What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 312 added, 292 removed, 459 unchanged (57% of the section changed)

40 unchanged sentences

Preferred stock, no par value—10,000,000 shares authorized;

none issued and outstanding as of March 31, 2021 and December 30, 2020.

none issued and outstanding as of June 30, 2021 and December 30, 2020.

Class A common stock, $0.001 par value—200,000,000 shares authorized;

39,103,239 and 38,717,790 shares issued and outstanding as of March 31, 2021 and December 30, 2020, respectively.

39,134,356 and 38,717,790 shares issued and outstanding as of June 30, 2021 and December 30, 2020, respectively.

Class B common stock, $0.001 par value—35,000,000 shares authorized;

2,921,588 and 2,951,188 shares issued and outstanding as of March 31, 2021 and December 30, 2020, respectively.

2,921,587 and 2,951,188 shares issued and outstanding as of June 30, 2021 and December 30, 2020, respectively.

Additional paid-in capital 401,567 395,067

12 unchanged sentences

(in thousands, except per share amounts)

Thirteen Weeks Ended

2021 March 25

Thirteen Weeks Ended Twenty-Six Weeks Ended

Shack sales $ 181,470 $ 89,519 $ 332,138 $ 227,567

11 unchanged sentences

TOTAL EXPENSES 184,153 115,861 349,456 259,818

OPERATING LOSS ( 10,021 ) ( 787 )

Other income (expense), net 31 ( 93 )

OPERATING INCOME (LOSS) 3,307 ( 24,075 ) ( 6,714 ) ( 24,862 )

Other income, net 108 394 139 301

Interest expense ( 359 ) ( 442 ) ( 874 ) ( 554 )

LOSS BEFORE INCOME TAXES ( 10,505 ) ( 992 )

INCOME (LOSS) BEFORE INCOME TAXES 3,056 ( 24,123 ) ( 7,449 ) ( 25,115 )

Income tax expense (benefit) 991 ( 6,092 ) ( 10,089 ) ( 6,005 )

NET INCOME (LOSS) 2,065 ( 18,031 ) 2,640 ( 19,110 )

net loss attributable to non-controlling interests ( 734 ) ( 119 )

Net income (loss) attributable to non-controlling interests 121 ( 1,820 ) ( 613 ) ( 1,939 )

NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.

11 unchanged sentences

(in thousands)

Thirteen Weeks Ended

2021 March 25

Thirteen Weeks Ended Twenty-Six Weeks Ended

Net income (loss) $ 2,065 $ ( 18,031 ) $ 2,640 $ ( 19,110 )

4 unchanged sentences

COMPREHENSIVE INCOME (LOSS) 2,065 ( 18,031 ) 2,639 ( 19,109 )

comprehensive loss attributable to non-controlling interest ( 734 ) ( 119 )

comprehensive income (loss) attributable to non-controlling interest 121 ( 1,820 ) ( 613 ) ( 1,939 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.

$ 1,944 $ ( 16,211 ) $ 3,252 $ ( 17,170 )

(1) Net of tax expense of $ 0 for the thirteen weeks ended March 31, 2021 and March 25, 2020.

(1) Net of tax expense of $ 0 for the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020.

See accompanying Notes to Condensed Consolidated Financial Statements.

4 unchanged sentences

(in thousands, except share amounts)

For the Thirteen Weeks Ended March 31, 2021 and March 25, 2020

For the Thirteen Weeks Ended June 30, 2021 and June 24, 2020

Common Stock Class B

Common Stock Additional

Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Non-

Capital Retained Earnings Accumulated Other Comprehensive Income Non-

Interest Total

Shares Amount Shares Amount

BALANCE, DECEMBER 30, 2020 38,717,790 $ 39 2,951,188 $ 3 $ 395,067 $ 12,209 $ 3 $ 27,172 $ 434,493

BALANCE, MARCH 31, 2021 39,103,239 $ 39 2,921,588 $ 3 $ 400,371 $ 13,518 $ 2 $ 26,017 $ 439,950

Net income (loss) 1,944 121 2,065

5 unchanged sentences

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — —

Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs — — — — —

Distributions paid to non-controlling interest holders ( 239 ) ( 239 )

BALANCE, JUNE 30, 2021 39,134,356 $ 39 2,921,587 $ 3 $ 401,567 $ 15,462 $ 2 $ 26,459 $ 443,532

BALANCE, MARCH 25, 2020 34,523,400 $ 35 3,117,002 $ 3 $ 246,970 $ 53,407 $ 3 $ 22,188 $ 322,606

Net income (loss) ( 16,211 ) ( 1,820 ) ( 18,031 )

Other comprehensive income (loss):

Net change in foreign currency translation adjustment — —

Equity-based compensation 1,429 1,429

Activity under stock compensation plans 63,601 — ( 164 ) 72 ( 92 )

Redemption of LLC Interests — — — — —

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis 385 385

Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs 3,649,537 3 135,718 9,276 144,997

Distributions paid to non-controlling interest holders ( 9 ) ( 9 )

BALANCE, JUNE 24, 2020 38,236,538 $ 38 3,117,002 $ 3 $ 384,338 $ 37,196 $ 3 $ 29,707 $ 451,285

6 | Shake Shack Inc.

For the Twenty-Six Weeks Ended June 30, 2021 and June 24, 2020

Common Stock Class B

Common Stock Additional

Capital Retained Earnings Accumulated Other Comprehensive Income Non-

Interest Total

Shares Amount Shares Amount

BALANCE, DECEMBER 30, 2020 38,717,790 $ 39 2,951,188 $ 3 $ 395,067 $ 12,209 $ 3 $ 27,172 $ 434,493

Net loss ( 960 ) ( 119 ) ( 1,079 )

Net income (loss) 3,253 ( 613 ) 2,640

Other comprehensive income (loss):

4 unchanged sentences

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis 213 213

Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs — — — — —

Distributions paid to non-controlling interest holders ( 706 ) ( 706 )

BALANCE, MARCH 25, 2020 34,523,400 $ 35 3,117,002 $ 3 $ 246,970 $ 53,407 $ 3 $ 22,188 $ 322,606

BALANCE, JUNE 30, 2021 39,134,356 $ 39 2,921,587 $ 3 $ 401,567 $ 15,462 $ 2 $ 26,459 $ 443,532

BALANCE, DECEMBER 25, 2019 34,417,302 $ 35 3,145,197 $ 3 $ 244,410 $ 54,367 $ 2 $ 23,168 $ 321,985

Net income (loss) ( 17,171 ) ( 1,939 ) ( 19,110 )

Other comprehensive income (loss):

Net change in foreign currency translation adjustment 1 1

Equity-based compensation 2,742 2,742

Activity under stock compensation plans 141,504 — 260 ( 289 ) ( 29 )

Redemption of LLC Interests 28,195 — ( 28,195 ) — 195 ( 195 ) —

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis 1,013 1,013

Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs 3,649,537 3 135,718 9,276 144,997

Distributions paid to non-controlling interest holders ( 314 ) ( 314 )

BALANCE, JUNE 24, 2020 38,236,538 $ 38 3,117,002 $ 3 $ 384,338 $ 37,196 $ 3 $ 29,707 $ 451,285

See accompanying Notes to Condensed Consolidated Financial Statements.

Shake Shack Inc.

Form 10-Q | 7

SHAKE SHACK INC.

1 unchanged sentence

(in thousands)

Thirteen Weeks Ended

2021 March 25

Twenty-Six Weeks Ended

OPERATING ACTIVITIES

8 unchanged sentences

Non-cash interest expense 343 16

Gain on sale of marketable securities — ( 79 )

Loss (gain) on sale of marketable securities 5 ( 79 )

Impairment and loss on disposal of assets 727 2,522

Unrealized loss on available-for-sale securities 46 356

Unrealized loss on equity securities 37 22

Other non-cash (income) expense ( 1 ) 897

15 unchanged sentences

Sales of marketable securities 4,004 20,000

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ( 27,228 ) 649

NET CASH USED IN INVESTING ACTIVITIES ( 87,969 ) ( 17,905 )

FINANCING ACTIVITIES

1 unchanged sentence

Proceeds from revolving credit facility — 50,000

Payments on revolving credit facility — ( 50,000 )

Deferred financing costs ( 101 ) ( 64 )

Proceeds from issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs — 144,997

Payments on principal of finance leases ( 1,272 ) ( 1,150 )

10 unchanged sentences

8 | Shake Shack Inc.

Form 10-Q | 7

SHAKE SHACK INC.

12 unchanged sentences

Shake Shack Inc.

Form 10-Q | 9

NATURE OF OPERATIONS

1 unchanged sentence

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.

As of March 31, 2021 we owned 93.0 % of SSE Holdings.

Shake Shack is the sole managing member of SSE Holdings and, as sole managing member, the Company operates and controls all of the business and affairs of SSE Holdings.

As a result, the Company consolidates the financial results of SSE Holdings and reports a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings.

As of June 30, 2021 the Company owned 93.1 % of SSE Holdings.

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.

We operate and license Shake Shack restaurants ("Shacks"), which serve hamburgers, hot dogs, chicken, crinkle-cut fries, shakes, frozen custard, beer, wine and more.

As of March 31, 2021, there were 321 Shacks in operation, system-wide, of which 192 were domestic Company-operated Shacks, 22 were domestic licensed Shacks and 107 were international licensed Shacks.

As of March 31, 2021, four domestic Company-operated Shacks and 16 licensed Shacks were temporarily closed, primarily due to the COVID-19 pandemic.

The Company operates and licenses Shake Shack restaurants ("Shacks"), which serve hamburgers, hot dogs, chicken, crinkle-cut fries, shakes, frozen custard, beer, wine and more.

As of June 30, 2021, there were 339 Shacks in operation, system-wide, of which 200 were domestic Company-operated Shacks, 23 were domestic licensed Shacks and 116 were international licensed Shacks.

As of June 30, 2021, one domestic Company-operated Shack and eight licensed Shacks were temporarily closed due to the COVID-19 pandemic.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 30, 2020 ("2020 Form 10-K").

These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in its Annual Report on Form 10-K for the fiscal year ended December 30, 2020 ("2020 Form 10-K").

Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our 2020 Form 10-K.

In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in its 2020 Form 10-K.

In the Company's opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of the financial position and results of operation have been included.

Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.

1 unchanged sentence

Shake Shack Inc.

is the primary beneficiary as we have the majority economic interest in SSE Holdings and, as the sole managing member, have decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights.

As a result, we consolidate SSE Holdings.

The assets and liabilities of SSE Holdings represent substantially all of our consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement.

As of March 31, 2021 and December 30, 2020, the net assets of SSE Holdings were $ 380,713 and $ 383,669 , respectively.

is the primary beneficiary as the Company has the majority economic interest in SSE Holdings and, as the sole managing member, has decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights.

As a result, the Company consolidates SSE Holdings.

The assets and liabilities of SSE Holdings represent substantially all of the Company's consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement.

As of June 30, 2021 and December 30, 2020, the net assets of SSE Holdings were $ 384,193 and $ 383,669 , respectively.

The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreement.

See Note 6, Debt, for more information.

We operate on a 52/53 week fiscal year ending on the last Wednesday in December.

Refer to Note 6, Debt, for additional information.

The Company operates on a 52/53 week fiscal year ending on the last Wednesday in December.

Fiscal 2021 contains 52 weeks and ends on December 29, 2021.

1 unchanged sentence

Unless otherwise stated, references to years in this report relate to fiscal years.

Use of Estimates

10 | Shake Shack Inc.

Form 10-Q | 9

liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period.

Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period.

Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

We adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal 2021.

The Company adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal 2021.

Accounting Standards Update Description Date

1 unchanged sentence

(ASU 2019-12) This standard simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in ASC 740, “Income Taxes” (“ASC 740”), and clarifying certain aspects of the current guidance to promote consistency among reporting entities.

The adoption of this standard did not have a material impact to our condensed consolidated financial statements.

The adoption of this standard did not have a material impact to the Company's condensed consolidated financial statements.

December 31, 2020

2 unchanged sentences

(ASU 2020-06) This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics.

We elected to early adopt this standard, beginning December 31, 2020.

The guidance of this ASU is applicable to our convertible notes issued in March 2021.

The Company elected to early adopt this standard, beginning December 31, 2020.

The guidance of this ASU is applicable to the convertible notes issued in March 2021.

As a result, the convertible notes are accounted for as a single liability measured at amortized cost.

The if-converted earnings per share ("EPS") method is used, with the effect of potential share settlement included in diluted EPS.

Refer to Note 6, Debt, for further details of the convertible notes issued.

Refer to Note 6, Debt, and Note 11, Earnings Per Share, for additional information.

December 31, 2020

1 unchanged sentence

Revenue consists of Shack sales and Licensing revenue.

Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Shack revenues are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied.

Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Shack sales are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied.

Revenue from Shack sales is presented net of discounts and recognized when food, beverage and retail products are sold.

Sales tax collected from customers is excluded from Shack sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing authorities.

Revenue from our gift cards is deferred and recognized upon redemption.

Licensing revenues include initial territory fees, Shack opening fees, and ongoing sales-based royalty fees from licensed Shacks.

Generally, the licenses granted to develop, open and operate each Shack in a specified territory are the predominant goods or services transferred to the licensee in our contracts, and represent distinct performance obligations.

Revenue from gift cards is deferred and recognized upon redemption.

Licensing revenue includes initial territory fees, Shack opening fees, and ongoing sales-based royalty fees from licensed Shacks.

Generally, the licenses granted to develop, open and operate each Shack in a specified territory are the predominant goods or services transferred to the licensee in the contracts, and represent distinct performance obligations.

Ancillary promised services, such as training and assistance during the initial opening of a Shack, are typically combined with the licenses and considered as one performance obligation per Shack.

We determine the transaction price for each contract, which is comprised of the initial territory fee, and an estimate of the total Shack opening fees we expect to be entitled to.

The calculation of total Shack opening fees included in the transaction price requires judgment, as it is based on an estimate of the number of Shacks we expect the licensee to open.

The Company determines the transaction price for each contract, which is comprised of the initial territory fee, and an estimate of the total Shack opening fees the Company expects to be entitled to.

The calculation of total Shack opening fees included in the transaction price requires judgment, as it is based on an estimate of the number of Shacks the Company expects the licensee to open.

The transaction price is then allocated equally to each Shack expected to open.

The performance obligations are satisfied over time, starting when a Shack opens, through the end of the term of the license granted to the Shack.

Because we are transferring licenses to access our intellectual property during a contractual term, revenue is recognized on a straight-line basis over the license term.

The performance obligations are satisfied over time, starting when a Shack opens, through the end of the term of the

Shake Shack Inc.

Form 10-Q | 11

license granted to the Shack.

Because the Company is transferring licenses to access intellectual property during a contractual term, revenue is recognized on a straight-line basis over the license term.

Generally, payment for the initial territory fee is received upon execution of the licensing agreement, and payment for the Shack opening fees are received either in advance of or upon opening the related Shack.

These payments are initially deferred and recognized as revenue as the performance obligations are satisfied, which occurs over a long-term period.

10 | Shake Shack Inc.

Revenue from sales-based royalties is recognized as the related sales occur.

Revenue recognized during the thirteen weeks ended March 31, 2021 and March 25, 2020, disaggregated by type is as follows:

Thirteen Weeks Ended

2021 March 25

Revenue recognized during the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020, disaggregated by type is as follows:

Thirteen Weeks Ended Twenty-Six Weeks Ended

Shack sales $ 181,470 $ 89,519 $ 332,138 $ 227,567

3 unchanged sentences

Total revenue $ 187,460 $ 91,786 $ 342,742 $ 234,956

The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2021 was $ 16,748 .

We expect to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 5 to 20 years.

The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2021 and June 24, 2020 was $ 17,633 and $ 15,794 , respectively.

The Company expects to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 5 to 20 years.

This amount excludes any variable consideration related to sales-based royalties.

7 unchanged sentences

Deferred revenue, long-term 12,704 12,151

Revenue recognized during the thirteen weeks ended March 31, 2021 and March 25, 2020 that was included in their respective liability balances at the beginning of the period is as follows:

Thirteen Weeks Ended

2021 March 25

Revenue recognized during the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020 that was included in their respective liability balances at the beginning of the period is as follows:

Thirteen Weeks Ended Twenty-Six Weeks Ended

Gift card liability $ 108 $ 46 $ 327 $ 345

2 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The carrying value of our Cash and cash equivalents, Accounts receivable, net, Accounts payable and Accrued expenses approximate their fair value due to the short-term nature of these financial instruments.

As of March 31, 2021 and December 30, 2020, we held certain assets that are required to be measured at fair value on a recurring basis including our Marketable securities, which consist of investments in equity securities.

Fair value of these investments is measured using Level 1 inputs (unadjusted quoted prices in active markets for identical assets).

The carrying value of these investments in equity securities approximates fair value.

Our assets measured at fair value on a recurring basis as of March 31, 2021 and December 30, 2020 were as follows:

The carrying value of the Company's Cash and cash equivalents, Accounts receivable, net, Accounts payable and Accrued expenses approximate their fair value due to the short-term nature of these financial instruments.

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Form 10-Q | 12

As of June 30, 2021 and December 30, 2020, the Company held certain assets that are required to be measured at fair value on a recurring basis including Marketable securities, which consist of investments in equity securities.

Fair value of these investments is measured using Level 1 inputs (unadjusted quoted prices in active markets for identical assets).

The carrying value of these investments in equity securities approximates fair value.

Assets measured at fair value on a recurring basis as of June 30, 2021 and December 30, 2020 were as follows:

Fair Value Measurements

4 unchanged sentences

Total Marketable securities $ 80,105 $ 36,887

Refer to Note 6, Debt, for the fair value of the Company's outstanding debt instruments.

A summary of Other income (expense) from equity securities recognized during the thirteen weeks ended March 31, 2021 and March 25, 2020 is as follows:

Thirteen Weeks Ended

2021 March 25

Refer to Note 6, Debt, for additional information relating to the fair value of the Company's outstanding debt instruments.

A summary of Other income, net from equity securities recognized during the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020 is as follows:

Thirteen Weeks Ended Twenty-Six Weeks Ended

Equity securities:

4 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets and liabilities that are measured at fair value on a non-recurring basis include our long-lived assets, operating lease right-of-use assets and indefinite-lived intangible assets.

During the thirteen weeks ended March 25, 2020, we recognized an impairment charge of $ 1,132 at one location.

Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, operating lease right-of-use assets and indefinite-lived intangible assets.

There were no impairment charges recognized during the thirteen and twenty-six weeks ended June 30, 2021.

During the twenty-six weeks ended June 24, 2020, the Company recognized an impairment charge of $ 1,132 at one location.

Of the total impairment charge, $ 736 was attributed to property and equipment held and used, $ 383 was attributed to operating lease right-of-use assets, and $ 13 was attributed to finance lease right-of-use assets.

The asset impairment charge was included in Impairment and loss on disposal of assets on the Condensed Consolidated Statement of Income (Loss).

The impairment charge was included in Impairment and loss on disposal of assets on the Condensed Consolidated Statements of Income (Loss).

The fair values of assets were determined using an income-based approach and are classified as Level 3 within the fair value hierarchy.

Significant inputs include projections of future cash flows, discount rates, Shack sales and profitability.

There were no impairment charges recognized during the thirteen weeks ended March 31, 2021.

Significant inputs include projections of future cash flows, discount rates, Shack sales and profitability.There were no impairment charges recognized during the thirteen weeks ended June 24, 2020.

Shake Shack Inc.

1 unchanged sentence

SUPPLEMENTAL BALANCE SHEET INFORMATION

The components of Other current liabilities as of March 31, 2021 and December 30, 2020 are as follows:

The components of Other current liabilities as of June 30, 2021 and December 30, 2020 are as follows:

2021 December 30

4 unchanged sentences

Other current liabilities $ 13,899 $ 14,200

The components of Other long-term liabilities as of March 31, 2021 and December 30, 2020 are as follows:

The components of Other long-term liabilities as of June 30, 2021 and December 30, 2020 are as follows:

2021 December 30

2 unchanged sentences

Other long-term liabilities $ 23,694 $ 24,460

(1) As of March 31, 2021, Other included $ 3,359 of deferred lease incentive liabilities related to leases with variable lease cost as well as $ 2,607 of deferred Social Security taxes associated with the Coronavirus Aid, Relief, and Economic Security Act.

(1) As of June 30, 2021, Other included $ 3,967 of deferred lease incentive liabilities related to leases with variable lease cost as well as $ 2,607 of deferred Social Security taxes associated with the Coronavirus Aid, Relief, and Economic Security Act.

As of December 30, 2020, Other included $ 3,182 of deferred lease incentive liabilities related to leases with variable lease cost as well as $ 5,214 of deferred Social Security taxes associated with the Coronavirus Aid, Relief, and Economic Security Act.

Revolving Credit Facility

In August 2019, we entered into a revolving credit facility agreement ("Revolving Credit Facility"), which permits borrowings up to $ 50,000 , of which the entire amount is available immediately, with the ability to increase available borrowings up to an additional $ 100,000 , to be made available subject to satisfaction of certain conditions.

The Revolving Credit Facility also permits the issuance of letters of credit upon our request of up to $ 15,000 .

In March 2020, we drew down the full $ 50,000 available under the Revolving Credit Facility to enhance liquidity and financial flexibility given the uncertain market conditions created by the COVID-19 pandemic.

We repaid this amount in full, plus interest, in June 2020.

In May 2020, we entered into a first amendment to the Revolving Credit Facility ("First Amendment"), which, among other things, provided for modified financial covenant compliance requirements for a period of time.

The First Amendment required us to maintain minimum liquidity of $ 25,000 through July 1, 2021 and outstanding borrowings during the applicable period covered by the First Amendment bore interest at either:

(i) the London Interbank Offered Rate ("LIBOR") plus a percentage ranging from 1.0 % to 2.5 % or (ii) the base rate plus a percentage ranging from 0.0 % to 1.5 %, in each case depending on our net lease adjusted leverage ratio.

In March 2021, we entered into a second amendment to the Revolving Credit Facility (“Second Amendment”).

The Second Amendment modified the applicable covenants and restrictions in the Credit Agreement to permit the incurrence of the Convertible Notes (as defined below), including obligations and transactions in connection therewith.

In August 2019, the Company entered into a revolving credit facility agreement ("Revolving Credit Facility"), which permits borrowings up to $ 50,000 , of which the entire amount is available immediately, with the ability to increase available borrowings up to an additional $ 100,000 , to be made available subject to satisfaction of certain conditions.

The Revolving Credit Facility also permits the issuance of letters of credit upon request of up to $ 15,000 .

In March 2020, the Company drew down the full $ 50,000 available under the Revolving Credit Facility to enhance liquidity and financial flexibility given the uncertain market conditions created by the COVID-19 pandemic.

This amount was paid in full, plus interest, in June 2020.

In May 2020, the Company entered into a first amendment to the Revolving Credit Facility ("First Amendment"), which, among other things, provided for modified financial covenant compliance requirements for a period of time.

The First Amendment required the Company to maintain minimum liquidity of $ 25,000 through July 1, 2021 and outstanding borrowings during the applicable period covered by the First Amendment bore interest at either:

In March 2021, the Company entered into a second amendment to the Revolving Credit Facility (“Second Amendment”).

The Second Amendment modified the applicable covenants and restrictions in the Revolving Credit Facility to permit the incurrence of the Convertible Notes (as defined below), including obligations and transactions in connection therewith.

In addition, the Second Amendment, among other things, (i) extended the period applicable to the increased interest rate margin as set forth in the First Amendment;

(ii) shortened the maturity date of the Revolving Credit Facility from August 2024 to September 2022 and (iii) added mechanics relating to the transition from the use of LIBOR to the Secured Overnight Financing Rate ("SOFR") upon the discontinuance or unavailability of LIBOR.

Subsequently, and also in March 2021, we entered into a third amendment to the Revolving Credit Facility (“Third Amendment”) with JPMorgan Chase Bank, N.A.

(as successor agent to Wells Fargo Bank, National Association), as administrative agent, and

(ii) shortened the maturity date of the Revolving Credit Facility from August 2024 to September 2022 and (iii) added

Shake Shack Inc.

Form 10-Q | 14

the lenders party thereto.

In addition, in March 2021, Wells Fargo Bank resigned as administrative agent under the Revolving Credit Facility and assigned its commitments thereunder to JPMorgan Bank, N.A.

mechanics relating to the transition from the use of LIBOR to the Secured Overnight Financing Rate ("SOFR") upon the discontinuance or unavailability of LIBOR.

Subsequently, and also in March 2021, the Company entered into a third amendment to the Revolving Credit Facility (“Third Amendment”) as Wells Fargo Bank resigned as administrative agent under the Revolving Credit Facility and assigned its commitments thereunder to JPMorgan Bank, N.A.

The Third Amendment appoints JPMorgan Bank, N.A.

1 unchanged sentence

In addition, the Third Amendment, among other things, extends the maturity date of the Revolving Credit Facility from September 2022 to March 2026.

As of March 31, 2021 and December 30, 2020, no amounts were outstanding under the Revolving Credit Facility.

As of June 30, 2021 and December 30, 2020, no amounts were outstanding under the Revolving Credit Facility.

The obligations under the Revolving Credit Facility are secured by a first-priority security interest in substantially all of the assets of SSE Holdings and the guarantors.

The obligations under the Revolving Credit Facility are guaranteed by each of SSE Holdings' direct and indirect subsidiaries (with certain exceptions).

The Revolving Credit Facility requires us to comply with maximum net lease adjusted leverage and minimum fixed charge coverage ratios.

We are not subject to these coverage ratios for a period of time due to the Second Amendment to the Revolving Credit Facility described above.

In addition, the Revolving Credit Facility contains other customary affirmative and negative covenants, including those which (subject to certain exceptions and dollar thresholds) limit our ability to incur debt;

The Revolving Credit Facility requires the Company to comply with maximum net lease adjusted leverage and minimum fixed charge coverage ratios.

The Company is not subject to these coverage ratios for a period of time due to the Second Amendment to the Revolving Credit Facility described above.

make investments;

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engage in transactions with affiliates;

and prohibits us, with certain exceptions, from engaging in any line of business not related to our current line of business.

As of March 31, 2021, we were in compliance with all covenants.

As of March 31, 2021, the Revolving Credit Facility had unamortized deferred financing costs of $ 110 , and was included in Other assets on the Condensed Consolidated Balance Sheet.

Total interest expense related to the Revolving Credit Facility were $ 368 and $ 52 for the thirteen weeks ended March 31, 2021 and March 25, 2020, respectively.

Total interest expense for the thirteen weeks ended March 31, 2021 primarily included write-off of previously capitalized costs on the Revolving Credit Facility.

and prohibits the Company, with certain exceptions, from engaging in any line of business not related to its current line of business.

As of June 30, 2021, the Company was in compliance with all covenants.

As of June 30, 2021, the Revolving Credit Facility had unamortized deferred financing costs of $ 105 , and was included in Other assets on the Condensed Consolidated Balance Sheets.

Total interest expense related to the Revolving Credit Facility for the thirteen and twenty-six weeks ended June 30, 2021 was $ 37 and $ 405 , respectively, and $ 442 and $ 554 , respectively, for the thirteen and twenty-six weeks ended June 24, 2020.

Interest expense for the twenty-six weeks ended June 30, 2021 primarily included the write-off of previously capitalized costs on the Revolving Credit Facility.

Convertible Notes

In March 2021, we issued $ 225,000 aggregate principal amount of 0% Convertible Senior Notes due 2028 (the “Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933.

We granted an option to the initial purchasers to purchase up to an additional $ 25,000 aggregate principal amount of Convertible Notes to cover over-allotments, which was subsequently fully exercised during March 2021, resulting in a total issuance of $ 250,000 aggregate principal amount of Convertible Notes.

In March 2021, the Company issued $ 225,000 aggregate principal amount of 0% Convertible Senior Notes due 2028 (“Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933.

The Company granted an option to the initial purchasers to purchase up to an additional $ 25,000 aggregate principal amount of Convertible Notes to cover over-allotments, which was subsequently fully exercised during March 2021, resulting in a total issuance of $ 250,000 aggregate principal amount of Convertible Notes.

The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances.

Upon conversion, we pay or deliver, as the case may be, cash, shares of Shake Shack’s Class A common stock or a combination of cash and shares of Shake Shack’s Class A common stock, at our election.

Upon conversion, the Company pays or delivers, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at the Company's election.

The Convertible Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 1, 2027, only under the following circumstances:

(1) during any fiscal quarter commencing after the fiscal quarter ending on June 30, 2021 (and only during such fiscal quarter), if the last reported sale price of our Class A common stock, par value $ 0.001 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Convertible Notes on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate for the Convertible Notes on each such trading day;

(3) if we call such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Convertible Notes called (or deemed called) for redemption;

(1) during any fiscal quarter commencing after the fiscal quarter ending on June 30, 2021 (and only during such fiscal quarter), if the last reported sale price of the Company's Class A common stock, par value $ 0.001 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Convertible Notes on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per one thousand dollar principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate for the Convertible Notes on each such trading day;

(3) if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Convertible Notes called (or deemed called) for redemption;

and (4) upon the occurrence of specified corporate events as set forth in the Indenture.

On or after December 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or any portion of their Convertible Notes at any time, regardless of the foregoing circumstances.

The Convertible Notes had an initial conversion rate of 5.8679 shares of Shake Shack’s Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $ 170.42 per share of Shake Shack’s Class A common stock.

We may not redeem the Convertible Notes prior to March 6, 2025.

We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after March 6, 2025 if the last reported sale price of Shake Shack’s Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30

Shake Shack Inc.

Form 10-Q | 15

consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.

In addition, if we undergo a fundamental change (as defined in the indenture governing the Convertible Notes), subject to certain conditions, holders may require us to repurchase for cash all or any portion of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if we deliver a notice of redemption in respect of some or all of the Convertible Notes, we will, in certain circumstances, increase the conversion rate of the Convertible Notes for a holder who elects to convert our Convertible Notes in connection with such a corporate event or convert our Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.

The Convertible Notes had an initial conversion rate of 5.8679 shares of Class A common stock per one thousand dollar principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $ 170.42 per share of Class A common stock.

Shake Shack may not redeem the Convertible Notes prior to March 6, 2025.

The Company may redeem for cash all or any portion of the Convertible Notes, at the Company's option, on or after March 6, 2025 if the last reported sale price of Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.

In addition, if Shake Shack undergoes a fundamental change (as defined in the indenture governing the Convertible Notes), subject to certain conditions, holders may require it to repurchase for cash all or any portion of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if the Company delivers a notice of redemption in respect of some or all of the Convertible Notes, the Company will, in certain circumstances, increase the conversion rate of the Convertible Notes for a holder who elects to convert the Convertible Notes in connection with such a corporate event or convert the Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.

Contemporaneously with the issuance of the Convertible Notes, Shake Shack Inc.

entered into an intercompany note with SSE Holdings, LLC (“Intercompany Note”).

entered into an intercompany note with SSE Holdings (“Intercompany Note”).

SSE Holdings promises to pay Shake Shack Inc., for value received, the principal amount with interest of the Intercompany Note in March 2028.

Shake Shack Inc.

will exercise its right to convert the Intercompany Note to maintain at all times a one-to-one ratio between the number of common units, directly or indirectly, by Shake Shack Inc and the aggregate number of outstanding shares of common stock.

As of March 31, 2021, the Convertible Notes had a gross principal balance of $ 250,000 and a balance of $ 242,875 , net of unamortized discount and debt issuance costs of $ 7,125 .

As of March 31, 2021, the unamortized balance of discount and debt issuance costs was recorded as a contra-liability and netted with Long-term debt on the Condensed Consolidated Balance Sheets and was being amortized as interest expense using the effective interest method.

Total amortization expense was $ 86 for the thirteen weeks ended March 31, 2021 and was included in Interest expense in the Condensed Consolidated Statements of Income (Loss).

In connection with the Convertible Notes, we also incurred costs of $ 236 , including consulting and advisory fees, in the thirteen weeks ended March 31, 2021 and was included in General and administrative expense in the Condensed Consolidated Statements of Income (Loss).

At March 31, 2021, the fair value of the Convertible Notes was approximately $ 248,125 , based on external pricing data, including available quoted market prices of these instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as a Level 2 measurement within the fair value hierarchy.

will exercise its right to convert the Intercompany Note to maintain at all times a one-to-one ratio between the number of common units, directly or indirectly, held by Shake Shack Inc.

and the aggregate number of outstanding shares of common stock.

As of June 30, 2021, the Convertible Notes had a gross principal balance of $ 250,000 and a balance of $ 243,019 , net of unamortized discount and debt issuance costs of $ 6,981 .

As of June 30, 2021, the unamortized balance of discount and debt issuance costs was recorded as a contra-liability and netted with Long-term debt on the Condensed Consolidated Balance Sheets and was being amortized as interest expense using the effective interest method.

Total amortization expense was $ 257 and $ 343 respectively, for thirteen and twenty-six weeks ended June 30, 2021 and was included in Interest expense in the Condensed Consolidated Statements of Income (Loss).

In connection with the Convertible Notes, the Company also incurred consulting and advisory fees of $ 236 for the twenty-six weeks ended June 30, 2021 and was included in General and administrative expense in the Condensed Consolidated Statements of Income (Loss).

At June 30, 2021, the fair value of the Convertible Notes was approximately $ 237,188 , based on external pricing data, including available quoted market prices of these instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as a Level 2 measurement within the fair value hierarchy.

Nature of Leases

We currently lease all of our domestic Company-operated Shacks, our home office and certain equipment under various non-cancelable lease agreements that expire on various dates through 2037.

We evaluate contracts entered into to determine whether the contract involves the use of property or equipment, which is either explicitly or implicitly identified in the contract.

We evaluate whether we control the use of the asset, which is determined by assessing whether we obtain substantially all economic benefits from the use of the asset, and whether we have the right to direct the use of the asset.

If these criteria are met and we have identified a lease, we account for the contract under the requirements of Accounting Standards Codification Topic 842 ("ASC 842").

Upon the possession of a leased asset, we determine its classification as an operating or finance lease.

Our real estate leases are classified as operating leases and most of our equipment leases are classified as finance leases.

Generally, our real estate leases have initial terms ranging from 10 to 15 years and typically include two five-year renewal options.

Renewal options are generally not recognized as part of the right-of-use assets and lease liabilities as it is not reasonably certain at commencement date that we would exercise the options to extend the lease.

Our real estate leases typically provide for fixed minimum rent payments and/or contingent rent payments based upon sales in excess of specified thresholds.

When the achievement of such sales thresholds are deemed to be probable, contingent rent is accrued in proportion to the sales recognized during the period.

Fixed minimum rent payments are recognized on a straight-line basis over the lease term from the date we take possession of the leased property.

Lease expense incurred before a Shack opens is recorded in Pre-opening costs on the Condensed Consolidated Statements of Income (Loss).

Once a domestic Company-operated Shack opens, we record the straight-line lease

Shake Shack currently leases all of its domestic Company-operated Shacks, the home office and certain equipment under various non-cancelable lease agreements that expire on various dates through 2038.

The Company evaluates contracts entered into to determine whether the contract involves the use of property or equipment, which is either explicitly or implicitly identified in the contract.

The Company evaluates whether it controls the use of the asset, which is determined by assessing whether substantially all economic benefits from the use of the asset is obtained, and whether the Company has the right to direct the use of the asset.

If these criteria are met and the Company has identified a lease, the contract is accounted for under the requirements of Accounting Standards Codification Topic 842.

Upon the possession of a leased asset, the Company determines its classification as an operating or finance lease.

The real estate leases are classified as operating leases and most of the equipment leases are classified as finance leases.

Generally, the real estate leases have initial terms ranging from 10 to 15 years and typically include two five-year renewal options.

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Form 10-Q | 16

expense and any contingent rent, if applicable, in Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss).

Many of our leases also require us to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss).

As there are no explicit rates provided in our leases, we use our incremental borrowing rate in determining the present value of future lease payments.

options are generally not recognized as part of the right-of-use assets and lease liabilities as it is not reasonably certain at commencement date that the Company would exercise the options to extend the lease.

The real estate leases typically provide for fixed minimum rent payments and/or contingent rent payments based upon sales in excess of specified thresholds.

When the achievement of such sales thresholds are deemed to be probable, contingent rent is accrued in proportion to the sales recognized during the period.

Fixed minimum rent payments are recognized on a straight-line basis over the lease term from the date the Company takes possession of the leased property.

Lease expense incurred before a Shack opens is recorded in Pre-opening costs on the Condensed Consolidated Statements of Income (Loss).

Once a domestic Company-operated Shack opens, the straight-line lease expense and any contingent rent, if applicable, is recorded in Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss).

Many of the leases also require the Company to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss).

As there are no explicit rates provided in the leases, the Company uses its incremental borrowing rate in determining the present value of future lease payments.

The discount rate used to measure the lease liability is derived from the average of the yield curves obtained from using the notching method and the recovery rate method.

The most significant assumption in calculating the incremental borrowing rate is our credit rating and is subject to judgment.

We determined our credit rating based on a comparison of the financial information of SSE Holdings to other public companies and then used their respective credit ratings to develop our own.

We expend cash for leasehold improvements to build out and equip our leased premises.

Generally, a portion of the leasehold improvements and building costs are reimbursed by our landlords as landlord incentives pursuant to agreed-upon terms in our lease agreements.

If obtained, landlord incentives usually take the form of cash, full or partial credits against our future minimum or contingent rents otherwise payable by us, or a combination thereof.

In most cases, landlord incentives are received after we take possession of the property, as we meet required milestones during the construction of the property.

We include these amounts in the measurement of the initial operating lease liability, which are also reflected as a reduction to the initial measurement of the right-of-use asset.

A summary of finance and operating lease right-of-use assets and liabilities as of March 31, 2021 and December 30, 2020 is as follows:

Classification March 31

The most significant assumption in calculating the incremental borrowing rate is the Company's credit rating and is subject to judgment.

The credit rating is determined by a comparison of the financial information of SSE Holdings to other public companies and then use their respective credit ratings to develop the Company's rate.

The Company expends cash for leasehold improvements to build out and equip the leased premises.

Generally, a portion of the leasehold improvements and building costs are reimbursed by the landlords as landlord incentives pursuant to agreed-upon terms in the lease agreements.

If obtained, landlord incentives usually take the form of cash, full or partial credits against future minimum or contingent rents otherwise payable by the Company, or a combination thereof.

In most cases, landlord incentives are received after the Company takes possession of the property, as required milestones are met during the construction of the property.

The Company includes these amounts in the measurement of the initial operating lease liability, which are also reflected as a reduction to the initial measurement of the right-of-use asset.

A summary of finance and operating lease right-of-use assets and liabilities as of June 30, 2021 and December 30, 2020 is as follows:

Classification June 30

2021 December 30

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Total lease liabilities $ 406,834 $ 384,977

The components of lease expense for the thirteen weeks ended March 31, 2021 and March 25, 2020 was as follows:

Thirteen Weeks Ended

Classification March 31

2021 March 25

Shake Shack Inc.

Form 10-Q | 17

The components of lease expense for the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020 was as follows:

Thirteen Weeks Ended Twenty-Six Weeks Ended

Classification June 30

Finance lease cost:

Amortization of right-of-use assets Depreciation expense $ 613 $ 577

Amortization of right-of-use assets Depreciation and amortization expense $ 675 $ 602 $ 1,288 $ 1,179

Interest on lease liabilities Interest expense 57 55 111 110

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Total lease cost $ 16,543 $ 16,291 $ 32,473 $ 31,519

Shake Shack Inc.

Form 10-Q | 16

As of March 31, 2021, future minimum lease payments for finance and operating leases consisted of the following:

As of June 30, 2021, future minimum lease payments for finance and operating leases consisted of the following:

Finance Leases Operating Leases

8 unchanged sentences

Total lease liabilities $ 6,675 $ 400,159

As of March 31, 2021 we had additional operating lease commitments of $ 55,964 for non-cancelable leases without a possession date, which will begin to commence in 2021.

These lease commitments are consistent with the leases that we have executed thus far.

A summary of lease terms and discount rates for finance and operating leases as of March 31, 2021 and December 30, 2020 is as follows:

As of June 30, 2021 the Company had additional operating lease commitments of $ 51,706 for non-cancelable leases without a possession date, which begin to commence in 2021.

These lease commitments are consistent with the leases that have been executed thus far.

A summary of lease terms and discount rates for finance and operating leases as of June 30, 2021 and December 30, 2020 is as follows:

2021 December 30

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Operating leases 3.7 % 4.2 %

Supplemental cash flow information related to leases for the thirteen weeks ended March 31, 2021 and March 25, 2020 is as follows:

Thirteen Weeks Ended

2021 March 25

Shake Shack Inc.

Form 10-Q | 18

Supplemental cash flow information related to leases for the twenty-six weeks ended June 30, 2021 and June 24, 2020 is as follows:

Twenty-Six Weeks Ended

Cash paid for amounts included in the measurement of lease liabilities:

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NON-CONTROLLING INTERESTS

We are the sole managing member of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings.

We report a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings.

Shake Shack is the sole managing member of SSE Holdings and, as a result, consolidates the financial results of SSE Holdings.

The Company reports a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings.

The Third Amended and Restated Limited Liability Company Agreement, as further amended, (the "LLC Agreement") of SSE Holdings provides that holders of LLC Interests may, from time to time, require SSE Holdings to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis.

In connection with any redemption or

Shake Shack Inc.

Form 10-Q | 17

exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings.

Changes in our ownership interest in SSE Holdings while we retain our controlling interest in SSE Holdings will be accounted for as equity transactions.

In connection with any redemption or exchange, the Company will receive a corresponding number of LLC Interests, increasing the total ownership interest in SSE Holdings.

Changes in the ownership interest in SSE Holdings while the Company retains its controlling interest in SSE Holdings will be accounted for as equity transactions.

As such, future redemptions or direct exchanges of LLC Interests in SSE Holdings by the other members of SSE Holdings will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital.

The following table summarizes the ownership interest in SSE Holdings as of March 31, 2021 and December 30, 2020.

March 31, 2021 December 30, 2020

The following table summarizes the ownership interest in SSE Holdings as of June 30, 2021 and December 30, 2020.

June 30, 2021 December 30, 2020

LLC Interests Ownership % LLC Interests Ownership %

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and the non-controlling interest holders.

The non-controlling interest holders' weighted average ownership percentage for the thirteen weeks ended March 31, 2021 and March 25, 2020 was 7.0 % and 8.4 %, respectively.

The following table summarizes the effects of changes in ownership of SSE Holdings on our equity during the thirteen weeks ended March 31, 2021 and March 25, 2020.

Thirteen Weeks Ended

2021 March 25

The non-controlling interest holders' weighted average ownership percentage for the thirteen and twenty-six weeks ended June 30, 2021 was 7.0 %.

The non-controlling interest holders' weighted average ownership percentage for the thirteen and twenty-six weeks ended June 24, 2020 was 7.7 % and 8.0 %, respectively.

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Form 10-Q | 19

The following table summarizes the effects of changes in ownership of SSE Holdings on the Company's equity during the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020.

Thirteen Weeks Ended Twenty-Six Weeks Ended

Net income (loss) attributable to Shake Shack Inc.

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Transfers (to) from non-controlling interests:

Increase in additional paid-in capital as a result of the redemption of LLC Interests 36 195

Increase (decrease) in additional paid-in capital as a result of activity under stock compensation plans and the related income tax effect 3,359 424

Increase (decrease) in additional paid-in capital as a result of the redemption of LLC Interests ( 3 ) — 33 195

Increase (decrease) in additional paid-in capital as a result of activity under stock compensation plans and the related income tax effects ( 788 ) ( 164 ) 2,571 260

Increase in additional paid-in-capital as a result of the issuance of Class A common stock sold in equity offerings — 135,718 — 135,718

Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.

$ 1,153 $ 119,343 $ 5,857 $ 119,002

The following table summarizes redemptions of LLC Interests activity during the thirteen weeks ended March 31, 2021 and March 25, 2020.

Thirteen Weeks Ended

2021 March 25

The following table summarizes redemptions of LLC Interests activity during the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020.

Thirteen Weeks Ended Twenty-Six Weeks Ended

Redemption and acquisition of LLC Interests

6 unchanged sentences

Shares of Class B common stock surrendered and canceled 1 — 29,601 28,195

During the thirteen weeks ended March 31, 2021 and March 25, 2020, we received an aggregate of 355,849 and 77,903 LLC Interests, respectively, in connection with the activity under our stock compensation plan .

18 | Shake Shack Inc.

During the thirteen and twenty-six weeks ended June 30, 2021 the Company received an aggregate of 31,116 and 386,965 LLC Interests, respectively, in connection with the activity under its stock compensation plan and 63,601 and 141,504 LLC Interests, respectively, during the thirteen and twenty-six weeks ended June 24, 2020.

EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the thirteen weeks ended March 31, 2021 and March 25, 2020 is as follows:

Thirteen Weeks Ended

2021 March 25

A summary of equity-based compensation expense recognized during the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020 is as follows:

Thirteen Weeks Ended Twenty-Six Weeks Ended

Stock options $ ( 17 ) $ 26 $ 3 $ 287

3 unchanged sentences

Total income tax benefit recognized related to equity-based compensation $ 63 $ 39 $ 130 $ 75

Equity-based compensation expense is included in General and administrative expenses and Labor and related expenses on the Condensed Consolidated Statements of Income (Loss) during the thirteen weeks ended March 31, 2021 and March 25, 2020 as follows:

Thirteen Weeks Ended

2021 March 25

20 | Shake Shack Inc.

Equity-based compensation expense is included in General and administrative expenses and Labor and related expenses on the Condensed Consolidated Statements of Income (Loss) during the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020 as follows:

Thirteen Weeks Ended Twenty-Six Weeks Ended

General and administrative expenses $ 1,723 $ 1,268 $ 3,264 $ 2,482

1 unchanged sentence

Equity-based compensation expense $ 1,958 $ 1,419 $ 3,639 $ 2,719

We are the sole managing member of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings.

Shake Shack is the sole managing member of SSE Holdings and, as a result, consolidates the financial results of SSE Holdings.

SSE Holdings is treated as a partnership for U.S.

2 unchanged sentences

federal and certain state and local income taxes.

Any taxable income or loss generated by SSE Holdings is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis.

We are subject to U.S.

federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of SSE Holdings, as well as any stand-alone income or loss generated by Shake Shack Inc.

We are also subject to withholding taxes in foreign jurisdictions.

Our effective income tax rates for the thirteen weeks ended March 31, 2021 and March 25, 2020 were 105.5 % and ( 8.8 )%, respectively.

The increase was primarily driven by lower pre-tax book income resulting in a loss, causing tax credits and windfall tax benefits related to equity-based compensation to have an increasing effect on the tax rate, as well as a reduction of a valuation allowance.

Additionally, an increase in our ownership interest in SSE Holdings increases our share of the taxable income (loss) of SSE Holdings.

Our weighted-average ownership interest in SSE Holdings was 93.0 % and 91.6 % for the thirteen weeks ended March 31, 2021 and March 25, 2020, respectively.

Any taxable income or loss generated by SSE Holdings is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis.

The Company is subject to U.S.

federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of SSE Holdings, as well as any stand-alone income or loss generated by Shake Shack Inc.

The Company is also subject to withholding taxes in foreign jurisdictions.

The effective income tax rates for the thirteen weeks ended June 30, 2021 and June 24, 2020 were 32.4 % and 25.3 %, respectively.

The increase was primarily driven by higher pre-tax book income resulting in income and higher foreign withholding taxes, partially offset by a reduction of a valuation allowance.

Additionally, an increase in the Company's ownership interest in SSE Holdings increases its share of the taxable income (loss) of SSE Holdings.

The weighted-average ownership interest in SSE Holdings was 93.0 % and 92.3 % for the thirteen weeks ended June 30, 2021 and June 24, 2020, respectively.

The effective income tax rates for the twenty-six weeks ended June 30, 2021 and June 24, 2020 were 135.4 % and 23.9 %, respectively.

The Company's weighted-average ownership interest in SSE Holdings was 93.0 % and 92.0 % for the twenty-six weeks ended June 30, 2021 and June 24, 2020, respectively.

Deferred Tax Assets and Liabilities

During the thirteen weeks ended March 31, 2021, we acquired an aggregate of 385,449 LLC Interests in connection with the redemption of LLC Interests, and activity relating to our stock compensation plan.

We recognized a deferred tax asset in the amount of $ 10,204 associated with the basis difference in our investment in SSE Holdings upon acquisition of these LLC Interests.

As of March 31, 2021, the total deferred tax asset related to the basis difference in our investment in SSE Holdings was $ 142,867 .

However, a portion of the total basis difference will only reverse upon the eventual sale of our interest in SSE Holdings, which we expect would result in a capital loss.

As of March 31, 2021, the total valuation allowance established against the deferred tax asset to which this portion relates was $ 1,260 .

During the twenty-six weeks ended June 30, 2021, the Company acquired an aggregate of 416,566 LLC Interests in connection with the redemption of LLC Interests, and activity relating to its stock compensation plan.

The Company recognized a deferred tax asset in the amount of $ 10,608 associated with the basis difference in its investment in SSE Holdings upon acquisition of these LLC Interests.

As of June 30, 2021, the total deferred tax asset related to the basis difference in the Company's investment in SSE Holdings was $ 135,176 .

However, a portion of the total basis difference will only reverse upon the eventual sale of its interest in SSE Holdings, which the Company expects would result in a capital loss.

As of June 30, 2021, the total valuation allowance established against the deferred tax asset to which this portion relates was $ 1,470 .

During the twenty-six weeks ended June 30, 2021, the Company also recognized $ 300 of deferred tax assets related to additional tax basis increases generated from expected future payments under the Tax Receivable Agreement and related deductions for imputed interest on such payments.

Refer to "Tax Receivable Agreement," herein for additional information.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized.

As of June 30, 2021, the Company concluded, based on the weight of all available positive and negative evidence, that all of its deferred tax assets (except for those deferred tax assets described above relating to basis differences that are expected to result in a capital loss upon eventual sale of its interest in SSE Holdings, New York City UBT credits and certain foreign tax credits) are more likely than not to be realized.

As such, no additional valuation allowance was recognized.

Shake Shack Inc.

Form 10-Q | 21

During the thirteen weeks ended March 31, 2021, we also recognized $ 300 of deferred tax assets related to additional tax basis increases generated from expected future payments under the Tax Receivable Agreement and related deductions for imputed interest on such payments.

See "Tax Receivable Agreement," herein for more information.

We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized.

As of March 31, 2021, we concluded, based on the weight of all available positive and negative evidence, that all of our deferred tax assets (except for those deferred tax assets described above relating to basis differences that are expected to result in a capital loss upon eventual sale of our interest in SSE Holdings, New York City UBT credits and certain foreign tax credits) are more likely than not to be realized.

As such, no additional valuation allowance was recognized.

Tax Receivable Agreement

Pursuant to our election under Section 754 of the Internal Revenue Code (the "Code"), we expect to obtain an increase in our share of the tax basis in the net assets of SSE Holdings when LLC Interests are redeemed or exchanged by the other members of SSE Holdings.

We plan to make an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC Interest occurs.

We intend to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S.

Pursuant to the Company's election under Section 754 of the Internal Revenue Code (the "Code"), the Company expects to obtain an increase in its share of the tax basis in the net assets of SSE Holdings when LLC Interests are redeemed or exchanged by the other members of SSE Holdings.

The Company plans to make an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC Interest occurs.

The Company intends to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S.

federal income tax purposes.

These increases in tax basis may reduce the amounts that we would otherwise pay in the future to various tax authorities.

These increases in tax basis may reduce the amounts that would otherwise be paid in the future to various tax authorities.

They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

On February 4, 2015, we entered into a tax receivable agreement with certain of the then-existing members of SSE Holdings (the "Tax Receivable Agreement") that provides for the payment by us of 85 % of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the "TRA Payments").

We expect to benefit from the remaining 15 % of any tax benefits that we may actually realize.

The TRA Payments are not conditioned upon any continued ownership interest in SSE Holdings or us.

On February 4, 2015, the Company entered into a tax receivable agreement with certain of the then-existing members of SSE Holdings (the "Tax Receivable Agreement") that provides for the payment by the Company of 85 % of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of (i) increases in the Company's share of the tax basis in the net assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the "TRA Payments").

The Company expects to benefit from the remaining 15 % of any tax benefits that may actually realize.

The TRA Payments are not conditioned upon any continued ownership interest in SSE Holdings or the Company.

The rights of each member of SSE Holdings that is a party to the Tax Receivable Agreement, are assignable to transferees of their respective LLC Interests.

During the thirteen weeks ended March 31, 2021, we acquired an aggregate of 29,600 LLC Interests in connection with the redemption of LLC Interests, which resulted in an increase in the tax basis of our investment in SSE Holdings subject to the provisions of the Tax Receivable Agreement.

We recognized an additional liability in the amount of $ 1,094 for the TRA Payments due to the redeeming members, representing 85 % of the aggregate tax benefits we expect to realize from the tax basis increases related to the redemption of LLC Interests, after concluding it was probable that such TRA Payments would be paid based on our estimates of future taxable income.

During the thirteen weeks ended March 31, 2021 and March 25, 2020, payments of $ 0 and $ 6,569 , inclusive of interest, were made to the parties to the Tax Receivable Agreement, respectively.

As of March 31, 2021, the total amount of TRA Payments due under the Tax Receivable Agreement, was $ 234,048 .

See Note 13, Commitments and Contingencies, for more information relating to our liabilities under the Tax Receivable Agreement.

During the twenty-six weeks ended June 30, 2021, the Company acquired an aggregate of 29,601 LLC Interests in connection with the redemption of LLC Interests, which resulted in an increase in the tax basis of its investment in SSE Holdings subject to the provisions of the Tax Receivable Agreement.

The Company recognized an additional liability in the amount of $ 1,094 for the TRA Payments due to the redeeming members, representing 85 % of the aggregate tax benefits the Company expects to realize from the tax basis increases related to the redemption of LLC Interests, after concluding it was probable that such TRA Payments would be paid based on estimates of future taxable income.

During the twenty-six weeks ended June 30, 2021, the Company made no payments to the parties to the Tax Receivable Agreement.

During the twenty-six weeks ended June 24, 2020, payments of $ 6,643 , inclusive of interest, were made to the parties to the Tax Receivable Agreement.

As of June 30, 2021, the total amount of TRA Payments due under the Tax Receivable Agreement, was $ 234,049 .

Refer to Note 13, Commitments and Contingencies, for additional information relating to the liabilities under the Tax Receivable Agreement.

EARNINGS (LOSS) PER SHARE

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock (in thousands, except per share amounts) for the thirteen weeks ended March 31, 2021 and March 25, 2020.

22 | Shake Shack Inc.

Thirteen Weeks Ended

2021 March 25

Thirteen Weeks Ended Twenty-Six Weeks Ended

Net income (loss) attributable to Shake Shack Inc.—basic $ 1,944 $ ( 16,211 ) $ 3,253 $ ( 17,171 )

Reallocation of net loss attributable to non-controlling interests from the assumed conversion of Class B shares ( 734 ) —

Reallocation of net income (loss) attributable to non-controlling interests from the assumed conversion of Class B shares 121 — ( 613 ) —

Net income (loss) attributable to Shake Shack Inc.—diluted $ 2,065 $ ( 16,211 ) $ 2,640 $ ( 17,171 )

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Earnings (loss) per share of Class A common stock—diluted $ 0.05 $ ( 0.43 ) $ 0.06 $ ( 0.48 )

Shares of our Class B common stock do not share in the earnings or losses of Shake Shack and are therefore not participating securities.

Shares of Class B common stock do not share in the earnings or losses of Shake Shack and are therefore not participating securities.

As such, separate presentation of basic and diluted earnings (loss) per share of Class B common stock under the two-class method has not been presented.

However, shares of our Class B common stock outstanding for the period are considered potentially dilutive shares of Class A common stock under application of the if-converted method and are included in the computation of diluted earnings (loss) per share, except when the effect would be antidilutive.

The following table presents potentially dilutive securities, as of the end of the period, excluded from the computations of diluted earnings (loss) per share of Class A common stock for the thirteen weeks ended March 31, 2021 and March 25, 2020.

Thirteen Weeks Ended

2021 March 25

However, shares of Class B common stock outstanding for the period are considered potentially dilutive shares of Class A common stock under application of the if-converted method and are included in the computation of diluted earnings (loss) per share, except when the effect would be antidilutive.

Thirteen Weeks Ended Twenty-Six Weeks Ended

Stock options — 813,488 (2) — 813,488 (2)

2 unchanged sentences

Shares of Class B common stock — 3,117,002 (2) — 3,117,002 (2)

(1) Number of securities outstanding at the end of the period that were excluded from the computation of diluted earnings (loss) per share of Class A common stock because the exercise price of the stock options exceeded the average market price of our Class A common stock during the period ("out-of-the-money").

(1) Number of securities outstanding at the end of the period that were excluded from the computation of diluted earnings (loss) per share of Class A common stock because the performance conditions associated with these awards were not met assuming the end of the reporting period was the end of the performance period.

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SUPPLEMENTAL CASH FLOW INFORMATION

The following table sets forth supplemental cash flow information for the thirteen weeks ended March 31, 2021 and March 25, 2020:

Thirteen Weeks Ended

2021 March 25

The following table sets forth supplemental cash flow information for the twenty-six weeks ended June 30, 2021 and June 24, 2020:

Twenty-Six Weeks Ended

Cash paid for:

10 unchanged sentences

Lease Commitments

We are obligated under various operating leases for Shacks and our home office space, expiring in various years through 2037.

Under certain of these leases, we are liable for contingent rent based on a percentage of sales in excess of specified thresholds and are typically responsible for our proportionate share of real estate taxes, common area maintenance costs and other occupancy costs.

See Note 7, Leases.

As security under the terms of one of our leases, we are obligated under a letter of credit totaling $ 130 as of March 31, 2021, which expires in February 2026.

Additionally, in September 2017, we entered into a letter of credit in conjunction with our new home office lease in the amount of $ 603 , which expires in August 2021 and renews automatically for one-year periods through January 31, 2034.

The Company is obligated under various operating leases for Shacks and the home office space, expiring in various years through 2038.

Under certain of these leases, the Company is liable for contingent rent based on a percentage of sales in excess of specified thresholds and are typically responsible for its proportionate share of real estate taxes, common area maintenance costs and other occupancy costs.

Refer to Note 7, Leases, for additional information.

As security under the terms of one of the leases, the Company is obligated under a letter of credit totaling $ 130 as of June 30, 2021, which expires in February 2026.

Additionally, in September 2017, the Company entered into a letter of credit in conjunction with the new home office lease in the amount of $ 603 , which expires in August 2021 and renews automatically for one-year periods through January 31, 2034.

Purchase Commitments

1 unchanged sentence

These obligations are generally short-term in nature and are recorded as liabilities when the related goods are received or services rendered.

We also enter into long-term, exclusive contracts with certain vendors to supply us with food, beverages and paper goods, obligating us to purchase specified quantities.

The Company also enters into long-term, exclusive contracts with certain vendors to supply food, beverages and paper goods, obligating the Company to purchase specified quantities.

Legal Contingencies

In March 2020, a claim was filed against Shake Shack alleging certain violations of the Fair Labor Standards Act.

At a mediation between the parties, we agreed to settle the matter with the plaintiff and other employees who elect to participate in the settlement for $ 595 .

As of March 31, 2021, an accrual in the amount of $ 595 was recorded for this matter and related expenses.

At a mediation between the parties, the Company agreed to settle the matter with the plaintiff and other employees who elect to participate in the settlement for $ 619 .

As of June 30, 2021, a remaining accrual of $ 24 was recorded in Accrued expenses in the Condensed Consolidated Balance Sheets related to this matter.

In February 2018, a claim was filed against Shake Shack in California state court alleging certain violations of the California Labor Code.

At a mediation between the parties, we agreed to settle the matter with the plaintiff and all other California employees who elect to participate in the settlement for $ 1,200 .

As of March 31, 2021, an accrual in the amount of $ 1,180 was recorded for this matter and related expenses.

At a mediation between the parties, the Company agreed to settle the matter with the plaintiff and all other

24 | Shake Shack Inc.

We are subject to various legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance.

As of March 31, 2021, the amount of the ultimate liability with respect to these matters was not material.

California employees who elect to participate in the settlement for $ 1,200 .

The Company accrued for this matter during the thirteen weeks ended September 26, 2018, and paid in full as of June 30, 2021.

The Company is subject to various legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance.

As of June 30, 2021, the amount of the ultimate liability with respect to these matters was not material.

Liabilities under Tax Receivable Agreement

As described in Note 10, Income Taxes, we are a party to the Tax Receivable Agreement under which we are contractually committed to pay certain of the members of SSE Holdings 85 % of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of certain transactions.

We are not obligated to make any payments under the Tax Receivable Agreement until the tax benefits associated with the transactions that gave rise to the payments are realized.

As described in Note 10, Income Taxes, the Company is a party to the Tax Receivable Agreement under which it is contractually committed to pay certain of the members of SSE Holdings 85 % of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of certain transactions.

The Company is not obligated to make any payments under the Tax Receivable Agreement until the tax benefits associated with the transactions that gave rise to the payments are realized.

Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) future changes in tax laws.

If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related TRA Payments.

During the thirteen weeks ended March 31, 2021 and March 25, 2020, we recognized liabilities totaling $ 1,094 and $ 310 , respectively, relating to our obligations under the Tax Receivable Agreement, after concluding that it was probable that we would have sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.

As of March 31, 2021 and December 30, 2020, our total obligations under the Tax Receivable Agreement were $ 234,048 and $ 232,954 , respectively.

There were no transactions subject to the Tax Receivable Agreement for which we did not recognize the related liability, as we concluded that we would have sufficient future taxable income to utilize all of the related tax benefits.

If the Company does not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then it would not be required to make the related TRA Payments.

During the twenty-six weeks ended June 30, 2021 and June 24, 2020, the Company recognized liabilities totaling $ 1,094 and $ 313 , respectively, relating to the obligations under the Tax Receivable Agreement, after concluding that it was probable that it would have sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.

As of June 30, 2021 and December 30, 2020, the total obligations under the Tax Receivable Agreement were $ 234,049 and $ 232,954 , respectively.

There were no transactions subject to the Tax Receivable Agreement for which the Company did not recognize the related liability, as the Company concluded that it would have sufficient future taxable income to utilize all of the related tax benefits.

RELATED PARTY TRANSACTIONS

Union Square Hospitality Group

The Chairman of our Board of Directors serves as the Chief Executive Officer of Union Square Hospitality Group, LLC.

The Chairman of the Board of Directors serves as the Chief Executive Officer of Union Square Hospitality Group, LLC.

As a result, Union Square Hospitality Group, LLC and its subsidiaries, set forth below, are considered related parties.

Hudson Yards Sports and Entertainment

In fiscal 2011, we entered into a Master License Agreement (as amended, "MLA") with Hudson Yards Sports and Entertainment LLC ("HYSE") to operate Shake Shack branded limited menu concession stands in sports and entertainment venues within the United States.

In fiscal 2011, Shake Shack entered into a Master License Agreement (as amended, "MLA") with Hudson Yards Sports and Entertainment LLC ("HYSE") to operate Shake Shack branded limited menu concession stands in sports and entertainment venues within the United States.

In February 2019, the agreement was assigned to Hudson Yards Catering ("HYC"), the parent of HYSE.

The agreement expires in January 2027 and includes five consecutive five-year renewal options at HYC's option.

As consideration for these rights, HYC pays us a license fee based on a percentage of net food sales, as defined in the MLA.

HYC also pays us a percentage of profits on sales of branded beverages, as defined in the MLA.

Thirteen Weeks Ended

Classification March 31

2021 March 25

As consideration for these rights, HYC pays the Company a license fee based on a percentage of net food sales, as defined in the MLA.

HYC also pays a percentage of profits on sales of branded beverages, as defined in the MLA.

Thirteen Weeks Ended Twenty-Six Weeks Ended

Classification June 30

Amounts received from HYC Licensing revenue $ 58 $ 12 $ 58 $ 34

Classification March 31

Classification June 30

2021 December 30

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Madison Square Park Conservancy

The Chairman of our Board of Directors serves as a director of the Madison Square Park Conservancy ("MSP Conservancy"), with which we have a license agreement and pay license fees to operate our Madison Square Park Shack.

No amounts were due to MSP Conservancy as of both March 31, 2021 and December 30, 2020.

Thirteen Weeks Ended

Classification March 31

2021 March 25

The Chairman of the Board of Directors serves as a director of the Madison Square Park Conservancy ("MSP Conservancy"), with which Shake Shack has a license agreement and pays license fees to operate the Madison Square Park Shack.

No amounts were due to MSP Conservancy as of both June 30, 2021 and December 30, 2020.

Thirteen Weeks Ended Twenty-Six Weeks Ended

Classification June 30

Amounts paid to MSP Conservancy Occupancy and related expenses $ 216 $ — $ 431 $ 219

The Chairman of our Board of Directors serves as a director of Olo, Inc.

(formerly known as "Mobo Systems, Inc."), a platform we use in connection with our mobile ordering application.

No amounts were due to Olo as of both March 31, 2021 and December 30, 2020.

Thirteen Weeks Ended

Classification March 31

2021 March 25

Amounts paid to Olo Other operating expenses $ 147 $ 52

Our Chief Executive Officer is a member of the Board of Directors of Square, Inc.

We currently use certain point-of-sale applications, payment processing services, hardware and other enterprise platform services in connection with the processing of a limited amount of sales at certain of our locations, sales for certain off-site events and in connection with our kiosk technology.

Thirteen Weeks Ended

Classification March 31

2021 March 25

The Chairman of the Board of Directors serves as a director of Olo, Inc.

(formerly known as "Mobo Systems, Inc."), a platform the Company uses in connection with its mobile ordering application.

No amounts were due to Olo, Inc.

as of both June 30, 2021 and December 30, 2020.

Thirteen Weeks Ended Twenty-Six Weeks Ended

Classification June 30

Amounts paid to Olo, Inc.

Other operating expenses $ 63 $ 42 $ 210 $ 94

The Company's Chief Executive Officer is a member of the Board of Directors of Square, Inc.

The Company currently uses certain point-of-sale applications, payment processing services, hardware and other enterprise platform services in connection with the processing of a limited amount of sales at certain locations, sales for certain off-site events and in connection with its kiosk technology.

Thirteen Weeks Ended Twenty-Six Weeks Ended

Classification June 30

Amounts paid to Square Other operating expenses $ 754 $ 218 $ 1,216 $ 789

Thirteen Weeks Ended

Classification March 31

2021 March 25

Classification June 30

2021 December 30

Amounts due to Square Accounts Payable $ 21 $ —

USHG Acquisition Corp.

Our Chief Executive Officer has been appointed to the board of directors of USHG Acquisition Corp.

in which the Chairman of our Board of Directors serves as the chairman of the board of directors of USHG Acquisition Corp.

The Company's Chief Executive Officer has been appointed to the Board of Directors of USHG Acquisition Corp.

in which the Chairman of the Board of Directors serves as the chairman of the board of directors of USHG Acquisition Corp.

USHG Acquisition Corp.

is a newly organized blank check company incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.

No amounts were due to or due from USHG Acquisition Corp as of both March 31, 2021 and December 30, 2020.

No amounts were due to or due from USHG Acquisition Corp as of both June 30, 2021 and December 30, 2020.

Tax Receivable Agreement

As described in Note 10, Income Taxes, we entered into a Tax Receivable Agreement with certain members of SSE Holdings that provides for the payment by us of 85 % of the amount of tax benefits, if any, that Shake Shack actually realizes or in some cases is deemed to realize as a result of certain transactions.

The Company entered into a Tax Receivable Agreement that provides for the payment by the Company of 85 % of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of certain transactions.

Refer to Note 10, Income Taxes, for additional information.

Shake Shack Inc.

Form 10-Q | 26

Thirteen Weeks Ended

Classification March 31

2021 March 25

Thirteen Weeks Ended Twenty-Six Weeks Ended

Classification June 30

Amounts paid to members (inclusive of interest) Other current liabilities $ — $ 74 $ — $ 6,643

Classification March 31

Classification June 30

2021 December 30

3 unchanged sentences

Under the terms of the SSE Holdings LLC Agreement, SSE Holdings is obligated to make tax distributions to its members.

No tax distributions were payable to non-controlling interest holders as of March 31, 2021 and December 30, 2020, respectively.

Thirteen Weeks Ended

Classification March 31

2021 March 25

No tax distributions were payable to non-controlling interest holders as of June 30, 2021 and December 30, 2020, respectively.

Thirteen Weeks Ended Twenty-Six Weeks Ended

Classification June 30

Amounts paid to non-controlling interest holders Non-controlling interests $ 239 $ 9 $ 706 $ 314

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-Q

Item 1. Financial Statements