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Case study · Shake Shack

How Shake Shack grew from a Madison Square Park hot dog cart to a public company

TL;DR

Shake Shack began in 2001 as a hot dog cart in New York City’s Madison Square Park, run out of the kitchen of the Eleven Madison Park restaurant. The cart drew daily lines, the city later invited a permanent kiosk, and the first Shake Shack opened in July 2004. The lesson: a cheap, temporary test in a high-traffic spot can reveal a business.

How it started

In 2001, restaurateur Danny Meyer’s Union Square Hospitality Group was helping revive Madison Square Park, across the street from its restaurant Eleven Madison Park. Randy Garutti, then the group’s director of operations, set up a hot dog cart in the park to support the effort, tied to an art exhibit in the park.

The cart was a side project, not a plan to start a chain. Its kitchen was little more than a few coolers, and staff ran back to the restaurant for supplies. Even so, lines grew day after day and week after week.

How they got the first customers

The first customers were park visitors and neighborhood office workers who walked by the cart. The restaurant team did not need paid ads: the line itself was the marketing, because a long queue for a hot dog in a park is something people notice and talk about.

The cart ran for nearly three years, which gave the team time to learn what people wanted and how to serve them quickly.

What drove growth

In 2003 the city asked for bids on a permanent kiosk-style restaurant in the park. Meyer sketched what Shake Shack should be: a modern version of the American roadside burger stand. The first Shake Shack opened in July 2004.

It was originally meant to be a single New York City shop, but sales grew and the company expanded. Shake Shack went public on the New York Stock Exchange in January 2015. The IPO was priced at $21 per share and the stock opened its first day of trading at $47.

The company has since grown to hundreds of locations worldwide, but the cart is the part a small founder can copy: test the idea cheaply, in public, before you spend on a restaurant build-out.

Lessons you can copy

  1. 1Test with a cart before you build a restaurantA cart cost a fraction of a lease and buildout, and daily lines proved demand. Treat a cart, stand or pop-up as a paid market test.
  2. 2Pick a spot where the crowd already isThe park already had foot traffic. You do not have to create demand if you stand where people already walk.
  3. 3Let the line do the marketingA visible queue tells strangers that the food is worth waiting for. Serve fast enough to keep the line moving but not so fast it disappears.
  4. 4Borrow resources from a parent businessThe cart used the Eleven Madison Park kitchen. If you already run a business, use its kitchen, staff and suppliers to test a side idea.
  5. 5Define the concept in one sentenceA modern roadside burger stand is easy to repeat in new locations. A short concept makes training and expansion simpler.

Frequently asked questions

Did Shake Shack really start as a hot dog cart?

Yes. In 2001 Danny Meyer’s restaurant group set up a hot dog cart in Madison Square Park, and the first Shake Shack kiosk opened there in July 2004.

Who started Shake Shack?

Danny Meyer’s Union Square Hospitality Group started it. Randy Garutti, then Meyer’s director of operations, set up the original cart.

When did Shake Shack go public?

Shake Shack went public on the New York Stock Exchange on January 30, 2015, after pricing its IPO at $21 per share.

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