REVENUE

9 Months Ended

Sep. 27, 2023

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

Revenue Recognition

Revenue primarily consists of Shack sales and Licensing revenue. Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Revenue from Shack sales is recognized when payment is tendered at the point of sale, net of discounts as the performance obligation has been satisfied at that time. Sales tax collected from guests is excluded from Shack sales and the obligation is included as sales tax payable until the taxes are remitted to the appropriate taxing authorities.

Delivery services are fulfilled by third-party delivery partners whether ordered through the Shack app and website ("Company-owned platforms") or through third-party delivery platforms. Revenue from orders through Company-owned platforms includes delivery fees and is recognized when the delivery partner transfers the order to the guest as the Company controls the delivery. For these sales, the Company receives payment directly from the guest at the time of sale. Revenue from orders through third-party delivery platforms is recognized when the order is transferred to the third-party delivery partner and excludes delivery fees collected by the delivery partner as the Company does not control the delivery. The Company receives payment from the delivery partner subsequent to the transfer of the order and the payment terms are short-term in nature. For all delivery sales, the Company is considered the principal and recognizes the revenue on a gross basis.

The Company sells gift cards which do not have expiration dates. Revenue from gift cards is recognized when gift cards are redeemed by the customer or, in the event a gift card is not expected to be redeemed, in proportion to actual redemptions of gift cards ("gift card breakage"). The gift card breakage rate is determined from historical gift card redemption patterns. Gift card breakage income for the thirteen weeks ended September 27, 2023 and September 28, 2022 was $60 and $47, respectively. Gift card breakage income for the thirty-nine weeks ended September 27, 2023 and September 28, 2022 was $238 and $1,415, respectively. The thirty-nine weeks ended September 28, 2022 included a cumulative catch-up adjustment of $1,281. Gift card breakage income is included in Shack sales in the Condensed Consolidated Statements of Income (Loss).

Licensing revenue includes initial territory fees, Shack opening fees and ongoing sales-based royalty fees from licensed Shacks. Generally, the licenses granted to develop, open and operate each Shack in a specified territory are the predominant good or service transferred to the licensee and represent distinct performance obligations. Ancillary promised services, such as training and assistance during the initial opening of a Shack, are typically combined with the license and considered one performance obligation per Shack. The Company determines the transaction price for each contract, which is comprised of the initial territory fee and an estimate of the total Shack opening fees the Company expects to be entitled to. The calculation of total Shack opening fees included in the transaction price requires judgment, as it is based on an estimated number of Shacks the Company expects the licensee to open. The transaction price is then allocated equally to each Shack expected to open. The performance obligation is satisfied over time, starting when a Shack opens through the end of the license term for the related Shack, therefore revenue is recognized on a straight-line basis over the license term. Generally, payment for the initial territory fee is received upon execution of the license agreement and payment for the Shack opening fees is received either in advance of or upon

opening the related Shack. These payments are initially deferred and recognized in revenue as the performance obligations are satisfied. Revenue from sales-based royalties is recognized as the related sales occur.

Revenue disaggregated by type was as follows:

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 27 2023		September 28 2022		September 27 2023		September 28 2022
Shack sales	$	264,980	$	219,501	$	771,044	$	639,346
Licensing revenue:
Sales-based royalties	10,898		8,050		29,388		21,936
Initial territory and opening fees	329		263		858		675
Total revenue	$	276,207	$	227,814	$	801,290	$	661,957

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied as of September 27, 2023 was $23,608. The Company expects to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 5 to 20 years. This amount excludes any variable consideration related to sales-based royalties.

Contract Balances

Contract liabilities and receivables from contracts with customers were as follows:

	September 27 2023		December 28 2022
Shack sales receivables	$	7,531	$	8,779
Licensing receivables, net of allowance for doubtful accounts	4,871		3,918
Gift card liability	1,972		2,285
Deferred revenue, current	1,180		969
Deferred revenue, long-term	16,709		14,340

Revenue recognized that was included in the respective liability balances at the beginning of the period was as follows:

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 27 2023		September 28 2022		September 27 2023		September 28 2022
Gift card liability(1)	$	83	$	82	$	560	$	1,725
Deferred revenue	311		234		829		638

(1)For the thirty-nine weeks ended September 28, 2022, amount includes the cumulative catch-up adjustment of $1,281 for gift card breakage income.