What changed in this filing

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Item 1A. Risk Factors

2025-02-21 compared with 2024-02-29 · 204 added, 212 removed, 628 unchanged (40% of the section changed)

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▪ Our long-term success is dependent on the selection, design and execution of appropriate business strategies.

▪ Our investments to enhance the customer experience through expanding the availability of our drive-thru options has required and will continue to require significant capital expenditures and may not generate the expected returns.

▪ Our primary growth strategy is highly dependent on the availability of suitable locations and our ability to develop and open new Shacks on a timely basis and on terms attractive to us.

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▪ New Shacks, once opened, may not be profitable, and may negatively affect Shack sales at our existing Shacks.

▪ Our investments to enhance the guest experience through expanding the availability of our drive-thru options has required and will continue to require significant capital expenditures and may not generate the expected returns.

▪ If we are unable to maintain and grow Shack sales at our existing Shacks, our financial performance could be adversely affected.

▪ Our mission to Stand For Something Good subjects us to risks.

▪ Our purpose to Stand For Something Good subjects us to risks.

▪ We have a limited number of suppliers for our major products and rely on one national distribution company for the majority of our domestic distribution needs.

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▪ Rising labor costs and difficulties recruiting and retaining the right team members could adversely affect our business.

▪ Increased food commodity and energy costs could decrease our Shack-level operating profit margins or cause us to limit or otherwise modify our menu, which could adversely affect our business.

▪ Increased food commodity and energy costs could decrease our Restaurant-level profit margins or cause us to limit or otherwise modify our menu, which could adversely affect our business.

▪ The digital and delivery business, related expenses, execution and expansion thereof, is uncertain and subject to risk.

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▪ Pandemics or disease outbreaks, such as the COVID-19 pandemic, have disrupted, and may continue to disrupt our business, and have materially affected our business, results of operations and our financial condition.

▪ The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.

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▪ Our international licensed Shacks import many of our proprietary and other core ingredients from the United States and other countries.

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▪ We are subject to risks associated with leasing property subject to long-term leases.

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▪ The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.

▪ Restaurant companies have been the target of class action lawsuits and other proceedings that are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs.

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▪ Changes in economic conditions, both domestically and internationally, could materially affect our business, financial condition and results of operations.

▪ Because many of our domestic Company-operated Shacks are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas.

▪ Security breaches of either confidential guest information in connection with, among other things, our electronic processing of credit and debit card transactions, kiosk ordering or mobile ordering app, or confidential team member information may adversely affect our business.

▪ Because many of our Company-operated Shacks are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas.

▪ Security breaches of either confidential guest information in connection with, among other things, our electronic processing of credit and debit card transactions;

kiosk, app, or web ordering;

or confidential team member information may adversely affect our business.

▪ If we are unable to maintain and update our information technology systems to meet the needs of our business, our business could be adversely impacted.

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Regulatory and Legal Risks

▪ We have identified a material weakness in our internal control over financial reporting.

▪ We may be unable to develop and maintain effective internal controls over financial reporting.

▪ We are subject to many federal, state, local and foreign laws and regulations, as well as other statutory and regulatory requirements, with which compliance is both costly and complex.

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▪ We do not currently expect to pay any cash dividends.

Risks Related to Our Tax Receivable Agreement ("TRA")

Risks Related to Our Tax Receivable Agreement

▪ We will continue to incur relatively outsized costs as a result of our complex organizational structure.

▪ We are a holding company and our principal asset is our interest in SSE Holdings, and, accordingly, we will depend on distributions from SSE Holdings to pay our taxes and expenses, including payments under the TRA.

SSE Holdings' ability to make such distributions may be subject to various limitations and restrictions.

▪ In certain cases, payments under the TRA to the non-controlling interest holders may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the TRA.

▪ We will not be reimbursed for any payments made to the non-controlling interest holders under the TRA in the event that any tax benefits are disallowed.

▪ In certain cases, payments under the Tax Receivable Agreement to the non-controlling interest holders may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.

▪ We will not be reimbursed for any payments made to the non-controlling interest holders under the Tax Receivable Agreement in the event that any tax benefits are disallowed.

Shake Shack Inc.

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▪ Global unit expansion and the refinement of future Shacks to increase our total addressable market and to build an efficient and more standardized operation.

This will include developing new prototypes and standards throughout our future Shack classes, as well as our continued focus on increasing our licensed Shack presence, both domestically and abroad, particularly in Asia.

▪ Enhancing our omnichannel guest experience.

This will occur through leveraging our digital tools to build more frictionless ways to serve our guests and to continue integration of our data platforms enabling segmentation and targeted marketing strategies.

This will include developing new prototypes and standards throughout our future Shack classes, as well as our continued focus on increasing our licensed Shack presence, both domestically and abroad.

▪ Enhancing our guest experience and optimizing our Shack operations to increase guest frequency and drive greater sales.

▪ Menu innovation, with a focus on LTOs and collaborations which may lead to the expansion of existing menu items.

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We may incur significant costs and damage our brand if we are unable to identify, develop and execute appropriate business strategies, which could have a material adverse effect on our business, financial condition and results of operations.

Our investments to enhance the customer experience through expanding the availability of our drive-thru options has required and will continue to require significant capital expenditures and may not generate the expected returns.

Our expansion strategies include opening new drive-thru Shacks at desirable locations which will require significant capital expenditures.

Our drive-thru formats are larger than our traditional Shacks, which can result in higher real estate costs, and require additional infrastructure and construction costs.

If our drive-thru initiatives are not well executed, or if we do not realize the intended benefits of these significant investments, our business results may suffer.

Our primary growth strategy is highly dependent on the availability of suitable locations and our ability to develop and open new Shacks on a timely basis and on terms attractive to us.

One of the key means of achieving our growth strategies will be through opening and operating new Shacks on a profitable basis for the foreseeable future.

We must identify target markets where we can enter or expand, taking into account numerous factors such as the location of our current Shacks, the format of our current Shacks, the target consumer base, population density, demographics, traffic patterns, competition, geography and information gathered from our various contacts.

We may not be able to open our planned new Shacks within budget or on a timely basis, if at all, given the uncertainty of these factors, which could adversely affect our business, financial condition and results of operations.

As we operate more Shacks, our rate of expansion relative to the size of our Shack base will decline.

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The number and timing of new Shacks opened during any given period may be negatively impacted by a number of factors including:

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▪ difficulty negotiating suitable lease terms;

▪ shortages of construction labor or materials;

▪ shortages of construction labor, materials, and restaurant equipment;

▪ recruitment and training of qualified personnel in the local market;

▪ our ability to obtain all required governmental permits, including zonal approvals;

▪ our ability to control construction and development costs of new Shacks, particularly in the current inflationary environment;

▪ our ability to obtain all required governmental permits in a timely manner, including zoning approvals;

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▪ our ability to control construction and development costs of new Shacks, particularly in inflationary environments and including the impacts of tariffs or the responses of other governments, consumers or suppliers to U.S.

imposed tariffs;

▪ competition in new markets, including competition for appropriate sites;

▪ the risk of opening too many Shacks in a particular location, or in too close proximity;

▪ failure of the landlords to timely deliver real estate to us and other landlord delays;

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▪ cost and availability of capital to fund construction costs and pre-opening costs.

▪ COVID-19 or pandemic related factors such as longer permitting cycles and availability of construction and restaurant equipment and services.

Accordingly, we cannot assure you that we will be able to successfully expand as we may not correctly analyze the suitability of a location or anticipate all of the challenges imposed by expanding our operations.

Our growth strategy, and the substantial investment associated with the development of each new domestic Company-operated Shack, may cause our operating results to fluctuate and be unpredictable or adversely affect our profits.

In fiscal 2024, we closed nine underperforming Company-operated Shacks, and, if we identify other underperforming Shacks in the future, we may be required to close additional Shacks.

Our growth strategy, and the substantial investment associated with the development of each new Company-operated Shack, may cause our operating results to fluctuate and be unpredictable or adversely affect our profits.

In addition, as has happened when other restaurant concepts have tried to expand, we may find that our concept has limited appeal in new markets or we may experience a decline in the popularity of our concept in the markets in which we operate.

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If the costs of funding new Shacks or renovations or enhancements to existing Shacks exceed budgeted amounts, and/or the time for building or renovation is longer than anticipated, our profits could be reduced.

Additionally, recent inflation of material and labor costs in addition to our larger drive-thru formats have resulted in higher construction costs.

If we cannot access the capital we need, we may not be able to execute our growth strategy, take advantage of future opportunities or respond to competitive pressures.

Our expansion into new domestic markets may present increased risks, which could affect our profitability.

We plan to open domestic Company-operated Shacks in markets where we have little or no operating experience.

We plan to open Company-operated Shacks in markets where we have little or no operating experience.

Shacks we open in new markets may take longer to reach expected Shack sales and profit levels on a consistent basis, may be less profitable on average than our current base of Shacks and may have higher construction, occupancy or operating costs than Shacks we open in existing markets.

New markets may have competitive conditions, consumer tastes and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets.

We may need to make greater

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investments than we originally planned in advertising and promotional activity in new markets to build brand awareness.

We may need to make greater investments than we originally planned in advertising and promotional activity in new markets to build brand awareness.

We may find it more difficult in new markets to hire, motivate and retain qualified team members who share our values.

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Also, until we attain a critical mass in a market, the Shacks we do open may incur higher food distribution costs and reduced operating leverage.

As a result, these new Shacks may be less successful or may achieve target Shack-level operating profit margins at a slower rate, if ever.

As a result, these new Shacks may be less successful or may achieve target Restaurant-level profit margins at a slower rate, if ever.

If we do not successfully execute our plans to enter new markets, our business, financial condition or results of operations could be adversely affected.

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During fiscal 2024, we closed nine underperforming Company-operated Shacks in California, Ohio and Texas as these Shacks were not projected to provide acceptable returns in the foreseeable future, in part due to changes in the trade area and the negative impact on other Shacks within their proximity by cannibalizing sales.

If other Shacks are identified as non-performing, we may be required to close additional Shacks.

Our failure to manage our growth effectively could harm our business and operating results.

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Our existing personnel, management systems, financial and management controls and information systems may not be adequate to support our planned expansion.

See the risk captioned “We have identified a material weakness in our internal control over financial reporting” included below in this Item 1A of this Annual Report on Form 10-K.

Our ability to manage our growth effectively will require us to continue to enhance these systems, procedures and controls and to locate, hire, train and retain management and operating personnel, particularly in new markets.

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Cannibalization of Shack sales among our Shacks may become significant in the future as we continue to expand our operations and could adversely affect our Shack sales growth, which could, in turn, adversely affect our business, financial condition and results of operations.

Our investments to enhance the guest experience through expanding the availability of our drive-thru options has required and will continue to require significant capital expenditures and may not generate the expected returns.

Our expansion strategies include opening new drive-thru Shacks at desirable locations which will require significant capital expenditures.

Our drive-thru formats are larger than our traditional Shacks, which can result in higher real estate costs, and require additional infrastructure and construction costs.

If our drive-thru initiatives are not well executed, or if we do not realize the intended benefits of these significant investments, our business results may suffer.

If we are unable to maintain and grow Shack sales at our existing Shacks, our financial performance could be adversely affected.

The level of same-Shack sales growth, which represents the change in year-over-year revenues for domestic Company-operated Shacks open for 24 full months or longer, could affect our overall Shack sales growth.

The level of same-Shack sales growth, which represents the change in year-over-year revenues for Company-operated Shacks open for 24 full months or longer, could affect our overall Shack sales growth.

Our ability to increase same-Shack sales depends, in part, on our ability to successfully implement our initiatives to build Shack sales.

It is possible such initiatives will not be successful, that we will not achieve our target same-Shack sales growth or that same-Shack sales growth could be negative, which may cause a decrease in Shack sales and profit growth that would adversely affect our business, financial condition or results of operations.

It is possible such initiatives will not be

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Our mission to Stand For Something Good subjects us to risks.

Our mission to Stand For Something Good is a significant part of our business strategy and who we are as a Company.

successful, that we will not achieve our target same-Shack sales growth or that same-Shack sales growth could be negative, which may cause a decrease in Shack sales and profit growth that would adversely affect our business, financial condition or results of operations.

Our purpose to Stand For Something Good subjects us to risks.

Our purpose to Stand For Something Good is a significant part of our business strategy and who we are as a Company.

It's our commitment to all that is good in the world and is a reflection of how we embrace our values both internally and externally.

We pride ourselves on sourcing premium ingredients from like-minded producers — 100% all-natural proteins with no added hormones or antibiotics that are humanely raised and source verified.

We are dedicated to using sustainable materials and equipment whenever possible, and distinctive furniture and fixtures that advance our sustainability and diversity initiatives, as well as being committed to achieving ethical and humane practices for the animals in our supply chain.

We are dedicated to using sustainable materials and equipment whenever possible, and distinctive furniture and fixtures that advance our sustainability initiatives, as well as being committed to achieving ethical and humane practices for the animals in our supply chain.

We also strive to be the best employer and a good citizen in each community we call home.

We do, however, face many challenges in carrying out our mission to Stand For Something Good.

We do, however, face many challenges in carrying out our purpose to Stand For Something Good.

We incur higher costs and other risks associated with purchasing high quality ingredients grown or raised with an emphasis on quality and responsible practices and paying highly competitive compensation to our team members.

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The damage to our reputation may be greater than other companies that do not have similar values as us, and it may take us longer to recover from such an incident and gain back the trust of our guests.

Our mission to Stand For Something Good also exposes us to criticism from special interest groups who have different opinions regarding certain food issues or who believe we should pursue different strategies and goals.

Our purpose to Stand For Something Good also exposes us to criticism from special interest groups who have different opinions regarding certain food issues or who believe we should pursue different strategies and goals.

Any adverse publicity that results from such criticism could damage our brand and adversely affect guest traffic.

We believe that our Stand For Something Good philosophy has been a major contributing factor in our past success because we believe consumers are increasingly focused on where their food comes from and how it is made, and that consumers want to associate themselves with brands whose ethos matches that of their own.

We believe that our Stand For Something Good purpose has been a major contributing factor in our past success because we believe consumers are increasingly focused on where their food comes from and how it is made, and that consumers want to associate themselves with brands whose ethos matches that of their own.

However, if these trends change we may no longer be able to successfully compete with other restaurants who share different values than us.

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

In fiscal 2023, we purchased all of our (i) ground beef patties from 10 approved ground beef processors, with approximately 41% of our ground beef patties from one supplier;

During fiscal 2024, we purchased our (i) ground beef patties from 10 approved ground beef processors, with approximately 40% of our ground beef patties from one supplier;

(ii) chicken breasts from two suppliers;

(iii) potato buns from one supplier;

(iv) custard base from two suppliers;

(iii) potato buns from two suppliers;

(iv) custard base from four suppliers;

(v) 'Shroom Burgers from one supplier;

(vi) crinkle cut fries from two suppliers;

(vi) crinkle cut fries from three suppliers;

and (vii) ShackSauce from one supplier.

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We cannot assure you that we would be able to find replacement suppliers on commercially reasonable terms or a timely basis, if at all.

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

As of December 27, 2023, approximately 95% of certain food and beverage ingredients, including chicken, fries and custard, collectively representing 47% of our purchases, were processed through our broadline distributor for distribution and delivery to each Shack.

As of December 27, 2023, we utilized 20 affiliated distribution centers and each

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distribution center carries two to three weeks of inventory for our core ingredients.

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

As of December 25, 2024, approximately 95% of certain food and beverage ingredients, including chicken, fries and custard, collectively representing 45% of our purchases, were processed through our broadline distributor for distribution and delivery to each Shack.

As of December 25, 2024, we utilized 20 affiliated distribution centers and each distribution center carries two to three weeks of inventory for our core ingredients.

In the event of a catastrophe, such as a fire, our broadline distributor can supply the Shacks affected by their respective distribution center from another affiliated distribution center.

If a catastrophe, such as a fire, were to occur at the distribution center that services the Shacks located in New York and northern New Jersey, we would be at immediate risk of product shortages because that distribution center supplies approximately 21% of our domestic Company-operated Shacks as of December 27, 2023, which collectively represented 25% of our Shack sales for fiscal 2023.

The other 19 distribution centers collectively supply the other 79% of our domestic Company-operated Shacks, which represented the remaining 75% of our Shack sales.

If a catastrophe were to occur at the distribution center that services the Shacks located in New York and northern New Jersey, we would be at immediate risk of product shortages because that distribution center supplies our domestic licensed Shacks as well as approximately 20% of our Company-operated Shacks as of December 25, 2024, which collectively represented 24% of our Shack sales for fiscal 2024.

The other 19 distribution centers collectively supply the other 80% of our Company-operated Shacks, which represented the remaining 76% of our Shack sales.

Although we believe that alternative supply and distribution sources are available, there can be no assurance that we will continue to be able to identify or negotiate with such sources on terms that are commercially reasonable to us.

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Shake Shack is a growing brand, and we incur costs and expend other resources in our marketing efforts to attract and retain guests.

Our strategy primarily includes public relations, digital and social media, promotions and in-store messaging, which typically require less marketing spend as compared to traditional marketing programs.

Our strategy primarily includes public relations, digital and social media, promotions, commercials on streaming platforms, and in-store messaging, which typically require less marketing spend as compared to traditional marketing programs.

As the number of Shacks increases, and as we expand into new markets, we expect to increase our investment in advertising and promotional activities, including targeted marketing offers to unique guest segments and incentivizing and rewarding loyal guests.

Accordingly, in the future, we will incur greater marketing expenditures, resulting in greater financial risk and a greater impact on our financial results.

We rely heavily on social media for many of our marketing efforts.

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We rely, in part, on our licensees and the manner in which they operate their Shacks to develop and promote our business.

As of December 27, 2023, 10 licensees operated all of our domestic licensed Shacks and six licensees operated all of our international licensed Shacks, with one such licensee operating 36% of our international licensed Shacks and one such licensee operating 28% of our domestic licensed Shacks.

As of December 25, 2024, 11 licensees operated all of our domestic licensed Shacks and 10 licensees operated all of our international licensed Shacks, with one such licensee operating 34% of our international licensed Shacks and one such licensee operating 32% of our domestic licensed Shacks.

Our licensees are required to operate their Shacks according to the specific guidelines we set forth, which are essential to maintaining brand integrity and reputation, all laws and regulations applicable to Shake Shack and its subsidiaries, and all laws and regulations applicable in the countries in which Shake Shack operates.

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However, since we do not have day-to-day control over these Shacks, we cannot give assurance that there will not be differences in product and service quality, operations, labor law enforcement, marketing or that there will be adherence to all of our guidelines and applicable laws at these Shacks.

In addition, if our licensees fail to make investments necessary to maintain or improve their Shacks, guest preference for the Shake Shack brand could suffer.

Failure of these Shacks to operate effectively could adversely affect the results of operations from our licensed business or have a negative impact on our reputation.

The success of our licensed operations depends on our ability to establish and maintain good relationships with our licensees.

The value of our brand and the rapport that we maintain with our licensees are important factors for potential licensees

In addition, if our licensees fail to make investments necessary to maintain or improve their Shacks, guest preference for the Shake

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considering doing business with us.

Shack brand could suffer.

Failure of these Shacks to operate effectively could adversely affect the results of operations from our licensed business or have a negative impact on our reputation.

The success of our licensed operations depends on our ability to establish and maintain good relationships with our licensees.

The value of our brand and the rapport that we maintain with our licensees are important factors for potential licensees considering doing business with us.

If we are unable to maintain good relationships with licensees, we may be unable to renew license agreements and opportunities for developing new relationships with additional licensees may be adversely affected.

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Our licensees compete for guests with other restaurants in their geographic markets, and the ability of our licensees to compete for guests directly impacts our business, financial condition and results of operations, as well as the desirability of our brand to prospective licensees.

Our licensees also complete for employees and may not be able to recruit a sufficient number of individuals to meet their needs or retain qualified individuals to maintain operations.

Our licensees also compete for team members and may not be able to recruit a sufficient number of individuals to meet their needs or retain qualified individuals to maintain operations.

Licensees may not have access to the financial or management resources that they need to open the Shacks contemplated by their agreements with us or to be able to find suitable sites on which to develop them, or they may elect to cease development for other reasons.

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We take great pride in our culture and believe that it is an extremely important factor in our success.

We believe that our culture of Enlightened Hospitality and our mission to Stand For Something Good creates a truly differentiated experience for our guests and is one of the reasons guests choose to dine with us and team members choose us as a place of employment.

We believe that our culture of Enlightened Hospitality and our purpose to Stand For Something Good creates a truly differentiated experience for our guests and is one of the reasons guests choose to dine with us and team members choose us as a place of employment.

If we are unable to maintain our culture, especially as we continue to rapidly grow and expand in new markets, our reputation may be damaged, we may lose the trust of our guests, team member morale may be diminished and we may experience difficulty recruiting and retaining qualified team members.

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Regardless of the source or cause, any report of food-borne illnesses or food safety issues, whether or not accurate, at one or more of our Shacks, including Shacks operated by our licensees, could adversely affect our brand and reputation, which in turn could result in reduced guest traffic and lower sales.

Additionally, we believe that, because our mission to Stand For Something Good promotes the use of premium ingredients, our guests have high expectations of us and we could be more severely affected by incidents of food-borne illnesses or food safety issues than some of our competitors who do not promote such standards.

We may also have a more difficult time recovering from a food-borne illness incident and may be required to incur significant costs to repair our reputation.

If any of our guests become ill from food-borne illnesses, we could be forced to temporarily close one or more Shacks or choose to close as a preventative measure if we suspect there was a pathogen in our Shacks.

Furthermore, any instances of food contamination, whether or not at our Shacks, could subject us or our suppliers to voluntary or involuntary food recalls and the

Additionally, we believe that, because our purpose to Stand For Something Good promotes the use of premium ingredients, our guests have high expectations of us and we could be more severely affected by incidents of food-borne illnesses or food safety issues than some of our competitors who do not promote such standards.

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costs to conduct such recalls could be significant and could interrupt our supply to unaffected Shacks or increase the cost of our ingredients.

may also have a more difficult time recovering from a food-borne illness incident and may be required to incur significant costs to repair our reputation.

Furthermore, any instances of food contamination, whether or not at our Shacks, could subject us or our suppliers to voluntary or involuntary food recalls and the costs to conduct such recalls could be significant and could interrupt our supply to unaffected Shacks or increase the cost of our ingredients.

Additionally, consumer preferences could be affected by health concerns about the consumption of beef, our key ingredient.

For example, if a pathogen, such as "mad cow disease," or other virus, bacteria, parasite or toxin infects the food supply (or is believed to have infected the food supply), regardless of whether our supply chain is affected, guests may actively avoid consuming certain ingredients.

For example, livestock-based diseases such as “mad cow disease” or “avian flu” that could have implications for human health, or another virus, bacteria, parasite, or toxin infects the food supply (or is believed to have infected the food supply), regardless of whether our supply chain is affected, guests may actively avoid consuming certain ingredients.

A negative report or negative publicity surrounding such an incident, whether related to one of our Shacks or to a competitor in the industry, may have an adverse impact on demand for our food and could result in a material decrease in guest traffic and lower sales.

Rising labor costs and difficulties recruiting and retaining the right team members could adversely affect our business.

As our culture remains an important factor to our success, it in part depends on our ability to recruit, reward and retain a sufficient number of qualified managers and team members to meet the needs of our existing Shacks and to staff new Shacks.

As our culture remains an important factor to our success, it in part depends on our ability to recruit, develop and reward high performing teams with a sufficient number of qualified managers and team members to meet the needs of our existing Shacks and to staff new Shacks.

We aim to hire talented people who have integrity, who are warm, motivated, self-aware, intellectually curious, and possess the competencies and skills to continue to foster our growth.

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As a result, because we aim to hire the best people, we may be required to pay higher wages and provide greater benefits.

Our commitment to taking care of our team may cause us to incur higher labor costs compared to other restaurant companies.

Our commitment to taking care of our team members may cause us to incur higher labor costs compared to our competitors .

Additionally, several states in which we operate have enacted minimum wage increases and it is possible that other states or the federal government could also enact minimum wage increases, scheduling and benefit changes and increased health care and workers' compensation insurance costs.

Such increases have and may continue to cause an increase to our labor and related expenses and cause our Shack-level operating profit margins to decline.

In the event there are additional minimum wage increases, increases in employee turnover or other legislation related to employee benefits are enacted or changed, such as the Affordable Care Act, we may be required to implement additional pay increases or provide additional benefits in the future in order to continue to recruit, reward and retain the most qualified people, which may put further pressure on our operating margins by increasing costs.

Such increases have and may continue to cause an increase to our labor and related expenses and cause our Restaurant-level profit margins to decline.

In the event there are additional minimum wage increases, rises in team member turnover or other legislation related to team member benefits are enacted or changed, such as the Affordable Care Act, we may be required to implement additional pay increases or provide additional benefits in the future in order to continue to build teams with the most qualified people, which may put further pressure on our operating margins by increasing costs.

Overall, we expect wages at all levels to continue to increase in the near term and we expect these rising wages to add pressure to our operating profit.

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Such increased costs of attracting qualified team members or delays in Shack openings could adversely affect our business, financial condition and results of operations.

Increased food commodity and energy costs could decrease our Shack-level operating profit margins or cause us to limit or otherwise modify our menu, which could adversely affect our business.

Our profitability depends, in part, on our ability to anticipate and react to changes in the price and availability of food commodities, including among other things beef, poultry, grains, dairy and produce.

Prices may be affected due to market changes, increased competition, the general risk of inflation, shortages or interruptions in supply due to weather, disease or other conditions beyond our control, or other reasons.

For example, the current avian flu is causing increased costs of poultry and eggs.

Other events, including events for products we do not serve, could increase commodity prices or cause shortages that could affect the cost and quality of the items we buy or require us to further raise prices or limit our menu items.

Furthermore, increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with global climate change, could have a significant impact on the price or availability of some of our ingredients.

These events, combined with other more general economic and demographic conditions, could impact our pricing and negatively affect our Shack sales

Increased food commodity and energy costs could decrease our Restaurant-level profit margins or cause us to limit or otherwise modify our menu, which could adversely affect our business.

Prices may be affected due to market

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and Shack-level operating profit margins.

changes, increased competition, the general risk of inflation, the impacts of tariffs or the responses of other governments, consumers or suppliers to U.S.

imposed tariffs, shortages or interruptions in supply due to weather, disease or other conditions beyond our control, or other reasons.

For example, the current avian flu has impacts on the costs of poultry and eggs.

These events, combined with other more general economic and demographic conditions, could impact our pricing and negatively affect our Shack sales and Restaurant-level profit margins.

While we have been able to partially offset inflation and other changes in the costs of core operating resources by increasing menu prices, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future.

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The digital and delivery business, related expenses, execution and expansion thereof, is uncertain and subject to risk.

Digital innovation and growth remains a key focus for us.

We continue to execute upon our digital strategy, including the continued integration of our data platforms enabling segmentation and targeted marketing strategies.

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Information processed by these third parties could also be impacted by cyber attacks, which could not only negatively impact our sales, but also harm our brand image.

Recognizing the rise in delivery services offered throughout the restaurant industry, we understand the importance of providing such services to meet our guests wherever and whenever they want.

Recognizing the option to provide delivery services throughout the restaurant industry, we understand the importance of providing such services to meet our guests wherever and whenever they want.

We have invested in marketing to promote our delivery partnerships, which could negatively impact our profitability if the business does not continue to expand.

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We developed sealed packaging to provide some deterrence against such potential food tampering.

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We are also subject to risk if there is a shortage of delivery drivers, which could result in a failure to meet our guests' expectations.

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Additionally, some of our competitors have greater financial resources to spend on marketing and advertising around their digital and delivery campaigns than we are able to at this time.

Should our competitors increase their spend in these areas, or if our advertising and

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promotions be less effective than our competitors, there could be an adverse impact on our business in this space.

Should our competitors increase their spend in these areas, or if our advertising and promotions are less effective than our competitors, there could be an adverse impact on our business in this space.

Third-party delivery services within the restaurant industry typically charge restaurants a fee per order.

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However, there is uncertainty as to how these fees will evolve.

In 2021, we implemented menu price inflation on our third-party delivery platforms to help offset a portion of this fee;

In fiscal 2024, we continued with the implementation of menu price increases on our third-party delivery platforms to help offset a portion of this fee;

the higher menu prices could result in loss of sales.

We face significant competition for guests, and if we are unable to compete effectively, our business could be adversely affected.

The restaurant industry is intensely competitive with many well-established companies that compete directly and indirectly with us with respect to taste, price, food quality, service, value, design and location.

The restaurant industry is intensely competitive with many well-established companies that compete directly and indirectly with us with respect to taste, menu, price, food quality, service, value, design and location.

We compete in the restaurant industry with multi-unit national, regional and locally-owned and/or operated limited-service restaurants and full-service restaurants.

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

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

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

Many of our competitors have existed longer than we have and may have a more established market presence, better locations and greater name recognition nationally or in some of the local markets in which we operate or plan to open Shacks.

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Our competition continues to intensify as new competitors enter the burger, fast casual, quick service and casual dining segments.

Many of our competitors emphasize low cost "value meal" menu items or other programs that provide price discounts on their menu items, a strategy we have just begun to test.

Many of our competitors emphasize low cost "value meal" menu items or other programs that provide price discounts on their menu items, a strategy we are currently testing.

We also face increasing competitive pressures from some of our competitors who have announced initiatives to offer better quality ingredients, such as antibiotic-free meat.

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Additionally, as we continue to expand upon our digital strategy and offer more ways to reach our guests through digital channels, such as the app, web ordering and delivery, we compete with other competitors who currently, or are beginning to, offer the same options as well as new and improved technologies.

With these digital channels, there is also an increased opportunity for customer credit card fraud to occur, which may have a negative impact on guest traffic and our reputation temporarily.

With these digital channels, there is also an increased opportunity for guest credit card fraud to occur, which may have a negative impact on guest traffic and our reputation temporarily.

Our continued success depends, in part, on the continued popularity of our menu and the experience we offer guests at our Shacks.

If we are unable to continue to compete effectively on any of the factors mentioned above, our traffic, Shack sales and Shack-level operating profit margins could decline and our business, financial condition and results of operations would be adversely affected.

If we are unable to continue to compete effectively on any of the factors mentioned above, our traffic, Shack sales and Restaurant-level profit margins could decline and our business, financial condition and results of operations would be adversely affected.

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Shortages or interruptions in the supply or delivery of food products could adversely affect our operating results.

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Availability of our blend depends on two different components:

raw material supplied by the slaughterhouses and ground and formed beef patties supplied by regional grinders

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who further process and convert whole muscle purchased from the slaughterhouses.

The primary risk we face is with our regional grinders.

If there is an interruption of operation at any one of our regional grinder's facilities, we face an immediate risk because each Shack typically has less than three days of beef patty inventory on hand.

However, we have agreements with our regional grinders to provide an alternate back-up supply in the event of a disruption in their operations.

In addition, our second largest regional grinder can, in an emergency, supply us in the event of a disruption of operations at one of our beef grinders through our broadline distributor's network, but there would be a delay in availability due to production and shipping.

We currently have nine approved raw beef suppliers and 10 approved beef processors in the United States.

raw material supplied by the slaughterhouses and ground and formed beef patties supplied by regional processors who further process and convert whole muscle purchased from the slaughterhouses.

The primary risk we face is with our regional processors.

If there is an interruption of operation at any one of our regional processor's facilities, we face an immediate risk because each Shack typically has less than three days of beef patty inventory on hand.

However, we have agreements with our regional processors to provide an alternate back-up supply in the event of a disruption in their operations.

In addition, our second largest regional processor can, in an emergency, supply us in the event of a disruption of operations at one of our beef processors through our broadline distributor's network, but there would be a delay in availability due to production and shipping.

As of December 25, 2024, we have nine approved raw beef suppliers and nine approved beef processors in the U.S.

If there is a supply issue with all U.S.

raw beef, we have 12 approved raw beef suppliers and nine approved beef processors in other countries.

raw beef, we have 21 approved raw beef suppliers and 13 approved beef processors in other countries.

The risks to using international suppliers are shipping lead time, shipping costs, potential import duties and U.S.

It is unknown at this time how long it would take and at what cost the raw material would be to import from any such other country, but the delay and cost would likely be adverse to our business.

customs delays.

Should there become a need to utilize international suppliers, it is unknown at this time how long it would take and at what cost imports would be, but the delay and cost would likely be adverse to our business.

Inflationary environment poses a risk to broader demand for restaurants, including ours.

Our continued success depends on our guests' ability and willingness to pay for rising menu prices across our channels.

The restaurant industry broadly has faced widespread inflation over the past two years, and is likely to continue to face inflationary pressures for the foreseeable future.

The restaurant industry broadly has faced widespread inflation in recent years, and is likely to continue to face inflationary pressures for the foreseeable future.

In a bid to help offset these additional cost pressures, many restaurants have raised menu prices as well as charge a premium price through third-party delivery channels.

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Pandemics or disease outbreaks, such as the COVID-19 pandemic, have disrupted, and may continue to disrupt our business, results of operations and our financial condition.

The World Health Organization officially declared the COVID-19 health emergency a global pandemic in March 2020 and subsequently declared an end to the health emergency in May 2023, more than three years after its original declaration.

However, the COVID-19 pandemic may continue to impact the United States and the global economy, including impacts to travel, work patterns, commuting, leisure, vacation and other activities in the future.

We continue to follow public health guidelines to ensure the health and safety of our teams and guests.

An increase in restrictions or a return to shutdowns imposed by governmental authorities may have a material impact to our business, financial condition and results of operations.

Disease outbreaks have historically posed significant challenges to public health and economic stability, with varying impacts depending on the nature of the disease and the responses undertaken.

The COVID-19 pandemic, for instance, was officially declared a global pandemic by the World Health Organization in March 2020 and its emergency status ended in May 2023.

Throughout the COVID-19 pandemic, state and local governments in the U.S.

and throughout the world have alternated between removing and easing certain restrictions and reintroducing restrictions on businesses, such as imposing curfews, restrictions on public gatherings, human interactions and restaurant operation, depending on the severity of local or regional outbreaks.

Additionally, different jurisdictions have seen varying levels of outbreaks or resurgences in outbreaks, and corresponding differences in government responses, which may continue to make it difficult for us to plan or forecast an appropriate response.

For example, a material portion of our licensed revenue comes from Asia, a region which has seen more severe restrictions from rising COVID-19 pandemic cases than the United States.

In many jurisdictions, the pandemic has continued to disrupt consumer activity and negatively impact the foot traffic in our Shacks, as employees continue to work from home more frequently.

The significance of the operational and financial impact on the Company will depend on how long and widespread the disruptions caused by the COVID-19 pandemic, and the corresponding response to contain the virus and treat those affected by it prove to be.

Further uncertain or changing economic and market conditions, including prolonged periods of high unemployment, staffing issues, inflation, deflation or prolonged weak consumer demand or a decrease in consumer discretionary spending, or political or other changes resulting from the pandemic or other factors would continue to impact our business, sales and operating results.

and throughout the world alternated between removing and easing certain restrictions and reintroducing restrictions on businesses, such as imposing curfews, restrictions on public gatherings, human interactions and restaurant operations, depending on the severity of local or regional outbreaks.

Additionally, changes in behavior and routine may disrupt consumer activity and foot traffic in our Shacks, such as remote and hybrid work practices.

The significance of the operational and financial impact on the Company would depend on how long and widespread any potential disruptions caused by an outbreak may be, and the corresponding response to contain the viruses and treat those affected by it prove to be.

Further, uncertain or changing economic and market conditions, including prolonged periods of high unemployment, staffing issues, inflation or deflation, prolonged weak consumer demand or a decrease in consumer discretionary spending, or political or other changes resulting from pandemics or other factors could continue to impact our business, sales and operating results.

Viruses such as COVID-19 may be transmitted through human contact and airborne delivery, and the risk of contracting viruses could cause team members or guests to avoid gathering in public places.

Additionally, government authorities, from time to time, may impose curfews, restrictions on public gatherings, human interactions and restaurant operations which may impact our ability to offer all sales channels at all Shacks, and employees in many jurisdictions continue to work from home at a higher rate.

These restrictions and changing travel patterns may adversely affect our guest traffic and the ability to adequately staff our Shacks.

Additionally, government authorities, from time to time, may impose curfews, restrictions on public gatherings, human interactions and restaurant operations which may impact our

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Additionally, if a significant percentage of our workforce or the workforce of our business partners are unable to work due to reasons including illness or travel restrictions in connection with pandemics or disease outbreaks, our operations may be negatively impacted, which could have a material adverse effect on our business, financial condition and results of operations.

The increasing focus on environmental, sustainability, social and governance matters could increase our costs, harm our reputation and adversely impact our business and financial results.

There has been increasing public focus by investors, environmental activists, the media, governmental and nongovernmental organizations and other stakeholders on a variety of environmental, sustainability, social and governance matters, commonly referred to as "ESG".

With respect to the restaurant industry, concerns have been expressed regarding energy management, water management, food and packaging waste management, food safety, nutritional content, labor practices and supply chain and management of food sourcing.

We experience pressure to make commitments relating to sustainability matters that affect companies in our industry, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability and the environment.

If we are not effective in addressing environmental, sustainability and social matters affecting our industry, or setting and meeting relevant environmental, sustainability or social goals and meeting evolving stakeholder expectations, our brand image may suffer, which could lead to a loss of revenue.

Certain investors may choose not to invest in our securities if we do not meet their relevant ESG expectations, which may continue to evolve over time.

We may also experience increased costs in order to execute upon our ESG goals and measure achievement of those goals and our ability to achieve any stated goal, target, or objective is subject to numerous factors and conditions, many of which are outside of our control.

Any failure to achieve our ESG goals or meeting evolving stakeholder expectations, or a perception of our failure to act appropriately with respect to environmental, sustainability, social or governance matters could adversely affect our business and impact our reputation with investors, guests and other business partners and impact our ability to attract and retain team members.

Standards for tracking and reporting on ESG have not been harmonized and continue to evolve.

Additionally, this increased focus on ESG has resulted in and may result in new laws, regulations and requirements that could cause us to experience increased reporting or implementation costs or require us to make changes to our operations to comply with those laws, regulations and requirements.

These increased costs could have an adverse impact on our business, financial condition and results of operations.

ability to offer all sales channels at all Shacks.

These restrictions and changing travel patterns may adversely affect our guest traffic and the ability to adequately staff our Shacks.

Additionally, if a significant percentage of our workforce or the workforce of our business partners may be unable to work due to reasons including illness or travel restrictions in connection with pandemics or disease outbreaks, our operations may be negatively impacted, which could have a material adverse effect on our business, financial condition and results of operations.

Our international licensed Shacks import many of our proprietary and other core ingredients from the United States and other countries.

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Our international licensed Shacks import many of our proprietary ingredients from the United States as well as other countries.

For example, our proprietary blend of beef patties and/or raw materials for beef patties primarily originate from the United States, Australia and Uruguay and our mushrooms originate from the United States and United Kingdom.

We have worked to expand our international supply chain with secondary suppliers for various key ingredients across Turkey, Japan, South Korea and China.

We have worked to expand our international supply chain with secondary suppliers for various key ingredients across most of our licensed markets.

While we have established secondary supply solutions for some of these ingredients, we have not acquired secondary suppliers for all of them.

Due to the increasingly long lead time and general volatility in the supply chain and global ocean freight disruptions, the third-party logistic providers for our international licensed Shacks carry at least three months of inventory to allow for delays or interruptions in the supply chain.

Due to general volatility in the supply chain and global ocean freight disruptions, our guidance to our licensed partners is to carry at least three months of inventory to allow for delays or interruptions in the supply chain.

Specifically, we have had past and ongoing issues ensuring that timely and adequate supplies reach our international licensed Shacks.

Our licensees delegate the supply function to their internal or third-party logistics providers in each country in which they operate, with which we have limited and restricted communication, preventing us from exercising direct control or instruction over such entities.

If our international licensed Shacks are unable to obtain our proprietary ingredients in the necessary amounts in a timely fashion as a result of logistics issues, sanctions or other challenges, it could harm its business and adversely affect the licensing revenue we receive, adversely impacting our business, financial condition and results of operations.

If our international licensed Shacks are unable to obtain our proprietary ingredients in the necessary quantities in a timely fashion as a result of logistics issues, the impacts of tariffs or the response of other governments, consumers or suppliers to U.S.-imposed tariffs, sanctions or other challenges, it could harm its business and adversely affect the licensing revenue we receive, adversely impacting our business, financial condition and results of operations.

We are subject to risks associated with leasing property subject to long-term leases.

We do not own any real property and all of our domestic Company-operated Shacks are located on leased premises.

We do not own any real property and all of our Company-operated Shacks are located on leased premises.

The leases for our Shacks generally have initial terms ranging from 10 to 15 years and typically include two five-year renewal options.

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Generally, our leases are net leases that require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent.

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If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings or other sources, we may not be able to service our lease obligations or fund our other liquidity and capital needs, which would materially affect our business.

The increasing focus on environmental, sustainability, social and governance matters could increase our costs, harm our reputation and adversely impact our business and financial results.

In recent years, there has been increased public focus by investors, environmental activists, the media, governmental and nongovernmental organizations and other stakeholders on a variety of environmental, sustainability, social and governance matters, commonly referred to as "ESG".

We have experienced pressure to make commitments relating to sustainability matters that affect companies in our industry, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability and the environment.

If we are not effective in addressing environmental,

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sustainability and social matters affecting our industry and meeting evolving stakeholder expectations, our brand image may suffer, which could lead to a loss of sales.

Certain investors may choose not to invest in our securities if we do not meet their relevant ESG expectations, which may continue to evolve over time.

In addition, in recent years, "anti-ESG" sentiment has gained momentum across the U.S., with several states and Congress having proposed or enacted "anti-ESG" policies, legislation, or initiatives, and the President having recently issued an executive order opposing diversity and inclusion ("DEI") initiatives in the private sector.

Institutional investors and proxy advisory firms have also updated their guidelines and expectations with respect to ESG and DEI initiatives.

Such anti-ESG and anti-DEI-related policies, legislation, initiatives, litigation, and scrutiny could result in us facing additional compliance obligations, becoming the subject of investigations and enforcement actions, or sustaining reputational harm.

We may also experience increased costs in order to execute upon our ESG strategy or to revise our ESG strategy to meet evolving expectations and the regulatory environment, and our ability to achieve any stated objective is subject to numerous factors and conditions, many of which are outside of our control.

Any failure to meet evolving stakeholder expectations, or a perception of our failure to act appropriately with respect to environmental, sustainability, social or governance matters, could adversely affect our business and impact our reputation with investors, guests and other business partners and impact our ability to attract and retain team members.

These increased costs could have an adverse impact on our business, financial condition and results of operations.

Restaurant companies have been the target of class action lawsuits and other proceedings that are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs.

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A number of these lawsuits have resulted in the payment of substantial damages by the defendants.

Similar lawsuits have been instituted from time to time alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal-time deductions, overtime eligibility of exempt managers and failure to pay for all hours worked.

Similar lawsuits have been instituted from time to time alleging violations of various federal and state wage and hour laws regarding, among other things, team member meal-time deductions, overtime eligibility of exempt managers and failure to pay for all hours worked.

Occasionally, our guests file complaints or lawsuits against us alleging that we are responsible for an alleged illness or injury they suffered at or after a visit to one of our Shacks, including actions seeking damages resulting from alleged food-borne illness or accidents in our Shacks.

We are also subject to a variety of other claims from third parties arising in the ordinary course of our business, including contract claims.

The restaurant industry has also been subject to claims that the menus and actions of restaurant chains have led to the obesity of certain of their customers.

The restaurant industry has also been subject to claims that the menus and actions of restaurant chains have led to the obesity of certain of their guests.

Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from our operations.

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Any future failure to comply with these regulations and obtain or retain licenses could adversely affect our business, financial condition and results of operations.

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We are also subject in certain states to "dram shop" statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

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A judgment significantly in excess of our insurance coverage or not covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

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GENERAL BUSINESS AND ECONOMIC RISKS

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Ultimately, the risks associated with any such negative publicity or incorrect information cannot be completely eliminated or mitigated and may materially harm our reputation, business, financial condition and results of operations.

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Changes in economic conditions, both domestically and internationally, could materially affect our business, financial condition and results of operations.

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These factors, as well as national, regional and local regulatory and economic conditions, gasoline prices, energy and other utility costs, conditions in the residential real estate and mortgage markets, health care costs, access to credit, disposable consumer income and consumer confidence, affect discretionary consumer spending.

Furthermore, with some of our Shacks located in or near retail malls, general declines in mall traffic experienced by the retail industry over the last few years in general may negatively affect us.

Furthermore, with some of our Shacks located in or near retail malls, general declines in mall traffic experienced by the retail industry over the last several years in general may negatively affect us.

In poor economic conditions, guest traffic could be adversely impacted if our guests choose to dine out less frequently or reduce the amount they spend on meals while dining out.

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Prolonged negative trends in sales could cause us and our licensees to, among other things, reduce the number and frequency of new Shack openings, close Shacks, delay remodeling of our existing Shacks or recognize asset impairment charges.

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Because many of our domestic Company-operated Shacks are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas.

Because many of our Company-operated Shacks are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas.

Since our founding, we have built some of the industry's favorite community gathering places.

As a result, much of our real estate footprint has been centered in urban, office, travel and dynamic traffic-driving sales environments.

Our urban Shacks make up approximately 39% of our total domestic Company-operated Shacks as of December 27, 2023.

Our urban Shacks make up approximately 35% of our total Company-operated Shacks as of December 25, 2024.

Additionally, our financial performance is highly dependent on Shacks located along both the East and West Coasts.

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Temporary or prolonged Shack closures may occur and guest traffic may decline due to the actual or perceived effects of future weather related events.

Security breaches of either confidential guest information in connection with, among other things, our electronic processing of credit and debit card transactions, kiosk ordering or mobile ordering app, or confidential team member information may adversely affect our business.

Security breaches of either confidential guest information in connection with, among other things, our electronic processing of credit and debit card transactions;

kiosk, app, or web ordering;

or confidential team member information may adversely affect our business.

Our business requires the collection, transmission and retention of large volumes of guest and team member data, including credit and debit card numbers and other personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services.

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Due to these scenarios we cannot provide assurance that we will be successful in preventing such breaches or data loss.

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Additionally, the information, security and privacy requirements imposed by governmental regulation are increasingly demanding.

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If we are unable to maintain and update our information technology systems to meet the needs of our business, our business could be adversely impacted.

We rely heavily on information systems, including point-of-sale processing in our Shacks, for management of our supply chain, accounting, payment of obligations, collection of cash, credit and debit card transactions, digital ordering and other processes

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and procedures.

As a rapidly growing business, our current information technology infrastructure may not be adequately suited to handle the increasing volume of data and additional information needs of our organization.

If we are unable to successfully upgrade our information systems to meet the growing needs of our business or are delayed in doing so, whether through current or future initiatives, our growth and profitability could be adversely affected.

Additionally, as technology systems continue to evolve and as consumers adopt new technologies, we may need to enhance our systems or modify our strategies in order to remain relevant in our industry and to our guests.

Additionally, as technology systems continue to evolve and as consumers adopt new technologies, such as the use of artificial intelligence, we may need to enhance our systems or modify our strategies in order to remain relevant in our industry and to our guests.

If we are unable to successfully identify and implement new and emerging technologies, our business could be adversely affected.

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▪ changes in foreign currency exchange rates or currency restructurings and hyperinflation or deflation in the countries in which we operate;

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▪ the imposition of restrictions on currency conversion or the transfer of funds or limitations on our ability to repatriate non-U.S.

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▪ political, social and economic instability.

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Any or all of these factors may adversely affect the performance of and revenues we receive from our licensed Shacks located in international markets or cause delays to the licensees' opening timelines.

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If our efforts to maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on our intellectual property, the value of our brand may be harmed, which could have a material adverse effect on our business and might prevent our brand from achieving or maintaining market acceptance.

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We may also from time to time be required to institute litigation to enforce our trademarks, service marks and other intellectual property.

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We depend on the leadership and experience of key members of our executive management team.

As previously announced, our Chief Executive Officer, Randy Garutti, has informed the Company's Board of Directors that he will retire from the Company in 2024.

Garutti will serve as an advisor to the Company following his resignation to ensure a proper transition to his successor.

The loss of the services of any of our executive management team members, including Mr.

Garutti prior to and during

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his planned transition period, could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all.

The loss of the services of any of our executive management team members could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all.

We do not maintain key person life insurance policies on any of our executive officers.

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Our insurance coverage and self-insurance reserves may not provide adequate levels of coverage against claims.

We maintain various insurance policies for team member health, workers' compensation, general liability, and property damage.

We maintain various insurance policies, including for team member health, workers' compensation, general liability, employment practices, and property damage.

We believe that we maintain insurance customary for businesses of our size and type.

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Our estimated liability is based on a number of assumptions and factors, including actuarial assumptions and historical trends.

Our history of claims experience is short and our significant growth rate could affect the accuracy of our estimates.

If a greater amount of claims are reported, or if medial costs increase beyond what we expect, our liabilities may not be sufficient and we could recognize additional expense, which could adversely affect our results of operations.

Our significant growth rate could affect the accuracy of our estimates.

If a greater amount of claims are reported, or if medical costs increase beyond what we expect, our liabilities may not be sufficient and we could recognize additional expense, which could adversely affect our results of operations.

REGULATORY AND LEGAL RISKS

We have identified a material weakness in our internal control over financial reporting.

If our remediation of the material weakness is not effective or if we fail to develop and maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial information or comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired, which could have a material adverse effect on our business and stock price.

If we fail to develop and maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial information or comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired, which could have a material adverse effect on our business and stock price.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), and the listing standards of the New York Stock Exchange.

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We are required to have our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.

We have identified a material weakness in our internal control over financial reporting in connection with management review internal controls over the calculation of state deferred taxes and the related income tax expense (benefit).

Refer to Note 3, Restatement of Previously Issued Consolidated Financial Statements, in the Consolidated Financial Statements in Part II, Item 8 for additional information.

Any failure to remediate the identified material weakness, or to develop or maintain effective controls, or any difficulties encountered in the implementation or improvement of such controls, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods, such as the restatement of our previously issued consolidated financial statements described in more detail in this Annual Report on Form 10-K.

Any failure to remediate the identified material weakness, or to implement and maintain effective internal control over financial reporting also could adversely affect the results of management evaluations and independent registered public accounting firm audits of our internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC.

We can provide no assurance that the measures we are taking and plan to take in the future will remediate the material weakness identified in connection with the restatement, or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

We continue to evaluate steps to

As previously disclosed, we identified a material weakness in our internal control over financial reporting as of the end of our fiscal year ended December 27, 2023, in connection with management review internal controls over the calculation of state deferred taxes and the related income tax expense (benefit).

Although we have remediated this material

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remediate the material weakness.

These remediation measures may be time consuming and costly, and there is no assurance that these initiatives will ultimately have the intended effects.

weakness and concluded that our internal control over financial reporting was effective as of December 25, 2024, we can provide no assurance that the measures taken to remediate the material weakness identified in connection with the restatement will continue to be effective in the future.

Moreover, additional material weaknesses or restatements of financial results may arise in the future due to a failure to implement and maintain adequate internal control over financial reporting as a result of circumvention of these controls.

Any failure to remediate a material weakness, or to develop or maintain effective controls, or any difficulties encountered in the implementation or improvement of such controls, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods, such as the restatement of our previously issued consolidated financial statements described in more detail in this Annual Report on Form 10-K.

Any failure to remediate a material weakness, or to implement and maintain effective internal control over financial reporting also could adversely affect the results of management evaluations and independent registered public accounting firm audits of our internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC.

In general, remediation measures may be time consuming and costly, and there is no assurance that any such initiatives will ultimately have the intended effects.

Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis.

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Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

The SEC has proposed new rules which, if adopted, would impose significant new disclosure obligations related to climate change, and has recently adopted new rules relating to cybersecurity which have required us to develop and implement effective controls with respect to these new obligations.

The SEC has adopted rules relating to cybersecurity which have required us to develop, implement and maintain effective controls with respect to these new obligations.

In addition, California has approved climate change rules, including the requirement to provide a climate-related financial risk report, which will require effective internal controls.

Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which may have a negative effect on the trading price of our Class A common stock.

In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the New York Stock Exchange.

In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE.

We are subject to many federal, state, local and foreign laws and regulations, as well as other statutory and regulatory requirements, with which compliance is both costly and complex.

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These changes have resulted in, and may continue to result in, the enactment of laws and regulations that impact the ingredients and nutritional content of our menu items, or laws and regulations requiring us to disclose the nutritional content of our food offerings.

For example, a number of states, counties and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose certain nutritional information to customers, or have enacted legislation restricting the use of certain types of ingredients in restaurants.

For example, a number of states, counties and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose certain nutritional information to guests, or have enacted legislation restricting the use of certain types of ingredients in restaurants.

These labeling laws may change consumer buying habits in a way that adversely impacts our sales.

Additionally, an unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our offerings.

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▪ Food safety regulations - There is a potential for increased regulation of certain food establishments in the United States, where compliance with a Hazard Analysis and Critical Control Points ("HACCP") approach may be required.

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Difficulties or failure to maintain or obtain the required licenses, permits and approvals could adversely affect our existing Shacks and delay or result in our decision to cancel the opening of new Shacks, which would adversely affect our business.

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▪ Employment regulations - We are subject to various federal and state laws governing our employment practices, including laws relating to minimum wage requirements, employee classifications as exempt or non-exempt, payroll and unemployment tax laws, requirements to provide meal and rest periods or other benefits, family leave mandates, requirements regarding working conditions and accommodations to certain employees, citizenship and work authorization requirements, insurance and workers' compensation rules, scheduling notification requirements and anti-discrimination laws.

▪ Employment regulations - We are subject to various federal and state laws governing our employment practices, including laws relating to minimum wage requirements, team member classifications as exempt or non-exempt, payroll and unemployment tax laws, requirements to provide meal and rest periods or other benefits, family leave mandates, requirements regarding working conditions and accommodations to certain team members, citizenship and work authorization requirements, insurance and workers' compensation rules, scheduling notification requirements, and anti-discrimination laws.

Compliance with these regulations is costly and requires significant resources.

For example, the Fair Workweek legislation implemented in New York City requires fast food employers to provide employees with specified notice in scheduling changes and pay premiums for changes made to employees' schedules, among other requirements.

For example, the Fair Workweek legislation implemented in New York City requires fast food employers to provide team members with specified notice in scheduling changes and pay premiums for changes made to team members' schedules, among other requirements.

Similar legislation has been and may be enacted in other jurisdictions in which we operate as well, and in turn, could result in increased costs.

Additionally, we may suffer losses from or incur significant costs to defend claims alleging non-compliance.

Although none of our employees are currently covered under collective bargaining agreements, certain employees of other companies in our industry have recently become unionized, and our employees may elect to be represented by labor unions in the future.

If a significant number of our employees were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could adversely affect our business, financial condition or results of operations.

In addition, a labor dispute involving some or all of our employees may harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes may increase our costs.

Although none of our team members are currently covered under collective bargaining agreements, certain team members of other companies in our industry have recently become unionized, and our team members may elect to be represented by labor unions in the future.

If a significant number of our team members were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could adversely affect our business, financial condition and results of operations.

In addition, a labor dispute involving some or all of our team members may harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes may increase our costs.

Further, if we enter into a new market with unionized construction companies, or the construction companies in our current markets become unionized, construction and build costs for new Shacks in such markets could materially increase.

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It is our responsibility to ensure we are complying with these laws by taking the appropriate measures as well as monitoring our practices as these laws continue to evolve.

As our environment continues to evolve in this digital age and reliance upon new technologies becomes more prevalent, it is imperative we secure the private and sensitive information we collect.

As our environment continues to expand in this digital age and reliance upon new technologies becomes more prevalent, it is imperative we secure the private and sensitive information we collect.

Failure to do so, whether through fault of our own information systems or those of outsourced third-party providers, could not only cause us to fail to comply with these laws and regulations, but also could cause us to face litigation and penalties that could adversely affect our business, financial condition and results of operations.

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As of December 25, 2024, our federal and state net operating loss (“NOL”) carryforwards, for income tax purposes were $615.8 million and $334.4 million, respectively.

If not utilized, $544.5 million of our federal NOLs can be carried forward indefinitely and the remainder will begin to expire in 2035.

If not utilized, $49.9 million of our state NOL carryforwards can be carried forward indefinitely, and the remainder will begin to expire in 2024.

As of December 27, 2023, the Company had federal tax credit carryforwards of $25.7 million which will begin to expire in 2025 and gross state tax credit carryforwards of $0.4 million which will begin to expire in 2024.

Of the federal NOL carryforward, $563.9 million can be carried forward indefinitely, while the remaining $51.9 million will begin to expire in 2035.

Similarly, of the state NOL carryforward, $106.7 million can be carried forward indefinitely, while the remaining $227.7 million will begin to expire in 2025.

Federal NOLs incurred in taxable years beginning after December 31, 2017 will be carried forward indefinitely, but the deductibility of federal NOLs in taxable years beginning after December 31, 2020, is subject to certain limitations.

In addition, under Section 382 of the Internal Revenue Code (“IRC”) of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” its ability to use its pre-change NOLs to offset its post-change income may be limited.

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Outcomes from these audits could have an adverse effect on our operating results and financial condition.

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

Additionally, SSE Holdings is classified as a partnership for U.S.

federal income tax purposes, and the SSE Holdings LLC Agreement restricts transfers of LLC Interests that would cause SSE Holdings to be treated as a "publicly traded partnership" for U.S.

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It is possible that the interests of the non-controlling interest holders may in some circumstances conflict with our interests and the interests of our other stockholders.

For example, the non-controlling interest holders may have different tax positions from us, especially in light of the tax receivable agreement we entered into with the non-controlling interest holders that provides for the payment by us to the non-controlling interest holders of 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize (the "Tax Receivable Agreement").

This could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when Shake Shack should terminate the Tax Receivable Agreement and accelerate its obligations thereunder.

In addition, the determination of future tax reporting positions, the structuring of future transactions and the handling of any future challenges by any taxing authorities to our tax reporting positions may take into consideration these non-controlling interest holders' tax or other considerations, which may differ from the considerations of us or our other stockholders.

In addition, certain of the non-controlling interest holders may hold, and may from time to time in the future acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or the business of our

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In addition, certain of the non-controlling interest holders are in the business of making or advising on investments in companies and may hold, and may from time to time in the future acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or the business of our suppliers.

Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, none of the non-controlling interest holders or any director who is not employed by us or his or her affiliates has any duty to refrain from engaging in a corporate opportunity in the same or similar lines of business as us.

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The non-controlling interest holders have the right to have their LLC Interests redeemed or exchanged into shares of Class A common stock, which may cause volatility in our stock price.

We have an aggregate of 160,525,685 shares of Class A common stock authorized but unissued, including 2,834,513 shares of Class A common stock issuable upon the redemption or exchange of LLC Interests held by the non-controlling interest holders.

As of December 25, 2024, we have an aggregate of 159,931,932 shares of Class A common stock authorized but unissued, including 2,455,713 shares of Class A common stock issuable upon the redemption or exchange of LLC Interests held by the non-controlling interest holders.

Subject to certain restrictions set forth in the SSE Holdings LLC Agreement, the non-controlling interest holders are entitled to have their LLC Interests redeemed or exchanged for shares of our Class A common stock.

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Sales or distributions of substantial amounts of our Class A common stock, including shares issued in connection with an acquisition, or the perception that such sales or distributions could occur, may cause the market price of our Class A common stock to decline.

We have and will continue to incur significant expenses in connection with the administration of our organizational structure.

As a result, our expenses for legal, tax and accounting compliance may be significantly greater than other companies of our size that do not have a similar organizational structure or a tax receivable agreement in place.

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We will continue to incur relatively outsized costs as a result of being a public company and in the administration of our complex organizational structure.

As a public company, we incur significant legal, accounting, insurance and other expenses that we would not incur as a private company, including costs associated with public company reporting requirements.

We have also incurred and will continue to incur costs associated with compliance with the Sarbanes-Oxley Act and related rules implemented by the SEC, and will incur additional costs in connection with remediating the material weakness we have identified in our internal control over financial reporting.

Refer to Note 3, Restatement of Previously Issued Consolidated Financial Statements, in the Consolidated Financial Statements in Part II, Item 8 for additional information.

The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing, and the SEC has proposed new rules which, if adopted, would impose significant new disclosure obligations on us related to climate change, and has adopted new rules relating to cybersecurity.

We have also incurred and will continue to incur costs associated with compliance with the Sarbanes-Oxley Act and related rules implemented by the SEC.

The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing, and in addition to new climate change rules approved in California, the SEC has adopted rules relating to cybersecurity and may in the future implement additional regulatory requirements.

These rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming.

These laws and regulations also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

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and coverage or incur substantially higher costs to obtain the same or similar coverage.

Furthermore, if we are unable to continue to satisfy our obligations as a public company, we would be subject to delisting our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Our organizational structure, including our Tax Receivable Agreement, is very complex and we require the expertise of various tax, legal and accounting advisers to ensure compliance with applicable laws and regulations, and we have identified a material weakness in our internal control over financial reporting in connection with internal controls over the calculation of state deferred taxes and the related income tax expense (benefit).

We have and will continue to incur significant expenses in connection with the administration of our organizational structure.

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In addition, the Delaware General Corporation Law (the "DGCL"), to which we are subject, prohibits us, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with any stockholder or group of stockholders who owns at least 15% of our common stock.

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We do not currently expect to pay any cash dividends.

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We will continue to incur relatively outsized costs as a result of our complex organizational structure.

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In addition, if SSE Holdings does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.

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In certain cases, payments under the Tax Receivable Agreement to the non-controlling interest holders may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.

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In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.

There can be no assurance that we will be able to fund or finance our obligations under the Tax Receivable Agreement.

There can be no assurance that we will be able to fund or finance our obligations

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under the Tax Receivable Agreement.

Furthermore, any increases in the federal corporate tax rate may result in an increase in our Tax Receivable Agreement liability, including a gross up of our deferred tax balances.

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If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive.

Our ability to refinance our indebtedness will depend on

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the capital markets and our financial condition at such time.

Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.

We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

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In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

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Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our Class A common stock.

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

What changed 10-K

Item 1A. Risk Factors