The establishment known as Shake Shack – a name that suggests, perhaps, a humble dwelling for the shaking of shoulders, rather than the purveying of comestibles – has, in the year of our Lord 2025, undergone a most curious expansion. They speak of a thousand and five hundred locations, a veritable proliferation of burger-slinging outposts. One pictures a cart, once modest, now spawning copies like a particularly prolific, if greasy, hydra. Thirty new establishments have sprung forth, and they promise fifty-five, perhaps sixty more in the coming year. A relentless march of patties and frozen custard, it is.
And, most astonishingly, they claim a growth in sales at existing locations – a 4.9% increase, they boast – while the very nation seems to have lost its appetite for fast-food frivolities. A decline of 1.1%, they say, in the general consumption of hastily prepared meals. One suspects a phantom diner, a spectral gourmand, is single-handedly propping up the industry. The executives, of course, lament the “challenging macroeconomic conditions,” a phrase as hollow and worn as a beggar’s shoe. They speak of “pinched consumers,” as if the very act of purchasing a burger is now a form of self-flagellation.
Consider, if you will, the plight of Chipotle, once a titan, now experiencing a decline in sales after two decades of uninterrupted growth. A most unsettling omen. And Wendy’s, a name that conjures images of red-haired girls and frosty beverages, has seen its shares fall by a most precipitous 43%, while Arby’s – a purveyor of meats of questionable origin – has closed dozens of establishments. Even McDonald’s, that ubiquitous behemoth, reports a decline in patronage among those of more modest means. The CEO speaks of a “challenging pricing environment,” a euphemism, one suspects, for the simple fact that the common man can no longer afford a ten-dollar burger.
The AdvisorShares Restaurant ETF – a cumbersome title, and one that sounds suspiciously like a bureaucratic decree – has, over the past year, managed a paltry 2% gain, while the broader market – the S&P 500, a symbol of American prosperity – has soared by 18.5%. A most disheartening disparity. One pictures the ETF as a weary traveler, struggling to keep pace with a fleet of galloping thoroughbreds.
Shake Shack, however, stands apart. It has, against all odds, managed to achieve a measure of success. Its restaurant-level profits have increased by 180 basis points – a statistic that sounds suspiciously like a military maneuver – bringing its profitability to 22.8%. The average establishment, one gathers, struggles to achieve even a fraction of that. And they have, for nineteen consecutive quarters, managed to increase their sales. A most remarkable feat, especially considering the prevailing economic gloom. One suspects a hidden alchemy, a secret ingredient in their frozen custard, that compels even the most frugal of customers to return for more.
A Lesson in Pricing Power, or the Art of the Fleecing
They have, over these nineteen quarters, repeatedly raised their prices, yet the customers continue to flock to their establishments. In 2024, sales increased by 4.3% despite these price increases. And, most astonishingly, they were named the most overpriced fast-food chain in a survey conducted by a company called Preply – a name that sounds suspiciously like a clerical error. Yet, they continue to get away with it. They pass on the higher costs to the consumers, and their profit margins continue to climb. This, they say, is called “pricing power.” A most curious phrase. It suggests a certain… audacity. A willingness to exploit the insatiable appetite of the masses.
Old Mr. Buffett, a man known for his fondness for both wealth and confectionery, once explained that he purchased a company called See’s Candies for $25 million. They sold candy for $1.97 a pound, yet they were able to raise prices by 11.4% each year for a decade, while simultaneously increasing their sales volume. He claimed that this “pricing power” was the reason he knew that this investment would be a success. One suspects he simply enjoyed the taste of the candy. Still, there is a lesson to be learned. Shake Shack, like See’s Candies, has demonstrated its ability to raise prices with impunity. This indicates, perhaps, a special business. Yet, its shares have slumped in 2025. A most perplexing anomaly.
Severe Overvaluation, or the Peril of Exaggerated Expectations
The price-to-earnings ratio of Shake Shack is a staggering 98 – more than triple that of the average company in the S&P 500. It is more than twice as expensive as Nvidia, a company that specializes in artificial intelligence and boasts a P/E ratio of 45. At least Nvidia is growing its earnings by 65% each year. Shake Shack, on the other hand, is simply… expensive. One could post a 100% increase in earnings overnight, and it would still be overpriced. When a stock is this overvalued, it tilts the odds against investors. A company that is “priced for perfection” oftentimes can do nothing but disappoint. A most predictable outcome.
Shake Shack is, admittedly, an intriguing and impressive establishment. One might consider purchasing its shares at a modest premium. But this nosebleed valuation is simply too much. Investors would be well advised to wait for a more favorable entry point before venturing into this most peculiar appetite.
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2026-01-18 23:53