SHAK 10-K & 10-Q changes, risk factors and insider trading

Described below are risks that we believe apply to our business and the industry in which we operate. You should carefully consider each of the following risk factors in conjunction with other information provided in this Annual Report on Form 10-K and in our other public disclosures. The risks described below highlight potential events, trendstrends, or other circumstances that could adversely affect our business, reputation, financial condition, results of operations, cash flows, liquidity or access to sources of financing, and consequently, the market value of our Class A common stock. These risks could cause our future results to differ materially from historical results and from guidance we may provide regarding our expectations of future financial performance. The risks described below are not the only risks we may face and additional risks not currently known to us or that we presently deem immaterial may emerge or become material at any time.

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

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

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

We may experience challenges in achieving the goals we have set and we may be unsuccessful in executing our strategies once identified and we will be required to make significant capital expenditures to pursue these goals. Conversely, we may also execute on poorly designed strategies that prove to be ineffective or require us to make substantial changes to our strategies in order to produce the desired results. Our strategies may expose us to additional risks,risks and strategies that have been successful for us in the past may fail to be so in the future or may be more expensive than we currently anticipate. We may incur significant costs and damage our brand if we are unable to identify, developdevelop, and execute appropriate business strategies, which could have a material adverse effect on our business, financial condition and results of operations.

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

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. InWe fiscal 2024, wehave closed nine underperforming Company-operated Shacks, and, if we identify other underperforming Shacks in the future, we may be requiredchoose to close additionalthem, Shacks.as a result. 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. If we are unable to expand in existing markets or penetrate new markets, our ability to increase our revenues and profitability may be materially harmed or we may face losses.

Our growth strategy depends on opening new Shacks in various formats and continuing our digital evolution, which will require us to use cash flows from operations. 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. We cannot assure that cash flows from operations will be sufficient to allow us to implement our growth strategy. If these funds are not allocated efficiently among our various projects, or if any of these initiatives prove to be unsuccessful, we may experience reduced profitability and we could be required to delay a project or delay, significantly curtail, or eliminate planned Shack openings, which could have a material adverse effect on our business, financial condition and results of operations.

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 ShacksShacks, 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 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. We may also incur higher costs from entering new markets if, for example, we assign area directors to manage comparatively fewer Shacks than we assign in more developed markets. 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 Restaurant-level profit margins at a slower rate, if ever. If we identify these Shacks as underperforming, we may choose to close them, as a result. If we do not successfully execute our plans to enter new markets, our business, financial condition or results of operations could be adversely affected.

OurShake growthShack planInc. includesForm opening10-K a| large number of new Shacks. Our existing personnel, management systems, financial and management controls and information systems may not be adequate to support our planned expansion. Our ability to manage16 our growth effectively will require us to continue to enhance these systems, procedures and controlscontrols, and to locate, hire, train and retain management and operating personnel, particularly in new markets. We may not be able to respond on a timely basis to all of the changing demands that our planned expansion will impose on management and on our existing infrastructure, or be able to hire or retain the necessary management and operating personnel, which could harm our business, financial condition or results of operations. These demands could cause us to operate our existing business less effectively, which in turn could cause a deterioration in the financial performance of our existing Shacks. If we experience a decline in financial performance, we may decrease the number of or discontinue Shack openings, or we may decide to close Shacks that we are unable to operate in a profitable manner.

Our results have been, and in the future may continue to be, significantly impacted by the timing of new Shack openings (often dictated by factors outside of our control), including landlord, construction and permitting delays, associated Shack pre-opening costs and operating inefficiencies, as well as changes in our geographic concentration. We typically incur the most significant portion of pre-opening costs associated with a given Shack within the several months preceding the opening of the Shack. Our experience has been that labor and operating costs associated with a newly opened Shack for the first several months of operation are materially greater than what can be expected after that time, both in aggregate dollars and as a percentage of Shack sales. Our new Shacks take a period of time to reach target operating levels due to inefficiencies typically associated with new Shacks, including the training of new personnel, new market learning curves, inability to hire sufficient qualified staff and other factors. We may incur additional costs in new markets, particularly for transportation and distribution, which may impact the profitability of those Shacks. Although we have specific target operating and financial metrics, new Shacks may not meet these targets or may take longer than anticipated to do so. If we identify these new Shacks as underperforming, we may choose to close them, as a result. Any new Shacks we open may not be profitable or achieve operating results similar to those of our existing Shacks, which could adversely affect our business, financial condition and results of operations.

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 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 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. As a result, our food and labor costs may be significantly higher than other companies who do not source high quality ingredients or pay above minimum wage. Additionally, the supply for high quality ingredients may be limited and it may take us longer to identify and secure relationships with suppliers that are able to meet our quality standards and have sufficient quantities to support our growing business. If we are unable to obtain a sufficient and consistent supply for our ingredients on a cost-effective basis, our food costs could increase or we may experience supply interruptions which could have an adverse effect on our operating margins. Additionally, some of our competitors have announced initiatives to offer better quality ingredients, such as antibiotic-free and fresh meat.ingredients. If this trend continues, it could further limit our supply for certain ingredients and we may lose our competitive advantage as it will be more difficult to differentiate ourselves.

We have a limited number of suppliers for our major ingredients, including beef patties, chicken, potato buns, custard, portobello mushrooms and cheese sauce. During fiscal 2024,2025, we purchased our (i) ground beef patties from 1011 approved ground beef processors, with approximately 40%38% of our ground beef patties from one supplier; (ii) chicken breasts from two suppliers; (iii) potato buns from two suppliers; (iv) custard base from fourthree suppliers; (v) 'Shroom Burgers from one supplier; (vi) crinkle cut fries from three suppliers; and (vii) ShackSauce from one supplier. Due to this concentration of suppliers,suppliers and our food quality expectations, the cancellation of our supply arrangements with any one of these suppliers or the disruption, delay or inability of these suppliers to deliver these major products to our Shacks may materially and adversely affect our results of operations while we establish alternate distribution channels. In addition, if our suppliers fail to comply with food safety or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. We cannot assure you that we would be able to find replacement suppliers on commercially reasonable terms or a timely basis, if at all.

WeShake contractShack withInc. oneForm distributor,10-K 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, including18 chicken, friesfries, and custard, collectively representing 45%approximately 42% of our purchases, were processed through our broadline distributor for distribution and delivery to each Shack. As of December 25,31, 2024,2025, 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 were to occur at the distribution centercenters that servicesservice the Shacks located in New York and northern New Jersey, or California, we would be at immediate risk of product shortages because thatthese distribution centercenters supplies our domestic licensed Shacks as well assupply approximately 20%21% of our Company-operated Shacks as of December 25,31, 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.2025.

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 25,31, 2024,2025, 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%30% of our international licensed Shacks and one such licensee operating 32%30% 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. We provide training to these licensees to integrate them into our operating strategy and culture. 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 improveupgrade 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.

WeShake takeShack greatInc. prideForm in10-K our| culture and believe that it is an extremely important factor in our success. 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 to19 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 diminisheddiminished, and we may experience difficulty recruiting and retaining qualified team members. Any of these factors could have a material adverse effect on our business, financial condition and results of operations.

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 wemay believealso that,have becausea difficult time recovering from a food-borne illness incident and may be required to incur significant costs to repair 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. Wereputation.

If any of our guests become ill from food-borne illnesses, we could be forced to temporarily close one or more ShacksShacks, or choose to close as a preventative measuremeasure, 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 costs to conduct such recalls could be significant and could interrupt our supply to unaffected Shacks or increase the cost of our ingredients.

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. We value people who are excited and committed to high performance, remarkable and enriching hospitality, embodying our culture, and actively growing themselves and the brand.

In many markets, competition for qualified individuals is intense and we may be unable to identify and recruit a sufficient number of individuals to meet our growing needs, especially in markets where our brand is less established. 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 members may cause us to incur higher labor costs compared to our competitors .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 changeschanges, 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 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.

We place a heavy emphasis on the qualification and training of our team members and spend a significant amount of time and money training our team members. Any inability to recruit and retain qualified individuals may result in higher turnover andturnover, increased labor costs, and delays in planned openings of new Shacks, which could compromise the quality of our service, all of which could adversely affect our business. Any such inability could also delay the planned openings of new Shacksservice and could adversely impact our existing Shacks. Such increased costs of attracting qualified team members or delays in Shack openings could adversely affect our business, financial conditioncondition, and results of operations.

This section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about the Company'sour growth, including our long-term growth goals, strategic priorities and initiatives, and liquidity. Forward-looking statements discuss our current expectations, targets and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "likely," "outlook," "potential," "preliminary," "project," "projection," "plan," "seek," "targets," "may," "could," "would," "will," "should," "can," "can have," the negatives thereof and other similar expressions.

Forward-looking statementstatements reflect our current views with respect to future events and are based on certain assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from trends, plans, or expectations set forth in the forward-looking statement, as set forth in this Form 10-.10-K. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this Form 10-K in the context of the risks and uncertainties disclosed in Part I, Item 1A of this Form 10-K under the heading "Risk Factors," in this Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in Item 7A "Quantitative and Qualitative Disclosures About Market Risk."

“System-wide sales” is an operating measure and consists of sales from Company-operated Shacks and licensed Shacks. The Company does not recognize the sales from licensed Shacks as revenue. Of these amounts, revenue is limited to licensing revenue based on a percentage of sales from licensed Shacks, as well as certain up-front fees, such as territory feesfees, opening fees, and openingtermination fees.

Same-Shack salessales1 for the thirteenfiscal weeksfourth quarter ended December 25,31, 20242025 increased 4.3%2.1% compared to the same period last year, driven by a 4.8%1.6% increase in price mix,mix partially offset byand a 0.5% declineincrease in guest traffic. Same-Shack salessales1 for the fifty-twofiscal weeksyear ended December 25,31, 20242025 increased 3.6%2.3% compared to the same period last year, driven by a 4.3%3.1% increase in price mix, partially offset by a 0.7%0.8% decline in guest traffic. For the purpose of calculating same-Shack sales growth for the thirteenfiscal fourth quarter and fifty-twofiscal weeksyear ended December 25,31, 2024,2025, Shack sales for 235278 Shacks were included in the comparable Shack base.

Average weekly salessales1 were $79,000$77,000 for the thirteenfiscal weeksfourth quarter ended December 25,31, 2024,2025, compared to $76,000$79,000 for the same period last year, primarily driven by highera decline in guest traffic and menu prices and the closure of nine underperforming Company-operated Shacks,mix, partially offset by ahigher decreasemenu in items per check and guest traffic.prices. Average weekly salessales1 were $76,000 for the fifty-twofiscal weeksyear ended December 31, 2025, which was flat compared to the same period last year, primarily driven by a decline in guest traffic, offset by higher menu prices.

System-wide sales increased 13.3%23.4% to $500.7$618.0 million for the thirteenfiscal weeksfourth quarter ended December 25,31, 2024,2025, versus the same period last year. System-wide sales increased 13.0%15.9% to $1,922.7$2,228.8 million for the fifty-twofiscal weeksyear ended December 25,31, 2024,2025, versus the same period last year. The 53rd week contributed $47.3 million to System-wide sales in fiscal 2025. Average unit volume for Company-operated Shacks was $3.9$4.0 million for the fifty-twofiscal weeksyear ended December 25,31, 2024,2025, which was flat compared to the same period last year.

During fiscal 2024,2025, we opened 4345 new Company-operated Shacks and 3340 new licensed Shacks. There were sixfour permanent licensed Shack closures and nineone permanent Company-operated Shack closuresclosure in fiscal 2024.2025. Below are Shacks opened during the fourth quarter of 2024.2025.

Shack sales for the fiscal year ended December 25,31, 20242025 increased 15.4%15.2% to $1.2$1.4 billion versus the prior year. The increase was primarily due to increased menu prices, which contributed $64.0 million, as well as the opening of 4345 new Company-operated Shacks during fiscal 2024,2025, which contributed $63.9$218.5 million.million, partially offset by a decline in guest traffic. Excluding the 53rd week, Shack sales for fiscal year 2025 increased 12.9% versus the prior year.

Licensing revenue is comprised of license fees and opening feesfees, territory fees, and territorytermination fees for certain licensed Shacks. License fees are calculated as a percentage of sales and territory fees are payments for the exclusive right to develop Shacks in a specific geographic area.

Licensing revenue for the fiscal year ended December 25,31, 20242025 increased 10.6%20.2% to $45.0$54.1 million versus the prior year. The increase was primarily due to 27higher netsales at existing licensed Shacks, which contributed $3.5 million, and the opening of 40 new licensed Shacks opened during fiscal 2024,2025, which contributed approximately $2.5$3.2 million, as well as higherrevenue sales,recognized mainlyfrom atthe existingcontract domestictermination of a licensed Shacks.partner. Excluding the 53rd week, Licensing revenue for fiscal year 2025 increased 17.5% versus the prior year.

Food and paper costs include the direct costs associated with food, beverage and packaging of our menu items. The components of Food and paper costs are variable by nature, change with sales volume, and are impacted by menu mix, channel mix and fluctuations in commodity costs, as well as geographic scale and proximity.

Food and paper costs for the fiscal year ended December 25,31, 20242025 increased 11.4%16.7% to $339.9$396.7 million versus the prior year. The increase was primarily due to the openings from the fiscal 20232024 class of Shacks, which contributed approximately $20.7$24.8 million of incremental expense as well as the opening of 4345 new Company-operated Shacks during fiscal 2024,2025, which contributed approximately $18.2 million.

As a percentage of Shack sales, the decreaseincrease in Food and paper costs for fiscal 20242025 was primarily due to increasedunfavorable menu prices,mix and increased commodity costs, mainly beef, as well as increased marketing promotions, partially offset by increased marketingmenu promotions and certain commodity costs, mainly beef and fries.price.

Labor and related expenses for the fiscal year ended December 25,31, 20242025 increased 11.3%6.5% to $338.8$360.7 million versus the prior year. The increase was primarily due to the opening of 4345 new Company-operated Shacks during fiscal 2024,2025, which contributed $20.3$19.4 million. Excluding the 53rd week, Labor and related expenses for fiscal year 2025 increased 4.4% versus the prior year.

As a percentage of Shack sales, the decrease in Labor and related expenses for fiscal 20242025 was primarily due to labor efficiencies and sales leverage, partially offset by increased wages and incremental expenses from the opening of 4345 new Company-operated Shacks during fiscal 2024.2025.

Other operating expenses for the fiscal year ended December 25,31, 20242025 increased 19.4%19.2% to $178.4$212.7 million versus the prior year. The increase was primarily due to increased transaction costscosts, mainly delivery commissions, associated with higher sales, increased facilities costs, mainly utilities and repair and maintenance, as well as increased facilities costs and marketing spend. Excluding the 53rd week, Other operating expenses for fiscal year 2025 increased 16.9% versus the prior year.

As a percentage of Shack sales, the increase in Other operating expenses for fiscal 20242025 was primarily due to increased delivery commissions associated with higherthe deliverygrowth salesin our digital business and increased marketing spend, partially offset by sales leverage.

Occupancy and related expenses for the fiscal year ended December 25,31, 20242025 increased 16.6%14.6% to $93.1$106.6 million versus the prior year. The increase was primarily due to the openings from the fiscal 20232024 class of Shacks weighted to the second half of fiscal 2023,Shacks, which contributed approximately $4.6$7.7 million,million of incremental expense as well as the opening of 4345 new Company-operated Shacks during fiscal 2025, which contributed $4.3 million, partially offset by the closure of nine Company-operated Shacks in fiscal 2024. Excluding the 53rd week, Occupancy and related expenses for fiscal year 2025 increased 14.5% versus the prior year.

As a percentage of Shack sales, the increase in Occupancy and related expenses was flat for fiscal 20242025 was primarily duecompared to higherthe basesame rent.period last year.

General and administrative expenses for the fiscal year ended December 25,31, 20242025 increased 15.1%18.2% to $149.0$176.2 million versus the prior year. The increase was primarily due to increased investments in marketing andas well as increased wages and other team costs to support our Shack growthgrowth, partially offset by a decrease in professional fees related to non-recurring matters and strategic initiatives, as well as costs associated with the prior restatement of prior periods included in the fiscal 2023 Form 10-K.

As a percentage of Total revenue, the increase in General and administrative expenses were flat for fiscal 20242025 was primarily due to sales leverage offset by the aforementioned items.

Pre-opening costs consist primarily of occupancy, manager and team member wages, cookware, travel and lodging costs for our opening training team and other supporting team members, marketing expenses, legal fees and inventory costs incurred prior to the opening of a Company-operated Shack. All such costs incurred prior to the opening of a Company-operated Shack are expensed in the period in which the expense was incurred. Pre-opening costs can fluctuate significantly from period to period, based on the number and timing of Company-operated Shack openings and the specific pre-opening costs incurred for each Company-operated Shack. Additionally, Company-operated Shack openings in new geographic markets may initially experience higher pre-opening costs than our established geographic markets, such as the New York City metropolitan area, where we have greater economies of scale and incur lower travel and lodging costs for our training team.

Pre-opening costs for the fiscal year ended December 25,31, 20242025 decreasedincreased 19.2%15.8% to $15.5$18.0 million versus the prior year. The decreaseincrease was primarily due to reductionsincreased inlegal costs and occupancy expense to support our larger development pipeline as well as increased wages and team costs asfor weour standardizeShack teams related to the trainingtiming processof forShack unopenedopenings Shacks.throughout the year.

Impairments, loss on disposal of assets, and Shack closures primarily consists of the net book value of assets that have been retired which primarilymainly consists ofincludes furniture, equipment and fixtures that were replaced in the normal course of business; impairment charges related to our long-lived assets, which includes property and equipment, as well as operating and finance lease assets; and miscellaneous Shack closure expenses, including employee-related costs, cleaning, and sign removal costs.

Impairments, loss on disposal of assets, and Shack closures for the fiscal year ended December 25,31, 20242025 increaseddecreased to $32.4$5.2 million versus the prior year. The increasedecrease was primarily due to expensesnon-cash impairment charges and miscellaneous Shack closure expense of $29.3 million during fiscal 2024, related to the closure of nine Company-operated Shacks in August 2024.2024, partially offset by the closure of one Company-operated Shack in December 2025.

Other income, net consists primarily of interest income, adjustments to liabilities under the Tax Receivable Agreement, dividend incomeincome, and net unrealized and realized gains and losses from marketable securities.

Interest expense for the fiscal year ended December 25,31, 20242025 increased 19.1%5.6% to $2.0$2.2 million versus the prior year. The increase was primarily due to increased finance lease charges from the opening of 4345 new Company-operated Shacks during fiscal 2024.2025, partially offset by a decrease in various sales tax audit assessment charges compared to prior year.

Income Tax Expense (Benefit)

Our effective income tax rate for the fiscal year ended December 25,31, 20242025 increased to 24.0%31.5% from (23.6)%24.0% in the prior year. The increase in our effective income tax rate was primarily driven by theforeign releasetax ofcredits athat valuationare allowancenot expected to be realized and a higherthe remeasurement of deferred tax assets infollowing fiscalthe 2023.filing of the Company’s 2024 tax returns.

We are the sole managing member of SSE Holdings and have the sole voting power in, and control the management of, SSE Holdings. Accordingly, we consolidate the financial results of SSE Holdings and report a non-controlling interest on our Consolidated Statements of Income (Loss),Income, representing the portion of net income attributable to the other members of SSE Holdings. The Third Amended and Restated Limited Liability Company Agreement of SSE Holdings provides that holders of LLC Interests may, from time to time, require SSE Holdings to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis. In connection with any redemption or exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings. The weighted average ownership percentages for the applicable reporting periods are used to attribute net income and other comprehensive income to Shake Shack Inc. and the non-controlling interest holders.

Net income attributable to non-controlling interests for the fiscal year ended December 25,31, 20242025 decreasedincreased from $0.7$0.6 million to $0.6$4.0 million. The decreaseincrease was primarily due to a decline inincreased net results compared to the same period last year, partially offset by a decrease in the non-controlling interest holders' weighted average ownership, which was 6.2%5.7% and 6.7%,6.2%, respectively for fiscal 20242025 and fiscal 2023.2024.

To supplement the Consolidated Financial Statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we use the following non-GAAP financial measures: Restaurant-level profit, Restaurant-level profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro forma net income (loss),income, and adjusted pro forma earnings (loss) per fully exchanged and diluted share (collectively the "non-GAAP financial measures").

Restaurant-level profit, formerly referred to as Shack-level operating profit,profit is defined as Shack sales less Shack-level operating expenses which include Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.

Restaurant-level profit and Restaurant-level profit margin may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of Restaurant-level profit and Restaurant-level profit margin is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Restaurant-level profit excludes certain costs, such as General and administrative expenses and Pre-opening costs, which are considered normal, recurring cash operating expenses and are essential to support the operation and development of our Shacks. Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole and Restaurant-level profit and Restaurant-level profit margin should be reviewed in conjunction with our GAAP financial results. A reconciliation of Restaurant-level profit to Income (loss) from operations, the most directly comparable GAAP financial measure, is as follows.

This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements including, but not limited to, statements about our growth, including our long-term growth goals, strategic priorities and initiatives, and liquidity. Forward-looking statements discuss our current expectations, targets and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "likely," "outlook," "potential," "preliminary," "project," "projection," "plan," "seek," "targets,target," "may," "could," "would," "will," "should," "can," "can have," the negatives thereof and other similar expressions.

Forward-looking statements reflect our current views with respect to future events and are based on certain assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from trends, plans, or expectations set forth in the forward-looking statement, as set forth in this Form 10-Q. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 ("2025 Form 10-K"), our subsequent Quarterly Reports on Form 10-Q, and our other filings with the SEC.

The following discussion should be read in conjunction with our 2025 Form 10-K10-K, andour subsequent Quarterly Reports on Form 10-Q, the Condensed Consolidated Financial Statements and notes thereto included in Part I, Item 1 of this Form 10-Q.10-Q, and our other filings with the SEC. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years.

Shake Shack serves modern, fun and elevated versions of American classics using only premiumthe best ingredients. We areWe're known for our delicious made-to-order 100% Angus beef burgers, crinkle cut fries, crispy chicken, hand-spun milkshakes, house-made lemonades, beer, wine, and more. With our fine-dininghigh-quality rootsfood at a great value, warm hospitality, and a commitment to crafting uplifting experiences, Shake Shack has become a cult-brand andwith createdwidespread a new category, fine-casual.appeal.

Same-Shack sales for the thirteen weeks ended AprilJuly 1, 2026 increased 4.6%3.5% compared to the same period last year, driven by a 3.2%2.0% increase in guest traffic and a 1.5% increase in price mix. Same-Shack sales for the twenty-six weeks ended July 1, 2026 increased 4.0% compared to the same period last year, driven by a 2.3% increase in price mix and a 1.4%1.7% increase in guest traffic. For the purpose of calculating same-Shack sales for the thirteen and twenty-six weeks ended AprilJuly 1, 2026, Shack sales for 287296 Shacks were included in the comparable Shack base.

Average weekly sales were $72,000$78,000 for the thirteen weeks ended AprilJuly 1, 2026, which was flat compared to the same period last year, primarily driven by higher menu prices, partially offset by weathermenu headwindsmix. andAverage weekly sales were $75,000 for the twenty-six weeks ended July 1, 2026, which was flat compared to the same period last year, primarily driven by higher menu prices, partially offset by menu mix.

System-wide sales for the thirteen weeks ended AprilJuly 1, 2026 increased 14.1%13.8% to $558.3$625.8 million compared to the same period last year. System-wide sales for the twenty-six weeks ended July 1, 2026 increased 13.9% to $1,184.1 million compared to the same period last year.

Digital sales for the thirteen weeks ended AprilJuly 1, 2026 increased 19.6%34.3% to $141.1$164.5 million compared to the same period last year. Digital sales for the twenty-six weeks ended July 1, 2026 increased 27.1% to $305.6 million compared to the same period last year. Digital sales includes orders placed on the Shake Shack app, website and third-party delivery platforms, which represented 39.9%40.8% and 40.3%, respectively, of Shack sales during the thirteen and twenty-six weeks ended AprilJuly 1, 2026.

The following tables summarize the Shacks opened and closed during the thirteen and twenty-six weeks ended AprilJuly 1, 2026.

The following table summarizes our results of operations for the thirteen and twenty-six weeks ended AprilJuly 1, 2026 and MarchJune 26,25, 2025:

Shack sales for the thirteen weeks ended AprilJuly 1, 2026 increased 14.3%17.5% to $354.0$403.4 million versus the same period last year. The increase was primarily due to the opening of 5861 new Company-operated Shacks between MarchJune 26,25, 2025 and AprilJuly 1, 2026, which contributed $38.7$47.2 millionmillion, as well as increaseda menu3.5% prices.increase in same-Shack sales.

Licensing revenue for the thirteen weeks ended AprilJuly 1, 2026 increased 14.7%7.1% to $12.7$14.2 million versus the same period last year. The increase was primarily due to the opening of 3840 new licensed Shacks between MarchJune 26,25, 2025 and AprilJuly 1, 2026, which contributed $1.3 millionmillion, topartially Licensingoffset revenue.by decreased sales at existing international licensed Shacks, primarily in the Middle East.

Food and paper costs for the thirteen weeks ended AprilJuly 1, 2026 increased 16.3%20.3% to $100.0$116.3 million versus the same period last year. Food and paper costs for the twenty-six weeks ended July 1, 2026 increased 18.4% to $216.3 million versus the same period last year. The increaseincreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily due to the opening of 5861 new Company-operated Shacks between MarchJune 26,25, 2025 and AprilJuly 1, 2026, which contributed approximately $11.3$14.3 million.million and $22.9 million, respectively, as well as increased commodity costs, mainly beef.

As a percentage of Shack sales, the increaseincreases in Food and paper costs for the thirteen and twenty-six weeks ended April 1, 2026 waswere primarily driven by unfavorable menu mix and increased commodity costs, mainly beef, and marketing promotions, partially offset by increased menu prices.

Labor and related expenses for the thirteen weeks ended AprilJuly 1, 2026 increased 7.0%15.0% to $92.7$101.2 million versus the same period last year. Labor and related expenses for the twenty-six weeks ended July 1, 2026 increased 11.0% to $193.9 million versus the same period last year. The increaseincreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily due to the opening of 5861 new Company-operated Shacks between MarchJune 26,25, 2025 and AprilJuly 1, 2026, partially offset by labor efficiencies.

As a percentage of Shack sales, the decreasedecreases in Labor and related expenses for the thirteen and twenty-six weeks ended AprilJuly 1, 2026 waswere primarily due to labor efficiencies and sales leverageleverage, partially offset by increased wages.wages and incremental expenses from the opening of 61 new Company-operated Shacks between June 25, 2025 and July 1, 2026 as we accelerate our pipeline and as these Shacks mature.

Other operating expenses for the thirteen weeks ended AprilJuly 1, 2026 increased 19.2%24.3% to $57.5$63.1 million versus the same period last year. Other operating expenses for the twenty-six weeks ended July 1, 2026 increased 21.8% to $120.6 million versus the same period last year. The increaseincreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily drivendue by increased facilities costs, mainly the timing of repairs and maintenance,to increased transaction costs associated with higher salessales, and increased marketingfacilities spending.costs.

As a percentage of Shack sales, the increase in Other operating expenses for the thirteen weeks ended AprilJuly 1, 2026 was primarily due to increased delivery commissions associated with higher delivery sales and increased facilities costs. As a percentage of Shack sales, the increase in Other operating expenses for the twenty-six weeks ended July 1, 2026 was primarily due to increased facilities costs,cost, mainly the timing of repairs and maintenance, and increased traveltransaction expensescosts relatedassociated towith thehigher 17 new Company-operated Shacks opened in the period.sales.

Occupancy and related expenses for the thirteen weeks ended AprilJuly 1, 2026 increased 16.3%17.8% to $28.7$30.2 million versus the same period last year. Occupancy and related expenses for the twenty-six weeks ended July 1, 2026 increased 17.1% to $58.8 million versus the same period last year. The increaseincreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily due to the opening of 5861 new Company-operated Shacks between MarchJune 26,25, 2025 and AprilJuly 1, 2026, which contributed approximately $2.7$3.2 million.million and $5.2 million, respectively.

As a percentage of Shack sales, Occupancy and related expenses were flat for the thirteen weeks ended July 1, 2026. As a percentage of Shack sales, the increase in Occupancy and related expenses for the thirteentwenty-six weeks ended AprilJuly 1, 2026 was primarily duedriven toby higher common area maintenance charges.

General and administrative expenses for the thirteen weeks ended AprilJuly 1, 2026 increased 31.9%18.8% to $53.6$48.3 million versus the same period last year. The increase was primarily due to increased investments in marketing and technology initiatives as well as increased wageslegal costs. As a percentage of Total revenue, the increase in General and otheradministrative teamexpenses costsfor the thirteen weeks ended July 1, 2026 was primarily due to supportthe ouraforementioned Shack growth,items, partially offset by a decreasereduction in legalperformance-based costs.compensation and forfeitures of equity-based compensation.

Depreciation and amortization expense for the thirteen weeks ended AprilJuly 1, 2026 increased 9.7%15.7% to $29.1$30.7 million versus the same period last year. Depreciation and amortization expense for the twenty-six weeks ended July 1, 2026 increased 12.7% to $59.8 million versus the same period last year. The increaseincreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily due to incremental depreciation of capital expenditures related to the opening of 5861 new Company-operated Shacks between MarchJune 26,25, 2025 and AprilJuly 1, 2026, partially offset by a reduction in depreciation expense due to fully depreciated assets compared to the prior year period.2026.

Pre-opening costs for the thirteen weeks ended AprilJuly 1, 2026 increased 113.5%34.0% to $6.9$6.6 million versus the same period last year. Pre-opening costs for the twenty-six weeks ended July 1, 2026 increased 65.3% to $13.5 million versus the same period last year. The increaseincreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily due to increased wages and team costs, occupancy costscosts, and travel and entertainment expense to support our larger development pipeline which includes more Shacks opened during the thirteen and twenty-six weeks ended July 1, 2026 and Shacks under construction compared to the same prior year periods.

Impairments, loss on disposal of assets, and Shack closures primarily consists of the net book value of assets that have been retired which mainlyprimarily includesconsists of furniture, equipment and fixtures that were replaced in the normal course of business; impairment charges related to our long-lived assets, which includes property and equipment, as well as operating and finance lease assets; and miscellaneous Shack closure expenses, including employee-related costs, cleaning, and sign removal costs.

Impairments, loss on disposal of assets, and Shack closures for the thirteen and twenty-six weeks ended AprilJuly 1, 2026 decreased to $0.9$0.4 million and $1.3 million, respectively, versus the same periodperiods last year. The decreasedecreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily due to the absence of expenses related to the closure of nine Company-operated Shacks in fiscal 2024, partially offset by an increase in the cost of abandoned projects.2024.

Other income, net consists primarily of interest income, adjustments to liabilities under the Tax Receivable Agreement, dividend income,income and net unrealized and realized gains and losses from marketable securities.

Other income, net for the thirteen weeks ended AprilJuly 1, 2026 decreased fromto $3.0$2.6 million versus the same period last year. Other income, net for the twenty-six weeks ended July 1, 2026 decreased to $2.7$5.3 million versus the same period last year. The decreasedecreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily due to lower dividends.

Interest expense generally consists of interest on the current portion of our liabilities under the Tax Receivable Agreement, imputed interest related to our financing equipment leases, amortization of deferred financing costs, interest and fees on our Revolving Credit FacilityFacility, interest on the current portion of our liabilities under the Tax Receivable Agreement and amortization of debt issuance costs.

Interest expense for the thirteen weeks ended AprilJuly 1, 2026 decreasedincreased 2.7%0.9% to $0.5$0.6 million versus the same period last year. The decreaseincrease for the thirteen weeks ended July 1, 2026 was primarily due to an increase in various sales tax audit assessment charges, partially offset by a decrease in finance lease charges related to new financing equipment leases with lower lease liability balances.

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Income Tax Expense (Benefit)

We are the sole managing member of SSE Holdings,Holdings andand, as a result, consolidate the financial results of SSE Holdings. For U.S. federal and certain state and local tax purposes, SSE Holdings is classified as a partnership. Consequently, any taxable income or loss generated by SSE Holdings is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. As a result, the Company is subject to U.S. federal income taxes, along with applicable state and local taxes on its allocable share of any taxable income or loss of SSE Holdings. Additionally, the Company is taxed on any standalone income or loss generated by Shake Shack, Inc. The Company is also subject to withholding taxes in certain foreign jurisdictions.

Our effective income tax rates for the thirteen weeks ended AprilJuly 1, 2026 and MarchJune 26,25, 2025 were 33.0%25.9% and 14.0%,25.1%, respectively. Our effective income tax rates for the twenty-six weeks ended July 1, 2026 and June 25, 2025 were 25.8% and 23.2%, respectively. The increaseincreases in the effective income tax raterates for the thirteen and twenty-six weeks ended AprilJuly 1, 2026 waswere primarily driven by a declinedecrease in theforecasted pre-tax income compared to the prior yearyear, period,including whichthe resultedeffects inof discretenondeductible tax items havingand a proportionatelynonrecurring greater impact on the effective incomedeferred tax rate.adjustment Additionally, an increaserecognized in the Company'sprior-year ownership interest in SSE Holdings increases its share of the taxable income (loss) of SSE Holdings. Our weighted-average ownership interest in SSE Holdings was 94.3% and 94.2%, respectively, for the thirteen weeks ended April 1, 2026 and March 26, 2025.period.

Net Income (Loss) Attributable to Non-controlling Interests

We are the sole managing member of SSE Holdings and have the sole voting power in, and control the management of, SSE Holdings. Accordingly, we consolidate the financial results of SSE Holdings and report a non-controlling interest on our Condensed Consolidated Statements of Income (Loss),Income, representing the portion of net income (loss) attributable to the other members of SSE Holdings. The Third Amended and Restated Limited Liability Company Agreement of SSE Holdings provides that holders of LLC Interests may, from time to time, require SSE Holdings to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis. In connection with any redemption or exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings. The weighted average ownership percentages for the applicable reporting periods are used to attribute net income (loss) and other comprehensive income (loss) to Shake Shack Inc. and the non-controlling interest holders.

Net income (loss) attributable to non-controlling interests for the thirteen and twenty-six weeks ended AprilJuly 1, 2026 declineddecreased to nil from income of $0.3$1.2 million inversus the same periodperiods last year. The declinedecreases wasfor the thirteen and twenty-six weeks ended July 1, 2026 were primarily due to a decreasedecline in net results compared to the same periodperiods last year, partially offset by a decrease in the non-controlling interest holders' weighted average ownership, which was 5.7% and 5.8%, respectively for the thirteen weeks ended April 1, 2026 and March 26, 2025.year.

34 | Shake Shack Inc. Form 10-Q | 31

Restaurant-level profit and Restaurant-level profit margin may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of Restaurant-level profit and Restaurant-level profit margin is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Restaurant-level profit excludes certain costs, such as General and administrative expenses and Pre-opening costs, which are considered normal, recurring cash operating expenses and are essential to support the operation and development of our Shacks. Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole and Restaurant-level profit and Restaurant-level profit margin should be reviewed in conjunction with our GAAP financial results. ReconciliationsA reconciliation of Restaurant-level profit to Income (loss) from operations, the most directly comparable GAAP financial measure, wereis as follows.

EBITDA is defined as Net income (loss) before Interest expense (net of interest income), Income tax expense (benefit) and Depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA excluding equity-based compensation expense, Impairments, loss on disposal of assets, and Shack closures, amortization of cloud-based software implementation costs, as well as certain non-recurring items that we do not believe directly reflect our core operations and may not be indicative of our recurring business operations.

EBITDA and adjusted EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of EBITDA and adjusted EBITDA is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. EBITDA and adjusted EBITDA exclude certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures. ReconciliationsA reconciliation of EBITDA and adjusted EBITDA to Net income (loss),income, the most directly comparable GAAP measure, wereis as follows.

(5)Calculated as a percentage of Total revenue, which was $366.7$417.6 million and $320.9$784.4 million for the thirteen and twenty-six weeks ended AprilJuly 1, 20262026, respectively, and March$356.5 26,million and $677.4 million for the thirteen and twenty-six weeks ended June 25, 2025, respectively.

Adjusted pro forma net income represents Net income (loss) attributable to Shake Shack Inc. assuming the full exchange of all outstanding SSE Holdings, LLC membership interests ("LLC Interests") for shares of Class A common stock, adjusted for certain non-recurring items that we do not believe are directly related to our core operations and may not be indicative of our recurring business operations. Adjusted pro forma earnings per fully exchanged and diluted share is calculated by dividing adjusted pro forma net income by the weighted average shares of Class A common stock outstanding, assuming the full exchange of all outstanding LLC Interests, after giving effect to the dilutive effect of outstanding equity-based awards.