with Grubhub is a great way for us to not only partake in joint marketing initiatives, but also to retain access to and gain insights from our guest data.

Capitalizing On Our Outsized Brand Awareness

Since 2004, we have become a globally recognized brand with outsized consumer awareness relative to our current footprint of 275 Shacks.

Shake Shack has become a New York City institution, a vibrant and authentic community gathering place that delivers an unparalleled experience to our loyal guests.

One of the great advantages for Shake Shack has been our birthplace and headquarters in New York City.

Rarely has a brand of our type been born in New York, and from a fine dining company.

This gives us tremendous media and brand power which often outweighs our relative size.

Shake Shack was named in Fast Casual's Top 100 Movers and Shakers , was amongst the finalists in the 2019 Shorty Awards' Best in Food & Beverage Sites and Apps and was on Nation's Restaurant's News' 2018 Top 10 Fastest Growing Chains and was named Foodable's "brand of the year" list as part of their 2018 Top Emerging Brands .

We believe that this outsized brand awareness will continue to fuel our growth in existing and new markets.

Media, Product Placement and Influencer s

Shake Shack’s unique positioning has allowed us to garner robust media coverage across food, lifestyle, business and trade publications.

We have been featured in outlets such as Bon Appetit, Food & Wine, Eater, Grub Street, Refinery29, BuzzFeed, People, New York Times, Wall Street Journal, Business Insider, CNBC, Fast Company, Forbes, Digiday and more.

Shake Shack has been mentioned on morning shows like TODAY Show, Good Morning America, CBS Sunday Morning and LIVE with Kelly and Ryan , as well as late shows like Saturday Night Live, The Late Show with James Corden, Jimmy Kimmel Live!, The Daily Show, Late Night with Seth Meyers and Late Night with Jimmy Fallon .

We have been fortunate to receive considerable product placement in movies, TV shows and other media without any cost to the Company, and in some cases, has been able to charge fees for these location shoots.

We have also been participating in feature stories, such as NYSE:

Walk This Way, Men's Health, Foodable Network Podcast, First We Feast:

The Burger Show , and Fast Company:

The Recommender.

Shake Shack’s popularity and cultural relevance has awarded us countless celebrity and influencer fans across Hollywood, music, fashion, sports and more.

We have seen organic promotion from the likes of John Mayer, Hailey Baldwin, Ashely Simpson, Matt Damon, Oprah, and Taylor Swift, to name a few.

Influencer coverage has driven awareness of our presence at popular events, such as our participation at the Coachella music festival, and even highlighted our food truck at the wedding of two former Bachelo r stars, NY Fashion Week and the Super Bowl.

We Are All-In

To make sure every Shake Shack team member at every level has a positive experience, we strive to build an inclusive workplace, made up of diverse talent throughout the Company.

Our diversity, equity and inclusion program, All-In, is part of that mission.

With the support of executive leaders, All-In works to ensure Shake Shack provides equal opportunities for, and removes obstacles to, success, while also fostering a culture of diversity, inclusion and empowerment.

Our All-In program's initiatives include:

▪ Employee Resource Groups — We launched four Employee Resource Groups in fiscal 2020, with a focus on women, Black, Hispanic and LGBTQ+ identifying team members, to help Shake Shack continue to foster a diverse, inclusive workplace.

These are voluntary employee-led groups of people who gather together based on common interests, backgrounds or demographics such as gender, race or ethnicity.

These groups support both personal and career development.

▪ Unconscious Bias Training — We launched unconscious bias training for all home office and field-based team members.

The training was designed to create awareness for the impact of bias in the workplace, and to provide tools for our teams to address and counteract that bias.

▪ Stand Together Series — We launched a Stand Together Series forum to discuss on-going social issues.

The Company-wide sessions served as an open forum and safe space for sharing personal stories to help deepen the collective understanding of diversity issues in the United States while strengthening our community and team.

In 2020, we hosted live sessions on topics such as racial discrimination and injustice, gender equity, LGBTQ inclusion, voting, and more.

▪ Mentorship Program — As part of our commitment to leadership and team member development, our mentorship program facilitates learning and growth, while providing tools and opportunities to connect with other members of the program, and the Company as a whole.

▪ #ShacktheVote — Leading up to the general election in November 2020, we launched an internal campaign to help educate our employees on the importance of civic engagement, including how and where to vote.

We also provided our team members with paid time off to exercise their right to vote.

▪ We were proud to be named one of the "Best places to work for LGBTQ+ Equality" and earn a 100% score on the Human Rights Campaign's Corporate Equality Index for our support of the LGBTQ+ community in the workplace.

This designation highlights the core of our Enlightened Hospitality ethos and our commitment to a great workplace for all.

One of the ways we embrace Enlightened Hospitality internally is through the administration of our own HUG (Help Us Give) Fund, a 501(c)(3) organization available for all of our employees.

The HUG Fund provides an opportunity for all Shake Shack employees to take care of each other through tax-deductible payroll and other one-time contributions.

The HUG Fund provides timely financial assistance to employees impacted by financially devastating circumstances far beyond their control and their means.

In fiscal 2020, employee participation in the HUG Fund increased, with donations increasing by 24% compared to 2019.

Actions Taken to Protect our Teams and Guests During COVID-19

Our priority throughout the COVID-19 pandemic has been to keep our teams and guests safe first and foremost, while keeping our Shacks open wherever we can.

Our team created a new guest experience around curbside pickup with digital pre-ordering, and created distinct and separate areas for delivery courier pickups — all to ensure safety of our team and our guests.

We have taken significant actions to ensure maximum safety for our team members and guests in these times, including increased cleaning, sanitizing and hand washing protocols, social distancing, and wearing gloves and masks at all times.

We also incurred additional costs in procuring and distributing the supplies necessary to keep our teams and guests safe, such as face coverings, gloves, additional secure packaging for all orders, directional signage and cleaning supplies, which are all expected to be ongoing for the immediate

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The restaurant industry is highly competitive and fragmented, with restaurants competing on multiple areas, such as taste, price, food quality, service, location and the ambiance and condition of the restaurant.

Furthermore, in fiscal 2021, we have begun installing state-of-the-art air purification systems to ensure a safe and clean working and dining environment for our teams and guests.

Beyond the safety of our team, we also took steps to ensure their security during an uncertain time.

We paid 100% of our furloughed team members’ medical insurance through August 2020, and we guaranteed full pay for our Shack General Managers even if their Shacks were closed.

In fiscal 2020, we incurred close to $6 million incremental payroll costs to support our Shack employees.

These incremental payroll costs were related to a temporary 10% premium pay raise to hourly employees through the end of August, guaranteed bonuses for Shack teams, and payments related to scheduling changes for hourly team members as our teams navigated the challenging operating conditions caused by COVID-19.

Furthermore, understanding the burden that the pandemic has placed on people's mental health, our employees have free access to a 24-hour emotional support helpline.

As of December 30, 2020, we had 7,429 employees, of whom 7,187 were hourly team members and Shack-level managers and 242 were home office personnel.

The restaurant industry is highly competitive and fragmented, with restaurants competing on a variety of fronts, including taste, price, food quality, service, location and the ambiance and condition of the restaurant.

Our primary competitors include other fast casual restaurants, quick service restaurants and casual dining restaurants.

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Many of our competitors offer breakfast, lunch and dinner, as well as dine-in, carry-out and delivery services.

We may also compete with companies outside of the traditional restaurant industry, such as grocery store chains, meal subscription services and delicatessens, especially those that target customers who seek high-quality food, as well as convenience food stores, cafeterias and other dining outlets.

Our competition continues to intensify as new competitors enter both the burger and fast casual segments, and in addition, offer new digital experiences.

We also face increasing competitive pressures from some of our competitors who have recently announced initiatives to offer better quality ingredients relative to their previous offerings, such as antibiotic-free meat or plant-based meat alternatives.

In certain ways, we also compete with companies outside of the traditional restaurant industry, such as grocery store chains, meal subscription services and delicatessens — especially those that target customers who seek high-quality food — as well as convenience food stores, cafeterias and other dining outlets.

As new competitors enter the burger and fast casual segments, and offer new digital experiences, our competition continues to intensify.

We also face increasing pressures from certain competitors who have announced initiatives to offer better quality ingredients relative to their previous offerings, such as antibiotic-free meat or plant-based meat alternatives.

For more information regarding the risks we face from our competitors — who may have, among other things, a more diverse menu, greater financial resources, lower operating costs, a more well-established brand, additional locations and more extensive marketing than we do — see "Risks Related to Operating in the Restaurant Industry — We face significant competition for guests, and if we are unable to compete effectively, our business could be adversely affected" in Item 1A, Risk Factors .

We strive to engage our guests with a differentiated experience that includes great food, unique and thoughtful integration with local communities and high standards of excellence and hospitality.

We believe that we are well positioned to continue to grow our market position, as we believe consumers will continue to trade up to higher quality offerings given the increasing consumer focus on responsible sourcing, ingredients and preparation.

We believe that many consumers want to associate with brands whose ethos matches their own, and that Shake Shack, with our mission to Stand For Something Good and our culture of Enlightened Hospitality, is a distinct and differentiated global lifestyle brand.

We see ourselves as well-positioned to continue our market growth, as we believe consumers will keep seeking higher quality offerings — especially given an increasing consumer focus on responsible sourcing, ingredients and preparation.

INTELLECTUAL PROPERTY

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We also own the domain www.shakeshack.com as well as over 400 other domain names for use in other markets.

In addition, we have agreements with the suppliers of our proprietary products stating that the recipes and production processes associated with those products are our property, confidential to us, and may not be provided to any other customer.

Our proprietary products include the burger recipe for our whole-muscle blend, the patty grinding procedure and the product formulations for our ShackSauce, 'Shroom Burger, chicken breast, chicken breading and buttermilk herb mayo, cheese sauce, unflavored custard base, chocolate custard base, and certain toppings and custard mix-ins.

We also have exclusive arrangements with our suppliers of ShackMeister Ale, Shack Red wine, Shack White wine, hot dog and chicken sausage, relish and cherry peppers.

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Our proprietary products include the burger recipe for our whole-muscle blend, our patty grinding procedure and the product formulations for our ShackSauce, 'Shroom Burger, chicken breast, chicken breading and buttermilk herb mayo, cheese sauce, unflavored custard base, chocolate custard base, as well as certain toppings and custard mix-ins.

We also have exclusive arrangements with our suppliers of ShackMeister Ale, Shack Red wine, Shack White wine, hot dog and chicken sausage, relish and cherry peppers.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

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New laws and regulations or new interpretations of existing laws and regulations may also impact our business.

The costs of compliance with these laws and regulations are high and are likely to increase in the future and any failure on our part to comply with these laws may subject us to significant liabilities and other penalties.

The costs of compliance with these laws and regulations are high, are likely to increase in the future, and any failure on our part to comply with these laws may subject us to significant liabilities and other penalties.

See "Regulatory and Legal Risks" in Item 1A, Risk Factors for more information.

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Additionally, given our use of a fiscal calendar, there may be some fluctuations between quarters due to holiday shifts in the calendar year.

As of December 25, 2019 , we had 7,603 employees, of whom 7,346 were hourly team members and Shack-level managers and 257 were Home Office personnel.

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And of course, the COVID-19 outbreak may have an impact on consumer behaviors and customer traffic that may result in temporary changes in the seasonal fluctuations of our business.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The name, age and position held by each of our executive officers as of December 30, 2020 is set forth below.

Randy Garutti

Chief Executive Officer and Director

President and Chief Financial Officer

Chief Operating Officer

Name Age Position

Randy Garutti 45 Chief Executive Officer and Director

Tara Comonte 46 President and Chief Financial Officer

Zachary Koff 41 Chief Operating Officer

Randy Garutti has served as Shake Shack's Chief Executive Officer and on the Board of Directors since April 2012.

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Garutti served as Chief Operating Officer of SSE Holdings since January 2010.

Garutti has worked with USHG and Mr.

Meyer for over 20 years.

Prior to leading Shake Shack, Mr.

Garutti was the Director of Operations, overseeing the operations for all USHG restaurants.

Garutti was the Director of Operations for USHG, of which Mr.

Meyer is the Chief Executive Officer and Chairman, overseeing the operations for all its restaurants.

In addition, Mr.

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Garutti graduated from Cornell University's School of Hotel Administration in 1997.

Garutti was selected to our board of directors because of his leadership role in our development and growth and because he possesses particular knowledge and experience in strategic planning and leadership in the hospitality business.

Tara Comonte has served as Shake Shack's President and Chief Financial Officer since October 2019 and Chief Financial Officer since June 2017.

Prior to joining Shake Shack, Ms.

Comonte served as Chief Financial & Business Affairs Officer and Executive Vice President at Getty Images, having joined in April 2013 as Chief Financial Officer and Senior Vice President.

Earlier in her career, Ms.

Comonte served as Chief Financial Officer at McCann Worldgroup, part of Interpublic Group (IPG).

Previously, she was a key founding member of Mediabrands, IPG's media group, serving there as Global Chief Financial Officer and Chief Operating Officer.

Zachary Koff has served as Shake Shack’s Chief Operating Officer since January 2017.

Prior to becoming Chief Operating Officer, Mr.

Koff served as the Senior Vice President of Operations since March 2015, Vice President of Operations since April of 2012 and Director of Operations since February 2010, as well as opened Shake Shack’s 4th location in Miami Beach.

Prior to leading operations for Shake Shack, Mr.

Koff worked for the Bravo/Brio Restaurant Group for eight years, and opened and operated locations in five markets.

Koff graduated from Cornell University’s School of hotel administration in 2002 with a Bachelor’s Degree in Hospitality Administration and a concentration in law.

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Tara Comonte has served as Shake Shack's President and Chief Financial Officer since October 2019 and as Shake Shack's Chief Financial Officer since June 2017.

Prior to becoming Chief Financial Officer at Shake Shack, Ms.

Comonte served as Chief Financial & Business Affairs Officer and Executive Vice President at Getty Images, a global digital media company, since October 2016 where she was responsible for the company's global finance, enterprise reporting & analytics and investor relations functions, together with real estate and facilities, as well as oversight of information systems & technology.

Prior to that, Ms.

Comonte served as the Chief Financial Officer and Senior Vice President of Getty Images since April 2013, where she managed the overall leadership and strategic direction of all aspects of the company's global finance function.

Prior to that, Ms.

Comonte served as Chief Financial Officer at McCann Worldgroup, the world's largest marketing communications business, since October 2010.

Zachary Koff has served as Shake Shack’s Chief Operating Officer since January 2017.

Prior to becoming Chief Operating Officer, Mr.

Koff served as the Senior Vice President, Operations since March 2015, Vice President, Operations since April 2012, and Director of Operations since February 2010.

Prior to joining Shake Shack, Mr.

Koff spent eight years working in operations for the Bravo Brio Restaurant Group.

Koff graduated from Cornell University’s School of hotel administration in 2002 with a Bachelor’s Degree in Hospitality Administration.

AVAILABLE INFORMATION

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business