Randy Garutti, Shake Shack CEO, joins Yahoo Finance’s Alexis Christoforous, Brian Sozzi and Heidi Chung to discuss the fast food chain’s response to the coronavirus outbreak.

Video Transcript

- I want to go right to Shake Shack CEO Randy Garutti. I talked a little about his business and the state of the restaurant industry. Randy, always good to see you. And I will say this, hat tip to you guys. You know, I follow you on Instagram. I see what you're doing there on the food delivery to health care workers, so hat tip to you guys there.

But you know, just on the state of the business, you put out a press release last week. The business has taken a hit. You noted same store sales down 29% in March. You and I have talked about this in the past. Shake Shack is a community gathering place. As you come out the other side of this, what does the company look like?

RANDY GARUTTI: Thanks, Brian, and I appreciate being here. Look, there's so many challenging things going on and so much good, like you noted. And we'll get back to that. Shake Shack, born as a community gathering place in Madison Square Park. I mean, the very thing that we were born as that humans need right now to come together is the thing we're being asked not to do.

It's crazy. It's crazy, and you think about all of our restaurants with Danny Meyer. He was on 60 Minutes. I'm sure you saw last night, and it's hard for us. So what are we going to do, and who do we want to be when we come out of this? We're pivoting.

Good news is the investments we've made in the last few years at digital have been huge for us. They have been massive indicators of our ability to still be open right now, so our own app, the Shake Shack app, is growing every day. We made an important business pivot, where we had an exclusive arrangement with Grubhub.

We've added some other delivery partners now. So DoorDash, Postmates, Caviar Uber Eats coming on board has been a huge lift in order to get those on. And look, for right now, our biggest goal is to keep our team safe and to keep them working. We want to be able to provide a paycheck for as many of our team members as we can for as long as we can.

Certain jacks have had a close for physical reasons or for certain ones that are more touristy areas, just not doing the sales. But for the most part, we are open. Nearly 90% of our shacks are open, and some are doing more than others. You know, this is going to be something that takes a while. But like you said, there's been some heroic moments.

We were with a friend this weekend, who has figured out how to raise over $10,000 to provide Shake Shack to go to Montefiore, Mount Sinai, other hospitals in our neighborhoods and bring food to those workers. And there's been so much joy created in the midst of this challenge, but a lot happening, a lot of time spent thinking about who we want to be when we come out of this. We have balanced our balance sheet bigger than ever.

We have $100 million in cash. We drew down a $50 million revolver. We've never had debt in this company ever until now, but we feel like we're in a really strong position. So at the end of this, we can get back to growing again.

- That's an incredible position to be in, an enviable one at that, Randy, for sure. Talk about pivoting. You guys have actually released a cook at home burger kit that you can buy online. Tell us, how have those kits been received? And do you see this as something that's going to stick around, even when we get out the other side of this pandemic? Will you continue to sell those kits?

RANDY GARUTTI: We'll see. You know, I cooked mine last night. I literally got mine on Saturday. Me and my kids, we were making smashed stay at home shack burgers. And you wouldn't believe the response we've had. There's a company called Gold Belly that we've had a relationship with for a long time but never sold on it. And we always wanted to, and never thought this would be the way we'd be doing it. But we have been selling them like crazy.

In addition, on the west coast, we've got a small farm that's an organic regenerative farm that we work with called Cream Co. And through Uber Eats, you can even pick up in our shacks in the Bay Area the same kind of cook at home kit, so it's really cool. You know, whether we do this at the end or not, who knows.

But I do think, look, when all of us are changed forever, we've all figured out we can do this in our living rooms, right? We've all figured out there's a whole new way to be and to work. I think we're going to need to keep learning. I believe the part of Shake Shack that will remain stickier than ever will be our app and the way people pre-order.

I think there's going to be a sea change and shift towards convenience. But we're going to make sure we continue to get back to building those community gathering places. Because you can bet when we're all ready, holy cow, we're going to be dying to get outside, right? How many of us would love to be in a restaurant right now, or love to be in Madison Square Park, or with our friends or co-workers? And when we gather, again, Shake Shack's going to be one of those places people choose to gather.

HEIDI CHUNG: Hey, Randy. It's Heidi Chung, here, so let's talk a bit more about Shake Shack's business strategy going forward from here. You briefly mentioned that you guys reversed course from that Grubhub exclusive delivery deal to other delivery partners as well is a long term strategy shift. Because at the end of February, you had already transitioned more than around half your stores to that exclusive Grubhub partnership. And in addition, you guys were planning to open 40 to 42 stores this year. But I imagine all of that is on hold, correct?

RANDY GARUTTI: Yeah, so look, I think capital preservation and liquidity is the most important thing. I, as our CEO and any business leader, needs to do at the moment. That means a pause on spending cap ex that we don't need to spend. So we've got about seven or eight shacks that we're going to continue to finish our construction.

Everything else will pause, but that's why we shored up our balance sheet. That's why we took in that money. Because when we do come out of this, we do want to make sure we can grow. Not sure we'll get that 40 shacks this year, like we talked about. That's why we've suspended guidance for the moment, but look, we'll get back at it.

We'll get back at it in a way that will force us to really make the tough decisions we need to make in the short term. That is hard, but to figure out how to grow. When it comes to delivery, it has been important in this time and coming out of that first quarter just to give our guests options to give our guests every option they can to get Shake Shack wherever, however, whenever you want. And that'll be the goal, and I think that'll stick with us as we come out of this.

I think that'll be an important business shift. And look, all of us as human beings as dads, and husbands, and partners, we're all trying to figure out how to deal with every relationship we have in a new way, and how to be a stronger company, how to be a stronger person, and what we take with us coming out of this. I think it will be crucial for Shake Shack, and I know we'll be left standing in a strong position when we come out of this.

- Randy, a bigger picture on the restaurant space. I remember you telling me years ago that at 12 years old, you're working the New Jersey bagel shop. I think in college, you worked at Chili's. You know the restaurant industry backwards and forwards. But a lot of people I talked to suggest 30% of US restaurants won't reopen after this. Does that sound about right to you?

RANDY GARUTTI: Well, I sure hope not. I sure hope not. Look, this industry is one that this is heartbreaking for our teams who aren't getting enough hours right now, for Danny Meyer's teams, where his restaurants are closed, or to any mom and pop. We hope that this stimulus package can at least buy us some time, but I'm talking about other smaller companies. Because we need the independent restaurant. We need the neighborhood place, and we need Shake Shack.

And we need the chains that are way larger than us. And I think the thing we've got to focus on as a economy right now is making sure that those people, number one, and those businesses are shored up. I think we've made some good steps, and there will probably need to be more. Because we can't come out of this.

You're talking about farmers who can't plant right now. You're talking about fishermen who aren't able to do what they need to do. That has to come back. It has to come back. We have to make sure these small businesses get to us. Restaurants are the beating heart of our community gathering.

Where does all great things happen? Around the table, around the table with friends and family, co-workers. And we've got to get back to that. I believe we will. I don't think it's going to be easy, and everybody's going to need to find a new way. So we're all in this together.

- All right, Randy Garutti, the CEO of Shake Shack, I always appreciate your optimism. I appreciate what you're doing out there for health care workers, and please do stay safe.

RANDY GARUTTI: You too everybody. Stay safe.