Shake Shack is adding more tech to its stores — and it could mean a big boost to its bottom line

• Shake Shack says it expects to have self-service ordering kiosks in all of its restaurants by the end of Q3.
• The chain said the kiosks, currently in nearly 250 restaurants, are the chain's most profitable ordering channel.
• Consumers tend to order more from the self-ordering machines.  Kiosks also save on labor costs. 

As Shake Shack looks to control labor and improve profitability, the burger chain is turning to restaurant tech that's been around for years – self-serve ordering kiosks.

The burger chain founded by New York City restaurateur Danny Meyer said kiosks are the chain's most profitable ordering channel, and it expects to have self-ordering stations in all stores by the end of the third quarter.

CEO Randy Garutti said kiosks are convenient for customers and generate higher check averages, which lead to higher profits. The company ended the quarter with nearly 250 restaurants with kiosks, where sales grew by more than 100% year-over-year. The chain has 310 stores in the US.

But the real win is in labor costs.

Chief Financial Officer Katie Fogerty said Shake Shack kiosks and other labor streamlining strategies "have translated to us using 50 fewer hours per Shack per week in the quarter versus last year."

"We're starting to see some early signs of labor savings" on kiosks, she said. "And you know, that's been helpful, and we're going to continue to leverage that over time."

Brandon Barton, whose company, Bite, provides digital ordering solutions like kiosks to chains, said self-ordering devices free up staff to perform more hospitality-focused tasks like refilling drinks. They also supplement the workforce amid widespread staffing shortages, he added.

"Kiosks are the most profitable channel within restaurants, as the staffing need is low, the average check is high, and guests are happiest," Barton said.

Kiosks have been around for years at fast-food chains such as Panera Bread, McDonald's, and Taco Bell. Shake Shack first began experimenting with kiosks in 2017 when it debuted its first kiosk-only store in New York City.

But, when restaurant chains reopened dining rooms during the pandemic, they scrambled to find labor. Many chains began pushing cashier-less ordering systems like kiosks and mobile pickup drive-thru lanes. Over the past year, Shake Shack has also stepped up its kiosk rollout, going from 90 in early 2022 to nearly 250 stores, according to QSR Magazine.

"Kiosks are transitioning from a nice-to-have to an essential part of a restaurant's guest experience," Barton told Insider. "The sharpest operators are running towards 100% digital transactions, in store and out, and kiosks have proven to be the preferred path for guests in store."

Kiosks encourage premium drink orders

At Shack Shack, Garutti and Fogerty said kiosks have boosted profits in other ways beyond labor. Restaurants with kiosks use less costly packaging because they're taking more in-house orders than digital orders. Customers also tend to order more premium cold beverages on kiosks, including high-margin items like shakes.

"Our kiosk retrofit plan is already showing substantial impact, and we see a long runway for future improvements that can enhance what kiosk can offer in terms of driving sales and labor efficiencies," Garutti said.

He added: "Labor savings aside, this makes kiosks our most profitable channel."

Kiosks are also helping Shake Shack stores to enhance hospitality, a core mission among all Meyer-founded restaurants.

For about a year, Fogerty said Shake Shack workers in some stores have been redeployed to run food to tables instead of having customers respond to buzzers.

"Now, in most Shacks, most of the time, we're going to run your food to you," Fogerty said. "We're adding that added level of service, and we've been doing that for about a year now. That's all part of the shift in the way we can optimize our labor instead of taking an order where guests would prefer to do it themselves in our kiosk."