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As confidentially submitted to the Securities and Exchange Commission on September 30, 2014
pursuant to the Jumpstart Our Business Startups Act of 2012

Registration No. 333-           


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Confidential Submission on

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Shake Shack Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  5810
(Primary Standard Industrial
Classification Code Number)
  47-1941186
(I.R.S. Employer
Identification No.)

24 Union Square East, 5th Floor
New York, NY 10003
Telephone: (646) 747-7200
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Ronald Palmese, Jr., Esq.
Vice President, General Counsel and Secretary
24 Union Square East, 5th Floor
New York, NY 10003
Telephone: (646) 237-5039
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Howard A. Sobel, Esq.
Gregory P. Rodgers, Esq.
Ryan K. deFord, Esq.
Latham & Watkins LLP
885 Third Avenue
New York, NY 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
  Daniel J. Bursky, Esq.
Andrew B. Barkan, Esq.
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, NY 10004
Telephone: (212) 859-8000
Fax: (212) 859-4000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared effective.



          If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
Title of each class of securities to be registered
  Proposed maximum
aggregate offering
price(1)(2)

  Amount of
registration fee(3)

 

Class A common Stock, $      par value per share

  $                  $               

 

(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)
Includes the offering price of shares of Class A common stock that may be sold if the option to purchase additional shares of Class A common stock solely to cover over-allotments granted by the Registrant to the underwriters is exercised.

(3)
To be paid in connection with the initial filing of the registration statement.

          The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion, dated                   , 2014

PRELIMINARY PROSPECTUS

             Shares

GRAPHIC

Class A Common Stock



          This is an initial public offering of Shake Shack Inc. We anticipate that the initial public offering price will be between $             and $            per share of our Class A common stock.

          Prior to this offering, there has been no public market for our common stock. We intend to apply to have our Class A common stock listed on                        under the symbol "SHAK."

          We will use the net proceeds that we receive from this offering to purchase from SSE Holdings, LLC, which we refer to as "SSE Holdings," newly-issued common membership interests of SSE Holdings, which we refer to as the "LLC Interests." There is no public market for the LLC Interests. The purchase price for the newly-issued LLC Interests will be equal to the public offering price of our Class A common stock, less the underwriting discount referred to below. We intend to cause SSE Holdings to use the net proceeds it receives from us in connection with this offering as described in "Use of Proceeds." Simultaneous with this offering, certain of the holders of membership interests in SSE Holdings, whom we refer to as "Former SSE Equity Owners," will transfer their membership interests for shares of Class A common stock and certain other holders of membership interests in SSE Holdings, whom we refer to as "Continuing SSE Equity Owners," will retain their membership interests in SSE Holdings. In addition, certain individuals who hold existing awards under our Unit Appreciation Rights Plan, whom we refer to as the "Former UAR Plan Participants," will receive shares of Class A common stock in settlement of their awards.

          We will have two classes of common stock outstanding after this offering: Class A common stock and Class B common stock. Each share of Class A common stock and Class B common stock entitles its holder to one vote on all matters presented to our stockholders generally. All of our Class B common stock will be held by the Continuing SSE Equity Owners, on a one-to-one basis with the number of LLC Interests they own. Immediately following this offering, the holders of our Class A common stock issued in this offering collectively will hold        % of the economic interests in us and        % of the voting power in us, the Former SSE Equity Owners and the Former UAR Plan Participants, through their ownership of Class A common stock, collectively will hold        % of the economic interests in us and        % of the voting power in us, and the Continuing SSE Equity Owners, through their ownership of all of the outstanding Class B common stock, collectively will hold no economic interest in us and the remaining         % of the voting power in us. We will be a holding company, and upon consummation of this offering and the application of proceeds therefrom, our principal asset will be the LLC Interests we purchase from SSE Holdings and acquire from the Former SSE Equity Owners, representing an aggregate        % economic interest in SSE Holdings. The remaining        % economic interest in SSE Holdings will be owned by the Continuing SSE Equity Owners through their ownership of LLC Interests.

          Although we will have a minority economic interest in SSE Holdings, because we will be the sole managing member of SSE Holdings, we will operate and control all of the business and affairs of SSE Holdings and, through SSE Holdings and its subsidiaries, conduct our business.

          Following this offering, we will be a "controlled company" within the meaning of the corporate governance rules of                        . See "The Transactions" and "Management—Corporate Governance."

          We are an "emerging growth company," as defined in Section 2(a) of the Securities Act of 1933, as amended, and will be subject to reduced public reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.



          Investing in our Class A common stock involves risks. See "Risk Factors" beginning on page 18.

       
 
 
  Per Share
  Total
 

Initial public offering price

  $                                     $                                  
 

Underwriting discounts and commissions(1)

  $                                     $                                  
 

Proceeds to us, before expenses

  $                                     $                                  

 

(1)
See "Underwriting" for additional information regarding underwriting compensation.

          We have granted the underwriters an option for a period of 30 days to purchase up to an additional            shares of Class A common stock solely to cover over-allotments.

          Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

          Delivery of the shares will be made on or about                        .



J.P. Morgan

      Morgan Stanley

Barclays

 

Goldman, Sachs & Co.

 
Jefferies

Stifel

   

The date of this prospectus is                  , 2014.



TABLE OF CONTENTS

 
  Page

BASIS OF PRESENTATION

  ii

TRADEMARKS

  iii

MARKET AND INDUSTRY DATA

  iii

NON-GAAP FINANCIAL MEASURES

  iv

ADDITIONAL FINANCIAL MEASURES AND OTHER DATA

  v

PROSPECTUS SUMMARY

  1

RISK FACTORS

  18

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

  47

THE TRANSACTIONS

  49

USE OF PROCEEDS

  53

CAPITALIZATION

  54

DIVIDEND POLICY

  56

DILUTION

  57

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

  59

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

  62

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  66

BUSINESS

  82

MANAGEMENT

  98

EXECUTIVE COMPENSATION

  103

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

  113

PRINCIPAL STOCKHOLDERS

  121

DESCRIPTION OF CAPITAL STOCK

  123

DESCRIPTION OF INDEBTEDNESS

  129

SHARES ELIGIBLE FOR FUTURE SALE

  130

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF CLASS A COMMON STOCK

  133

UNDERWRITING

  137

LEGAL MATTERS

  144

EXPERTS

  144

WHERE YOU CAN FIND MORE INFORMATION

  144

INDEX TO FINANCIAL STATEMENTS

  F-1

        You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We and the underwriters have not authorized anyone to provide you with different information. We are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our Class A common stock.

        For investors outside the United States: We have not and the underwriters have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside the United States. See "Underwriting."



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BASIS OF PRESENTATION

        In connection with the closing of this offering, we will effect certain organizational transactions. Unless otherwise stated or the context otherwise requires, all information in this prospectus reflects the consummation of the organizational transactions and this offering, which we refer to collectively as the "Transactions." See "The Transactions" for a description of the Transactions and a diagram depicting our organizational structure after giving effect to the Transactions, including this offering.

        As used in this prospectus, unless the context otherwise requires, references to:

    "we," "us," "our," the "Company," "Shake Shack" and similar references refer: (i) following the consummation of the Transactions, including this offering, to Shake Shack Inc., and, unless otherwise stated, all of its subsidiaries, including SSE Holdings, LLC, which we refer to as "SSE Holdings," and, unless otherwise stated, all of its subsidiaries, and (ii) on or prior to the completion of the Transactions, including this offering, to SSE Holdings and, unless otherwise stated, all of its subsidiaries.

    "Continuing SSE Equity Owners" refer to those Original SSE Equity Owners (including USHG (as defined below), Daniel Meyer and the S Corporations (as defined below), LGP (as defined below), SEG (as defined below) and certain of our executive officers) that will continue to own LLC Interests (as defined below) after the Transactions and who may, following the consummation of this offering, exchange their LLC Interests for shares of our Class A common stock as described in "Certain Relationships and Related Party Transactions—SSE Holdings LLC Agreement."

    "Former SSE Equity Owners" refer to those Original SSE Equity Owners who will transfer their LLC Interests for shares of our Class A common stock in connection with the consummation of this offering.

    "Former UAR Plan Participants" refer to certain individuals who hold existing awards under SSE Holdings' Unit Appreciation Rights Plan, which we refer to as the "UAR Plan," and will receive shares of Class A common stock in settlement of their awards under the UAR Plan in connection with the consummation of this offering.

    "LLC Interests" refer to the single class of newly-issued common membership interests of SSE Holdings.

    "Original SSE Equity Owners" refer to the direct and certain indirect owners of SSE Holdings, collectively, prior to the Transactions, including, the members of the Voting Group (as defined below).

    "USHG" refer to Union Square Hospitality Group, LLC.

    "Voting Group" refer collectively to (i) Daniel Meyer, (ii) Union Square Cafe Corp. and Gramercy Tavern Corp., each of which are controlled by Mr. Meyer, and to whom we refer to collectively as the "S Corporations," (iii) certain affiliates of Leonard Green & Partners, L.P., which we refer to as "LGP," (iv) certain affiliates of Select Equity Group, which we refer to as "SEG," and (v) certain other Original SSE Equity Owners, all of whom will be parties to the Voting Agreement as described in "Description of Capital Stock—Voting Agreement." The Voting Group will hold Class A common stock and Class B common stock representing in the aggregate a majority of the combined voting power of our common stock.

        We will be a holding company and the sole managing member of SSE Holdings, and upon completion of this offering and the application of proceeds therefrom, our principal asset will be LLC Interests of SSE Holdings. SSE Holdings, LLC is the predecessor of the issuer, Shake Shack Inc., for

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financial reporting purposes. Shake Shack Inc. will be the audited financial reporting entity following this offering. Accordingly, this prospectus contains the following historical financial statements:

    Shake Shack Inc.  Other than the inception balance sheet, dated as of September 23, 2014, the historical financial information of Shake Shack Inc. has not been included in this prospectus as it is a newly incorporated entity, has no business transactions or activities to date and had no assets or liabilities during the periods presented in this prospectus.

    SSE Holdings, LLC.  As we will have no other interest in any operations other than those of SSE Holdings, LLC and its subsidiaries, the historical consolidated financial information included in this prospectus is that of SSE Holdings, LLC and its subsidiaries.

        The unaudited pro forma financial information of Shake Shack Inc. presented in this prospectus has been derived by the application of pro forma adjustments to the historical consolidated financial statements of SSE Holdings, LLC and its subsidiaries included elsewhere in this prospectus. These pro forma adjustments give effect to the Transactions as described in "The Transactions," including the completion of this offering, as if all such transactions had occurred on December 27, 2012, in the case of the unaudited pro forma consolidated statement of operations data, and as of June 25, 2014, in the case of the unaudited pro forma consolidated balance sheet. See "Unaudited Pro Forma Consolidated Financial Information" for a complete description of the adjustments and assumptions underlying the pro forma financial information included in this prospectus.

        SSE Holdings, LLC is, and Shake Shack Inc. will be, on a 52- or 53-week fiscal year ending on the last Wednesday of the calendar year. Accordingly, references to fiscal 2012 and fiscal 2013 represent the financial results of SSE Holdings, LLC and its subsidiaries for the fiscal years ended December 26, 2012 and December 25, 2013, respectively. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. Every five or six years, a 53-week fiscal year occurs. Fiscal 2012 and fiscal 2013 were both 52-week years. Fiscal 2014 is a 53-week year, which may cause our revenue, expenses and other results of operations to be higher due to an additional week of operations.


TRADEMARKS

        This prospectus includes our trademarks, trade names and service marks, such as "Shake Shack®," "ShackBurger®," " GRAPHIC ®," " GRAPHIC ®," "Shack-Cago Dog®," "SmokeShack®," "ShackMeister®," "Shack20™," "Pooch-ini®" and "Stand for Something Good®," which are protected under applicable intellectual property laws and are our property. This prospectus also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties' trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.


MARKET AND INDUSTRY DATA

        Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources (including industry publications, surveys and forecasts), and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such

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industry and markets which we believe to be reasonable. Although we believe the data from these third-party sources is reliable, we have not independently verified any third-party information. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.


NON-GAAP FINANCIAL MEASURES

        Certain financial measures presented in this prospectus, such as same Shack sales, Average Unit Volume, Shack-level operating profit margin, EBITDA and Adjusted EBITDA are not recognized under accounting principles generally accepted in the United States, which we refer to as "GAAP." We define these terms as follows:

    "Same Shack sales" means, for any reporting period, sales for the comparable Shack base, which we define as the number of domestic company-operated Shacks open for 24 months or longer. For the fiscal years ended December 26, 2012 and December 25, 2013 and the twenty-six weeks ended June 26, 2013 and June 25, 2014, there were five, eight, seven and 10 Shacks, respectively, in our comparable Shack base.

    "Average Unit Volumes" or "AUVs" for any 12-month period consists of the average annualized sales of all domestic company-operated Shacks over that period. AUVs are calculated by dividing total sales from domestic company-operated Shacks by the number of domestic company-operated Shacks open during that period. For Shacks that are not open for the entire period, we make fractional adjustments to the number of Shacks open such that it corresponds to the period of associated sales. The measurement of AUVs allows us to assess changes in guest traffic and per transaction patterns at our domestic company-operated Shacks.

      Because our AUVs are significantly higher in Manhattan, we analyze AUVs on both a domestic company-operated Manhattan Shack ("Manhattan Shack") basis and domestic company-operated non-Manhattan Shack ("non-Manhattan Shack") basis. Manhattan Shack AUVs have historically been higher than non-Manhattan Shack AUVs given the population density and overall familiarity with the Shake Shack brand. Given that the majority of our new domestic company-operated Shack growth is expected to occur outside of Manhattan, we believe that non-Manhattan Shack AUVs are a more representative measure of expected sales in new Shacks, compared to Manhattan Shack AUVs.

    "Shack-level operating profit margin" is defined as sales less operating expenses, including food and paper costs, labor and related expenses, other operating expenses and occupancy and related expenses as a percentage of Shack sales. Shack-level operating profit margin is not required by, or presented in accordance with, GAAP. Shack-level operating profit margin is a supplemental measure of operating performance of our Shacks and our calculations thereof may not be comparable to similar measures reported by other companies. Shack-level operating profit margin has limitations as an analytical tool and should not be considered as a substitute for analysis of our results as reported under GAAP. We believe that Shack-level operating profit margin is an important measure to evaluate the performance and profitability of each Shack, individually and in the aggregate. We use Shack-level operating profit margin information to benchmark our performance versus competitors.

    "EBITDA" means, for any reporting period, net income before interest, taxes, depreciation, and amortization.

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    "Adjusted EBITDA" is a supplemental measure of our performance and is also the basis for performance evaluation under our executive compensation programs. Adjusted EBITDA is defined as net income before depreciation and amortization, interest expense and provision for income taxes, adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, stock-based compensation expense, non-cash deferred rent charges and pre-opening expenses. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance.

      EBITDA and Adjusted EBITDA are included in this prospectus because they are key metrics used by management and our board of directors to assess our financial performance. EBITDA and Adjusted EBITDA are frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

      EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity and should not be considered as alternatives to net income (loss) as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP. Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not reflect tax payments, debt service requirements, capital expenditures, Shack openings and certain other cash costs that may recur in the future, including, among other things, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. Management compensates for these limitations by relying on our GAAP results in addition to using EBITDA and Adjusted EBITDA supplementally. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled captions of other companies due to different methods of calculation.

    "Cash-on-cash return" is defined as third year operating profits for our domestic company-operated Shacks open for at least three full years as of June 25, 2014, divided by their life-to-date associated build-out costs excluding any pre-opening expenses. The small number of Shacks included in our calculation of our average cash-on-cash return may cause this measure to fluctuate and be subject to change.

    "Payback period" is defined as the length of time required to recover the original cash investment in a Shack. It is calculated as total build-out costs (excluding any pre-opening expenses) for our domestic company-operated Shacks open for at least three full years as of June 25, 2014, divided by their associated third year operating profits.


ADDITIONAL FINANCIAL MEASURES AND OTHER DATA

    "Shack sales" represents the aggregate sales of food and beverages in domestic company-operated Shacks. Shack sales in any period is directly influenced by the number of operating weeks in such period, the number of open Shacks and same Shack sales.

    The "number of new Shack openings" reflects the number of Shacks opened during a particular reporting period. Before we open new Shacks, we incur pre-opening costs, as described below. We expect that, beginning in fiscal 2015, we will open at least 10 domestic company-operated Shacks each fiscal year for the foreseeable future, which is the primary driver of our expected sales growth. The total number of new Shacks per year and the timing of Shack openings has, and will continue to have, an impact on our results. New Shacks sometimes experience normal

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      inefficiencies in the form of higher labor and other operating expenses and, as a result, Shack-level operating profit margins are generally lower during the start-up period of operation.

    "Same Shack sales growth" means, for any reporting period, the change in same Shack sales as compared to the corresponding prior reporting period. Same Shack sales growth can be generated by an increase in the number of daily transactions and/or by increases in the average amount of each transaction resulting from a shift in menu mix and/or higher prices from new products or price increases. The small number of Shacks included in our comparable Shack base may cause same Shack sales growth to fluctuate and be unpredictable.

      Given our focused marketing efforts surrounding each Shack opening, new Shacks often experience an initial start-up period with considerable sales volumes, which subsequently decrease to stabilized levels after approximately 12 months. As a result, the initial comparison of second year sales to first year sales is often to higher than normal sales in the first year. Accordingly, we do not include Shacks in the comparable Shack base until they have been open 24 months or longer. We expect that this trend will continue into the foreseeable future as we continue to open and expand into new markets.

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PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our Class A common stock. You should read the entire prospectus carefully, including the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. The principles of "Enlightened Hospitality," as defined by Danny Meyer, state that we prioritize our own people above all else, because we understand that taking care of each other is the foundation that enables us to provide uncommon excellence and hospitality to our guests, our community, our suppliers and our investors. We refer to our customers as "guests," as we treat anyone who walks into our restaurants, or "Shacks," as if they were guests in our home. Except as specifically noted or as the context otherwise implies, the description of our menu, supply chain and operations in this prospectus applies to our domestic company-operated Shacks, as some of the Shacks operated by our licensees vary in menu, supply chain and operations.

Overview of Shake Shack

        Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. Founded by Danny Meyer's Union Square Hospitality Group, LLC ("USHG"), Shake Shack was created leveraging USHG's expertise in community building, hospitality, fine dining, restaurant operations and sourcing premium ingredients. Danny's vision of Enlightened Hospitality guided the creation of the unique Shake Shack culture that, we believe, creates a differentiated experience for our guests across all demographics at each of the 53 Shacks around the world. As Shake Shack's Board Chairman and USHG's Chief Executive Officer, Danny has drawn from USHG's experience creating and operating some of New York City's most acclaimed and popular restaurants, including Union Square Cafe, Gramercy Tavern, Blue Smoke, The Modern and Maialino, to build what we believe is a new fine casual restaurant category in Shake Shack.

        Shake Shack originated from a hot dog cart that USHG established in 2001 to support the rejuvenation of New York City's Madison Square Park through its Conservancy's first art installation—"I © Taxi." The hot dog cart was an instant hit, with lines forming daily throughout the summer months for the next three years. In response to this success, the city's Department of Parks and Recreation awarded Shake Shack a contract to create a kiosk to help fund the park's future. In 2004, Shake Shack officially opened and immediately became a community gathering place for New Yorkers and visitors from all over the world. Over the last decade, Shake Shack has become a beloved New York City institution that generates significant media attention, critical acclaim and a passionately devoted following. We have since grown rapidly, with 53 Shacks in nine countries and 29 cities.

        Our vision is to Stand For Something Good in all aspects of Shake Shack's business, including the exceptional team we hire and train, the premium ingredients making up our menu, our community engagement and the design of our Shacks. Stand For Something Good is a call to action to all of our stakeholders—our team, guests, communities, suppliers and investors—and we actively invite them all to share in this philosophy with us. This commitment drives our integration into the local communities in which we operate and fosters a lasting connection with our guests. We continually invest in our "Shack Team," as we believe that team members who are treated and trained well will deliver Enlightened Hospitality and a superior guest experience. Through our leadership development program, The Shacksperience, we teach our team members the principles of Enlightened Hospitality and how to live and breathe our Shack Pact, the agreement that encompasses our value system and brand ethos. Our people make all the difference, as they embody the sense of community necessary to create the complete Shake Shack experience. This vision reflects our goal to be the best burger company in the world, for the world and for our team.

 

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        We believe Shake Shack has become a compelling lifestyle brand and has helped to pioneer the creation of a new fine casual category in restaurants. Fine casual couples the ease, value and convenience of fast casual concepts with the high standards of excellence in thoughtful ingredient sourcing, preparation, hospitality and quality grounded in fine dining. As a pioneer in this new category, we strive to maintain the culinary traditions of the classic American burger stand, while providing our guests a menu of chef-inspired food and drinks. Our signature items are our all-natural, hormone and antibiotic-free burgers, hot dogs, crinkle-cut fries, shakes and frozen custard. We cook our burgers and spin our shakes to order and strive to use the freshest premium ingredients available. This core menu is supplemented with seasonal and innovative culinary offerings such as those featured during our annual Shacktoberfest event.

        Of the 53 Shacks, there are 26 domestic company-operated Shacks, five domestic licensed Shacks and 22 international licensed Shacks. We open Shacks in areas where communities gather, often with high foot traffic and substantial commercial density such as New York City's Theater District, London's Covent Garden and Dubai's Mall of the Emirates. We have been able to successfully grow across a variety of locations due to our versatile Shack formats and designs that are tailored to reflect each Shack community's core attributes. During the three fiscal years ended December 25, 2013, we grew from seven Shacks in two states to 40 Shacks across seven states, Washington, D.C. and eight other countries, representing a 79% compound annual growth rate ("CAGR"). In fiscal 2013, our domestic company-operated Shacks had AUVs of approximately $5.0 million, of which our Manhattan Shacks had AUVs of approximately $7.4 million and our non-Manhattan Shacks had AUVs of approximately $3.8 million. During the three fiscal years ended December 25, 2013, our total revenue grew from $19.5 million to $82.5 million, a 62% CAGR, and Adjusted EBITDA grew to $14.5 million. For a reconciliation of Adjusted EBITDA, a non-GAAP measure, to net income, see "—Summary Historical and Pro Forma Consolidated Financial and Other Data."

GRAPHIC

The Burger Market

        Shake Shack is part of the burger market of the restaurant industry, which is the largest dine-out segment in the United States with more than $72 billion in 2013 sales, according to Technomic Inc. The burger industry is estimated to be twice the size of the pizza market, which is the next largest category. Given its role as the quintessential American meal, burgers have also proven to be the most portable concept internationally, with an estimated global market size of over $135 billion.

        With the majority of the burger restaurant segment comprised of quick service restaurant competitors, we believe that Shake Shack is well positioned to take market share, as we believe consumers will continue to trade up to higher quality offerings given an increasing consumer focus on responsible sourcing, ingredients and preparation. Additionally, we believe that consumers will continue to move away from the added time commitment and cost of traditional casual dining.

        We believe that many consumers want to associate with brands whose ethos matches that of their own, and that Shake Shack's fine casual position, born and raised in Manhattan, creates a distinctly differentiated global lifestyle brand opportunity.

 

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What Makes Shake Shack Special

        1. Our culture of Enlightened Hospitality: taking care of each other.    We believe that the culture of our team is the single most important factor in our success. We aim to recruit and develop a team with the innate "personality to please" that cannot be taught. We look for people who are warm, friendly, motivated, caring, self-aware and intellectually curious team members, or what we call "51%'ers." We use the term "51%" to describe the emotional skills needed to thrive at the job and "49%" to describe the technical skills needed for the job. Our 51%'ers are excited and committed to championship performance, remarkable and enriching hospitality, embodying our culture and actively growing themselves and the brand. Our team is trained to understand and practice the values of Enlightened Hospitality: caring for each other, caring for our guests, caring for our community, caring for our suppliers and caring for our investors. These principles have been championed by Danny Meyer throughout his career and are detailed in his New York Times best-selling book Setting the TableThe Transforming Power of Hospitality in Business; they are fundamental to the way Shake Shack operates its business. We invest in our team through extensive leadership development programs to ensure that Shake Shack remains a great place to work and an exciting career choice for team members at every level. We have built a culture of active learning and we foster an environment of leadership development throughout the entire lifecycle of employment. We seek to be the employer of choice by offering above industry average compensation in most markets, comprehensive benefits and a variety of incentive programs, including a monthly revenue-sharing program with our employees. We believe that our culture of Enlightened Hospitality enables us to develop future leaders from within and deliver a consistent Shack experience as we continue to grow.

        2. Fine Casual: inspired food and drink.    We embrace our Company's fine-dining heritage and are committed to sourcing premium, sustainable ingredients, such as all-natural, hormone and antibiotic-free beef, while offering excellent value to our guests. Our core menu remains focused and is supplemented with targeted innovation inspired by the best versions of the classic American roadside burger stands. As a result of culinary creativity and excellence, we attract continued interest from partners such as award-winning chefs, talented bakers, farmers and artisanal purveyors who want to collaborate with us in different and engaging ways. We never stop looking for the best culinary ingredients and the best partners in order to exceed our guests' expectations in every aspect of their experience.

        3. Beloved lifestyle brand.    In Shake Shack's 10-year history, we have become a globally recognized brand with outsized consumer awareness relative to our current footprint. Shake Shack is a New York City institution, a vibrant and authentic community gathering place that delivers an unparalleled experience to loyal, passionate guests and a broad, global demographic. Born in 2004, Shake Shack grew up alongside the emergence of social media and has benefited from an ongoing love affair with passionate fans who share their real-time experiences with friends. We aim to establish genuine connections with our guests and the communities in which they live. Each Shack is localized with design and menu options that we believe drive a sense of appreciation and enthusiasm for the Shake Shack brand. Shake Shack has been recognized with numerous accolades, including Bon Appétit's "The 20 Most Important Restaurants in America" (ranked #16), TIME Magazine's "17 Most Influential Burgers of All Time" (ranked #7 for the ShackBurger) and winning "Best Burger" in 2007 and 2014 at the South Beach Wine and Food Festival's Burger Bash.

        4. Versatile real estate model built for growth.    During fiscal 2013, we grew the number of our domestic company-operated Shacks by 62% to 21. We will continue to not only fill in existing markets such as New York, Boston, Philadelphia, Washington, D.C. and Florida to leverage operational effectiveness as we cluster in high-density markets, but also enter new markets, including Las Vegas, Atlanta, Chicago and Austin, where we have signed leases. Although we currently have only 53 Shacks around the world, we have identified many attractive and differentiated markets for the Shake Shack experience. In major metropolitan areas, we seek locations where communities gather, often with

 

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characteristics such as high foot traffic, substantial commercial density, reputable co-tenants and other traffic drivers such as proximity to parks, museums, schools, hospitals and tourist attractions. For every potential domestic company-operated Shack we consider, we apply rigorous financial metrics to ensure we maintain our targeted profitability. We measure much of our financial success by analyzing Shack-level operating profit margins, cash-on-cash returns and payback periods. Our flexible model allows us to design our Shacks so that we can pursue a variety of property types. We have successfully launched different layouts and sizes of Shacks in varied locations throughout urban high density areas, suburban in-line and pad sites, regional malls, lifestyle centers, ballparks, airports and train stations. Each design is critical to the Shake Shack experience and we blend our core brand identifiers with features specifically designed for each Shack to be of its place and connect directly with its neighborhood. With a disciplined approach to new Shack development and a successful track record in site selection, we are positioned well for future growth.

        5. Shack-onomics.    Our brand power and thoughtful approach to growth have resulted in strong Shack performance across a variety of geographic areas and formats. Shake Shack has grown and thrived during both strong and weak economic environments. Our Shack model is designed to generate attractive Shack-level operating profit margins, strong cash flow and high returns on invested capital. We have notable AUVs at both Manhattan Shacks and non-Manhattan Shacks. In fiscal 2013, our domestic company-operated Shacks had AUVs of approximately $5.0 million, of which our Manhattan Shacks generated AUVs of approximately $7.4 million with Shack-level operating profit margins of approximately 30% and our non-Manhattan Shacks generated AUVs of approximately $3.8 million with Shack-level operating profit margins of approximately 22%. Historically, our domestic company-operated Shacks have delivered an attractive average cash-on-cash return of 71% and payback period of 1.4 years, of which our Manhattan Shacks generated an average cash-on-cash return of 83% and a payback period of 1.2 years and our non-Manhattan Shacks generated an average cash-on-cash return of 34% and payback period of 2.9 years. Since the vast majority of future Shacks will be non-Manhattan locations, we anticipate AUVs, Shack-level operating profit margins, cash-on-cash returns and payback periods for future Shacks to generally resemble the AUVs, Shack-level operating profit margins, cash-on-cash returns and payback periods of our non-Manhattan Shacks.

        6. The Shack travels abroad.    With 22 licensed Shacks outside the United States, we believe that we have proven to be an internationally desirable restaurant concept. Our track record of opening successful Shacks in both the United States and overseas demonstrates the global appeal of Shake Shack and validates our belief in our significant whitespace opportunity internationally. We currently have license agreements for four major international territories, with Shacks operating in eight countries. The Middle East has been our most prominent growth market with 16 Shacks in operation, followed by Turkey with four and Russia and the United Kingdom with one each. In fiscal 2013, our international licensed Shacks had AUVs of approximately $6.1 million, which resulted in license fees of approximately $3.5 million. In addition to license fees, we also receive exclusive territory fees, which help us fund further domestic growth.

        7. Leaders training future leaders.    Our team is led by passionate and experienced senior leaders, balanced with professionals formerly from USHG's fine dining operations and industry veterans from larger restaurant companies. Randy Garutti, our Chief Executive Officer, combines strategic multi-unit leadership experience with fine dining expertise. Randy has worked in restaurants since he was 13 and joined USHG in 2000 as General Manager of Tabla, followed by Union Square Cafe, and later took on the role of Director of Operations overseeing all USHG restaurants, prior to launching the first Shake Shack in 2004. Randy has led the development of the Shake Shack concept from its earliest stages and guided every aspect of the business. Jeff Uttz, our Chief Financial Officer, brings valuable experience managing high growth restaurant concepts drawing from his 22 years of restaurant finance experience, most recently as Chief Financial Officer at Yard House Restaurants. Jeff led the expansion of Yard House from three units when he began to over 40 units when Yard House was acquired by Darden Restaurants, Inc. Randy and Jeff are supported by a talented executive leadership team that has deep

 

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experience in operations, culinary arts, supply chain, finance and accounting, training and leadership development, people resources, real estate and design, construction and facilities, information technology, legal, marketing and communications.

Shake Shack is in the Very Early Stages of Growth

        We believe that we are well-positioned to achieve significant, sustainable financial growth, primarily driven by:

        Opening new domestic company-operated Shacks.    This is where our greatest immediate opportunity for growth lies. We waited nearly five years to open our second Shack, and we are still in the very nascent stage of our story, with only 26 domestic company-operated and five domestic licensed Shacks in seven states and Washington, D.C. We believe there is tremendous whitespace opportunity to expand in both existing and new U.S. markets, and we have invested in the infrastructure that will enable us to continue to grow rapidly and with discipline. In fiscal 2013, we significantly expanded our domestic company-operated footprint by opening eight new Shacks representing 62% domestic unit growth. Thus far in fiscal 2014, we have opened five domestic company-operated Shacks and plan to open another three by fiscal year end, including entering the Chicago and Atlanta markets. We plan to open at least 10 new domestic company-operated Shacks each year, beginning in fiscal 2015, for the foreseeable future. As we grow, we will continue to live by one principle to ensure the success of both our new and existing restaurants: "The Bigger We Get, The Smaller We Need To Act." This mantra is central to our Stand For Something Good vision and encompasses our commitment to continue to make decisions that focus on the core of who we are, staying true to the principles of Enlightened Hospitality.

        Capitalizing on our outsized brand awareness.    The Shake Shack experience has cultivated significant brand awareness relative to the small number of Shacks. We have worked tirelessly to establish a genuine connection with our guests and integrate into their communities through investment in innovative marketing and programming. We utilize various social media outlets to actively engage with our growing online following. In June 2014, we ranked #10 on Restaurant Social Media Index's top 250 restaurant brands, which is measured on influence, sentiment and engagement. Furthermore, we believe that our press and media impressions and industry recognition are a testament to the strength of our brand. We were named one of "The 25 Most Innovative Consumer and Retail Brands" in 2014 by Entrepreneur.com, ranked #11 in The Daily Meal's "101 Best Restaurants in America" for 2013, and were the winner of the 2013 "Most Loved Brand of the Year" from the RIZMY Awards, "Best Burger" at the 2014 South Beach Wine and Food Festival's Burger Bash and more. Additionally, we give back to the communities in which we operate, and strengthen awareness for philanthropic causes such as Share Our Strength's No Kid Hungry campaign. Our marketing focuses on interacting with our guests in an authentic, innovative manner which creates memorable, meaningful experiences. The experience that we provide for our guests and local communities has generated a growing loyal following who promote our brand through word-of-mouth. We believe that this outsized brand awareness will continue to fuel our growth in existing and new markets.

        Growing Same Shack Sales.    Given the significant awareness of our brand and the excitement we have been able to generate for our market launches, our Shacks have generally opened with higher volumes and operating profits relative to their second year, which have often shown a decline in sales and operating profit. In year three, our Shacks generally mature and continue to grow from the second year base and then retain these higher volumes over time. It is important to note that, while our goal is to grow same Shack sales over time, this is not our greatest growth opportunity. We expect our Shacks to deliver low same Shack sales growth for the foreseeable future as the number of new Shack openings relative to our comparable Shack base remains our primary driver of growth. We do, however, continually focus on improving our same Shack sales performance by providing an engaging and differentiated guest experience that includes new seasonal and Shack-specific offerings, unique and thoughtful integration with local communities and high standards of excellence and hospitality. We will continue to innovate around our core menu to keep our offerings fresh, while remaining focused on

 

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our signature items. For example, our SmokeShack, which debuted in 2012, has been a great success and helped drive sales.

        Opportunistically increasing our licensed Shacks abroad.    We will continue to grow our licensed portfolio by expanding further in the eight countries in which we currently have internationally licensed operations. This strategy historically has been a low-cost, high-return method of growing our brand awareness and providing significant cash flow. We believe there are additional international markets that will embrace the Shake Shack concept. Given our position in New York and the success of our current licensed Shacks at home and abroad, we continue to attract substantial interest from potential international licensees around the world and have identified opportunities to expand our licensing footprint in existing and new international markets.

Summary Risk Factors

        We are subject to a number of risks, including risks that may prevent us from achieving our business objectives or that may adversely affect our business, financial condition, results of operations, cash flows and prospects. You should carefully consider the risks discussed in the section entitled "Risk Factors," including the following risks, before investing in our Class A common stock:

    our long-term success is highly dependent on our ability to successfully identify and secure appropriate sites and timely develop and expand our operations in existing and new markets;

    damage to our reputation could negatively impact our business, financial condition and results of operations;

    food safety and food-borne illness incidents may have an adverse effect on our business by not only reducing demand but also increasing operating costs;

    shortages or interruptions in the supply or delivery of food products;

    risks related to our international operations and our international licensed Shacks; and

    we face significant competition for guests, and our inability to compete effectively may affect our traffic, Shack sales and Shack-level operating profit margins.

Summary of the Transactions

        Prior to the consummation of this offering and the organizational transactions described below, the Original SSE Equity Owners are the only members of SSE Holdings. Shake Shack Inc. was incorporated as a Delaware corporation on September 23, 2014 to serve as the issuer of the Class A common stock offered hereby. In connection with the closing of this offering we will consummate the following organizational transactions:

    we will amend and restate the second amended and restated limited liability company agreement of SSE Holdings, as amended, effective as of the completion of this offering (the "SSE Holdings LLC Agreement"), to, among other things, (i) provide for LLC Interests that will be the single class of common membership interests in SSE Holdings, (ii) exchange all of the Original SSE Equity Owners' existing membership interests in SSE Holdings for LLC Interests and (iii) appoint Shake Shack as the sole managing member of SSE Holdings;

    we will amend and restate Shake Shack's certificate of incorporation to, among other things, (i) provide for Class A common stock and Class B common stock and (ii) issue shares of Class B common stock to the Continuing SSE Equity Owners, on a one-to-one basis with the number of LLC interests they own, for nominal consideration;

    we will issue shares of our Class A common stock to the purchasers in this offering;

    we will use all of the net proceeds from this offering (including net proceeds received upon exercise of the underwriters' option to purchase additional shares of Class A common stock) to acquire newly-issued LLC Interests from SSE Holdings at a purchase price per interest equal to the initial public offering price per share of Class A common stock, less underwriting discounts

 

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      and commissions, collectively representing        % of SSE Holdings' outstanding LLC Interests (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

    SSE Holdings will use the proceeds from the sale of LLC Interests to Shake Shack as described in "Use of Proceeds," including (i) to pay the fees and expenses from this offering and (ii) for general corporate purposes, including opening new Shacks and renovating existing Shacks;

    the Former SSE Equity Owners will transfer their LLC Interests for        shares of Class A common stock on a one-to-one basis;

    the Former UAR Plan Participants will receive        shares of Class A common stock in settlement of their awards under the UAR Plan (and Shake Shack will receive a corresponding number of LLC Interests from SSE Holdings);

    the Continuing SSE Equity Owners will continue to own the LLC Interests they received in exchange for their existing membership interests in SSE Holdings, which LLC Interests, following this offering, will be redeemable, at the election of such members, for, at Shake Shack's option, newly-issued shares of Class A common stock on a one-for-one basis or a cash payment equal to a volume weighted average market price of one share of Class A common stock for each LLC Interest redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the SSE Holdings LLC Agreement; and

    Shake Shack will enter into (i) a tax receivable agreement (the "Tax Receivable Agreement") with the Continuing SSE Equity Owners and (ii) a registration rights agreement (the "Registration Rights Agreement") with the Continuing SSE Equity Owners who, assuming that all of the LLC Interests of the Continuing SSE Equity Owners are redeemed or exchanged for newly-issued shares of Class A common stock on a one-for-one basis, will own            shares of Shake Shack's Class A common stock, representing approximately        % of the combined voting power of all of Shake Shack's common stock (or approximately        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), and the Former SSE Equity Owners.

        We refer to the foregoing transactions collectively as the "Transactions." For more information regarding our structure after the completion of the Transactions, including this offering, see "The Transactions."

        Immediately following this offering, Shake Shack will be a holding company and its principal asset will be the LLC Interests it purchases from SSE Holdings and acquires from the Former SSE Equity Owners. As the sole managing member of SSE Holdings, we will operate and control all of the business and affairs of SSE Holdings and, through SSE Holdings and its subsidiaries, conduct our business. Accordingly, although we will have a minority economic interest in SSE Holdings, we will have the sole voting interest in, and control the management of, SSE Holdings. As a result, we will consolidate SSE Holdings in our consolidated financial statements and will report a non-controlling interest related to the LLC Interests held by the Continuing SSE Equity Owners on our consolidated financial statements.

        See "Description of Capital Stock" for more information about our certificate of incorporation and the terms of the Class A common stock and Class B common stock. See "Certain Relationships and Related Party Transactions" for more information about:

    the SSE Holdings LLC Agreement, including the terms of the LLC Interests and the redemption right of the Continuing SSE Equity Owners;

    the Tax Receivable Agreement;

    the Registration Rights Agreement; and

    the Voting Agreement.

 

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        The diagram below depicts our organizational structure after giving effect to the Transactions, including this offering, assuming no exercise by the underwriters of their option to purchase additional shares of Class A common stock.

GRAPHIC

 

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Our Corporate Information

        Shake Shack Inc., the issuer of the Class A common stock in this offering, was incorporated as a Delaware corporation on September 23, 2014. Our corporate headquarters are located at 24 Union Square East, 5th Floor, New York, NY 10003. Our telephone number is (646) 747-7200. Our principal website address is www.shakeshack.com. The information on any of our websites is deemed not to be incorporated in this prospectus or to be part of this prospectus.

Implications of Being an Emerging Growth Company

        As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include:

    we are required to have only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure;

    we are not required to engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act");

    we are not required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (the "PCAOB") regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

    we are not required to submit certain executive compensation matters to stockholder advisory votes, such as "say-on-pay," "say-on-frequency" and "say-on-golden parachutes;" and

    we are not required to disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer's compensation to median employee compensation.

        We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenue, have more than $700 million in market value of our Class A common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have elected to adopt the reduced disclosure with respect to financial statements and the related Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure. As a result of this election, the information that we provide stockholders may be different than you might get from other public companies in which you hold equity.

        The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period is irrevocable.

 

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The Offering

Issuer in this offering

  Shake Shack Inc.

Class A common stock offered by us

 

            shares.

Underwriters' option to purchase additional shares of Class A common stock from us solely to cover overallotments

 

            shares.

Class A common stock to be issued to the Former SSE Equity Owners and the Former UAR Plan Participants

 

            shares.

Class A common stock to be outstanding after this offering

 

            shares (or            shares, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Class B common stock to be outstanding after this offering

 

            shares, all of which will be owned by the Continuing SSE Equity Owners.

Voting Rights

 

Holders of our Class A common stock and Class B common stock will vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by law. Each share of Class A common stock and Class B common stock will entitle its holder to one vote per share on all such matters. See "Description of Capital Stock."

Voting power held by purchasers in this offering

 

        % (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Voting power held by the Former SSE Equity Owners and the Former UAR Plan Participants

 

        % (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Voting power held by all holders of Class A common stock after giving effect to this offering

 

        % (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Voting power held by all holders of Class B common stock after giving effect to this offering

 

        % (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

 

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Voting power held by the Original SSE Equity Owners and the Former UAR Plan Participants after giving effect to this offering

 

        % (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Ratio of shares of Class A common stock to LLC Interests

 

Our amended and restated certificate of incorporation and the SSE Holdings LLC Agreement will require that we at all times maintain a ratio of one LLC Interest owned by us for each share of Class A common stock (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities). and SSE Holdings at all times maintain a one-to-one ratio between the number of shares of Class A common stock issued by us and the number of LLC Interests owned by us, as well as a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing SSE Equity Owners and the number of LLC Interests owned by the Continuing SSE Equity Owners. This construct is intended to result in the Continuing SSE Equity Owners having a voting interest in Shake Shack that is substantially the same as the Continuing SSE Equity Owners' percentage economic interest in SSE Holdings. The Continuing SSE Equity Owners will own all of our outstanding Class B common stock.

Use of proceeds

 

We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $             million (or approximately $             million if the underwriters exercise in full their option to purchase additional shares of Class A common stock), assuming the shares are offered at $            per share (the midpoint of the price range listed on the cover page of this prospectus).

 

We intend to use the net proceeds that we receive from this offering to purchase            newly-issued LLC Interests from SSE Holdings at a purchase price per interest equal to the initial public offering price per share of Class A common stock less underwriting discounts and commissions payable thereon.

 

We intend to cause SSE Holdings (i) to use such proceeds to pay fees and expenses in connection with this offering and (ii) for general corporate purposes, including opening new Shacks and renovating existing Shacks. See "Use of Proceeds."

Redemption rights of holders of LLC Interests

 

The Continuing SSE Equity Owners, from time to time following the offering may require SSE Holdings to redeem or exchange all or a portion of their LLC Interests for, at Shake Shack's option, newly-issued shares of Class A common stock on a one-for-one basis or a cash payment equal to the volume

   

 

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weighted average market price of one share of our Class A common stock for each LLC Interest redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the SSE Holdings LLC Agreement. See "Certain Relationships and Related Party Transactions—SSE Holdings LLC Agreement." Shares of our Class B common stock will be cancelled on a one-for-one basis if we, at the election of a Continuing SSE Equity Owner, redeem or exchange LLC Interests of such Continuing SSE Equity Owner pursuant to the terms of the SSE Holdings LLC Agreement.

Registration Rights Agreement

 

Pursuant to the Registration Rights Agreement, we will, subject to the terms and conditions thereof, agree to register the resale of the shares of our Class A common stock that are issuable to the Continuing SSE Equity Owners upon redemption or exchange of their LLC Interests and the shares of our Class A common stock that are issued to the Former SSE Equity Owners in connection with the Transactions. See "Certain Relationships and Related Party Transactions—Registration Rights Agreement."

Directed share program

 

The underwriters have reserved for sale, at the initial public offering price, up to approximately            shares of our Class A common stock being offered for sale to our directors, officers and certain employees and other parties related to the Company. We will offer these shares to the extent permitted under applicable regulations. The number of shares available for sale to the general public in this offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not purchased will be offered by the underwriters to the general public on the same terms as the other shares.

Controlled company

 

Following this offering we will be a "controlled company" within the meaning of the corporate governance rules of            . See "Management—Corporate Governance."

Dividend policy

 

We currently intend to retain all available funds and any future earnings for use in the operation of our business, and therefore we do not currently expect to pay any cash dividends on our Class A common stock. Any future determination to pay dividends to holders of Class A common stock will be at the discretion of our board of directors and will depend upon many factors, including our results of operations, financial condition, capital requirements, restrictions in SSE Holdings' debt agreements and other factors that our board of directors deems relevant. We are a holding company, and substantially all of our operations are carried out by SSE Holdings and its subsidiaries. Our ability to pay dividends may also be restricted by the terms of any credit agreement or any debt or preferred equity securities of ours or of our subsidiaries. See "Dividend Policy."

   

 

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Tax Receivable Agreement

 

We will enter into the Tax Receivable Agreement with SSE Holdings and the Continuing SSE Equity Owners that will provide for the payment by Shake Shack to the Continuing SSE Equity Owners of 85% of the amount of tax benefits, if any, that Shake Shack actually realizes (or in some circumstances is deemed to realize) as a result of (i) increases in the tax basis of assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests described above under "—The Offering—Redemption rights of holders of LLC Interests" and (ii) certain other tax benefits related to our making payments under the Tax Receivable Agreement. See "Certain Relationships and Related Party Transactions—Tax Receivable Agreement."

Risk factors

 

Investing in shares of our Class A common stock involves a high degree of risk. See "Risk Factors" beginning on page 18 of this prospectus for a discussion of factors you should carefully consider before investing in shares of our Class A common stock.

Proposed symbol

 

"SHAK."

        The number of shares of our Class A common stock to be outstanding after this offering is based on the membership interests of SSE Holdings outstanding as of                  , 2014 and excludes:

                 shares of Class A common stock reserved as of the closing date of this offering for future issuance under our stock option plan; and

                 shares of Class A common stock reserved as of the closing date of this offering for future issuance upon redemption or exchange of LLC Interests by the Continuing SSE Equity Owners.

        Unless otherwise indicated, this prospectus assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock.

 

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Summary Historical and Pro Forma Consolidated Financial and Other Data

        The following tables present the summary historical and pro forma consolidated financial and other data for SSE Holdings, LLC and its subsidiaries. SSE Holdings, LLC is the predecessor of the issuer, Shake Shack Inc., for financial reporting purposes. The summary consolidated statement of operations data for each of the years in the two-year period ended December 25, 2013 and the summary consolidated balance sheet data as of December 26, 2012 and December 25, 2013 are derived from the audited consolidated financial statements of SSE Holdings, LLC and its subsidiaries contained herein. The summary consolidated statement of operations data for the twenty-six weeks ended June 25, 2014 and the summary consolidated balance sheet data as of June 25, 2014 are derived from the audited consolidated financial statements of SSE Holdings, LLC and its subsidiaries included in this prospectus. The summary consolidated statement of operations data for the twenty-six weeks ended June 26, 2013 is derived from the unaudited consolidated financial statements of SSE Holdings, LLC and its subsidiaries included in this prospectus. In the opinion of our management, such unaudited financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for those periods.

        The results of operations for the periods presented below are not necessarily indicative of the results to be expected for any future period and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. The information set forth below should be read together with the "Selected Historical Consolidated Financial and Other Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.

        The summary unaudited pro forma consolidated financial data of Shake Shack Inc. presented below have been derived from our unaudited pro forma consolidated financial statements included elsewhere in this prospectus. The summary unaudited pro forma financial data for the fiscal year ended December 25, 2013 and as of and for the twenty-six weeks ended June 25, 2014 give effect to the Transactions as described in "The Transactions" and the completion of this offering as if all such transactions had occurred on December 27, 2012, in the case of the summary unaudited pro forma consolidated statement of operations data, and as of June 25, 2014, in the case of the summary unaudited pro forma consolidated balance sheet data. The unaudited pro forma financial information includes various estimates which are subject to material change and may not be indicative of what our operations or financial position would have been had this offering and related transactions taken place on the dates indicated, or that may be expected to occur in the future. See "Unaudited Pro Forma Consolidated Financial Information" for a complete description of the adjustments and assumptions underlying the summary unaudited pro forma consolidated financial data.

        The summary historical consolidated financial and other data of Shake Shack Inc. have not been presented as Shake Shack Inc. is a newly incorporated entity, has had no business transactions or activities to date and had no assets or liabilities during the periods presented in this section.

 

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  Historical SSE Holdings, LLC    
   
 
 
  Pro Forma Shake Shack Inc.  
 
  Fiscal year ended   Twenty-six weeks ended  
 
  Fiscal year
ended
December 25,
2013
  Twenty-six
weeks ended
June 25,
2014
 
(in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 
 
   
   
  (unaudited)
   
  (unaudited)
 

Consolidated statement of operations data:

                                     

Revenues

                                     

Shack sales

  $ 55,591   $ 78,587   $ 35,227   $ 48,823   $     $    

Licensing revenue

    1,447     3,869     1,474     3,110              
                           

Total revenue

    57,038     82,456     36,701     51,933              

Expenses

                                     

Operating expenses

                                     

Food and paper costs

    16,774     23,865     10,713     14,908              

Labor and related expenses

    14,436     20,096     8,744     12,937              

Other operating expenses

    5,081     7,315     3,123     4,961              

Occupancy and related expenses

    5,053     6,892     2,990     4,119              

General and administrative expenses

    6,988     12,453     4,313     6,992              

Depreciation expense

    2,162     3,541     1,571     2,565              

Pre-opening costs

    1,858     2,334     1,028     2,062              

Loss on disposal of property and equipment

        25         18              
                           

Total expenses

    52,352     76,521     32,482     48,562              
                           

Income from operations

    4,686     5,935     4,219     3,371              
                           

Interest expense, net

    156     52     18     91              
                           

Income before income taxes

    4,530     5,883     4,201     3,280              

Income tax expense

    397     460     219     239              
                           

Net income

  $ 4,133   $ 5,423   $ 3,982   $ 3,041   $     $    
                           
                           

 

 
  Historical SSE Holdings, LLC   Pro Forma
Shake
Shack Inc.
 
 
  As of  
(in thousands)
  December 26,
2012
  December 25,
2013
  June 25,
2014
  June 25,
2014
 
 
   
   
   
  (unaudited)
 

Consolidated balance sheet data:

                         

Cash

  $ 16,033   $ 13,076   $ 5,843   $    

Total assets

    44,068     55,219     57,797        

Total liabilities

    12,197     17,832     21,105        

Total members'/stockholders' equity

    31,871     37,387     36,692        

 

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  Fiscal year ended   Twenty-six weeks ended  
(Dollar amounts in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 

Other data:

                         

Number of Shacks

   
21
   
40
   
28
   
48
 

Domestic company-operated

    13     21     16     23  

Domestic licensed

    3     4     4     4  

International licensed

    5     15     8     21  

Same Shack sales growth

   
7.1

%
 
5.9

%
 
3.6

%
 
4.2

%

Average unit volumes

   
 
   
 
   
 
   
 
 

Domestic company-operated Shacks

  $ 5,367   $ 5,017              

Manhattan Shacks

    7,034     7,387              

Non-Manhattan Shacks

    3,791     3,840              

International licensed Shacks(1)

    9,665     6,077              

Shack system-wide sales(1)

 
$

81,048
 
$

139,903
 
$

58,908
 
$

98,416
 

Shack-level operating profit margins

   
25.6

%
 
26.0

%
 
27.4

%
 
24.4

%

Manhattan Shacks

    29.0 %   30.3 %   31.3 %   30.5 %

Non-Manhattan Shacks

    19.8 %   21.9 %   23.5 %   19.5 %

Adjusted EBITDA(2)

 
$

9,998
 
$

14,459
 
$

7,085
 
$

8,347
 

As a percentage of revenue

    17.5 %   17.5 %   19.3 %   16.1 %

Capital expenditures

 
$

11,036
 
$

16,194
 
$

4,693
 
$

11,351
 

(1)
Sales of licensed Shacks are not included in our revenue, except to the extent of our licensing revenue.

(2)
EBITDA and Adjusted EBITDA are included in this prospectus because they are key metrics used by management and our board of directors to assess our financial performance. EBITDA and Adjusted EBITDA are frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

    EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity and should not be considered as alternatives to net income (loss) as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP. Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not reflect tax payments, debt service requirements, capital expenditures, Shack openings and certain other cash costs that may recur in the future, including, among other things, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. Management compensates for these limitations by relying on our GAAP results in addition to using EBITDA and Adjusted EBITDA supplementally. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled captions of other companies due to different methods of calculation.

 

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    A reconciliation of net income to EBITDA and Adjusted EBITDA is set forth below:

 
  Historical SSE Holdings, LLC   Pro Forma
Shake Shack Inc.
 
 
  Fiscal year ended   Twenty-six weeks ended  
 
  Fiscal year
ended
December 25,
2013
  Twenty-six
weeks ended
June 25,
2014
 
(in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 

Net income

  $ 4,133   $ 5,423   $ 3,982   $ 3,041   $     $    

Depreciation expense

    2,162     3,541     1,571     2,565              

Interest expense, net

    156     52     18     91              

Income tax expense

    397     460     219     239              
                           

EBITDA

    6,848     9,476     5,790     5,936              

Equity-based compensation(a)

    450     93     38     83              

Deferred compensation(b)

        2,054         43              

Pre-opening costs(c)

    1,623     1,737     814     1,221              

Deferred rent(d)

    839     975     416     1,010              

Loss on disposal of property and equipment(e)

        25         18              

Other non-cash items(f)

    238     99     27     36              
                           

Adjusted EBITDA

  $ 9,998   $ 14,459   $ 7,085   $ 8,347   $     $    
                           
                           

(a)
Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards.

(b)
For the periods presented, represents amounts accrued under a bonus agreement we entered into with an employee pursuant to which we agreed to pay a bonus in a future period.

(c)
Non-capital expenditures associated with opening new Shacks exclusive of deferred rent incurred prior to opening.

(d)
Reflects the extent to which our annual rent expense has been above or below our cash rent payments.

(e)
Includes the loss on disposal of assets in the ordinary course of business.

(f)
For the periods presented, represents non-cash charges related to certain employee benefits.

 

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RISK FACTORS

        You should carefully consider the risks described below, together with all of the other information included in this prospectus, before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks or uncertainties. In that case, the trading price of our Class A common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

Our long-term success is highly dependent on our ability to successfully identify and secure appropriate sites and timely develop and expand our operations in existing and new markets.

        One of the key means of achieving our growth strategies will be through opening and operating new Shacks on a profitable basis for the foreseeable future. We opened eight new domestic company-operated Shacks in fiscal 2013 and expect to open eight domestic company-operated Shacks and nine international licensed Shacks in fiscal 2014. We must identify target markets where we can enter or expand, taking into account numerous factors such as the location of our current Shacks, demographics, traffic patterns and information gathered from our various contacts. We may not be able to open our planned new Shacks within budget or on a timely basis, if at all, given the uncertainty of these factors, which could adversely affect our business, financial condition and results of operations. As we operate more Shacks, our rate of expansion relative to the size of our Shack base will eventually decline.

        The number and timing of new Shacks opened during any given period may be negatively impacted by a number of factors including, without limitation:

    the identification and availability of attractive sites for new Shacks and the ability to negotiate suitable lease terms;

    the lack of development and overall decrease in commercial real estate due to a macroeconomic downturn;

    recruitment and training of qualified personnel in the local market;

    our ability to obtain all required governmental permits, including zonal approvals, on a timely basis;

    our ability to control construction and development costs of new Shacks;

    competition in new markets, including competition for appropriate sites;

    failure of the landlords to timely deliver real estate to us;

    landlord delays;

    the proximity of potential sites to an existing Shack, and the impact of cannibalization on future growth;

    anticipated commercial, residential and infrastructure development near our new Shacks; and

    the cost and availability of capital to fund construction costs and pre-opening expenses.

        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. 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

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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.

Damage to our reputation could negatively impact our business, financial condition and results of operations.

        Our reputation and the quality of our brand are critical to our business and success in existing markets, and will be critical to our success as we enter into new markets. We believe that we have built our reputation on the high quality of our food and service, our commitment to our guests, our strong employee culture, and the atmosphere and design of our Shacks, and we must protect and grow the value of our brand in order for us to continue to be successful. Any incident that erodes consumer loyalty for our brand could significantly reduce its value and damage our business.

        We may be adversely affected by any negative publicity, regardless of its accuracy, including with respect to:

    food safety concerns, including food tampering or contamination;

    food-borne illness incidents;

    the safety of the food commodities we use, particularly beef;

    guest injury;

    security breaches of confidential guest or employee information;

    employment-related claims relating to alleged employment discrimination, wage and hour violations; labor standards or healthcare and benefit issues; or

    government or industry findings concerning our Shacks, restaurants operated by other foodservice providers, or others across the food industry supply chain.

        Also, there has been a marked increase in the use of social media platforms and similar devices, including weblogs (blogs), social media websites and other forms of Internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. Many social media platforms immediately publish the content their subscribers and participants can post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our Company may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction.

        Ultimately, the risks associated with any such negative publicity or incorrect information cannot be completely eliminated or mitigated and may materially harm our reputation, business, financial condition and results of operations.

Food safety and food-borne illness incidents may have an adverse effect on our business by not only reducing demand but also increasing operating costs.

        Food safety is a top priority, and we dedicate substantial resources to help ensure that our guests enjoy safe, quality food products. However, food-borne illnesses and other food safety issues have occurred in the food industry in the past, and could occur in the future. In addition, consumer preferences could be affected by health concerns about the consumption of beef, our key ingredient. A negative report or negative publicity, whether related to one of our Shacks or to a competitor in the industry, may have an adverse impact on demand for our food and could result in decreased guest traffic to our Shacks. A decrease in guest traffic to our Shacks as a result of these health concerns or

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negative publicity could materially harm our brand, business, financial condition and results of operations.

        Furthermore, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness incidents could be caused by factors outside of our control and that multiple Shacks would be affected rather than a single Shack. We cannot assure that all food items will be properly maintained during transport throughout the supply chain and that our employees will identify all products that may be spoiled and should not be used in our Shacks. If our guests become ill from food-borne illnesses, we could be forced to temporarily close some Shacks. Furthermore, any instances of food contamination, whether or not at our Shacks, could subject us or our suppliers to a food recall pursuant to the United States Food and Drug Administration's (the "FDA") recently enacted Food Safety Modernization Act ("FSMA").

Shortages or interruptions in the supply or delivery of food products could adversely affect our operating results.

        We are dependent on frequent deliveries of food products that meet our specifications. Shortages or interruptions in the supply of food products caused by problems in production or distribution, inclement weather, unanticipated demand or other conditions could adversely affect the availability, quality and cost of ingredients, which would adversely affect our operating results.

        Our burgers depend on the availability of our proprietary ground beef blend. Availability of our blend depends on two different components; raw material supplied by the slaughterhouses and ground and formed beef patties supplied by regional grinders who further process and convert whole muscle purchased from the slaughterhouses. The primary risk we face is with our regional grinders. If there is an interruption of operation at any one of our regional grinder's facilities, we face an immediate risk because each Shack typically has less than three days of beef patty inventory on hand. However, we have agreements with our regional grinders to provide an alternative back up supply in the event of a disruption in their operations. In addition, our largest supplier of raw material has agreed to an emergency plan to supply us in the event of a disruption of operations at one of our beef grinders through our broadline distributor's distribution network, but it would not be able to do so immediately.

        We currently have five approved sources of raw material in the United States. If there is a supply issue with all U.S. raw material, we have seven approved suppliers in other countries. The risks to using international suppliers are shipping lead time, shipping costs, potential import duties and U.S. customs. It is unknown at this time how long it would take and at what cost the raw material would be to import from any such other country, but the delay and cost would likely be adverse to our business.

Our international licensed Shacks import most of our proprietary and other core ingredients from the United States and the European Union. If this international supply chain is interrupted, our international licensed operations could encounter supply shortages and incur higher costs.

        Our international licensed Shacks import most of our proprietary ingredients from the United States and the European Union (the "EU"). For example, our proprietary blend of beef patties and/or raw materials for beef patties originate from the United States and the EU as well as Australia. In addition, our potato buns are exclusively from the United States, and other key items such as crinkle-cut fries and American cheese originate within the United States or the EU. While we have established secondary supply solutions for some of these ingredients, we have not acquired secondary supplies for all of them.

        Due to the long lead time and general volatility in the supply chain, the third party logistic providers for our international licensed Shacks in the Middle East carry one to three months of inventory to allow for delays or interruptions in the supply chain. Specifically, we have had past and ongoing issues in ensuring that timely and adequate supplies reach our Middle East Shacks. In the

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Middle East, our licensee delegates the supply function to its third party logistics providers in each country in which the licensee operates, with which we have limited and restricted communication, preventing us from exercising control or instruction over such entities. As a result, in the Middle East, our licensee has a limited ability to achieve economies of scale and minimize production and freight costs.

        The recent sanctions enacted by the Russian Federation on many imported ingredients from the United States, the EU and Australia have affected our licensee in Russia's ability to import such ingredients to our Russian Shack. As a result of the changing and uncertain nature of such sanctions, while our licensee in Russia has identified a back-up supplier, we are unable to guarantee that the licensee will be able to import our proprietary ingredients to supply this Shack. We have given our licensee in Russia approval to utilize alternative ingredients not affected by the sanctions, but there is a risk that these substitute ingredients may be inferior in taste and quality or come from suppliers that have not been vetted for food safety and quality assurance.

        Our U.K. Shack faces challenges in obtaining potato buns and custard, which originate from our U.S. suppliers. While these ingredients have no trade restrictions, they must be shipped from the United States, which poses an ongoing risk of delay in supply deliveries.

        Our Turkish Shacks currently import many key ingredients from both the EU and the United States. As is common in many developing markets, regulations are always subject to change which could potentially give rise to import risks should current importation legislation change. We are currently working on local Turkish alternatives to alleviate these risks in the future.

        If our international licensed Shacks are unable to obtain our proprietary ingredients in the necessary amounts in a timely fashion as a result of logistics issues, sanctions or other challenges, it could harm its business and adversely affect the licensing fees we receive from our international licensee, adversely impacting our business and results of operations.

We have a limited number of suppliers for our major products and rely on one distribution company for the majority of our domestic distribution program. If our suppliers or distributor are unable to fulfill their obligations under our arrangements with them, we could encounter supply shortages and incur higher costs.

        We have a limited number of suppliers for our major products, including beef patties, potato buns, custard, Portobello mushrooms and cheese sauce. In fiscal 2013, we purchased all of our (i) ground beef patties from two suppliers, with more than 87% of our ground beef patties supplied by one supplier, (ii) potato buns directly from one supplier, (iii) custard base from one supplier, (iv) ShroomBurgers from two suppliers, with approximately 50% of our ShroomBurgers supplied by each supplier and (v) ShackSauce from two suppliers, with approximately 87% of our ShackSauce supplied by one supplier. Due to this concentration of suppliers, the cancellation of our supply arrangements with 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 alternative 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.

        We contract with one distributor to provide virtually all of our food distribution services in the United States. Specifically, as of June 25, 2014, we consolidated approximately 89% of our core food and beverage ingredients, as well as 100% of our paper goods and chemicals with this distributor, which we refer to as our broadline distributor, for distribution and delivery to each Shack. We currently utilize six affiliated distribution centers and plan to add three more by the end of fiscal 2014. 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

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distribution center from another affiliated distribution center. If a catastrophe, such as a fire, were to occur at the distribution center that services the New York and New Jersey Shacks, we would be at immediate risk of product shortages because that distribution center supplies approximately 42% of our domestic company-operated Shacks, which collectively represented approximately 61% of our Shack sales, as of June 25, 2014. The other five distribution centers are all along the eastern seaboard and collectively supply the other approximately 58% of our domestic company-operated Shacks which represent the remaining approximately 39% of our total Shack sales.

        Accordingly, although we believe that alternative supply and distribution sources are available, there can be no assurance that we will continue to be able to identify or negotiate with such sources on terms that are commercially reasonable to us. If our suppliers or distributors are unable to fulfill their obligations under their contracts or we are unable to identify alternative sources, we could encounter supply shortages and incur higher costs, each of which could have a material adverse effect on our results of operations. See "Business—Operations—Sourcing and Supply Chain."

Security breaches of confidential guest information, in connection with our electronic processing of credit and debit card transactions, or confidential employee information may adversely affect our business.

        Our business requires the collection, transmission and retention of large volumes of guest and employee data, including credit and debit card numbers and other personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services. The integrity and protection of that guest and employee data is critical to us. Further, our guests and employees have a high expectation that we and our service providers will adequately protect their personal information.

        The information, security and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and guest and employee expectations, or may require significant additional investments or time in order to do so. Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error or inadvertent releases of data all threaten our and our service provider's information systems and records. A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits. Additionally, a significant theft, loss or misappropriation of, or access to, guests' or other proprietary data or other breach of our information technology systems could result in fines, legal claims or proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from guests and employees, any of which could have a material adverse effect on our financial condition and results of operations.

We face significant competition for guests, and our inability to compete effectively may affect our traffic, Shack sales and Shack-level operating profit margins, which could adversely affect our business, financial condition and results of operations.

        The restaurant industry is intensely competitive with many well-established companies that compete directly and indirectly with us with respect to food quality, service, price and value, design and location. We compete in the restaurant industry with national, regional and locally-owned and/or operated limited-service restaurants and full-service restaurants. We compete with (i) "better burger" restaurants, (ii) fast casual restaurants, (iii) quick service restaurants and (iv) casual dining restaurants. Some of our competitors have significantly greater financial, marketing, personnel and other resources than we do, and many of our competitors are well-established in markets in which we have existing Shacks or intend to locate new Shacks. In addition, many of our competitors have greater name recognition nationally or in some of the local markets in which we have or plan to have Shacks. Any

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inability to successfully compete with the restaurants in our markets will place downward pressure on our guest traffic and may prevent us from increasing or sustaining our revenues and profitability.

        Our continued success depends in part on the continued popularity of our menu and the experience we offer guests at our Shacks. Consumer tastes, nutritional and dietary trends, traffic patterns and the type, number, and location of competing restaurants often affect the restaurant business, and our competitors may react more efficiently and effectively to those conditions. In addition, some of our competitors in the past have implemented programs that provide price discounts on certain menu offerings, and they may continue to do so in the future. If we are unable to continue to compete effectively, our traffic, Shack sales and Shack-level operating profit margins could decline and our business, financial condition and results of operations would be adversely affected.

Our expansion into new domestic markets may present increased risks, which could affect our profitability.

        We plan to open domestic 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, are likely to be less profitable on average than our Manhattan Shacks 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 keep qualified employees 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 will have reduced operating leverage. As a result, these new Shacks may be less successful or may achieve target Shack-level operating profit margins at a slower rate, if ever. If we do not successfully execute our plans to enter new markets, our business, financial condition or results of operations could be adversely affected. In addition, we plan to continue to expand into new international markets, which can pose similar and additional challenges in opening new Shacks.

New Shacks, once opened, may not be profitable, and the performance of our Shacks that we have experienced in the past may not be indicative of future results.

        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 delays, associated Shack pre-opening costs and operating inefficiencies, as well as changes in our geographic concentration due to the opening of new Shacks. We typically incur the most significant portion of pre-opening expenses associated with a given Shack within the three 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 commonly take eight to 12 weeks to reach planned 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. Accordingly, the volume and timing of new Shack openings may have a material adverse impact on our profitability.

        In addition, the majority of our current domestic company-operated Shacks are located in Manhattan and other high revenue markets. As we expand, this percentage will decline and as a result we may not be able to maintain our current AUVs and Shack-level operating profit margins and our business, financial condition and results of operations may be adversely affected.

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        Although we target specified operating and financial metrics, new Shacks may not meet these targets or may take longer than anticipated to do so. 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 or results of operations.

Our Shack sales and profit growth could be adversely affected if same Shack sales growth is less than we expect.

        The level of same Shack sales growth, which represents the change in year-over-year revenues for domestic company-operated Shacks open for 24 months or longer, could affect our Shack sales growth. Our ability to increase same Shack sales depends in part on our ability to successfully implement our initiatives to build Shack sales. It is possible such initiatives will not be successful, that we will not achieve our target same Shack sales growth or that same Shack sales growth could be negative, which may cause a decrease in Shack sales and profit growth that would adversely affect our business, financial condition or results of operations.

Opening new Shacks in existing markets may negatively affect Shack sales at our existing Shacks.

        The consumer target area of our Shacks varies by location, depending on a number of factors, including population density, other local restaurants and attractions, area demographics and geography. As a result, the opening of a new Shack in or near markets in which we already have Shacks could adversely affect the Shack sales of those existing Shacks. Existing Shacks could also make it more difficult to build our consumer base for a new Shack in the same market. We will continue to cluster in select markets and open new Shacks in and around areas of existing Shacks that are operating at or near capacity to leverage operational efficiencies and effectively serve our guests. Shack sales cannibalization among our Shacks may become significant in the future as we continue to expand our operations and could adversely affect our Shack sales growth, which could, in turn, adversely affect our business, financial condition or results of operations.

Our failure to manage our growth effectively could harm our business and operating results.

        Our growth plan includes a significant number of new Shacks. Our existing management systems, financial and management controls and information systems may not be adequate to support our planned expansion. Our ability to manage our growth effectively will require us to continue to enhance these systems, procedures and controls 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 the 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 plans to open new Shacks, and the ongoing need for capital expenditures at our existing Shacks, require us to spend capital.

        Our growth strategy depends on opening new Shacks, which will require us to use cash flows from operations and a portion of the net proceeds of this offering. We cannot assure you that cash flows from operations and the net proceeds of this offering will be sufficient to allow us to implement our growth strategy. If this cash is 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, significantly curtail or eliminate planned Shack openings, which could have a material adverse

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effect on our business, financial condition, results of operations and the price of our Class A common stock.

        In addition, as our Shacks mature, our business will require capital expenditures for the maintenance, renovation and improvement of existing Shacks to remain competitive and maintain the value of our brand standard. This creates an ongoing need for cash, and, to the extent we cannot fund capital expenditures from cash flows from operations, funds will need to be borrowed or otherwise obtained.

        If the costs of funding new Shacks or renovations or enhancements at existing Shacks exceed budgeted amounts, and/or the time for building or renovation is longer than anticipated, our profits could be reduced. If we cannot access the capital we need, we may not be able to execute on our growth strategy, take advantage of future opportunities or respond to competitive pressures.

We are subject to risks associated with leasing property subject to long-term non-cancelable leases.

        We do not own any real property and all of our domestic company-operated Shacks are located in leased premises. The leases for our Shacks generally have initial terms of 10 years and typically provide for two renewal options in five-year increments as well as for rent escalations. However, the license agreement for our Madison Square Park Shack can be terminated by the New York City Commissioner of Parks for any reason on 25 days' written notice.

        Generally, our leases are net leases that require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent. We generally cannot cancel these leases. Additional sites that we lease are likely to be subject to similar long-term non-cancelable leases. If we close a Shack, we nonetheless may be obligated to perform our monetary obligations under the applicable lease, including, among other things, payment of the base rent for the balance of the lease term. In addition, as each of our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close Shacks in desirable locations. As of June 25, 2014, we were a party to operating leases associated with our Shacks and administrative offices requiring future minimum lease payments of $3.5 million in the aggregate through fiscal 2014 and approximately $159.8 million thereafter, which minimum lease commitments are not reflected as liabilities on our balance sheet. We depend on cash flows from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under the Revolving Credit Facility (as defined in "Description of Indebtedness") or other sources, we may not be able to service our lease expenses or fund our other liquidity and capital needs, which would materially affect our business.

If our operating and financial performance in any given period does not meet the guidance that we provide to the public, our stock price may decline.

        We may provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this prospectus and in our other public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts or if we reduce our guidance for future periods, the market price of our Class A common stock may decline as well.

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We depend on key executive management.

        We depend on the leadership and experience of our key executive management. The loss of the services of any of our executive management members could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all. We do not maintain key man life insurance policies on any of our executive officers. We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in our industry. Our inability to meet our executive staffing requirements in the future could impair our growth and harm our business.

Our inability to identify qualified individuals for our workforce could slow our growth and adversely impact our ability to operate our Shacks.

        We believe that the "Enlightened Hospitality" culture of our Shack team is the single most important factor to our success. Accordingly, our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified managers and associates to meet the needs of our existing Shacks and to staff new Shacks. We aim to hire warm, friendly, motivated, caring, self-aware and intellectually curious individuals, who are excited and committed to championship performance, remarkable and enriching hospitality, embodying our culture and actively growing themselves and our brand. A sufficient number of qualified individuals to fill these positions and qualifications may be in short supply in some communities. Competition in these communities for qualified staff could require us to pay higher wages and provide greater benefits, especially if there is significant improvement in regional or national economic conditions. We place a heavy emphasis on the qualification and training of our personnel and spend a significant amount of time and money on training our employees. Any inability to recruit and retain qualified individuals may result in higher turnover and increased labor costs, and 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 Shacks and could adversely impact our existing Shacks. Any such inability to retain or recruit qualified employees, increased costs of attracting qualified employees or delays in Shack openings could adversely affect our business and results of operations.

Unionization activities may disrupt our operations and affect our profitability.

        Although none of our employees are currently covered under collective bargaining agreements, our employees may elect to be represented by labor unions in the future. If a significant number of our employees were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could adversely affect our business, financial condition or results of operations. In addition, a labor dispute involving some or all of our employees may harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes may increase our costs. Further, if we enter into a new market with unionized construction companies, or the construction companies in our current markets become unionized, construction and build out costs for new Shacks in such markets could materially increase.

Increased food commodity and energy costs could decrease our Shack-level operating profit margins or cause us to limit or otherwise modify our menu, which could adversely affect our business.

        Our profitability depends in part on our ability to anticipate and react to changes in the price and availability of food commodities, including among other things beef, poultry, grains, dairy and produce. Prices may be affected due to market changes, increased competition, the general risk of inflation, shortages or interruptions in supply due to weather, disease or other conditions beyond our control, or other reasons. For example, certain regions of the United States have been experiencing a significant drought in 2014, which has increased the price of certain food commodities, including beef, dairy and produce. Other events could increase commodity prices or cause shortages that could affect the cost

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and quality of the items we buy or require us to further raise prices or limit our menu options. These events, combined with other more general economic and demographic conditions, could impact our pricing and negatively affect our Shack sales and Shack-level operating profit margins. While we have been able to partially offset inflation and other changes in the costs of core operating resources by gradually increasing menu prices, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions could limit our menu pricing flexibility. In addition, macroeconomic conditions could make additional menu price increases imprudent. There can be no assurance that future cost increases can be offset by increased menu prices or that increased menu prices will be fully absorbed by our guests without any resulting change to their visit frequencies or purchasing patterns. In addition, there can be no assurance that we will generate same Shack sales growth in an amount sufficient to offset inflationary or other cost pressures.

        We do not currently hedge our commodity risks. We may decide to enter into certain forward pricing arrangements with our suppliers, which could result in fixed or formula-based pricing with respect to certain food products. However, these arrangements generally are relatively short in duration and may provide only limited protection from price changes. In addition, the use of these arrangements may limit our ability to benefit from favorable price movements.

        Our profitability also is adversely affected by increases in the price of utilities, such as natural gas, electric, and water, whether as a result of inflation, shortages or interruptions in supply, or otherwise. Our ability to respond to increased costs by increasing prices or by implementing alternative processes or products will depend on our ability to anticipate and react to such increases and other more general economic and demographic conditions, as well as the responses of our competitors and guests. All of these things may be difficult to predict and beyond our control. In this manner, increased costs could adversely affect our results of operations.

Higher health care costs and labor costs could adversely affect our business.

        With the passage in 2010 of the U.S. Patient Protection and Affordable Care Act (the "ACA"), we are required to provide affordable coverage, as defined in the ACA, to all employees, or otherwise be subject to a payment per employee based on the affordability criteria in the ACA. Many of these requirements will be phased in over a period of time, with the majority of the most impactful provisions affecting us presently anticipated to begin in the second quarter of fiscal 2015. Additionally, some states and localities have passed state and local laws mandating the provision of certain levels of health benefits by some employers. Increased health care and insurance costs could have a material adverse effect on our business, financial condition and results of operations. In addition, changes in federal or state workplace regulations could adversely affect our ability to meet our financial targets.

        Various federal and state labor laws govern our relationships with our employees and affect operating costs. These laws include employee classifications as exempt or non-exempt, minimum wage requirements, unemployment tax rates, workers' compensation rates, overtime, family leave, safety standards, payroll taxes, citizenship requirements and other wage and benefit requirements for employees classified as non-exempt. As our team members are paid at rates set above, but related to, the applicable minimum wage, further increases in the minimum wage could increase our labor costs. Significant additional government regulations could materially affect our business, financial condition and results of operations.

We are subject to many federal, state and local laws with which compliance is both costly and complex.

        The restaurant industry is subject to extensive federal, state and local laws and regulations, including the recently enacted comprehensive health care reform legislation discussed above, those relating to building and zoning requirements and those relating to the preparation and sale of food. Such laws and regulations are subject to change from time to time. The failure to comply with these

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laws and regulations could adversely affect our operating results. Typically, licenses, permits and approvals under such laws and regulations must be renewed annually and may be revoked, suspended or denied renewal for cause at any time if governmental authorities determine that our conduct violates applicable regulations. Difficulties or failure to maintain or obtain the required licenses, permits and approvals could adversely affect our existing Shacks and delay or result in our decision to cancel the opening of new Shacks, which would adversely affect our business.

        The development and operation of Shacks depend, to a significant extent, on the selection of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements. We are also subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards.

        There is also a potential for increased regulation of certain food establishments in the United States, where compliance with a Hazard Analysis and Critical Control Points ("HACCP") approach may now be required. HACCP refers to a management system in which food safety is addressed through the analysis and control of potential hazards from production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Many states have required restaurants to develop and implement HACCP Systems, and the United States government continues to expand the sectors of the food industry that must adopt and implement HACCP programs. For example, FSMA signed into law in January 2011, granted the FDA new authority regarding the safety of the entire food system, including through increased inspections and mandatory food recalls. Although restaurants are specifically exempted from or not directly implicated by some of these new requirements, we anticipate that the new requirements may impact our industry. Additionally, our suppliers may initiate or otherwise be subject to food recalls that may impact the availability of certain products, result in adverse publicity or require us to take actions that could be costly for us or otherwise impact our business.

        We are subject to the Americans with Disabilities Act (the "ADA"), which, among other things, requires our Shacks to meet federally mandated requirements for the disabled. The ADA prohibits discrimination in employment and public accommodations on the basis of disability. Under the ADA, we could be required to expend funds to modify our Shacks to provide service to, or make reasonable accommodations for the employment of, disabled persons. In addition, our employment practices are subject to the requirements of the Immigration and Naturalization Service relating to citizenship and residency.

        In addition, our licensing activities are subject to laws enacted by a number of states, rules and regulations promulgated by the U.S. Federal Trade Commission and certain rules and requirements regulating licensing activities in foreign countries. Failure to comply with new or existing licensing laws, rules and regulations in any jurisdiction or to obtain required government approvals could negatively affect our licensing sales and our relationships with our licensees.

        The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and, therefore, have an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. In addition, certain laws, including the ADA, could require us to expend significant funds to make modifications to our Shacks if we failed to comply with applicable standards. Compliance with all of these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.

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Our marketing strategies and channels will evolve and our programs may or may not be successful.

        Shake Shack is a small, but growing brand. We incur costs and expend other resources in our marketing efforts to attract and retain guests. The brand's promotion includes public relations, digital and social media, promotions, and in-store messaging, which require less marketing spend as compared to traditional marketing programs. Currently, the amount of discounted promotions and advertising we do is nominal. As the number of Shacks increases, and as we expand into new markets, we expect to increase our investment in advertising and consider additional promotional activities. Accordingly, in the future, we will incur greater marketing expenditures, resulting in greater financial risk and a greater impact on our Company.

        Some of these initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues. Additionally, some of our competitors have greater financial resources, which enable them to spend significantly more on marketing and advertising than we are able to at this time. Should our competitors increase spending on marketing and advertising or our marketing funds decrease for any reason, or should our advertising and promotions be less effective than those of our competitors, there could be a material adverse effect on our results of operations and financial condition.

Changes in economic conditions, including continuing effects from the recent recession, could materially affect our business, financial condition and results of operations.

        The restaurant industry depends on consumer discretionary spending. During the economic downturn starting in 2008, continuing disruptions in the overall economy, including the ongoing impacts of the housing crisis, high unemployment, and financial market volatility and unpredictability, caused a related reduction in consumer confidence, which negatively affected guest traffic and Shack sales at our Shacks and throughout our industry. These factors, as well as national, regional and local regulatory and economic conditions, gasoline prices, energy and other utility costs, inclement weather, conditions in the residential real estate and mortgage markets, health care costs, access to credit, disposable consumer income and consumer confidence, affect discretionary consumer spending. If these economic conditions persist or worsen, guest traffic could be adversely impacted if our guests choose to dine out less frequently or reduce the amount they spend on meals while dining out. If such negative economic conditions persist for a long period of time or become more pervasive, consumer changes to their discretionary spending behavior, including the frequency with which they dine out, could be more permanent. If Shack sales decrease, our profitability could decline as we spread fixed costs across a lower level of Shack sales. Prolonged negative trends in Shack sales could cause us to, among other things, reduce the number and frequency of new Shack openings, close Shacks or delay remodeling of our existing Shacks or take asset impairment charges.

Changes to estimates related to our property, fixtures and equipment or operating results that are lower than our current estimates at certain Shacks may cause us to incur impairment charges on certain long-lived assets, which may adversely affect our results of operations.

        In accordance with accounting guidance as it relates to the impairment of long-lived assets, we make certain estimates and projections with regard to individual Shack operations, as well as our overall performance, in connection with our impairment analyses for long-lived assets. If an impairment indicator was deemed to exist for a Shack, the estimated undiscounted future cash flows would be compared to its carrying value. If the carrying value exceeds the undiscounted cash flows, an impairment charge equal to the difference between the carrying value and the fair value. The projections of future cash flows used in these analyses require the use of judgment and a number of estimates and projections of future operating results. If actual results differ from our estimates, additional charges for asset impairments may be required in the future.

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We rely on a limited number of licensees for the operation of our licensed Shacks, and we have limited control with respect to the operations of our licensed Shacks, which could have a negative impact on our reputation and business.

        We rely in part on our licensees and the manner in which they operate their Shacks to develop and promote our business. As of June 25, 2014, two licensees operated all of our domestic licensed Shacks and one licensee, through affiliated and unaffiliated third party sublicensees, operated all of our international licensed Shacks. Our licensees are required to operate their Shacks according to the specific guidelines we set forth that are essential to maintaining brand integrity and reputation as well as in accordance with all laws and regulations applicable to Shake Shack and its subsidiaries, and all laws and regulations applicable in the countries in which we operate. 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 all of these Shacks, we cannot give assurance that there will not be differences in product and service quality, operations, marketing or profitably 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 improve their Shacks, guest preference for the Shake Shack brand could suffer. Failure of these Shacks to operate effectively could adversely affect our cash flows from those operations or have a negative impact on our reputation or our business.

        Although we have developed criteria to evaluate and screen prospective developers and licensees, we cannot be certain that the developers and licensees we select will have the business acumen necessary to open and operate successful licensed Shacks in their licensing areas. Our licensees compete for guests with other restaurants in their geographic markets, and the ability of our licensees to compete for guests directly impacts our results of operations, as well as the desirability of our brand to prospective licensees. Licensees may not have access to the financial or management resources that they need to open the Shacks contemplated by their agreements with us or to be able to find suitable sites on which to develop them, or they may elect to cease development for other reasons. Licensees may not be able to negotiate acceptable lease or purchase terms for the sites, obtain the necessary permits and governmental approvals or meet construction schedules. Additionally, financing from banks and other financial institutions may not always be available to licensees to construct and open new Shacks. Any of these problems could slow our growth from licensing operations and reduce our licensing revenues.

A challenging economic environment may affect our licensees, with adverse consequences to us.

        Our operating results are impacted by the ability of our licensees to generate revenues at their licensed Shacks. It is possible that, in a challenging economic environment, some licensees could file for bankruptcy or become delinquent in their payments to us, which could have significant adverse impacts on our business due to loss or delay in payments of licensing and other fees. Bankruptcy or other adverse performance by our licensees could negatively impact our market share and operating results as we may have fewer well-performing Shacks, and adversely impact our ability to attract new licensees.

If we are unable to maintain good relationships with our licensees, revenues could decrease and we may be unable to expand our presence in certain markets.

        Our licensees pay us a license fee and certain other fees pursuant to our license agreements. The viability of our licensing business depends on our ability to establish and maintain good relationships with our licensees. In particular, our relationship with our international licensee, who is our sole international licensee and has an exclusive right to open new Shacks in certain markets, is critical to our international operations.

        The value of our brand and the rapport that we maintain with our licensees are important factors for potential licensees considering doing business with us. If we are unable to maintain good relationships with licensees, we may be unable to renew license agreements and opportunities for

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developing new relationships with additional licensees may be adversely affected. This, in turn, could have an adverse effect on our results of operations.

        Our license agreements require us and our licensees to comply with operational and performance conditions that are subject to interpretation and could result in disagreements. At any given time, we may be in disputes with one or more of our licensees. An adverse result in any such dispute could adversely impact our results of operations and business.

We rely heavily on information technology, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.

        We rely heavily on information systems, including point-of-sale processing in our Shacks, for management of our supply chain, accounting, payment of obligations, collection of cash, credit and debit card transactions and other processes and procedures. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems. Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses and other disruptive problems. The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, expanding our systems as we grow or a breach in security of these systems could result in interruptions to or delays in our business and guest service and reduce efficiency in our operations. If our information technology systems fail and our redundant systems or disaster recovery plans are not adequate to address such failures, or if our business interruption insurance does not sufficiently compensate us for any losses that we may incur, our revenues and profits could be reduced and the reputation of our brand and our business could be materially adversely affected. In addition, remediation of such problems could result in significant, unplanned capital investments.

Legislation and regulations requiring the display and provision of nutritional information for our menu offerings, and new information or attitudes regarding diet and health or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our business, financial condition and results of operations.

        We serve burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet and health or new information regarding the health effects of consuming our menu offerings. These changes have resulted in, and may continue to result in, the enactment of laws and regulations that impact the ingredients and nutritional content of our menu offerings, or laws and regulations requiring us to disclose the nutritional content of our food offerings.

        For example, a number of states, counties and cities have enacted menu labeling laws requiring multi-unit restaurant operators to disclose certain nutritional information to customers, or have enacted legislation restricting the use of certain types of ingredients in restaurants. Furthermore, the Patient Protection and Affordable Care Act of 2010 (the "PPACA") establishes a uniform, federal requirement for certain restaurants to post certain nutritional information on their menus. Specifically, the PPACA amended the Federal Food, Drug and Cosmetic Act to require certain chain restaurants to publish the total number of calories of standard menu items on menus and menu boards, along with a statement that puts this calorie information in the context of a total daily calorie intake. The PPACA also requires covered restaurants to provide to consumers, upon request, a written summary of detailed nutritional information for each standard menu item, and to provide a statement on menus and menu boards about the availability of this information. The PPACA further permits the FDA to require covered restaurants to make additional nutrient disclosures, such as disclosure of trans-fat content. An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our offerings.

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        We cannot make any assurances regarding our ability to effectively respond to changes in consumer health perceptions or our ability to successfully implement the nutrient content disclosure requirements and to adapt our menu offerings to trends in eating habits. The imposition of menu-labeling laws could have an adverse effect on our results of operations and financial position, as well as the hospitality industry in general.

Our insurance may not provide adequate levels of coverage against claims.

        We believe that we maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Such losses could have a material adverse effect on our business and results of operations.

Because a component of our strategy is to continue to grow our licensed business internationally, the risks of doing business internationally could lower our revenues, increase our costs, reduce our profits or disrupt our business.

        Twenty-two of our 27 licensed Shacks are located outside the United States and we expect to continue to expand our licensed Shacks internationally. As a result, we are and will be, on an increasing basis, subject to the risks of doing business outside the United States, including:

    changes in foreign currency exchange rates or currency restructurings and hyperinflation or deflation in the countries in which our licensees operate;

    the imposition of restrictions on currency conversion or the transfer of funds or limitations on our ability to repatriate non-U.S. earnings in a tax effective manner;

    the presence and acceptance of varying levels of business corruption in international markets;

    the ability to comply with, or impact of complying with, complex and changing laws, regulations and policies of foreign governments that may affect investments or operations, including foreign ownership restrictions, import and export controls, tariffs, embargoes, intellectual property, licensing requirements and regulations, increases in taxes paid and other changes in applicable tax laws;

    the difficulties involved in managing an organization doing business in many different countries;

    the ability to comply with, or impact of complying with, complex and changing laws, regulations and economic and political policies of the U.S. government, including U.S. laws and regulations relating to economic sanctions, export controls and anti-boycott requirements;

    increases in anti-American sentiment and the identification of the licensed brand as an American brand;

    the effect of disruptions caused by severe weather, natural disasters, outbreak of disease or other events that make travel to a particular region less attractive or more difficult; and

    political and economic instability.

        Any or all of these factors may adversely affect the performance of and licensing fees we receive from our licensed Shacks located in international markets. In particular, our international licensed Shacks operate in several volatile regions that are subject to geopolitical and sociopolitical factors that pose risk to our business operations. In addition, the economy of any region in which our Shacks are located may be adversely affected to a greater degree than that of other areas of the country or the world by certain developments affecting industries concentrated in that region or country. While these factors and the impact of these factors are difficult to predict, any one or more of them could lower our revenues, increase our costs, reduce our profits or disrupt our business, and, as our international licensed operations increase, these risks will become more pronounced.

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Because of our international licensed operations, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws.

        A significant portion of our licensed operations are located outside the United States. The U.S. Foreign Corrupt Practices Act, and other similar anti-bribery and anti-kickback laws and regulations, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. While our license agreements mandate compliance with applicable law, we cannot assure you that we will be successful in preventing our employees or other agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.

Changes in statutory, regulatory, accounting, and other legal requirements could potentially impact our operating and financial results.

        We are subject to numerous statutory, regulatory and legal requirements, domestically and abroad. Our operating results could be negatively impacted by developments in these areas due to the costs of compliance in addition to possible government penalties and litigation in the event of deemed noncompliance. Changes in the regulatory environment in the area of food safety, privacy and information security, wage and hour laws, among others, could potentially impact our operations and financial results.

        We lease all of our domestic company-operated Shacks, and each is classified as an operating lease. The Financial Accounting Standards Board ("FASB") has issued an exposure draft that will revise lease accounting and require many leases currently considered to be operating leases to instead be classified as capital leases. The primary impact to this exposure draft would be that such leases would be recorded on the balance sheet as debt, and they currently have an off-balance sheet classification as operating leases. The timeline for effectiveness of this pronouncement, as well as the final guidelines and potential financial impact, are unclear at this point.

Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets may result in volatility of our operating results.

        We are subject to income taxes in various U.S. and foreign jurisdictions. We record tax expense based on our estimates of future payments, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets. At any one time, many tax years may be subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. We expect that throughout the year there could be ongoing variability in our quarterly tax rates as events occur and exposures are evaluated.

        In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance or by changes to existing accounting rules or regulations. Further, tax legislation may be enacted in the future which could negatively impact our current or future tax structure and effective tax rates.

We may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect our business.

        Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our trademarks, service marks, proprietary products and other intellectual property, including our name and logos and the unique character and atmosphere of our Shacks. We rely on U.S. and foreign trademark, copyright, and trade secret laws, as well as license agreements,

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nondisclosure agreements, and confidentiality and other contractual provisions to protect our intellectual property. Nevertheless, our competitors may develop similar menu items and concepts, and adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets and other intellectual property.

        The success of our business depends on our continued ability to use our existing trademarks and service marks to increase brand awareness and further develop our brand in both domestic and international markets. We have registered and applied to register trademarks and service marks in the United States and foreign jurisdictions. We may not be able to adequately protect our trademarks and service marks, and our competitors and others may successfully challenge the validity and/or enforceability of our trademarks and service marks and other intellectual property. The steps we have taken to protect our intellectual property in the United States and in foreign countries may not be adequate. In addition, the laws of some foreign countries do not protect intellectual property to the same extent as the laws of the United States.

        If our efforts to maintain and protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on our intellectual property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our brands from achieving or maintaining market acceptance.

        We may also from time to time be required to institute litigation to enforce our trademarks, service marks and other intellectual property. Such litigation could result in substantial costs and diversion of resources and could negatively affect our sales, profitability and prospects regardless of whether we are able to successfully enforce our rights.

        Third parties may assert that we infringe, misappropriate or otherwise violate their intellectual property and may sue us for intellectual property infringement. Even if we are successful in these proceedings, we may incur substantial costs, and the time and attention of our management and other personnel may be diverted in pursuing these proceedings. If a court finds that we infringe a third party's intellectual property, we may be required to pay damages and/or be subject to an injunction. With respect to any third party intellectual property that we use or wish to use in our business (whether or not asserted against us in litigation), we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms.

Restaurant companies have been the target of class action lawsuits and other proceedings that are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs.

        Our business is subject to the risk of litigation by employees, guests, suppliers, licensees, stockholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action and regulatory actions, is difficult to assess or quantify. In recent years, restaurant companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state laws regarding workplace and employment matters, discrimination and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Similar lawsuits have been instituted from time to time alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal deductions, overtime eligibility of assistant managers and failure to pay for all hours worked. While we have not been a party to any of these types of lawsuits in the past, there can be no assurance that we will not be named in any such lawsuit in the future or that we would not be required to pay substantial expenses and/or damages.

        Occasionally, our guests file complaints or lawsuits against us alleging that we are responsible for some illness or injury they suffered at or after a visit to one of our Shacks, including actions seeking damages resulting from food-borne illness or accidents in our Shacks. We are also subject to a variety

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of other claims from third parties arising in the ordinary course of our business, including contract claims. The restaurant industry has also been subject to a growing number of claims that the menus and actions of restaurant chains have led to the obesity of certain of their customers.

        Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from our operations. In addition, they may generate negative publicity, which could reduce guest traffic and Shack sales. Although we maintain what we believe to be adequate levels of insurance, insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims or any adverse publicity resulting from claims could adversely affect our business and results of operations.

Our business is subject to risks related to our sale of alcoholic beverages.

        We serve beer and wine at most of our Shacks. Alcoholic beverage control regulations generally require our Shacks to apply to a state authority and, in certain locations, county or municipal authorities for a license that must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of daily operations of our Shacks, including minimum age of patrons and employees, hours of operation, advertising, trade practices, wholesale purchasing, other relationships with alcohol manufacturers, wholesalers and distributors, inventory control and handling, storage and dispensing of alcoholic beverages. Any future failure to comply with these regulations and obtain or retain licenses could adversely affect our business, financial condition and results of operations.

        We are also subject in certain states to "dram shop" statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. We carry liquor liability coverage as part of our existing comprehensive general liability insurance. Recent litigation against restaurant chains has resulted in significant judgments and settlements under dram shop statutes. Because these cases often seek punitive damages, which may not be covered by insurance, such litigation could have an adverse impact on our business, results of operations or financial condition. Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from operations and hurt our financial performance. A judgment significantly in excess of our insurance coverage or not covered by insurance could have a material adverse effect on our business, results of operations or financial condition.

Our business is subject to seasonal fluctuations.

        Our business is subject to seasonal fluctuations in that our Shack sales are typically higher during the summer months affecting the second and third quarters of the fiscal year. Our quarterly results have been and will continue to be affected by the timing of new Shack openings and their associated pre-opening costs. As a result of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.

Because many of our domestic company-operated Shacks are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas.

        Our financial performance is highly dependent on Shacks located in the Northeast and the New York City metropolitan area, which comprised approximately 61% (or 14 out of 23) of our total domestic company-operated Shacks as of June 25, 2014. As a result, adverse economic conditions in any of these areas could have a material adverse effect on our overall results of operations. In addition,

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given our geographic concentrations, negative publicity regarding any of our Shacks in these areas could have a material adverse effect on our business and operations, as could other regional occurrences such as local strikes, terrorist attacks, increases in energy prices, inclement weather or natural or man-made disasters.

        In particular, adverse weather conditions, such as regional winter storms, floods, severe thunderstorms and hurricanes, could negatively impact our results of operations. Recently, we have experienced temporary Shack closures on the east coast due to Superstorm Sandy, which resulted in the closing of 11 Shacks for at least one day. Temporary or prolonged Shack closures may occur and guest traffic may decline due to the actual or perceived effects of future weather related events.

Risks Related to Our Company and Our Organizational Structure

Our principal asset after the completion of this offering will be our interest in SSE Holdings, and, accordingly, we will depend on distributions from SSE Holdings to pay our taxes and expenses, including payments under the Tax Receivable Agreement. SSE Holdings' ability to make such distributions may be subject to various limitations and restrictions.

        Upon the consummation of this offering, we will be a holding company and will have no material assets other than our ownership of LLC Interests of SSE Holdings. As such, we will have no independent means of generating revenue or cash flow, and our ability to pay our taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the financial results and cash flows of SSE Holdings and its subsidiaries and distributions we receive from SSE Holdings. There can be no assurance that our subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions, including negative covenants in our debt instruments, will permit such distributions.

        SSE Holdings will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to holders of LLC Interests, including us. Accordingly, we will incur income taxes on our allocable share of any net taxable income of SSE Holdings. Under the terms of the SSE Holdings LLC Agreement, SSE Holdings will be obligated to make tax distributions to holders of LLC Interests, including us. In addition to tax expenses, we will also incur expenses related to our operations, including payments under the Tax Receivable Agreement, which we expect could be significant. See "Certain Relationships and Related Party Transactions—Tax Receivable Agreement." We intend, as its managing member, to cause SSE Holdings to make cash distributions to the owners of LLC Interests in an amount sufficient to (i) fund their tax obligations in respect of taxable income allocated to them and (ii) cover our operating expenses, including payments under the Tax Receivable Agreement. However, SSE Holdings' ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which SSE Holdings is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering SSE Holdings insolvent. If we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow funds, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement. See "Certain Relationships and Related Party Transactions—Tax Receivable Agreement." In addition, if SSE Holdings does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired. See "—Risks Related to This Offering and Ownership of Our Class A Common Stock" and "Dividend Policy."

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The Tax Receivable Agreement with the Continuing SSE Equity Owners requires us to make cash payments to them in respect of certain tax benefits to which we may become entitled, and we expect that the payments we will be required to make will be substantial.

        Upon the closing of this offering, we will be a party to the Tax Receivable Agreement with the Continuing SSE Equity Owners. Under the Tax Receivable Agreement, we will be required to make cash payments to the Continuing SSE Equity Owners equal to 85% of the tax benefits, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (1) the increases in the tax basis of assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests from the Continuing SSE Equity Owners as described under "Certain Relationships and Related Party Transactions—SSE Holdings LLC Agreement—LLC Interest Redemption Right," and (2) certain other tax benefits related to our making payments pursuant to the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. The amount of the cash payments that we will be required to make under the Tax Receivable Agreement we expect will be significant. Any payments made by us to the Continuing SSE Equity Owners under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us. Furthermore, our future obligation to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the Tax Receivable Agreement. For more information, see "Certain Relationships and Related Party Transactions—Tax Receivable Agreement." Payments under the Tax Receivable Agreement are not conditioned on any Continuing SSE Equity Owner's continued ownership of LLC Interests or our Class A common stock after this offering.

        The actual amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of LLC Interests, the amount of gain recognized by such holders of LLC Interests, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable.

In certain cases, payments under the Tax Receivable Agreement to the Continuing SSE Equity Owners may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.

        The Tax Receivable Agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control or if, at any time, we elect an early termination of the Tax Receivable Agreement, then our obligations, or our successor's obligations, under the Tax Receivable Agreement to make payments thereunder would be based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.

        As a result of the foregoing, (i) we could be required to make payments under the Tax Receivable Agreement that are greater than the specified percentage of the actual benefits we ultimately realize in respect of the tax benefits that are subject to the Tax Receivable Agreement and (ii) if we elect to terminate the Tax Receivable Agreement early, we would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. There can be no assurance that we will be able to fund or finance our obligations under the Tax Receivable Agreement.

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We will not be reimbursed for any payments made to the Continuing SSE Equity Owners under the Tax Receivable Agreement in the event that any tax benefits are disallowed.

        Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, and the Internal Revenue Service (the "IRS") or another tax authority may challenge all or part of the tax basis increases, as well as other related tax positions we take, and a court could sustain such challenge. We will not be reimbursed for any cash payments previously made to the Continuing SSE Equity Owners under the Tax Receivable Agreement in the event that any tax benefits initially claimed by us and for which payment has been made to a Continuing SSE Equity Owner are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by us to a Continuing SSE Equity Owner will be netted against any future cash payments that we might otherwise be required to make to such Continuing SSE Equity Owner under the terms of the Tax Receivable Agreement. However, we might not determine that we have effectively made an excess cash payment to a Continuing SSE Equity Owner for a number of years following the initial time of such payment. As a result, payments could be made under the Tax Receivable Agreement in excess of the tax savings that we realize in respect of the tax attributes with respect to a Continuing SSE Equity Owner that are the subject of the Tax Receivable Agreement.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition.

        We are subject to taxes by the U.S. federal, state, local and foreign tax authorities, and our tax liabilities will be affected by the allocation of expenses to differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

    changes in the valuation of our deferred tax assets and liabilities;

    expected timing and amount of the release of any tax valuation allowances;

    tax effects of stock-based compensation;

    changes in tax laws, regulations or interpretations thereof; or

    future earnings being lower than anticipated in countries where we have lower statutory tax rates and higher than anticipated earnings in countries where we have higher statutory tax rates.

        In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal, state, local and foreign taxing authorities. Outcomes from these audits could have an adverse effect on our operating results and financial condition.

If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), as a result of our ownership of SSE Holdings, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

        Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an "investment company" for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an "investment company," as such term is defined in either of those sections of the 1940 Act.

        As the sole managing member of SSE Holdings, we will control and operate SSE Holdings. On that basis, we believe that our interest in SSE Holdings is not an "investment security" as that term is

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used in the 1940 Act. However, if we were to cease participation in the management of SSE Holdings, our interest in SSE Holdings could be deemed an "investment security" for purposes of the 1940 Act.

        We and SSE Holdings intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

Shake Shack is controlled by the Original SSE Equity Owners, whose interests may differ from those of our public stockholders.

        Immediately following this offering and the application of net proceeds from this offering, the Original SSE Equity Owners will control approximately        % of the combined voting power of our common stock through their ownership of both Class A common stock and Class B common stock. The Original SSE Equity Owners will, for the foreseeable future, have significant influence over corporate management and affairs, and will be able to control virtually all matters requiring stockholder approval. The Original SSE Equity Owners are able to, subject to applicable law, and the voting arrangements described in "Certain Relationships and Related Party Transactions," elect a majority of the members of our board of directors and control actions to be taken by us and our board of directors, including amendments to our certificate of incorporation and bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. The directors so elected will have the authority, subject to the terms of our indebtedness and applicable rules and regulations, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. It is possible that the interests of the Original SSE Equity Owners may in some circumstances conflict with our interests and the interests of our other stockholders, including you. For example, the Original SSE Equity Owners may have different tax positions from us, especially in light of the Tax Receivable Agreement that could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when Shake Shack should terminate the Tax Receivable Agreement and accelerate its obligations thereunder. In addition, the determination of future tax reporting positions and the structuring of future transactions may take into consideration these Original SSE Equity Owners' tax or other considerations, which may differ from the considerations of us or our other stockholders. See "Certain Relationships and Related Party Transactions—Tax Receivable Agreement."

        In addition, certain of the Original SSE Equity Owners are in the business of making or advising on investments in companies and may hold, and may from time to time in the future acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or the business of our suppliers. Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by law, none of the Original SSE Equity Owners or any director who is not employed by us or his or her affiliates will have any duty to refrain from engaging in a corporate opportunity in the same or similar lines of business as us. The Original SSE Equity Owners may also pursue acquisitions that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

We are a "controlled company" within the meaning of the                        listing standards and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

        Substantially concurrent with the closing of this offering, the Voting Group, which will hold Class A common stock and Class B common stock representing approximately        % of the combined voting power of our common stock, intends to enter into the Voting Agreement. Pursuant to the terms of the Voting Agreement, until such time as certain members of the Voting Group collectively control

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less than        % of the combined voting power of our Class A and Class B common stock, or the Voting Agreement is otherwise terminated in accordance with its terms, the parties to the Voting Agreement will agree to vote their shares of Class A common stock and Class B common stock in favor of the election of the nominees of certain members of the Voting Group to our board of directors upon their nomination by the nominating and corporate governance committee of our board of directors. See "Description of Capital Stock—Voting Agreement."

        Because of the Voting Agreement and the aggregate voting power over our Class A common stock and Class B common stock held by the parties to the Voting Agreement, we are considered a "controlled company" for the purposes of                        . As such, we are exempt from certain corporate governance requirements of                        , including (1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors and (3) the requirement that we have a compensation committee that is composed entirely of independent directors. Following this offering, we intend to rely on some or all of these exemptions. As a result, we will not have a majority of independent directors and our compensation and nominating and corporate governance committees will not consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of                        .

Our anti-takeover provisions could prevent or delay a change in control of our Company, even if such change in control would be beneficial to our stockholders.

        Provisions of our amended and restated certificate of incorporation and amended and restated bylaws as well as provisions of Delaware law could discourage, delay or prevent a merger, acquisition or other change in control of our Company, even if such change in control would be beneficial to our stockholders. These provisions include:

    authorizing the issuance of "blank check" preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;

    establishing a classified board of directors so that not all members of our board of directors are elected at one time;

    the removal of directors only for cause;

    prohibiting the use of cumulative voting for the election of directors;

    limiting the ability of stockholders to call special meetings or amend our bylaws;

    requiring all stockholder actions to be taken at a meeting of our stockholders; and

    establishing advance notice and duration of ownership requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

        These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team.

        In addition, the Delaware General Corporation Law, or the DGCL, to which we are subject, prohibits us, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with any stockholder or group of stockholders who owns at least 15% of our common stock.

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We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Class A common stock, which could depress the price of our Class A common stock.

        Our amended and restated certificate of incorporation will authorize us to issue one or more series of preferred stock. Our board of directors will have the authority to determine the preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our Class A common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discourage bids for our Class A common stock at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our Class A common stock.

The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.

        Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or the bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery in the State of Delaware. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.

Risks Related to This Offering and Ownership of Our Class A Common Stock

Immediately following the consummation of this offering, the Continuing SSE Equity Owners will have the right to have their LLC Interests redeemed pursuant to the terms of the SSE Holdings LLC Agreement.

        After this offering, we will have an aggregate of more than                shares of Class A common stock authorized but unissued, including approximately                shares of Class A common stock issuable upon redemption of LLC Interests that will be held by the Continuing SSE Equity Owners. SSE Holdings will enter into the SSE Holdings LLC Agreement and, subject to certain restrictions set forth therein and as described elsewhere in this prospectus, the Continuing SSE Equity Owners will be entitled to have their LLC Interests redeemed for shares of our Class A common stock. We also intend to enter into a Registration Rights Agreement pursuant to which the shares of Class A common stock issued to the Continuing SSE Equity Owners upon redemption of LLC Interests and the shares of Class A common stock issued to the Former SSE Equity Owners in connection with the Transactions will be eligible for resale, subject to certain limitations set forth therein. See "Certain Relationships and Related Party Transactions—Registration Rights Agreement."

        We cannot predict the size of future issuances of our Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock may have on the market price of our Class A common stock. Sales or distributions of substantial amounts of our Class A common stock, including shares issued in connection with an acquisition, or the perception that such sales or distributions could occur, may cause the market price of our Class A common stock to decline.

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If you purchase shares of Class A common stock in this offering, you will incur immediate and substantial dilution.

        Dilution is the difference between the offering price per share and the pro forma net tangible book value per share of our Class A common stock immediately after the offering. The price you pay for shares of our Class A common stock sold in this offering is substantially higher than our pro forma net tangible book value per share immediately after this offering. If you purchase shares of Class A common stock in this offering, you will incur immediate and substantial dilution in the amount of $            per share based upon an assumed initial public offering price of $            per share (the midpoint of the price range listed on the cover page of this prospectus). In addition, you may also experience additional dilution, or potential dilution, upon future equity issuances to investors or to our employees and directors under our stock option plan and any other equity incentive plans we may adopt. As a result of this dilution, investors purchasing shares of Class A common stock in this offering may receive significantly less than the full purchase price that they paid for the stock purchased in this offering in the event of liquidation. See "Dilution."

We do not know whether a market will develop for our Class A common stock or what the market price of our Class A common stock will be and as a result it may be difficult for you to sell your shares of our Class A common stock.

        Before this offering, there was no public trading market for our Class A common stock. If a market for our Class A common stock does not develop or is not sustained, it may be difficult for you to sell your shares of Class A common stock at an attractive price or at all. We cannot predict the prices at which our Class A common stock will trade. It is possible that in one or more future periods our results of operations may be below the expectations of public market analysts and investors and, as a result of these and other factors, the price of our Class A common stock may fall.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our Class A common stock, the price of our Class A common stock could decline.

        The trading market for our Class A common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our Class A common stock could decline. If one or more of these analysts cease to cover our Class A common stock, we could lose visibility in the market for our stock, which in turn could cause our Class A common stock price to decline.

Our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

        After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

    low same Shack sales growth compared to market expectations;

    delays in the planned openings of new Shacks;

    quarterly variations in our operating results compared to market expectations;

    changes in preferences of our guests;

    adverse publicity about us, the industries we participate in or individual scandals;

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    announcements of new offerings or significant price reductions by us or our competitors;

    stock price performance of our competitors;

    changes in the price and availability of food commodities, particularly beef and dairy;

    fluctuations in stock market prices and volumes;

    default on our indebtedness;

    actions by competitors;

    changes in senior management or key personnel;

    changes in financial estimates by securities analysts;

    the market's reaction to our reduced disclosure as a result of being an "emerging growth company" under the JOBS Act;

    negative earnings or other announcements by us or other restaurant companies;

    downgrades in our credit ratings or the credit ratings of our competitors;

    incurrence of indebtedness or issuances of capital stock;

    global economic, legal and regulatory factors unrelated to our performance; and

    the other factors listed in this "Risk Factors" section.

        The initial public offering price of our Class A common stock will be determined by negotiations between us and the underwriters based upon a number of factors and may not be indicative of prices that will prevail following the closing of this offering. Volatility in the market price of our common stock may prevent investors from being able to sell their Class A common stock at or above the initial public offering price. As a result, you may suffer a loss on your investment.

        In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies in our industry. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

Substantial future sales of our Class A common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

        Sales of substantial amounts of our Class A common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our Class A common stock and could impair our ability to raise capital through the sale of additional shares. Upon the closing of this offering, we will have                shares of Class A common stock outstanding (or                if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and                shares of Class A common stock that would be issuable upon redemption or exchange of LLC Interests authorized but unissued. The shares of Class A common stock offered in this offering will be freely tradable without restriction under the Securities Act, except for any shares of our common stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.

        The remaining outstanding                shares of Class A common stock held by the Former SSE Equity Owners and the Former UAR Plan Participants will be subject to certain restrictions on sale.

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We and each of our executive officers and directors and the Original SSE Equity Owners and the Former UAR Plan Participants, which collectively will hold        % of our outstanding capital stock (including shares of Class A common stock issuable upon redemption or exchange of LLC Interests) upon the closing of this offering, have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any shares of common stock or securities convertible into or exchangeable for (including the LLC Interests), or that represent the right to receive, shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC. See "Underwriting." All of our shares of common stock outstanding as of the date of this prospectus (and shares of Class A common stock issuable upon redemption or exchange of LLC Interests) may be sold in the public market by existing stockholders following the expiration of the applicable lock-up period, subject to applicable limitations imposed under federal securities laws.

        We also intend to enter into a Registration Rights Agreement pursuant to which the shares of Class A common stock issued upon redemption or exchange of LLC Interests held by the Continuing SSE Equity Owners and the shares of Class A common stock issued to the Former SSE Equity Owners in connection with the Transactions will be eligible for resale, subject to certain limitations set forth therein. See "Certain Relationships and Related Party Transactions—Registration Rights Agreement."

        We intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of Class A common stock subject to outstanding options and Class A common stock issued or issuable under our stock plans. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market following the expiration of the applicable lock-up period. We expect that the initial registration statement on Form S-8 will cover                shares of our Class A common stock.

        See "Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling shares of our common stock after this offering.

        In the future, we may also issue additional securities if we need to raise capital, which could constitute a material portion of our then-outstanding shares of common stock.

Taking advantage of the reduced disclosure requirements applicable to "emerging growth companies" may make our Class A common stock less attractive to investors.

        The JOBS Act provides that, so long as a company qualifies as an "emerging growth company," it will, among other things:

    be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;

    be exempt from the "say on pay" and "say on golden parachute" advisory vote requirements of the Dodd-Frank Wall Street Reform and Customer Protection Act (the "Dodd-Frank Act");

    be exempt from certain disclosure requirements of the Dodd-Frank Act relating to compensation of its executive officers and be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and

    be permitted to provide a reduced level of disclosure concerning executive compensation and be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor's report on the financial statements.

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        We currently intend to take advantage of the reduced disclosure requirements regarding executive compensation. We have irrevocably elected not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 107(b) of the JOBS Act. We could be an emerging growth company for up to five years after this offering. If we remain an "emerging growth company" after fiscal 2014, we may take advantage of other exemptions, including the exemptions from the advisory vote requirements and executive compensation disclosures under the Dodd-Frank Act and the exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act. We cannot predict if investors will find our Class A common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our Class A common stock. Also, as a result of our intention to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us as long as we qualify as an "emerging growth company," our financial statements may not be comparable to those of companies that fully comply with regulatory and reporting requirements upon the public company effective dates.

We will incur increased costs as a result of becoming a public company and in the administration of our organizational structure.

        As a public company, we will incur significant legal, accounting, insurance and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the Securities and Exchange Commission ("SEC"). Following the completion of this offering, we will incur ongoing periodic expenses in connection with the administration of our organizational structure. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. In estimating these costs, we took into account expenses related to insurance, legal, accounting, and compliance activities, as well as other expenses not currently incurred. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

        We are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC's rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Though we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. However, as an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of

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the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

        To comply with the requirements of being a public company, we have undertaken various actions, and may need to take additional actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal control can divert our management's attention from other matters that are important to the operation of our business. Additionally, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. For example, a material weakness was identified during fiscal 2014 relating to prior period financial statement close procedures. We have since remediated this material weakness. If we identify any additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

We do not currently expect to pay any cash dividends.

        The continued operation and expansion of our business will require substantial funding. Accordingly, we do not currently expect to pay any cash dividends on shares of our Class A common stock. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. We are a holding company, and substantially all of our operations are carried out by SSE Holdings and its subsidiaries. Under the Revolving Credit Facility, SSE Holdings is currently restricted from paying cash dividends, and we expect these restrictions to continue in the future. Our ability to pay dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred equity securities of ours or of our subsidiaries. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our Class A common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our Class A common stock.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

        Shake Shack intends to use the proceeds of this offering to purchase newly issued LLC Interests as described in "The Transactions" and "Use of Proceeds." We cannot specify with certainty the particular uses of the net proceeds that SSE Holdings will receive from such purchase. Our management will have broad discretion in SSE Holdings' application of such proceeds, including for any of the purposes described in "Use of Proceeds." Accordingly, you will have to rely upon the judgment of our management with respect to the use of the proceeds, with only limited information concerning management's specific intentions. Our management may cause SSE Holdings to spend a portion or all of the net proceeds from this offering in ways that our stockholders may not desire or that may not yield a favorable return. The failure by our management to cause SSE Holdings, to apply these funds effectively could harm our business. Pending their use, SSE Holdings may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding the Transactions, expected new Shack openings, future capital expenditures and debt service obligations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "targets," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions.

        Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these factors include, but are not limited to, the following:

    our inability to successfully identify and secure appropriate sites and timely develop and expand our operations;

    our inability to protect our brand and reputation;

    our failure to prevent food safety and food-borne illness incidents;

    shortages or interruptions in the supply or delivery of food products;

    our inability to maintain our international supply chain;

    our dependence on a small number of suppliers and a single distribution company for the majority of our domestic distribution program;

    our inability to protect against security breaches of confidential guest information;

    competition from other restaurants;

    changes in consumer tastes and nutritional and dietary trends;

    our inability to manage our growth;

    our inability to open profitable Shacks;

    our failure to generate projected same Shack sales growth;

    our inability to maintain sufficient levels of cash flow, or access to capital, to meet growth expectations;

    our dependence on long-term non-cancelable leases;

    our failure to meet the operational and financial performance guidance we provide to the public;

    our dependence on key executive management;

    our inability to identify qualified individuals for our workforce;

    labor relations difficulties;

    our vulnerability to increased food commodity and energy costs;

    our vulnerability to health care costs and labor costs;

    our vulnerability to global financial market conditions, including the continuing effects from the recent recession;

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    our sale of alcoholic beverages;

    our dependence on a limited number of licensees;

    our inability to maintain good relationships with our licensees;

    violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws;

    our ability to adequately protect our intellectual property;

    our business model being susceptible to litigation;

    failure to obtain and maintain required licenses and permits to comply with alcoholic beverage or food control regulations;

    our vulnerability to adverse weather conditions in local or regional areas where our Shacks are located; and

    the Voting Group's control of us.

        The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

        These forward-looking statements speak only as of the date of this prospectus. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this prospectus after we distribute this prospectus, whether as a result of any new information, future events or otherwise.

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THE TRANSACTIONS

Existing Organization

        Prior to the consummation of this offering and the organizational transactions described below, the Original SSE Equity Owners are the only members of SSE Holdings. SSE Holdings is treated as a partnership for U.S. federal income tax purposes and, as such, is not subject to any U.S. federal entity-level income taxes. Rather, taxable income or loss is included in the U.S. federal income tax returns of SSE Holdings' members.

        Shake Shack was incorporated as a Delaware corporation on September 23, 2014 to serve as the issuer of the Class A common stock offered hereby.

Transactions

        In connection with the closing of this offering we will consummate the following transactions, which we refer to as the "Transactions":

    we will amend and restate the SSE Holdings LLC Agreement, to, among other things, (i) provide for LLC Interests that will be the single class of common membership interests in SSE Holdings, (ii) exchange all of the Original SSE Equity Owners' existing membership interests in SSE Holdings for LLC Interests and (iii) appoint Shake Shack as the sole managing member of SSE Holdings;

    we will amend and restate Shake Shack's certificate of incorporation to, among other things, (i) provide for Class A common stock and Class B common stock and (ii) issue shares of Class B common stock to the Continuing SSE Equity Owners, on a one-to-one basis with the number of LLC Interests they own, for nominal consideration;

    we will issue                shares of our Class A common stock to the purchasers in this offering (or                 shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock) in exchange for net proceeds of approximately $             million (or approximately $             million if the underwriters exercise in full their option to purchase additional shares of Class A common stock), assuming the shares are offered at $            per share (the midpoint of the price range listed on the cover page of this prospectus), after deducting underwriting discounts and commissions but before offering expenses;

    we will use all of the net proceeds from this offering (including net proceeds received upon exercise of the underwriters' option to purchase additional shares of Class A common stock) to acquire newly-issued LLC Interests from SSE Holdings at a purchase price per interest equal to the initial public offering price of Class A common stock, less underwriting discounts and commissions, collectively representing        % of SSE Holdings' outstanding LLC Interests (or         %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

    SSE Holdings will use the proceeds from the sale of LLC Interests to Shake Shack (i) to pay the fees and expenses in connection with this offering and (ii) for general corporate purposes, including opening new Shacks and renovating existing Shacks. See "Use of Proceeds;"

    the Former SSE Equity Owners will transfer their LLC Interests for                shares of Class A common stock on a one-to-one basis;

    the Former UAR Plan Participants will receive            shares of Class A common stock in settlement of their awards under the UAR Plan (and Shake Shack will receive a corresponding number of LLC Interests from SSE Holdings);

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    the Continuing SSE Equity Owners will continue to own the LLC Interests they received in exchange for their existing membership interests in SSE Holdings; and

    Shake Shack will enter into (i) the Tax Receivable Agreement with the Continuing SSE Equity Owners and (ii) the Registration Rights Agreement with the Continuing SSE Equity Owners who, assuming that all of the LLC Interests of the Continuing SSE Equity Owners are redeemed or exchanged for newly-issued shares of Class A common stock on a one-for-one basis, will own                shares of Shake Shack's Class A common stock, representing approximately        % of the combined voting power of all of Shake Shack's common stock (or approximately        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), and the Former SSE Equity Owners. For a description of the terms of the Registration Rights Agreement and the Tax Receivable Agreement, see "Certain Relationships and Related Party Transactions."

Organizational Structure Following this Offering

        Immediately following the completion of the Transactions, including this offering:

    Shake Shack will be a holding company and the principal asset of Shake Shack will be LLC Interests of SSE Holdings;

    Shake Shack will be the sole managing member of SSE Holdings and will control the business and affairs of SSE Holdings and its subsidiaries;

    our amended and restated certificate of incorporation and the SSE Holdings LLC Agreement will require that we and SSE Holdings at all times maintain a one-to-one ratio between the number of shares of Class A common stock issued by us and the number of LLC Interests owned by us, as well as a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing SSE Equity Owners and the number of LLC Interests owned by the Continuing SSE Equity Owners;

    Shake Shack will own LLC Interests representing        % of the economic interest in SSE Holdings (or         %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

    the purchasers in this offering (i) will own                shares of Class A common stock, representing approximately        % of the combined voting power of all of Shake Shack's common stock (or approximately        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), (ii) will own        % of the economic interest in Shake Shack (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and (iii) through Shake Shack's ownership of LLC Interests, indirectly will hold (applying the percentages in the preceding clause (ii) to Shake Shack's percentage economic interest in SSE Holdings) approximately        % of the economic interest in SSE Holdings (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

    the Former SSE Equity Owners and the Former UAR Plan Participants (i) will own                shares of Class A common stock, representing approximately        % of the combined voting power of all of Shake Shack's common stock (or approximately        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), (ii) will own        % of the economic interest in Shake Shack (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and (iii) through Shake Shack's ownership of LLC Interests, indirectly will hold (applying the percentages in the preceding clause (ii) to Shake Shack's percentage economic interest in SSE Holdings)

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      approximately        % of the economic interest in SSE Holdings (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

    the Continuing SSE Equity Owners will own (i) LLC Interests, representing        % of the economic interest in SSE Holdings (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and (ii) through their ownership of Class B common stock, approximately        % of the voting power in Shake Shack (or approximately        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock). Following the offering, each LLC Interest held by the Continuing SSE Equity Owners will be redeemable, at the election of such members, for, at Shake Shack's option, newly-issued shares of Class A common stock on a one-for-one basis or a cash payment equal to a volume weighted average market price of one share of Class A common stock for each LLC Interest redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the SSE Holdings LLC Agreement. See "Certain Relationships and Related Party Transactions—SSE Holdings LLC Agreement;" and

    the Original SSE Equity Owners collectively (i) will own Class A and Class B common stock representing approximately        % of the combined voting power of all of Shake Shack's common stock (or approximately        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and (ii) will own        % of the economic interest in SSE Holdings (or        %, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), representing both a direct interest through the Continuing SSE Equity Owners' ownership of LLC Interests and an indirect interest through the Former SSE Equity Owners' ownership of Class A common stock.

        Immediately following this offering, we will be a holding company and our principal asset will be the LLC Interests we purchase from SSE Holdings and acquire from the Former SSE Equity Owners. As the sole managing member of SSE Holdings, we will operate and control all of the business and affairs of SSE Holdings and, through SSE Holdings and its subsidiaries, conduct our business. Accordingly, although we will have a minority economic interest in SSE Holdings, we will have the sole voting interest in, and control the management of, SSE Holdings. As a result, we will consolidate SSE Holdings in our consolidated financial statements and will report a non-controlling interest related to the LLC Interests held by the Continuing SSE Equity Owners on our consolidated financial statements.

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        The following diagram shows our organizational structure after giving effect to the Transactions, including this offering, assuming no exercise by the underwriters of their option to purchase additional shares of Class A common stock:

GRAPHIC

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USE OF PROCEEDS

        We estimate that the net proceeds to us of the sale of the Class A common stock that we are offering will be approximately $             million, assuming an initial public offering price of $            per share, which is the midpoint of the price range listed on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) the net proceeds to us from this offering by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Our management will have broad discretion over the uses of the net proceeds in this offering.

        We intend to use the net proceeds to us from this offering to purchase            newly-issued LLC Interests from SSE Holdings at a purchase price per interest equal to the initial public offering price per share of Class A common stock less the underwriting discounts payable thereon.

        We intend to cause SSE Holdings to use the proceeds it receives (i) to pay the fees and expenses in connection with this offering and (ii) for general corporate purposes, including opening new Shacks and renovating existing Shacks.

        If the underwriters exercise their option to purchase additional shares of Class A common stock in full, we estimate that our net proceeds will be approximately $             million. We will use the net proceeds we receive pursuant to any exercise of the underwriters' option to purchase additional shares of Class A common stock to purchase additional LLC Interests from SSE Holdings to maintain the one-to-one ratio between the number of shares of Class A common stock issued by us and the number of LLC Interests owned by us. We intend to cause SSE Holdings to use the proceeds it receives for general corporate purposes, including opening new Shacks and renovating existing Shacks.

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CAPITALIZATION

        The following table sets forth the cash and capitalization as of June 25, 2014, as follows:

    of SSE Holdings and its subsidiaries on an actual basis; and

    of Shake Shack and its subsidiaries on a pro forma basis to give effect to the Transactions, including our issuance and sale of shares of Class A common stock in this offering at an assumed initial public offering price of $            per share, the midpoint of the price range listed on the cover page of this prospectus, after (i) deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the application of the proceeds from the offering, each as described under "Use of Proceeds."

        For more information, please see "The Transactions," "Use of Proceeds" and "Unaudited Pro Forma Consolidated Financial Information" elsewhere in this prospectus. You should read this information in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and other financial information contained in this prospectus.

 
  As of June 25, 2014  
(in thousands, except share and per share data)
  SSE Holdings, LLC
Actual
  Shake Shack Inc.
Pro Forma(3)
 

Cash

  $ 5,843   $    
           
           

Long-term indebtedness:

             

Revolving Credit Facility(1)

  $   $    

Promissory note

    313        
           

Total long-term indebtedness

    313        

Total equity:

             

Members' equity

    36,692        

Class A common stock, par value $        per share; no shares authorized, issued and outstanding, actual;             shares authorized,            issued and outstanding, pro forma

           

Class B common stock, par value $        per share; no shares authorized, issued and outstanding, actual;             shares authorized,            issued and outstanding, pro forma

           

Additional paid-in capital

           
           

Total members' equity/stockholders' equity

    36,692        
           

Noncontrolling interest(2)

           
           

Total capitalization

  $ 37,005   $    
           
           

(1)
As of June 25, 2014, we had availability of $29.9 million under the Revolving Credit Facility and $0.1 million in letters of credit outstanding. The Revolving Credit Facility will be amended or terminated in connection with this offering. We will enter into the New Credit Facility concurrently with the consummation of this offering. See "Description of Indebtedness."

(2)
On a pro forma basis, includes the LLC Interests not owned by us, which represents        % of SSE Holdings LLC's outstanding common equity.

(3)
A $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the price range listed on the cover page of this prospectus, would increase (decrease) the pro forma amount of each of cash, additional paid-in capital, total stockholders' equity and total capitalization by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after

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    deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

    The table above does not include            shares of Class A common stock reserved as of the closing date of this offering for future issuance under our stock option plan and up to              shares of Class A common stock issuable to the Continuing SSE Equity Owners upon redemption or exchange of their LLC Interests as described in "Certain Relationships and Related Party Transactions—SSE Holdings LLC Agreement." The table assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock.

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DIVIDEND POLICY

        We currently intend to retain all available funds and any future earnings for use in the operation of our business, and therefore we do not currently expect to pay any cash dividends on our Class A common stock. Holders of our Class B common stock are not entitled to participate in any dividends declared by our board of directors. Any future determination to pay dividends to holders of Class A common stock will be at the discretion of our board of directors and will depend upon many factors, including our results of operations, financial condition, capital requirements, restrictions in SSE Holdings' debt agreements and other factors that our board of directors deems relevant. We are a holding company, and substantially all of our operations are carried out by SSE Holdings and its subsidiaries. Additionally, under the Revolving Credit Facility, SSE Holdings is currently restricted from paying cash dividends, and we expect these restrictions to continue in the future, which may in turn limit our ability to pay dividends on our Class A common stock. Our ability to pay dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred equity securities of us or our subsidiaries. See "Risk Factors—We do not currently expect to pay any cash dividends."

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DILUTION

        Because the Continuing SSE Equity Owners do not own any Class A common stock or other economic interests in Shake Shack, we have presented dilution in pro forma net tangible book value per share after this offering assuming that all of the holders of LLC Interests (other than Shake Shack) had their LLC Interests redeemed or exchanged for newly-issued shares of Class A common stock on a one-for-one basis in order to more meaningfully present the dilutive impact on the investors in this offering. We refer to the assumed redemption or exchange of all LLC Interests for shares of Class A common stock as described in the previous sentence as the "Assumed Redemption."

        Dilution is the amount by which the offering price paid by the purchasers of the Class A common stock in this offering exceeds the pro forma net tangible book value per share of Class A common stock after the offering. SSE Holdings' net tangible book value as of June 25, 2014 was $36.1 million. Net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of Class A common stock deemed to be outstanding at that date.

        If you invest in our Class A common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value per share of our Class A common stock after this offering.

        Pro forma net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of Class A common stock, after giving effect to the Transactions, including this offering, and the Assumed Redemption. Our pro forma net tangible book value as of June 25, 2014 would have been approximately $             million, or $            per share of Class A common stock. This amount represents an immediate increase in pro forma net tangible book value of $            per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $            per share to new investors purchasing shares of Class A common stock in this offering. We determine dilution by subtracting the pro forma net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of Class A common stock. The following table illustrates this dilution:

Assumed initial public offering price per share

  $    

Pro forma net tangible book value per share as of June 25, 2014 before this offering(1)

       

Increase per share attributable to investors in this offering

       

Pro forma net tangible book value per share after this offering

  $    
       

Dilution per share to new Class A common stock investors

  $    
       
       

(1)
Gives pro forma effect to the Transactions (other than this offering) and the Assumed Redemption.

        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the price range listed on the cover page of this prospectus, would increase (decrease) the pro forma net tangible book value per share after this offering by approximately $            , and dilution in pro forma net tangible book value per share to new investors by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        If the underwriters exercise their option to purchase additional shares of our Class A common stock in full in this offering, the pro forma net tangible book value after the offering would be $            per share, the increase in pro forma net tangible book value per share to existing stockholders would be $            and the dilution per share to new investors would be $            per share, in each case

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assuming an initial public offering price of $            per share, which is the midpoint of the price range listed on the cover page of this prospectus.

        The following table summarizes, as of June 25, 2014 after giving effect to this offering, the differences between the Original SSE Equity Owners and the Former UAR Plan Participants and new investors in this offering with regard to:

    the number of shares of Class A common stock purchased from us by investors in this offering and the number of shares issued to the Original SSE Equity Owners and the Former UAR Plan Participants after giving effect to the Assumed Redemption,

    the total consideration paid to us in cash by investors purchasing shares of Class A common stock in this offering and by the Original SSE Equity Owners and the Former UAR Plan Participants, and

    the average price per share of Class A common stock that such Original SSE Equity Owners and Former UAR Plan Participants and new investors paid.

        The calculation below is based on an assumed initial public offering price of $            per share, which is the midpoint of the price range listed on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
  Shares purchased   Total consideration    
 
 
  Average price
per share
 
 
  Number   Percent   Amount   Percent  

Original SSE Equity Owners and Former UAR Plan Participants

            % $         % $    

New investors

                               
                       

Total

          100 % $       100 % $    
                       
                       

        Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) the total consideration paid by new investors and the total consideration paid by all shareholders by $             million, assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions but before estimated offering expenses.

        Except as otherwise indicated, the discussion and the tables above assume no exercise of the underwriters' option to purchase additional shares of Class A common stock. In addition, the discussion and tables above exclude shares of Class B common stock, which have no economic interest in our business. The number of shares of our Class A common stock outstanding after this offering as shown in the tables above is based on the number of shares outstanding as of June 25, 2014, after giving effect to the Transactions and the Assumed Redemption, and excludes:

                 shares of Class A common stock issuable upon exercise of stock options expected to be granted in connection with this offering, at an exercise price equal to the price per share in this offering; and

                 shares of Class A common stock expected to be available for future issuance under our stock-based compensation plans after the consummation of this offering. See "Executive Compensation—New Incentive Plans."

        To the extent any of these outstanding options are exercised, there will be further dilution to new investors. To the extent all of such outstanding options had been exercised as of June 25, 2014 the pro forma net tangible book value per share after this offering would be $            , and total dilution per share to new investors would be $            .

        If the underwriters exercise their option to purchase additional shares of Class A common stock in full:

    the percentage of shares of Class A common stock held by Original SSE Equity Owners and Former UAR Plan Participants will decrease to approximately        % of the total number of shares of our Class A common stock outstanding after this offering; and

    the number of shares held by new investors will increase to            , or approximately        % of the total number of shares of our Class A common stock outstanding after this offering.

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

        The following table presents the selected historical consolidated financial data for SSE Holdings, LLC and its subsidiaries. SSE Holdings, LLC is the predecessor of the issuer, Shake Shack Inc., for financial reporting purposes. The selected consolidated statement of operations data for each of the years in the two-year period ended December 25, 2013 and the selected consolidated balance sheet data as of December 26, 2012 and December 25, 2013 are derived from the audited consolidated financial statements of SSE Holdings, LLC and its subsidiaries contained herein. The selected consolidated statement of operations data for the twenty-six weeks ended June 25, 2014 and the selected consolidated balance sheet data as of June 25, 2014 are derived from the audited consolidated financial statements of SSE Holdings, LLC and its subsidiaries contained herein. The selected consolidated statement of operations data for the twenty-six weeks ended June 26, 2013 are derived from the unaudited consolidated financial statements of SSE Holdings, LLC and its subsidiaries contained herein. In the opinion of our management, such unaudited financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for those periods.

        The results of operations for the periods presented below are not necessarily indicative of the results to be expected for any future period and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. The information set forth below should be read together with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and the consolidated financial statements and the accompanying notes included elsewhere in this prospectus.

        The selected historical financial data of Shake Shack Inc. have not been presented as Shake Shack Inc. is a newly incorporated entity, has had no business transactions or activities to date and had no assets or liabilities during the periods presented in this section.

 
  Fiscal year ended   Twenty-six weeks ended  
(Dollar amounts in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 
 
   
   
  (unaudited)
   
 

Consolidated statement of operations data:

                         

Revenues

                         

Shack sales

  $ 55,591   $ 78,587   $ 35,227   $ 48,823  

Licensing revenue

    1,447     3,869     1,474     3,110  
                   

Total revenue

    57,038     82,456     36,701     51,933  

Expenses

                         

Operating expenses

                         

Food and paper costs

    16,774     23,865     10,713     14,908  

Labor and related expenses

    14,436     20,096     8,744     12,937  

Other operating expenses

    5,081     7,315     3,123     4,961  

Occupancy and related expenses

    5,053     6,892     2,990     4,119  

General and administrative expenses

    6,988     12,453     4,313     6,992  

Depreciation expense

    2,162     3,541     1,571     2,565  

Pre-opening costs

    1,858     2,334     1,028     2,062  

Loss on disposal of property and equipment

        25         18  
                   

Total expenses

    52,352     76,521     32,482     48,562  
                   

Income from operations

    4,686     5,935     4,219     3,371  
                   

Interest expense, net

    156     52     18     91  
                   

Income before income taxes

    4,530     5,883     4,201     3,280  

Income tax expense

    397     460     219     239  
                   

Net income

  $ 4,133   $ 5,423   $ 3,982   $ 3,041  
                   
                   

Pro forma net income per share data:(1)

                         

Pro forma weighted average shares of Class A common stock outstanding:

                         

Basic

                         

Diluted

                         

Pro forma net income available to Class A common stock per share:

                         

Basic

        $           $    

Diluted

        $           $    

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  Fiscal year ended   Twenty-six weeks ended  
(Dollar amounts in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 
 
   
   
  (unaudited)
   
 

Other data:

                         

Number of Shacks

   
21
   
40
   
28
   
48
 

Domestic company-operated

    13     21     16     23  

Domestic licensed

    3     4     4     4  

International licensed

    5     15     8     21  

Same Shack sales growth

   
7.1

%
 
5.9

%
 
3.6

%
 
4.2

%

Average unit volumes

   
 
   
 
   
 
   
 
 

Domestic company-operated Shacks

  $ 5,367   $ 5,017              

Manhattan Shacks

    7,034     7,387              

Non-Manhattan Shacks

    3,791     3,840              

International licensed Shacks(2)

    9,665     6,077              

Shack system-wide sales(2)

 
$

81,048
 
$

139,903
 
$

58,908
 
$

98,416
 

Shack-level operating profit margins

   
25.6

%
 
26.0

%
 
27.4

%
 
24.4

%

Manhattan Shacks

    29.0 %   30.3 %   31.3 %   30.5 %

Non-Manhattan Shacks

    19.8 %   21.9 %   23.5 %   19.5 %

Adjusted EBITDA(3)

 
$

9,998
 
$

14,459
 
$

7,085
 
$

8,347
 

As a percentage of revenue

   
17.5

%
 
17.5

%
 
19.3

%
 
16.1

%

Capital expenditures

  $ 11,036   $ 16,194   $ 4,693   $ 11,351  

 

 
  As of  
(in thousands)
  December 26,
2012
  December 25,
2013
  June 25,
2014
 

Consolidated balance sheet data:

                   

Cash

  $ 16,033   $ 13,076   $ 5,843  

Total assets

    44,068     55,219     57,797  

Total liabilities

    12,197     17,832     21,105  

Total members' equity

    31,871     37,387     36,692  

(1)
Pro forma figures give effect to the Transactions, including this offering. See "Unaudited Pro Forma Consolidated Financial Information."

(2)
Sales of licensed Shacks are not included in our revenue, except to the extent of our licensing revenue.

(3)
EBITDA and Adjusted EBITDA are included in this prospectus because they are key metrics used by management and our board of directors to assess our financial performance. EBITDA and Adjusted EBITDA are frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

    EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity and should not be considered as alternatives to net income (loss) as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP. Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not reflect tax payments, debt service requirements, capital expenditures, Shack openings and certain other cash costs that may recur in the future, including, among other things, cash requirements for working capital needs and cash costs to

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    replace assets being depreciated and amortized. Management compensates for these limitations by relying on our GAAP results in addition to using EBITDA and Adjusted EBITDA supplementally. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled captions of other companies due to different methods of calculation.

    A reconciliation of net income to EBITDA and Adjusted EBITDA is set forth below:

 
  Historical SSE Holdings, LLC   Pro Forma Shake Shack Inc.  
 
   
   
  Twenty-six
weeks ended
   
   
 
 
  Fiscal year ended    
   
 
 
  Fiscal year
ended
December 25,
2013
  Twenty-six
weeks ended
June 25,
2014
 
(in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 

Net income

  $ 4,133   $ 5,423   $ 3,982   $ 3,041   $     $    

Depreciation expense

    2,162     3,541     1,571     2,565              

Interest expense, net

    156     52     18     91              

Income tax expense

    397     460     219     239              
                           

EBITDA

    6,848     9,476     5,790     5,936              

Equity-based compensation(a)

    450     93     38     83              

Deferred compensation(b)

        2,054         43              

Pre-opening costs(c)

    1,623     1,737     814     1,221              

Deferred rent(d)

    839     975     416     1,010              

Loss on disposal of property and equipment(e)

        25         18              

Other non-cash items(f)

    238     99     27     36              
                           

Adjusted EBITDA

  $ 9,998   $ 14,459   $ 7,085   $ 8,347   $     $    
                           
                           

(a)
Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards.

(b)
For the periods presented, represents amounts accrued under a bonus agreement we entered into with an employee pursuant to which we agreed to pay a bonus in a future period.

(c)
Non-capital expenditures associated with opening new Shacks exclusive of deferred rent incurred prior to opening.

(d)
Reflects the extent to which our annual rent expense has been above or below our cash rent payments.

(e)
Includes the loss on disposal of assets in the ordinary course of business.

(f)
For the periods presented, represents non-cash charges related to certain employee benefits.

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

        The following unaudited pro forma consolidated statement of operations for the year ended December 25, 2013 and the twenty-six weeks ended June 25, 2014 give effect to the Transactions, including this offering, as if the same had occurred on December 27, 2012. The unaudited pro forma consolidated balance sheet as of June 25, 2014 gives effect to the Transactions, including this offering, as if the same had occurred on June 25, 2014.

        We have derived the unaudited pro forma consolidated statement of operations for the year ended December 25, 2013 from the audited consolidated financial statements of SSE Holdings, LLC and its subsidiaries as of and for the year ended December 25, 2013 set forth elsewhere in this prospectus. We have derived the unaudited pro forma consolidated statement of operations for the twenty-six weeks ended as of June 25, 2014 and the unaudited pro forma consolidated balance sheet as of June 25, 2014 from the audited consolidated financial statements of SSE Holdings, LLC and its subsidiaries as of and for the twenty-six weeks ended June 25, 2014 set forth elsewhere in this prospectus. The pro forma financial information is qualified in its entirety by reference to, and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

        The pro forma adjustments are described in the notes to the unaudited pro forma financial information, and principally include the following:

    the Transactions, as described under "The Transactions," including the issuance and sale by us of shares of Class A common stock to the public representing        % of the economic interests of Shake Shack at an initial offering price of $            per share, the midpoint of the price range listed on the cover page of this prospectus, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us;

    the application of the net proceeds from this offering as set forth in "Use of Proceeds;" and

    a provision for federal and state income taxes of Shake Shack as a taxable corporation at an effective rate of         %.

        The unaudited pro forma consolidated financial information presented assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock from us.

        As described in greater detail under "Certain Relationships and Related Party Transactions—Tax Receivable Agreement," in connection with the closing of this offering, we will enter into the Tax Receivable Agreement with the Continuing SSE Equity Owners. No increases in tax basis in SSE Holdings' assets or other tax benefits that may be realized thereunder have been assumed in the unaudited pro forma consolidated financial information and therefore no pro forma adjustment has been made.

        As a public company, we will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to incur additional annual expenses related to these steps and, among other things, additional directors' and officers' liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses. We have not included any pro forma adjustments relating to these costs.

        The unaudited pro forma consolidated financial information and notes included in this prospectus are presented for illustrative purposes only. The pro forma adjustments are based upon available information and methodologies that are factually supportable and directly related to the Transactions, including this offering. The unaudited pro forma consolidated financial information includes various estimates which are subject to material change and may not be indicative of what our operations or financial position would have been had the Transactions, including this offering, taken place on the dates indicated, or that may be expected to occur in the future. For further discussion of these matters, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements and related notes included elsewhere in this prospectus.

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Shake Shack Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet as of June 25, 2014

(in thousands)
  Historical
SSE Holdings,
LLC
  Adjustments   Pro Forma
Shake Shack
Inc.
 

Assets

                 

Current assets:

                 

Cash

  $ 5,843   $   $    

Accounts receivable

    2,033            

Inventories

    312            

Prepaid expenses

    261            
               

Total current assets

    8,449            

Property and equipment, net

    46,997            

Deferred financing costs

    462            

Security deposits

    898            

Deferred income taxes

    67            

Other assets

    924            
               

Total assets

  $ 57,797   $   $    
               
               

Liabilities and Members'/Stockholders' Equity

                 

Current liabilities:

                 

Accounts payable

  $ 3,567   $   $    

Accrued expenses

    1,559            

Accrued wages and related liabilities

    1,816            

Sales tax payable

    399            

Due to affiliate

    345            

Deferred revenue

    601            
               

Total current liabilities

    8,287            

Deferred revenue, net of current portion

    1,425            

Promissory note

    313            

Deferred compensation

    2,097            

Deferred rent

    8,950            

Other long term liabilities

    33            
               

Total liabilities

    21,105            

Commitments and contingencies

                 

Members'/Stockholders' Equity

                 

Members' equity

    36,692            

Class A common stock, par value $            per share

               

Class B common stock, par value $            per share

               

Additional paid in capital

               
               

Total members'/stockholders' equity before non-controlling interest

    36,692            

Non-controlling interest

               

Total members'/stockholders' equity

    36,692            
               

Total liabilities and members'/stockholders' equity

  $ 57,797   $   $    
               
               

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Shake Shack Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations for the
Year Ended December 25, 2013

(in thousands)
  Historical
SSE Holdings,
LLC
  Adjustments   Pro Forma
Shake Shack
Inc.
 

Revenues

                   

Shack sales

  $ 78,587   $     $    

Licensing revenue

    3,869              
               

Total revenue

    82,456              

Expenses

                   

Operating expenses

                   

Food and paper costs

    23,865              

Labor and related expenses

    20,096              

Other operating expenses

    7,315              

Occupancy and related expenses

    6,892              

General and administrative expenses

    12,453              

Depreciation expense

    3,541              

Pre-opening costs

    2,334              

Loss on disposal of property and equipment

    25              
               

Total expenses

    76,521              
               

Income from operations

    5,935              
               

Interest expense, net

    52              

Income before income taxes

    5,883              
               

Income tax expense

    460              
               

Net income

  $ 5,423   $     $    
               
               

Net income attributable to non-controlling interest

                   
               

Net income attributable to us

  $     $     $    
               
               

Net income per share data:

                   

Weighted average shares of Class A common stock outstanding:

                   

Basic

                   

Diluted

                   

Net income available to Class A common stock per share:

                   

Basic

  $     $     $    

Diluted

  $     $     $    

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Shake Shack Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations for the
Twenty-Six Weeks Ended June 25, 2014

(in thousands)
  Historical
SSE Holdings,
LLC
  Adjustments   Pro Forma
Shake Shack
Inc.

Revenues

             

Shack sales

  $ 48,823   $   $

Licensing revenue

    3,110        
             

Total revenue

    51,933        

Expenses

             

Operating expenses

             

Food and paper costs

    14,908        

Labor and related expenses

    12,937        

Other operating expenses

    4,961        

Occupancy and related expenses

    4,119        

General and administrative expenses

    6,992        

Depreciation expense

    2,565        

Pre-opening costs

    2,062        

Loss on disposal of property and equipment

    18        
             

Total expenses

    48,562        
             

Income from operations

    3,371        
             

Interest expense, net

    91        

Income before income taxes

    3,280        
             

Income tax expense

    239        
             

Net income

  $ 3,041   $   $
             
             

Net income attributable to non-controlling interest

             
             

Net income attributable to us

  $     $   $
             
             

Net income per share data:

             

Weighted average shares of Class A common stock outstanding:

             

Basic

             

Diluted

             

Net income available to Class A common stock per share:

             

Basic

  $     $   $

Diluted

  $     $   $

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations together with the "Selected Historical Consolidated Financial and Other Data" and our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" sections of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

        The following discussion contains references to fiscal 2012 and fiscal 2013, which represent the financial results of our predecessor, SSE Holdings, LLC, for the fiscal years ended December 26, 2012 and December 25, 2013, respectively. We operate on a 52- or 53-week fiscal year ending on the last Wednesday of the calendar year. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. Every five or six years, a 53-week fiscal year occurs. Fiscal 2012 and fiscal 2013 were both 52-week years. Fiscal 2014 is a 53-week year, which may cause our revenue, expenses and other results of operations to be higher due to an additional week of operations.

Overview

        Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. There currently are 53 Shacks worldwide, comprised of:

    26 domestic company-operated Shacks;

    five domestic licensed Shacks; and

    22 international licensed Shacks.

        During the three fiscal years ended December 25, 2013, we grew from seven Shacks in two states to 40 Shacks across seven states, Washington, D.C. and eight other countries, representing a 79% compound annual growth rate ("CAGR"). As a result, our total revenue grew from $19.5 million to $82.5 million, a 62% CAGR, and Adjusted EBITDA grew to $14.5 million over the same period. For a reconciliation of Adjusted EBITDA, a non-GAAP measure, to net income, see "—Results of Operations." Our brand power and thoughtful approach to growth have resulted in strong Shack performance across a variety of geographic areas and formats. Our Shacks generate attractive Shack-level operating profit margins, strong cash flow and high returns on invested capital. We have notable AUVs in both domestic company-operated Manhattan Shacks ("Manhattan Shacks") and domestic company-operated non-Manhattan Shacks ("non-Manhattan Shacks"). Because our AUVs are higher in Manhattan, due in large part to population density and overall familiarity with the brand in Manhattan, we typically look at AUVs on both a Manhattan Shack and non-Manhattan Shack basis. There currently are 26 domestic company-operated Shacks, comprised of:

    six Manhattan Shacks; and

    20 Non-Manhattan Shacks.

        While we believe that there is still ample room to grow our Shack-base in Manhattan, the majority of our domestic company-operated Shack growth is expected to occur outside of Manhattan, and thus

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we believe that non-Manhattan Shack AUVs are a better measure of expected sales at new Shacks. In fiscal 2013, our domestic company-operated Shacks had AUVs of approximately $5.0 million, of which our Manhattan Shacks had AUVs of approximately $7.4 million with Shack-level operating profit margins of approximately 30%. Our non-Manhattan Shacks had AUVs of approximately $3.8 million with Shack-level operating profit margins of approximately 22% during the same period.

        Historically, our domestic company-operated Shacks have delivered an attractive average cash-on-cash return of approximately 71% and payback period of 1.4 years of which our Manhattan Shacks generated an average cash-on-cash return of 83% and payback period of 1.2 years and our non-Manhattan Shacks generated an average cash-on-cash return of 34% and payback period of 2.9 years. This performance is driven by our approach in targeting areas where communities gather, often with high foot traffic and substantial commercial density. The small number of Shacks included in our calculation of our average cash-on-cash return and payback period may cause these measures to fluctuate and be subject to change.

Growth Strategies and Outlook

        We plan to continue to expand our business, drive Shack sales and enhance our competitive positioning by executing on the following strategies:

    Open new domestic company-operated Shacks.  Our domestic company-operated Shack growth strategy is focused on both existing and new markets. Given that we are still in a nascent stage of growth, a substantial portion of our growth will come from opening Shacks in markets where we have little to no presence currently. Thus far in fiscal 2014, we have opened five domestic company-operated Shacks, and we plan to open another three by fiscal year end. Given that our primary growth driver will be the opening of new domestic company-operated Shacks, we are keenly focused on maintaining a rigorous site selection process. In addition to evaluating key new Shack criteria, our management team personally visits each potential Shack to determine if the prospective location is likely to meet certain Shack-level operating profit margin and cash-on-cash return targets.

    Capitalize on our outsized brand awareness.  The Shake Shack experience has cultivated significant brand awareness relative to the small number of Shacks. We have worked tirelessly to establish a genuine connection with our guests and integrate into their communities through investment in innovative marketing and programming.

    Grow same Shack sales.  We continually focus on improving our same Shack sales performance by providing an engaging and differentiated guest experience that includes great food, unique and thoughtful integration with local communities and high standards of excellence and hospitality.

    Opportunistically increase our licensed Shacks abroad.  We will continue to grow our licensed portfolio by expanding further in the eight countries in which we currently have internationally licensed operations. This strategy historically has been a low-cost, high-return method of growing our brand awareness and providing significant cash flow.

        With only 53 Shacks around the world, we have identified many attractive new markets for the Shake Shack experience. We have successfully launched different layouts and sizes of Shacks in varied locations throughout urban high density areas, suburban in-line and pad sites, regional malls, lifestyle centers, ballparks, airports and train stations. Each design is critical to the Shake Shack experience and we blend our core brand identifiers with features specifically designed for each Shack to be of its place and connect directly with its neighborhood. With a disciplined approach to new Shack development and a successful track record in site selection, we believe that we are positioned well for future growth.

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        Our profitability depends in part on our ability to anticipate and react to changes in the price and availability of food commodities. Prices for these commodities may be affected by market changes, increased competition, shortages or interruptions in supply due to weather, disease or other conditions beyond our control. In particular, certain regions of the United States have been experiencing a significant drought in 2014, which has increased, and we expect to continue to increase, the price we pay for our beef and dairy commodities. We do not currently hedge our commodity risks, and we may not be able to pass on these increased costs to our guests. If we cannot offset these costs, our operating margins and profitability may be adversely impacted.

Post-Offering Taxation and Expenses

        After consummation of this offering, we will become subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of SSE Holdings and will be taxed at the prevailing corporate tax rates. In addition to tax expenses, we also will incur expenses related to our operations, plus payments under the Tax Receivable Agreement, which we expect will be significant. We intend to cause SSE Holdings to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the Tax Receivable Agreement. See "Certain Relationships and Related Party Transactions—SSE Holdings LLC Agreement—Distributions."

        In addition, as a public company, we will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to incur additional annual expenses related to these steps and, among other things, additional directors' and officers' liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.

Key Performance Indicators

        To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include Shack sales, new Shack openings, average unit volumes, same Shack sales growth, Shack-level operating profit margin, growth in licensing fees and Adjusted EBITDA.

Shack Sales

        Shack sales represent the aggregate sales of food and beverages in domestic company-operated Shacks. Shack sales in any period are directly influenced by the number of operating weeks in such period, the number of open Shacks and same Shack sales.

New Shack Openings

        The number of new Shack openings reflects the number of Shacks opened during a particular reporting period. Before we open new Shacks, we incur pre-opening costs, as described below. We expect that, beginning in fiscal 2015, we will open at least 10 domestic company-operated Shacks each fiscal year for the foreseeable future, which is the primary driver of our expected sales growth. The total number of new Shacks per year and the timing of Shack openings has, and will continue to have, an impact on our results. New Shacks sometimes experience normal inefficiencies in the form of higher labor and other operating expenses and, as a result, Shack-level operating profit margins are generally lower during the start-up period of operation. See "Risk Factors—New Shacks, once opened may not be profitable, and the performance of our Shacks that we have experienced in the past may not be indicative of future results."

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Average Unit Volumes ("AUVs")

        Average Unit Volumes or AUVs for any 12-month period consist of the average annualized sales of all domestic company-operated Shacks over that period. AUVs are calculated by dividing total sales from domestic company-operated Shacks by the number of domestic company-operated Shacks open during that period. For Shacks that are not open for the entire period, we make fractional adjustments to the number of Shacks open such that it corresponds to the period of associated sales. The measurement of AUVs allows us to assess changes in guest traffic and per transaction patterns at our domestic company-operated Shacks.

        Because our AUVs are significantly higher in Manhattan, we analyze AUVs on both a Manhattan Shack and non-Manhattan Shack basis. Manhattan Shack AUVs have historically been higher than non-Manhattan Shack AUVs given the population density and overall familiarity with the Shake Shack brand. Given that the majority of our new domestic company-operated Shack growth is expected to occur outside of Manhattan, we believe that non-Manhattan Shack AUVs are a more representative measure of expected sales at new Shacks, compared to Manhattan Shack AUVs.

Same Shack Sales Growth

        Same Shack sales growth reflects the change in year-over-year sales ("same Shack sales") for the comparable Shack base, which we define as the number of domestic company-operated Shacks open for 24 months or longer. For the fiscal years ended December 25, 2012 and December 26, 2013 and the twenty-six weeks ended June 26, 2013 and June 25, 2014, there were five, eight, seven and 10 Shacks, respectively, in our comparable Shack base. The small number of Shacks included in our comparable Shack base may cause same Shack sales growth to fluctuate and be unpredictable.

        Given our focused marketing efforts surrounding each opening, new Shacks often experience an initial start-up period with considerable sales volumes, which subsequently decrease to stabilized levels after approximately 12 months. As a result, the initial comparison of second year sales to first year sales is often to higher than normal sales in the first year. Thus, we do not include Shacks in the comparable Shack base until they have been open 24 months or longer. We expect that this trend will continue for the foreseeable future as we continue to open and expand into new markets.

Shack-level Operating Profit Margin

        Shack-level operating profit margin is defined as sales less operating expenses, including food and paper costs, labor and related expenses, other operating expenses and occupancy and related expenses as a percentage of Shack sales. Shack-level operating profit margin is not required by, or presented in accordance with, GAAP. Shack-level operating profit margin is a supplemental measure of operating performance of our Shacks and our calculations thereof may not be comparable to similar measures reported by other companies. Shack-level operating profit margin has limitations as an analytical tool and should not be considered as a substitute for analysis of our results as reported under GAAP. We believe that Shack-level operating profit margin is an important measure to evaluate the performance and profitability of each Shack, individually and in the aggregate. We use Shack-level operating profit margin information to benchmark our performance versus competitors.

Growth in Licensing Fees

        We currently have five domestic licensed Shacks and 22 international licensed Shacks. Internationally, we have license agreements for four major territories, with Shacks operating in eight countries. The Middle East has been our most prominent growth market with 16 Shacks in operation, followed by Turkey with four and Russia and the United Kingdom with one each. In fiscal 2013, our international licensed Shacks had AUVs of approximately $6.1 million, which resulted in license fees of

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approximately $3.5 million. We also receive territory fees for the exclusive right to develop Shacks in a specific geographic area.

Adjusted EBITDA

        We use Adjusted EBITDA as a supplemental measure of our performance. Adjusted EBITDA is also the basis for performance evaluation under our executive compensation programs. Adjusted EBITDA is defined as net income before depreciation and amortization, interest expense and provision for income taxes, adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include stock-based compensation expense, non-cash deferred rent charges and pre-opening expenses, as well as certain non-recurring charges. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance.

        Adjusted EBITDA as presented in this prospectus is a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. Adjusted EBITDA should not be considered as a substitute for GAAP metrics such as net income or any other performance measures derived in accordance with GAAP. Also, in the future we may incur expenses or charges such as those added back to calculate Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

Results of Operations

        The following tables summarize key components of our results of operations for the periods indicated:

 
  Fiscal year ended   Twenty-six weeks ended  
(in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 
 
   
   
  (unaudited)
   
 

Revenues

                         

Shack sales

  $ 55,591   $ 78,587   $ 35,227   $ 48,823  

Licensing revenue

    1,447     3,869     1,474     3,110  
                   

Total revenue

    57,038     82,456     36,701     51,933  

Expenses

                         

Operating expenses

                         

Food and paper costs

    16,774     23,865     10,713     14,908  

Labor and related expenses

    14,436     20,096     8,744     12,937  

Other operating expenses

    5,081     7,315     3,123     4,961  

Occupancy and related expenses

    5,053     6,892     2,990     4,119  

General and administrative expenses

    6,988     12,453     4,313     6,992  

Depreciation expense

    2,162     3,541     1,571     2,565  

Pre-opening costs

    1,858     2,334     1,028     2,062  

Loss on disposal of property and equipment

        25         18  
                   

Total expenses

    52,352     76,521     32,482     48,562  
                   

Income from operations

    4,686     5,935     4,219     3,371  
                   

Interest expense, net

    156     52     18     91  
                   

Income before income taxes

    4,530     5,883     4,201     3,280  

Income tax expense

    397     460     219     239  
                   

Net income

  $ 4,133   $ 5,423   $ 3,982   $ 3,041  
                   
                   

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  Fiscal year ended   Twenty-six weeks ended  
(Dollar amounts in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 

Other data:

                         

Number of Shacks

    21     40     28     48  

Domestic company-operated

   
13
   
21
   
16
   
23
 

Domestic licensed

    3     4     4     4  

International licensed

    5     15     8     21  

Same Shack sales growth

   
7.1

%
 
5.9

%
 
3.6

%
 
4.2

%

Average unit volumes

   
 
   
 
   
 
   
 
 

Domestic company-operated Shacks

  $ 5,367   $ 5,017              

Manhattan Shacks

    7,034     7,387              

Non-Manhattan Shacks

    3,791     3,840              

International licensed Shacks(1)

    9,665     6,077              

Shack system-wide sales(1)

 
$

81,048
 
$

139,903
 
$

58,908
 
$

98,416
 

Shack-level operating profit margins

   
25.6

%
 
26.0

%
 
27.4

%
 
24.4

%

Manhattan Shacks

    29.0 %   30.3 %   31.3 %   30.5 %

Non-Manhattan Shacks

    19.8 %   21.9 %   23.5 %   19.5 %

Adjusted EBITDA(2)

 
$

9,998
 
$

14,459
 
$

7,085
 
$

8,347
 

As a percentage of revenue

    17.5 %   17.5 %   19.3 %   16.1 %

Capital expenditures

 
$

11,036
 
$

16,194
 
$

4,693
 
$

11,351
 

(1)
Sales of licensed Shacks are not included in our revenue, except to the extent of our licensing revenue.

(2)
A reconciliation of net income to EBITDA and Adjusted EBITDA is set forth below:

 
  Fiscal year ended   Twenty-six weeks ended  
(in thousands)
  December 26,
2012
  December 25,
2013
  June 26,
2013
  June 25,
2014
 

Net income

  $ 4,133   $ 5,423   $ 3,982   $ 3,041  

Depreciation expense

    2,162     3,541     1,571     2,565  

Interest expense, net

    156     52     18     91  

Income tax expense

    397     460     219     239  
                   

EBITDA

    6,848     9,476     5,790     5,936  

Equity-based compensation(a)

    450     93     38     83  

Deferred compensation(b)

        2,054         43  

Pre-opening costs(c)

    1,623     1,737     814     1,221  

Deferred rent(d)

    839     975     416     1,010  

Loss on disposal of property and equipment(e)

        25         18  

Other non-cash items(f)

    238     99     27     36  
                   

Adjusted EBITDA

  $ 9,998   $ 14,459   $ 7,085   $ 8,347  
                   
                   

(a)
Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards.

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(b)
For the periods presented, represents amounts accrued under a bonus agreement we entered into with an employee pursuant to which we agreed to pay a bonus in a future period.

(c)
Non-capital expenditures associated with opening new Shacks exclusive of deferred rent incurred prior to opening.

(d)
Reflects the extent to which our annual rent expense has been above or below our cash rent.

(e)
Includes the loss on disposal of assets in the ordinary course of business.

(f)
For the periods presented, represents non-cash charges for certain employee benefits.

        The following is a description of certain key financial definitions and a discussion of our results of operations for fiscal 2013 compared to fiscal 2012 and the twenty-six weeks ended June 25, 2014 compared to the twenty-six weeks ended June 26, 2013.

Shack Sales

        Shack sales represent the aggregate sales of food and beverages in domestic company-operated Shacks. Shack sales in any period are directly influenced by the number of operating weeks in such period, the number of open Shacks and same Shack sales.

        Shack sales were $78.6 million for fiscal 2013 compared to $55.6 million for fiscal 2012, an increase of $23.0 million or 41.4%. The growth in Shack sales was primarily driven by the opening of eight new domestic company-operated Shacks during fiscal 2013. Shacks in the comparable Shack base contributed $2.3 million of this increase while new domestic company-operated Shacks contributed $20.7 million. Same Shack sales growth increased 5.9% during fiscal 2013. For purposes of calculating same Shack sales growth, Shack sales for eight Shacks were included in the comparable Shack base. For fiscal 2013, AUVs for Manhattan Shacks were $7.4 million and AUVs for non-Manhattan Shacks were $3.8 million.

        For the twenty-six weeks ended June 25, 2014, Shack sales were $48.8 million compared to $35.2 million for the twenty-six weeks ended June 26, 2013, an increase of $13.6 million or 38.6%, primarily driven by the opening of seven new domestic company-operated Shacks after the twenty-six weeks ended June 26, 2013. Shacks in the comparable Shack base contributed $1.1 million of this increase while new domestic company-operated Shacks contributed $12.5 million. Same Shack sales increased 4.2% during the twenty-six weeks ended June 25, 2014. For purposes of calculating same Shack sales growth, Shack sales for 10 Shacks were included in the comparable Shack base.

Licensing Revenue

        Licensing revenue is comprised of license fees and territory fees. 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 was $3.9 million for fiscal 2013 compared to $1.4 million for fiscal 2012, an increase of $2.5 million or 167.4%. This increase was primarily driven by the opening of 10 international licensed and one domestic licensed Shack during fiscal 2013. AUVs at international licensed Shacks declined over the same period due to the opening of lower-volume Shacks during fiscal 2013.

        For the twenty-six weeks ended June 25, 2014, licensing revenue was $3.1 million compared to $1.5 million for the twenty-six weeks ended June 26, 2013, an increase of $1.6 million or 111.0%. This increase was primarily driven by the opening of 13 internationally licensed Shacks after the twenty-six weeks ended June 26, 2013.

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Food and Paper Costs

        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, are impacted by menu mix and are subject to increases or decreases in commodity costs.

        Food and paper costs were $23.9 million for fiscal 2013 compared to $16.8 million for fiscal 2012, an increase of $7.1 million or 42.3%, primarily due to the opening of eight new domestic company-operated Shacks during fiscal 2013. As a percentage of Shack sales, food and paper costs increased slightly to 30.4% for fiscal 2013 compared to 30.2% for fiscal 2012. This increase was due to an increase in the cost of certain food items, primarily beef, which was partially offset by menu price increases and purchasing efficiencies of other items.

        For the twenty-six weeks ended June 25, 2014, food and paper costs were $14.9 million compared to $10.7 million for the twenty-six weeks ended June 26, 2013, an increase of $4.2 million or 39.2%, primarily due to the opening of seven new domestic company-operated Shacks after the twenty-six weeks ended June 26, 2013. As a percentage of Shack sales, food and paper costs remained effectively unchanged at 30.5% for the twenty-six weeks ended June 25, 2014 and 30.4% for the twenty-six weeks ended June 26, 2013. During this period, we experienced an increase in the cost of certain food items, primarily beef, which was partially offset by menu price increases and purchasing efficiencies of other items.

Labor and Related Expenses

        Labor and related expenses include domestic company-operated Shack-level hourly and management wages, bonuses, payroll taxes, workers' compensation expense and medical benefits. As we expect with other variable expense items, we expect labor costs to grow as our Shack sales grow. Factors that influence labor costs include minimum wage and payroll tax legislation, health care costs and the performance of our domestic company-operated Shacks.

        Labor and related expenses were $20.1 million for fiscal 2013 compared to $14.4 million for fiscal 2012, an increase of $5.7 million or 39.2%. This increase was primarily due to the opening of eight new domestic company-operated Shacks during fiscal 2013. As a percentage of Shack sales, labor and related expenses decreased to 25.6% in fiscal 2013 compared to 26.0% in fiscal 2012. This decrease was due to certain operational efficiencies and strategies implemented at the Shacks in fiscal 2013.

        For the twenty-six weeks ended June 25, 2014, labor and related expenses were $12.9 million compared to $8.7 million for the twenty-six weeks ended June 26, 2013, an increase of $4.2 million or 48.0%. This increase was primarily due to the opening of seven new domestic company-operated Shacks after the twenty-six weeks ended June 26, 2013. As a percentage of Shack sales, labor and related expenses increased to 26.5% for the twenty-six weeks ended June 25, 2014 compared to 24.8% for the twenty-six weeks ended June 26, 2013. This increase was due to a decision by the Company to increase the starting rate of pay for a Shack team member at the beginning of fiscal 2014, as well as the opening of lower-volume Shacks and the impact of fixed management labor at those Shacks.

Other Operating Expenses

        Other operating expenses consist of marketing expenses, utilities and other operating expenses incidental to operating our domestic company-operated Shacks, such as non-perishable supplies, credit card fees, property insurance and repairs and maintenance.

        Other operating expenses were $7.3 million for fiscal 2013 compared to $5.1 million for fiscal 2012, an increase of $2.2 million or 44.0%, primarily due to the opening of eight new domestic company-operated Shacks in fiscal 2013. As a percentage of Shack sales, other operating expenses increased to 9.3% in fiscal 2013 compared to 9.1% in fiscal 2012. This increase was due to the opening of

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lower-volume non-Manhattan Shacks and the impact of fixed operating expenses at these lower-volume non-Manhattan Shacks.

        For the twenty-six weeks ended June 25, 2014, other operating expenses were $5.0 million compared to $3.1 million for the twenty-six weeks ended June 26, 2013, an increase of $1.9 million or 58.9%, primarily due to the opening of seven new domestic company-operated Shacks after the twenty-six weeks ended June 26, 2013. As a percentage of Shack sales, other operating expenses increased to 10.2% for the twenty-six weeks ended June 25, 2014 compared to 8.9% for the twenty-six weeks ended June 26, 2013. This increase was due to the impact of certain fixed operating expenses at new lower-volume Shacks.

Occupancy and Related Expenses

        Occupancy and related expenses consist of Shack-level occupancy expenses (including rent, common area expenses and certain local taxes), excluding pre-opening costs, which are recorded separately.

        Occupancy and related expenses were $6.9 million for fiscal 2013 compared to $5.1 million for fiscal 2012, an increase of $1.8 million or 36.4%, primarily due to the opening of eight new domestic company-operated Shacks in fiscal 2013. As a percentage of Shack sales, occupancy and related expenses decreased to 8.8% in fiscal 2013 compared to 9.1% in fiscal 2012, primarily due to the opening of non-Manhattan Shacks, where occupancy and related expenses are typically lower.

        For the twenty-six weeks ended June 25, 2014, occupancy and related expenses were $4.1 million compared to $3.0 million for the twenty-six weeks ended June 26, 2013, an increase of $1.1 million, or 37.8%, primarily due to the opening of seven new domestic company-operated Shacks after the twenty-six weeks ended June 26, 2013. As a percentage of Shack sales, occupancy and related expenses remained effectively unchanged at 8.4% for the twenty-six weeks ended June 25, 2014 and 8.5% for the twenty-six weeks ended June 26, 2013.

General and Administrative Expenses

        General and administrative expenses consist of costs associated with corporate and administrative functions that support Shack development and operations, as well as equity-based compensation expense for certain executives.

        General and administrative expenses were $12.5 million for fiscal 2013 compared to $7.0 million for fiscal 2012, an increase of $5.5 million or 78.2%. As a percentage of total revenue, general and administrative expenses increased to 15.1% in fiscal 2013 from 12.3% in fiscal 2012. This increase was due primarily to an increase in payroll related to building our infrastructure through new hires at our home office to support our planned growth as well as a $2.1 million charge for a deferred bonus payable to a member of our executive team.

        For the twenty-six weeks ended June 25, 2014, general and administrative expenses were $7.0 million compared to $4.3 million for the twenty-six weeks June 26, 2013, an increase of $2.7 million or 62.1%. As a percentage of total revenue, general and administrative expenses increased to 13.5% for the twenty-six weeks ended June 25, 2014 from 11.8% for the twenty-six weeks ended June 26, 2013. This increase was due primarily to an increase in payroll related to building our infrastructure through new hires at our home office to support our planned growth.

Depreciation Expense

        Depreciation expense consists of the depreciation of fixed assets, including leasehold improvements and equipment.

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        Depreciation expense was $3.5 million for fiscal 2013 compared to $2.2 million for fiscal 2012, an increase of $1.3 million or 63.8%. This increase was due primarily to depreciation of capital expenditures related to the opening of eight new domestic company-operated Shacks during fiscal 2013. As a percentage of total revenue, depreciation expense increased to 4.3% in fiscal 2013 compared to 3.8% in fiscal 2012 due to the introduction of lower-volume non-Manhattan Shacks into the Shack system.

        For the twenty-six weeks ended June 25, 2014, depreciation expense was $2.6 million compared to $1.6 million for the twenty-six weeks ended June 26, 2013, an increase of $1.0 million or 63.3%. This increase was due primarily to depreciation of capital expenditures related to the opening of seven new domestic company-operated Shacks after the twenty-six weeks ended June 26, 2013. As a percentage of total revenue, depreciation expense increased to 4.9% for the twenty-six weeks ended June 25, 2014 from 4.3% for the twenty-six weeks ended June 26, 2013 due to the introduction of lower-volume non-Manhattan Shacks into the Shack system.

Pre-opening Costs

        Pre-opening costs consist primarily of legal fees, rent, managers' salaries, training costs, employee payroll and related expenses, all costs to relocate and compensate Shack management teams prior to an opening and wages, travel and lodging costs for our opening training team and other support team members. All such costs incurred prior to the opening of a domestic 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 domestic company-operated Shack openings and the specific pre-opening costs incurred for each domestic company-operated Shack. Additionally, domestic company-operated Shack openings in new geographic market areas will initially experience higher pre-opening costs than our established geographic market areas, 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 were $2.3 million in fiscal 2013 compared to $1.9 million in fiscal 2012, an increase of $0.4 million or 25.6% as a result of an increase in the number of new domestic company-operated Shacks opened in fiscal 2013.

        For the twenty-six weeks ended June 25, 2014, pre-opening costs were $2.1 million compared to $1.0 million for the twenty-six weeks ended June 26, 2013, an increase of $1.1 million or 100.6% as a result of an increase in the number of new domestic company-operated Shacks opened during the twenty-six weeks ended June 25, 2014.

Loss on Disposal of Property and Equipment

        Loss on disposal of property and equipment represents the net book value of assets that have been retired and consists primarily of furniture and fixtures that were replaced in the normal course of business.

        For all periods presented, loss on disposal of property and equipment was immaterial.

Interest Expense

        Interest expense consists of interest on the Revolving Credit Facility (as defined below) as well as the amortization of deferred financing costs incurred in connection with the Revolving Credit Facility.

        For all periods presented, interest expense was immaterial.

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Income Tax Expense

        Income tax expense consists of unincorporated business tax payable to the City of New York as well as other various state and local taxes. We are also subject to tax withholding in other foreign jurisdictions. SSE Holdings is currently taxed as a partnership. See "—Critical Accounting Policies—Income Taxes."

        Income tax expense was $0.5 million in fiscal 2013 compared to $0.4 million in fiscal 2012 due primarily to the related increase in income.

        Income tax expense was $0.2 million for both the twenty-six weeks ended June 25, 2014 and the twenty-six weeks ended June 26, 2013.

Liquidity and Capital Resources

        We have continued to experience increases in Shack-level operating profit margin, Adjusted EBITDA, the number of domestic company-operated Shack openings, same Shack sales growth and AUVs. However, the restaurant industry continues to be challenged, and uncertainty exists as to the sustainability of these favorable trends. We believe that cash provided by operating activities, cash on hand and the Revolving Credit Facility are adequate to fund debt service requirements, operating lease obligations, capital expenditures and working capital obligations for the next 12 months. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow from operations and our ability to manage costs and working capital successfully.

        We desire to maintain a strong balance sheet to support our growth initiatives and increase same Shack sales with financial flexibility; to provide the financial resources necessary to protect and enhance the competitiveness of our brand and guest experience at our Shacks; and to provide a prudent level of financial capacity to manage the risks and uncertainties of operating our business in the current volatile economic environment and through future economic and industry cycles. Our ongoing capital expenditures are principally related to opening new Shacks, existing Shack capital investments (both for remodels and maintenance), as well as investment in our corporate infrastructure.

        In addition, following the consummation of this offering, we will be obligated to make payments under the Tax Receivable Agreement. Although the actual timing and amount of any payments that may be made under the Tax Receivable Agreement will vary, we expect that the payments that we will be required to make to the Continuing SSE Equity Owners will be significant. Any payments made by us to Continuing SSE Equity Owners under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us or to SSE Holdings and, to the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid by us.

        We utilize operating lease arrangements for all of our domestic company-operated Shacks. We believe that our operating lease arrangements continue to provide the appropriate leverage for our capital structure in a financially efficient manner. Because we lease all of the properties related to our domestic company-operated Shacks, as well as our home office, we do not have any debt that is secured by real property.

Summary of Cash Flows

        Our primary sources of liquidity and capital resources have been cash provided from operating activities, cash on hand and the Revolving Credit Facility. Aside from the capital expenditures noted above, our primary requirements for liquidity are for lease obligations, working capital and general corporate needs. Our requirement for working capital is not significant because our guests pay for their food and beverage purchases in cash or on debit or credit cards at the time of the sale and we are able to sell many of our inventory items before payment is due to the supplier of such items.

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        The following table and discussion presents, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities.

 
  Fiscal year ended   Twenty-six
weeks ended
 
(in thousands)