SHAKE SHACK INC., 10-Q filed on 11/2/2017
Quarterly Report
Document and Entity Information Document and Entity Information
9 Months Ended
Sep. 27, 2017
Oct. 25, 2017
Class A Common Stock
Oct. 25, 2017
Class B Common Stock
Document Information [Line Items]
 
 
 
Document type
10-Q 
 
 
Amendment flag
false 
 
 
Document period end date
Sep. 27, 2017 
 
 
Document fiscal year focus
2017 
 
 
Document fiscal period focus
Q3 
 
 
Entity registrant name
SHAKE SHACK INC. 
 
 
Entity central index key
0001620533 
 
 
Current fiscal year end date
--12-27 
 
 
Entity filer category
Accelerated Filer 
 
 
Entity current reporting status
Yes 
 
 
Entity common stock, shares outstanding (in shares)
 
26,195,741 
10,534,792 
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $)
In Thousands, unless otherwise specified
Sep. 27, 2017
Dec. 28, 2016
Current assets:
 
 
Cash and cash equivalents
$ 26,887 
$ 11,607 
Marketable Securities, Current
63,299 
62,040 
Accounts receivable
5,139 
6,006 
Inventories
1,127 
806 
Prepaid expenses and other current assets
2,057 
3,485 
Total current assets
98,509 
83,944 
Property and equipment, net
174,689 
136,264 
Deferred income taxes, net
322,224 
313,207 
Other assets
4,515 
4,779 
TOTAL ASSETS
599,937 
538,194 
Current liabilities:
 
 
Accounts payable
8,639 
6,921 
Accrued expenses
13,181 
8,538 
Accrued wages and related liabilities
5,127 
6,084 
Other current liabilities
9,817 
10,173 
Total current liabilities
36,764 
31,716 
Deemed landlord financing
13,162 
2,007 
Deferred rent
34,780 
31,107 
Liabilities under tax receivable agreement, net of current portion
280,820 
267,902 
Other long-term liabilities
2,633 
4,109 
Total liabilities
368,159 
336,841 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Preferred stock, no par value—10,000,000 shares authorized; none issued and outstanding as of September 27, 2017 and December 28, 2016.
0 
0 
Additional paid-in capital
147,890 
135,448 
Retained earnings
28,862 
16,719 
Accumulated other comprehensive income (loss)
30 
(15)
Total stockholders' equity attributable to Shake Shack Inc.
176,819 
152,188 
Non-controlling interests
54,959 
49,165 
Total equity
231,778 
201,353 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
599,937 
538,194 
Class A Common Stock
 
 
Stockholders' equity:
 
 
Common stock
26 
25 
Class B Common Stock
 
 
Stockholders' equity:
 
 
Common stock
$ 11 
$ 11 
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)
Sep. 27, 2017
Dec. 28, 2016
Preferred Stock, no par value (in dollars per share)
$ 0 
$ 0 
Preferred stock, shares authorized (in shares)
10,000,000 
10,000,000 
Preferred stock, shares issued (in shares)
0 
0 
Preferred stock, shares outstanding (in shares)
0 
0 
Class A Common Stock
 
 
Common stock par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, shares authorized (in shares)
200,000,000 
200,000,000 
Common stock, shares, issued (in shares)
26,161,111 
25,151,384 
Common Stock, Shares, Outstanding
26,161,111 
25,151,384 
Class B Common Stock
 
 
Common stock par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, shares authorized (in shares)
35,000,000 
35,000,000 
Common stock, shares, issued (in shares)
10,567,792 
11,253,592 
Common Stock, Shares, Outstanding
10,567,792 
11,253,592 
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) (UNAUDITED) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Income Statement [Abstract]
 
 
 
 
Shack sales
$ 91,100 
$ 71,871 
$ 253,258 
$ 188,430 
Licensing revenue
3,509 
2,696 
9,416 
6,774 
TOTAL REVENUE
94,609 
74,567 
262,674 
195,204 
Shack-level operating expenses:
 
 
 
 
Food and paper costs
25,760 
20,393 
71,646 
53,529 
Labor and related expenses
23,806 
18,216 
66,692 
46,640 
Other operating expenses
9,229 
6,577 
25,380 
17,475 
Occupancy and related expenses
7,522 
6,009 
20,741 
15,541 
General and administrative expenses
9,204 
7,885 
27,352 
22,265 
Depreciation expense
5,604 
3,719 
15,610 
10,229 
Pre-opening costs
2,670 
2,598 
6,961 
6,708 
Loss on disposal of property and equipment
204 
0 
317 
0 
TOTAL EXPENSES
83,999 
65,397 
234,699 
172,387 
OPERATING INCOME
10,610 
9,170 
27,975 
22,817 
Other income, net
229 
151 
622 
197 
Interest Expense
(475)
(89)
(1,144)
(267)
INCOME BEFORE INCOME TAXES
10,364 
9,232 
27,453 
22,747 
Income tax expense
2,494 
2,443 
7,537 
6,058 
NET INCOME
7,870 
6,789 
19,916 
16,689 
Less: net income attributable to non-controlling interests
2,873 
3,023 
7,773 
8,163 
NET INCOME ATTRIBUTABLE TO SHAKE SHACK INC.
$ 4,997 
$ 3,766 
$ 12,143 
$ 8,526 
Earnings per share of Class A common stock:
 
 
 
 
Basic (in dollars per share)
$ 0.19 
$ 0.16 
$ 0.47 
$ 0.38 
Diluted (in dollars per share)
$ 0.19 
$ 0.15 
$ 0.46 
$ 0.37 
Weighted-average shares of Class A common stock outstanding:
 
 
 
 
Basic (in shares)
26,024 
24,023 
25,733 
22,310 
Diluted (in shares)
26,477 
24,554 
26,248 
22,805 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 7,870 
$ 6,789 
$ 19,916 
$ 16,689 
Available-for-sale securities:
 
 
 
 
Change in net unrealized holding losses
53 1
(11)1
36 1
(19)1
Less: reclassification adjustments for net realized losses included in net income
14 1
3 1
28 1
3 1
OTHER COMPREHENSIVE LOSS
67 
(8)
64 
(16)
COMPREHENSIVE INCOME
7,937 
6,781 
19,980 
16,673 
Less: comprehensive income attributable to non-controlling interest
2,893 
3,020 
7,792 
8,157 
COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAKE SHACK INC.
$ 5,044 
$ 3,761 
$ 12,188 
$ 8,516 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) (USD $)
3 Months Ended 9 Months Ended
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
Income tax benefit
$ 0 
$ 0 
$ 0 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
USD ($)
Class A Common Stock
Class B Common Stock
Common stock
Class A Common Stock
USD ($)
Common stock
Class B Common Stock
USD ($)
Additional Paid-In Capital
USD ($)
Retained Earnings
USD ($)
Accumulated Other Comprehensive Loss
USD ($)
Non- Controlling Interest
USD ($)
Beginning balance at Dec. 28, 2016
$ 201,353 
 
 
$ 25 
$ 11 
$ 135,448 
$ 16,719 
$ (15)
$ 49,165 
Beginning balance (shares) at Dec. 28, 2016
 
25,151,384 
11,253,592 
25,151,384 
11,253,592 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
19,916 
 
 
 
 
 
12,143 
 
7,773 
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
Net unrealized losses related to available-for-sale securities
64 
 
 
 
 
 
 
45 
19 
Equity-based compensation
3,909 
 
 
 
 
3,909 
 
 
 
Activity under stock compensation plans (in shares)
 
 
 
323,927 
 
 
 
 
 
Activity under stock compensation plans
6,251 
 
 
1 
 
3,580 
 
 
2,670 
Redemption of LLC Interests (in shares)
 
 
 
685,800 
(685,800)
 
 
 
 
Redemption of LLC Interests
0 
 
 
0 
0 
2,883 
 
 
(2,883)
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis
2,070 
 
 
 
 
2,070 
 
 
 
Distributions paid to non-controlling interest holders
(1,785)
 
 
 
 
 
 
 
1,785 
Ending balance at Sep. 27, 2017
231,778 
 
 
26 
11 
147,890 
28,862 
30 
54,959 
Ending balance (shares) at Sep. 27, 2017
 
26,161,111 
10,567,792 
26,161,111 
10,567,792 
 
 
 
 
Beginning balance at Jun. 28, 2017
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
7,870 
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
Net unrealized losses related to available-for-sale securities
67 
 
 
 
 
 
 
47 
 
Ending balance at Sep. 27, 2017
$ 231,778 
 
 
 
 
 
 
$ 30 
 
Ending balance (shares) at Sep. 27, 2017
 
26,161,111 
10,567,792 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
OPERATING ACTIVITIES
 
 
Net income (including amounts attributable to non-controlling interests)
$ 19,916,000 
$ 16,689,000 
Adjustments to reconcile net income to net cash provided by operating activities
 
 
Depreciation expense
15,610,000 
10,229,000 
Equity-based compensation
3,823,000 
3,817,000 
Deferred income taxes
3,056,000 
121,000 
Non-cash interest expense
245,000 
211,000 
Excess tax benefits on equity-based compensation
0 
(35,000)
Loss on sale of marketable securities
27,000 
3,000 
Loss on disposal of property and equipment
(317,000)
0 
Changes in operating assets and liabilities:
 
 
Accounts receivable
5,628,000 
1,365,000 
Inventories
(321,000)
(285,000)
Prepaid expenses and other current assets
1,844,000 
196,000 
Other assets
(516,000)
(768,000)
Accounts payable
536,000 
(53,000)
Accrued expenses
4,455,000 
4,503,000 
Accrued wages and related liabilities
(957,000)
(493,000)
Other current liabilities
(1,544,000)
1,448,000 
Deferred rent
702,000 
3,863,000 
Other long-term liabilities
1,150,000 
(289,000)
NET CASH PROVIDED BY OPERATING ACTIVITIES
53,971,000 
40,522,000 
INVESTING ACTIVITIES
 
 
Purchases of property and equipment
(41,179,000)
(39,268,000)
Purchases of marketable securities
(6,675,000)
(60,566,000)
Sales of marketable securities
6,399,000 
498,000 
NET CASH USED IN INVESTING ACTIVITIES
(41,455,000)
(99,336,000)
FINANCING ACTIVITIES
 
 
Proceeds from (Repayments of) Notes Payable
0 
(313,000)
Sale Leaseback Transaction, Gross Proceeds, Financing Activities
530,000 
0 
Sale Leaseback Transaction, Transaction Costs, Financing Activities
154,000 
0 
Distributions paid to non-controlling interest holders
(2,392,000)
(1,602,000)
Tax Receivable Agreement Payments To Related Parties
(1,471,000)
0 
Proceeds from stock option exercises
6,567,000 
2,072,000 
Payments Related to Tax Withholding for Share-based Compensation
316,000 
0 
Excess tax benefits from equity-based compensation
0 
35,000 
NET CASH PROVIDED BY FINANCING ACTIVITIES
2,764,000 
192,000 
NET DECREASE IN CASH AND CASH EQUIVALENTS
15,280,000 
(58,622,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
11,607,000 
70,849,000 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$ 26,887,000 
$ 12,227,000 
NATURE OF OPERATIONS
NATURE OF OPERATIONS
NATURE OF OPERATIONS
 
Shake Shack Inc. ("we," "us," "our," "Shake Shack" and the "Company") was formed on September 23, 2014 as a Delaware corporation for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of SSE Holdings, LLC and its subsidiaries ("SSE Holdings"). On February 4, 2015, we completed an initial public offering ("IPO") of 5,750,000 shares of our Class A common stock at a public offering price of $21.00 per share. We used the net proceeds from the IPO to purchase newly-issued membership interests from SSE Holdings ("LLC Interests"). Following the organizational transactions completed in connection with the IPO, we became the sole managing member of SSE Holdings. As sole managing member, we operate and control all of the business and affairs of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings. We report a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. As of September 27, 2017 we owned 71.2% of SSE Holdings. Unless the context otherwise requires, "we," "us," "our," "Shake Shack," the "Company" and other similar references, refer to Shake Shack Inc. and, unless otherwise stated, all of its subsidiaries, including SSE Holdings.
We operate and license Shake Shack restaurants ("Shacks"), which serve hamburgers, chicken sandwiches, hot dogs, crinkle-cut fries, shakes, frozen custard, beer, wine and more. As of September 27, 2017, there were 143 Shacks in operation, system-wide, of which 79 were domestic company-operated Shacks, 10 were domestic licensed Shacks and 54 were international licensed Shacks.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Shake Shack Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 28, 2016, as amended ("2016 Form 10-K"). In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Certain reclassifications have been made to prior period amounts to conform to the current year presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
The accompanying Condensed Consolidated Balance Sheet as of December 28, 2016 has been derived from the audited financial statements at that date but does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our 2016 Form 10-K.
SSE Holdings is considered a VIE. Shake Shack Inc. is the primary beneficiary as we have the majority economic interest in SSE Holdings and, as the sole managing member, have decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights. As a result, we consolidate SSE Holdings. The assets and liabilities of SSE Holdings represent substantially all of our consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement. As of September 27, 2017 and December 28, 2016, the net assets of SSE Holdings were $189,581 and $158,845, respectively. The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreements. See Note 7 for more information.
Fiscal Year
We operate on a 52/53 week fiscal year ending on the last Wednesday in December. Fiscal 2017 contains 52 weeks and ends on December 27, 2017. Fiscal 2016 contained 52 weeks and ended on December 28, 2016. Unless otherwise stated, references to years in this report relate to fiscal years.
Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Pronouncements     
We adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal 2017. The effects of adoption did not have a material impact on our consolidated financial statements.
Accounting Standards Update (“ASU”)
Description
Date
Adopted
Improvements to Employee Share-Based Payment Accounting
(ASU 2016-09)
This standard simplifies certain aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, certain classifications on the statement of cash flows, and an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur. Upon adoption, we made such policy election. The adoption methodology applied varied based on each applicable provision of the standard, and none of the provisions had a material impact on our consolidated financial statements.
December 29, 2016
Simplifying the Measurement of Inventory (ASU 2015-11)
This standard applies to inventory measured using methods other than last-in, first-out (LIFO) or the retail method, and requires entities to measure such inventory at the lower of cost or net realizable value. It was applied prospectively.
December 29, 2016
Recently Issued Accounting Pronouncements       

Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Statement of Cash Flows: Classification of Certain Cash Receipts and Payments (ASU 2016-15)
This standard provides guidance on eight specific cash flow issues with the objective of reducing diversity in practice. It should be applied retrospectively to each period presented, subject to certain conditions.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 28, 2017

Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Recognition and Measurement of Financial Assets and Financial Liabilities
(ASU 2016-01)
For public business entities, this standard requires: (i) certain equity investments to be measured at fair value with changes in fair value recognized in net income; (ii) a qualitative assessment to identify impairment of equity investments without readily determinable fair values; (iii) elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (iv) use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) separate presentation of financial assets and liabilities by measurement category and form of financial asset in the financial statements; and (vii) an entity to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The standard should be applied by means of a cumulative-effect adjustment to the balance sheet at the beginning of the fiscal year of adoption. Early adoption is permitted, subject to certain conditions resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 28, 2017
Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Revenue from Contracts with Customers and related standards
(ASU’s 2014-09, 2015-14, 2016-08, 2016-10, 2016-12, 2016-20)
This standard supersedes the existing revenue recognition guidance and provides a new framework for recognizing revenue. The core principle of the standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard also requires significantly more comprehensive disclosures than the existing standard. Guidance subsequent to ASU 2014-09 has been issued to clarify various provisions in the standard, including principal versus agent considerations, identifying performance obligations, licensing transactions, as well as various technical corrections and improvements. This standard may be adopted using either a retrospective or modified retrospective method. Early adoption is permitted.

We are currently in the process of evaluating the impact this standard is expected to have on our consolidated financial statements.

Based on our preliminary assessment, we believe that the pattern and timing of revenue recognition related to the fixed fees associated with our licensing agreements (such as restaurant opening and territory fees) will differ from current policy. Currently, restaurant opening fees are recorded as deferred revenue when received and proportionate amounts are recognized as revenue when a licensed Shack is opened and all material services and conditions related to the fee have been substantially performed. Territory fees are recorded as deferred revenue when received and recognized as revenue on a straight-line basis over the term of the license agreement, which generally begins upon execution of the contract. Under the new standard, we will likely identify the licenses granted to each restaurant under each licensing agreement as separate performance obligations. Accordingly, we would allocate the opening and territory fees to each restaurant and recognize such fees as revenue on a straight-line basis over the individual restaurants’ license terms, which generally begin when the restaurant opens. We do not expect the accounting for the sales-based royalties of our licensing agreements to change from current policy. 

We are still in the process of assessing whether any sales promotions or discounts we currently offer related to our Shack sales could be considered separate performance obligations.

We plan to adopt the standard on December 28, 2017, and we have not yet selected a transition method.

December 28, 2017
Leases
(ASU 2016-02)

This standard establishes a new lease accounting model, which introduces the recognition of lease assets and liabilities for those leases classified as operating leases under previous GAAP. It should be applied using a modified retrospective approach, with the option to elect various practical expedients. Early adoption is permitted.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 27, 2018

FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis as of September 27, 2017 and December 28, 2016, and indicate the classification within the fair value hierarchy.
Cash, Cash Equivalents and Marketable Securities
The following tables summarize our cash, cash equivalents and marketable securities by significant investment categories as of September 27, 2017 and December 28, 2016:
 
 
September 27, 2017
 
 
Cost Basis

 
 Gross Unrealized Gains

 
 Gross Unrealized Losses

 
 Fair Value

 
 Cash and Cash Equivalents

 
Marketable Securities

Cash
$
21,862

 
$
—

 
$
—

 
$
21,862

 
$
21,862

 
$
—

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
5,025

 
—

 
—

 
5,025

 
5,025

 
—

 
Mutual funds
60,769

 
60

 
—

 
60,829

 
—

 
60,829

Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities(1)
2,493

 
2

 
(25
)
 
2,470

 
—

 
2,470

Total
$
90,149

 
$
62

 
$
(25
)
 
$
90,186

 
$
26,887

 
$
63,299

 
 
December 28, 2016
 
 
Cost Basis

 
 Gross Unrealized Gains

 
 Gross Unrealized Losses

 
 Fair Value

 
 Cash and Cash Equivalents

 
Marketable Securities

Cash
$
6,322

 
$
—

 
$
—

 
$
6,322

 
$
6,322

 
$
—

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
5,285

 
—

 
—

 
5,285

 
5,285

 
—

 
Mutual funds
60,232

 
—

 
—

 
60,232

 
—

 
60,232

Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities(1)
2,473

 
3

 
(30
)
 
2,446

 
—

 
2,446

Total
$
74,312

 
$
3

 
$
(30
)
 
$
74,285

 
$
11,607

 
$
62,678

(1)
Corporate debt securities were measured at fair value using a market approach utilizing observable prices for identical securities or securities with similar characteristics and inputs that are observable or can be corroborated by observable market data.

Net unrealized gains on available-for-sale securities totaling $37 and net unrealized losses on available-for-sale securities totaling $27 were included in accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheet as of September 27, 2017 and December 28, 2016, respectively.
The following tables summarize the gross unrealized losses and fair values for those investments that were in an unrealized loss position as of September 27, 2017 and December 28, 2016, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:
 
 
September 27, 2017
 
 
 
Less than 12 Months
 
 
12 Months or Greater
 
 
Total
 
 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Money market funds
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
Mutual funds
—

 
—

 
—

 
—

 
—

 
—

 
Corporate debt securities
1,638

 
(9
)
 
322

 
(16
)
 
1,960

 
(25
)
Total
$
1,638

 
$
(9
)
 
$
322

 
$
(16
)
 
$
1,960

 
$
(25
)
 
 
December 28, 2016
 
 
 
Less than 12 Months
 
 
12 Months or Greater
 
 
Total
 
 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Money market funds
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
Mutual funds
—

 
—

 
—

 
—

 
—

 
—

 
Corporate debt securities
1,244

 
(10
)
 
540

 
(20
)
 
1,784

 
(30
)
Total
$
1,244

 
$
(10
)
 
$
540

 
$
(20
)
 
$
1,784

 
$
(30
)

A summary of other income from available-for-sale securities recognized during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
September 27
2017

 
September 28
2016

 
September 27
2017

 
September 28
2016

Available-for-sale securities:
 
 
 
 
 
 
 
 
Dividend income
$
222

 
$
133

 
$
591

 
$
133

 
Interest income
19

 
22

 
58

 
68

 
Loss on investments
(12
)
 
(4
)
 
(27
)
 
(4
)
Total other income, net
$
229

 
$
151

 
$
622

 
$
197


A summary of available-for-sale securities sold and gross realized gains and losses recognized during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
September 27
2017

 
September 28
2016

 
September 27
2017

 
September 28
2016

Available-for-sale securities:
 
 
 
 
 
 
 
 
Gross proceeds from sales and redemptions
$
584

 
$
176

 
$
1,212

 
$
498

 
Cost basis of sales and redemptions
597

 
180

 
1,239

 
502

 
Gross realized gains included in net income
1

 
—

 
1

 
1

 
Gross realized losses included in net income
(13
)
 
(4
)
 
(28
)
 
(5
)
 
Amounts reclassified out of accumulated other comprehensive loss
14

 
3

 
28

 
3


Realized gains and losses are determined on a specific identification method and are included in other income, net on the Condensed Consolidated Statements of Income.
The estimated fair value of our investments in corporate debt securities that are accounted for as available-for-sale securities are all due within one year and are included within marketable securities on the Condensed Consolidated Balance Sheets.
We periodically review our marketable securities for other-than-temporary impairment. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. For our debt securities, we also consider whether (i) it is more likely than not that we will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. As of September 27, 2017 and December 28, 2016, the declines in the market value of our marketable securities investment portfolio were considered to be temporary in nature.
Other Financial Instruments
The carrying value of our other financial instruments, including accounts receivable, accounts payable, and accrued expenses as of September 27, 2017 and December 28, 2016 approximated their fair value due to the short-term nature of these financial instruments.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Assets and liabilities that are measured at fair value on a non-recurring basis include our long-lived assets and indefinite-lived intangible assets. There were no impairments recognized during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016.
INVENTORIES
INVENTORIES
INVENTORIES
 
Inventories as of September 27, 2017 and December 28, 2016 consisted of the following:
 
September 27
2017

 
December 28
2016

Food
$
774

 
$
543

Wine
55

 
47

Beer
75

 
58

Beverages
102

 
79

Retail merchandise
121

 
79

Inventories
$
1,127

 
$
806

PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
 
Property and equipment as of September 27, 2017 and December 28, 2016 consisted of the following:
 
September 27
2017

 
December 28
2016

Leasehold improvements
$
146,939

 
$
120,629

Landlord funded assets
6,555

 
—

Equipment
28,139

 
23,194

Furniture and fixtures
9,082

 
7,342

Computer equipment and software
10,966

 
8,710

Construction in progress (includes assets under construction from deemed landlord financing)
25,608

 
13,510

Property and equipment, gross
227,289

 
173,385

Less: accumulated depreciation
52,600

 
37,121

Property and equipment, net
$
174,689

 
$
136,264

SUPPLEMENTAL BALANCE SHEET INFORMATION
SUPPLEMENTAL BALANCE SHEET INFORMATION
SUPPLEMENTAL BALANCE SHEET INFORMATION
 
The components of other current liabilities as of September 27, 2017 and December 28, 2016 are as follows:
 
September 27
2017

 
December 28
2016

Sales tax payable
$
1,539

 
$
1,324

Current portion of liabilities under tax receivable agreement
3,140

 
4,580

Gift card liability
1,003

 
1,153

Deferred compensation
2,400

 
—

Other
1,735

 
3,116

Other current liabilities
$
9,817

 
$
10,173

DEBT
DEBT
DEBT
 
In January 2015, we executed a Third Amended and Restated Credit Agreement, which became effective on February 4, 2015 (together with the prior agreements and amendments, and as further amended, the "Revolving Credit Facility"), which provides for a revolving total commitment amount of $50,000, of which $20,000 is available immediately. The Revolving Credit Facility will mature and all amounts outstanding will be due and payable five years from the effective date. The Revolving Credit Facility permits the issuance of letters of credit upon our request of up to $10,000. Borrowings under the Revolving Credit Facility bear interest at either: (i) LIBOR plus a percentage ranging from 2.3% to 3.3% or (ii) the prime rate plus a percentage ranging from 0.0% to 0.8%, depending on the type of borrowing made under the Revolving Credit Facility. As of September 27, 2017 and December 28, 2016, there were no amounts outstanding under the Revolving Credit Facility. As of September 27, 2017, we had $19,317 of availability under the Revolving Credit Facility, after giving effect to $683 in outstanding letters of credit.
The Revolving Credit Facility is secured by a first-priority security interest in substantially all of the assets of SSE Holdings and the guarantors. The obligations under the Revolving Credit Facility are guaranteed by each of SSE Holdings' wholly-owned domestic subsidiaries (with certain exceptions).
The Revolving Credit Facility contains a number of covenants that, among other things, limit our ability to, subject to specified exceptions, incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve ourselves; pay dividends or make distributions; engage in businesses that are not in a related line of business; make loans, advances or guarantees; engage in transactions with affiliates; and make investments. In addition, the Revolving Credit Facility contains certain cross-default provisions. We are required to maintain a specified consolidated fixed-charge coverage ratio and a specified funded net debt to adjusted EBITDA ratio, both as defined under the Revolving Credit Facility. As of September 27, 2017, we were in compliance with all covenants.
As of September 27, 2017 and December 28, 2016 we had deemed landlord financing liabilities of $13,162 and $2,007, respectively, for certain leases where we are involved in the construction of leased assets and are considered the accounting owner of the construction project.
Total interest costs incurred were $527 and $1,260 for the thirteen and thirty-nine weeks ended September 27, 2017, respectively, and $89 and $267 for the thirteen and thirty-nine weeks ended September 28, 2016, respectively. Total amounts capitalized into property and equipment were $51 and $115 for the thirteen and thirty-nine weeks ended September 27, 2017, respectively. No amounts were capitalized for the thirteen and thirty-nine weeks ended September 28, 2016.
NON-CONTROLLING INTERESTS
NON-CONTROLLING INTERESTS
NON-CONTROLLING INTERESTS
 
We are the sole managing member of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings. We report a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. The Third Amended and Restated Limited Liability Company Agreement, as further amended, (the "LLC Agreement") of SSE Holdings provides that holders of LLC Interests may, from time to time, require SSE Holdings to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis. In connection with any redemption or exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings. Changes in our ownership interest in SSE Holdings while we retain our controlling interest in SSE Holdings will be accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC Interests in SSE Holdings by the other members of SSE Holdings will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital.
The following table summarizes the ownership interest in SSE Holdings as of September 27, 2017 and December 28, 2016.
 
September 27, 2017
 
 
December 28, 2016
 
 
LLC Interests

 
Ownership%

 
LLC Interests

 
Ownership %

Number of LLC Interests held by Shake Shack Inc.
26,161,111

 
71.2
%
 
25,151,384

 
69.1
%
Number of LLC Interests held by non-controlling interest holders
10,567,792

 
28.8
%
 
11,253,592

 
30.9
%
Total LLC Interests outstanding
36,728,903

 
100.0
%
 
36,404,976

 
100.0
%

The weighted average ownership percentages for the applicable reporting periods are used to attribute net income and other comprehensive income (loss) to Shake Shack Inc. and the non-controlling interest holders. The non-controlling interest holders' weighted average ownership percentage for the thirteen and thirty-nine weeks ended September 27, 2017 was 29.1% and 29.7%, respectively. The non-controlling interest holders' weighted average ownership percentage for the thirteen and thirty-nine weeks ended September 28, 2016 was 33.9% and 38.5%, respectively.
The following table summarizes the effects of changes in ownership of SSE Holdings on our equity during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016.
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
September 27
2017

 
September 28
2016

 
September 27
2017

 
September 28
2016

Net income attributable to Shake Shack Inc.
$
4,997

 
$
3,766

 
$
12,143

 
$
8,526

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Unrealized holding gains (losses) on available-for-sale securities
47

 
(5
)
 
45

 
(10
)
Transfers (to) from non-controlling interests:
 
 
 
 
 
 
 
 
Increase in additional paid-in capital as a result of the redemption of LLC Interests
841

 
4,708

 
2,883

 
15,086

 
Increase in additional paid-in capital as a result of activity under stock compensation plans
78

 
17

 
3,580

 
421

Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.
$
5,963

 
$
8,486

 
$
18,651

 
$
24,023


During the thirty-nine weeks ended September 27, 2017 and September 28, 2016, an aggregate of 685,800 and 4,706,663 LLC Interests, respectively, were redeemed by non-controlling interest holders for newly-issued shares of Class A common stock, and we received 685,800 and 4,706,663 LLC Interests in connection with these redemptions for the thirty-nine weeks ended September 27, 2017 and September 28, 2016, respectively, increasing our total ownership interest in SSE Holdings.
During the thirty-nine weeks ended September 27, 2017 and September 28, 2016, we received an aggregate of 323,927 and 101,837 LLC Interests, respectively, in connection with the activity under our stock compensation plan.
EQUITY-BASED COMPENSATION
EQUITY-BASED COMPENSATION
EQUITY-BASED COMPENSATION
 
A summary of equity-based compensation expense recognized during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
 
September 27
2017

 
September 28
2016

 
September 27
2017

 
September 28
2016

Stock options
$
816

 
$
1,085

 
$
2,643

 
$
3,168

Performance stock units
345

 
492

 
1,029

 
649

Restricted stock units
128

 
—

 
151

 
—

Equity-based compensation expense
$
1,289

 
$
1,577

 
$
3,823

 
$
3,817

Total income tax benefit recognized related to equity-based compensation
$
47

 
$
53

 
$
142

 
$
117


Amounts are included in general and administrative expense and labor and related expenses on the Condensed Consolidated Statements of Income.
INCOME TAXES
INCOME TAXES
INCOME TAXES
 
We are the sole managing member of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings. SSE Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, SSE Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by SSE Holdings is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of SSE Holdings, as well as any stand-alone income or loss generated by Shake Shack Inc. We are also subject to withholding taxes in foreign jurisdictions.
Income Tax Expense
A reconciliation of income tax expense computed at the U.S. federal statutory income tax rate to the recognized income tax expense is as follows:
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
September 27 2017
 
 
September 28
2016
 
 
September 27 2017
 
 
September 28
2016
 
Expected U.S. federal income taxes at statutory rate
$
3,627

35.0
 %
 
$
3,139

34.0
 %
 
$
9,609

35.0
 %
 
$
7,734

34.0
 %
State and local income taxes, net of federal benefit
630

6.1
 %
 
533

5.8
 %
 
1,638

6.0
 %
 
1,277

5.6
 %
Foreign withholding taxes
292

2.8
 %
 
148

1.6
 %
 
705

2.6
 %
 
505

2.2
 %
Tax credits
(399
)
(3.8
)%
 
(243
)
(2.6
)%
 
(777
)
(2.8
)%
 
(369
)
(1.6
)%
Non-controlling interest
(1,132
)
(10.9
)%
 
(1,134
)
(12.3
)%
 
(3,114
)
(11.3
)%
 
(3,089
)
(13.6
)%
Other
(524
)
(5.1
)%
 
—

—
 %
 
(524
)
(2.0
)%
 
—

—
 %
Income tax expense
$
2,494

24.1
 %
 
$
2,443

26.5
 %
 
$
7,537

27.5
 %
 
$
6,058

26.6
 %


Our effective income tax rates for the thirteen weeks ended September 27, 2017 and September 28, 2016 were 24.1% and 26.5%, respectively. The decrease was driven by a benefit related to an adjustment recognized in connection with the filing of our prior year tax returns and higher tax credits, which were partially offset by the increase in our ownership interest in SSE Holdings, which increases our share of the taxable income of SSE Holdings, and higher foreign withholding taxes. Our weighted-average ownership interest in SSE Holdings was 70.9% and 66.1% for the thirteen weeks ended September 27, 2017 and September 28, 2016, respectively.
Our effective income tax rates for the thirty-nine weeks ended September 27, 2017 and September 28, 2016 were 27.5% and 26.6%, respectively. The increase in our effective income tax rate for the period is primarily due to an increase in our ownership interest in SSE Holdings. As our ownership interest in SSE Holdings increases, our share of the taxable income of SSE Holdings also increases. Our weighted-average ownership interest in SSE Holdings was 70.3% and 61.5% for the thirty-nine weeks ended September 27, 2017 and September 28, 2016, respectively. This increase in ownership interest was partially offset by a benefit related to an adjustment recognized in connection with the filing of our prior year tax returns and higher tax credits.
Deferred Tax Assets and Liabilities
During the thirty-nine weeks ended September 27, 2017, we acquired an aggregate of 1,009,727 LLC Interests in connection with the redemption of LLC Interests and activity relating to our stock compensation plan. We recognized a deferred tax asset in the amount of $9,883 associated with the basis difference in our investment in SSE Holdings upon acquisition of these LLC Interests. As of September 27, 2017, the total deferred tax asset related to the basis difference in our investment in SSE Holdings was $216,285. However, a portion of the total basis difference will only reverse upon the eventual sale of our interest in SSE Holdings, which we expect would result in a capital loss. As of September 27, 2017, the total valuation allowance established against the deferred tax asset to which this portion relates was $15,679.
During the thirty-nine weeks ended September 27, 2017, we also recognized $5,216 of deferred tax assets related to additional tax basis increases generated from expected future payments under the Tax Receivable Agreement and related deductions for imputed interest on such payments. See "—Tax Receivable Agreement" for more information.
We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of September 27, 2017, we concluded, based on the weight of all available positive and negative evidence, that all of our deferred tax assets (except for those deferred tax assets described above relating to basis differences that are expected to result in a capital loss upon the eventual sale of our interest in SSE Holdings) are more likely than not to be realized. As such, no additional valuation allowance was recognized.
Uncertain Tax Positions
No uncertain tax positions existed as of September 27, 2017. Shake Shack Inc. was formed in September 2014 and did not engage in any operations prior to the IPO and related organizational transactions. Shake Shack Inc. first filed tax returns for tax year 2014, which is the first tax year subject to examination by taxing authorities for U.S. federal and state income tax purposes. Additionally, although SSE Holdings is treated as a partnership for U.S. federal and state income taxes purposes, it is still required to file an annual U.S. Return of Partnership Income, which is subject to examination by the Internal Revenue Service ("IRS"). The statute of limitations has expired for tax years through 2013 for SSE Holdings.
Tax Receivable Agreement
Pursuant to our election under Section 754 of the Internal Revenue Code (the "Code"), we expect to obtain an increase in our share of the tax basis in the net assets of SSE Holdings when LLC Interests are redeemed or exchanged by the other members of SSE Holdings. We plan to make an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC Interest occurs. We intend to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that we would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
On February 4, 2015, we entered into a tax receivable agreement with certain of the then-existing members of SSE Holdings (the "Tax Receivable Agreement") that provides for the payment by us of 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the "TRA Payments"). We expect to benefit from the remaining 15% of any tax benefits that we may actually realize. The TRA Payments are not conditioned upon any continued ownership interest in SSE Holdings or us. The rights of each member of SSE Holdings, that is a party to the Tax Receivable Agreement, are assignable to transferees of their respective LLC Interests.
During the thirty-nine weeks ended September 27, 2017, we acquired an aggregate of 685,800 LLC Interests in connection with the redemption of LLC Interests, which resulted in an increase in the tax basis of our investment in SSE Holdings subject to the provisions of the Tax Receivable Agreement. We recognized an additional liability in the amount of $12,918 for the TRA Payments due to the redeeming members, representing 85% of the aggregate tax benefits we expect to realize from the tax basis increases related to the redemption of LLC Interests, after concluding it was probable that such TRA Payments would be paid based on our estimates of future taxable income. During the thirty-nine weeks ended September 27, 2017, payments of $1,471, inclusive of interest, were made to the members of SSE Holdings pursuant to the Tax Receivable Agreement. No amounts were paid to the members during the thirty-nine weeks ended September 28, 2016. As of September 27, 2017, the total amount of TRA Payments due under the Tax Receivable Agreement, was $283,961, of which $3,140 was included in other current liabilities on the Condensed Consolidated Balance Sheet. See Note 13 for more information relating to our liabilities under the Tax Receivable Agreement.
EARNINGS PER SHARE
EARNINGS PER SHARE
EARNINGS PER SHARE
 
Basic earnings per share of Class A common stock is computed by dividing net income available to Shake Shack Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to Shake Shack Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016.
 
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
 
 
September 27 2017

 
September 28
2016

 
September 27 2017

 
September 28
2016

Numerator:
 
 
 
 
 
 
 
 
Net income
$
7,870

 
$
6,789

 
$
19,916

 
$
16,689

 
Less: net income attributable to non-controlling interests
2,873

 
3,023

 
7,773

 
8,163

 
Net income attributable to Shake Shack Inc.
$
4,997

 
$
3,766

 
$
12,143

 
$
8,526

Denominator:
 
 
 
 
 
 
 
 
Weighted-average shares of Class A common stock outstanding—basic
26,024

 
24,023

 
25,733

 
22,310

 
Effect of dilutive securities:
 
 
 
 
 
 
 
 
 
Stock options
411

 
531

 
486

 
495

 
 
Performance stock units
26

 
—

 
24

 
—

 
 
Restricted stock units
16

 
—

 
5

 
—

 
Weighted-average shares of Class A common stock outstanding—diluted
26,477

 
24,554

 
26,248

 
22,805

 
 
 
 
 
 
 
 
 
 
Earnings per share of Class A common stock—basic
$
0.19

 
$
0.16

 
$
0.47

 
$
0.38

Earnings per share of Class A common stock—diluted
$
0.19

 
$
0.15

 
$
0.46

 
$
0.37


Shares of our Class B common stock do not share in the earnings or losses of Shake Shack and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented.
The following table presents potentially dilutive securities excluded from the computations of diluted earnings per share of Class A common stock for the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016.
 
 
 
Thirteen Weeks Ended
 
Thirty-Nine Weeks Ended
 
 
 
September 27 2017

 
 
September 28
2016

 
 
September 27 2017

 
 
September 28
2016

 
Stock options(1)
18,676

(2)
 
—

 
 
18,676

(2)
 
—

 
Performance stock units(1)
86,396

(3)
 
62,800

(3)
 
86,396

(3)
 
62,800

(3)
Shares of Class B common stock
10,567,792

(4)
 
11,754,078

(4)
 
10,567,792

(4)
 
11,754,078

(4)

(1)
Represents the number of instruments outstanding at the end of the period. Application of the treasury stock method would reduce this amount if they had a dilutive effect and were included in the computation of diluted earnings per share.
(2)
Excluded from the computation of diluted earnings per share of Class A common stock because the exercise price of the stock options exceeded the average market price of our Class A common stock during the period ("out-of-the-money").
(3)
Excluded from the computation of diluted earnings per share of Class A common stock because the performance conditions associated with these awards were not met assuming the end of the reporting period was the end of the performance period.
(4)
Shares of our Class B common stock are considered potentially dilutive shares of Class A common stock. Amounts have been excluded from the computations of diluted earnings per share of Class A common stock because the effect would have been anti-dilutive under the if-converted and two-class methods.
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
 
The following table sets forth supplemental cash flow information for the thirty-nine weeks ended September 27, 2017 and September 28, 2016:
 
 
Thirty-Nine Weeks Ended
 
 
 
September 27
2017

 
September 28
2016

Cash paid for:
 
 
 
 
Income taxes, net of refunds
$
1,936

 
$
1,292

 
Interest, net of amounts capitalized
684

 
40

Non-cash investing activities:
 
 
 
 
Accrued purchases of property and equipment
10,138

 
5,792

 
Capitalized landlord assets for leases where we are deemed the accounting owner
9,095

 
—

 
Accrued purchases of marketable securities
307

 
51

 
Capitalized equity-based compensation
86

 
107

Non-cash financing activities:
 
 
 
 
Class A common stock issued in connection with the redemption of LLC Interests
—

 
5

 
Cancellation of Class B common stock in connection with the redemption of LLC Interests
—

 
(5
)
 
Establishment of liabilities under tax receivable agreement
12,918

 
90,776

 
Accrued distributions payable to non-controlling interest holders

—

 
607

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
 
Lease Commitments
We are obligated under various operating leases for Shacks and our home office space, expiring in various years through 2035. Under certain of these leases, we are liable for contingent rent based on a percentage of sales in excess of specified thresholds and are typically responsible for our proportionate share of real estate taxes, common area maintenance charges and utilities.
As security under the terms of several of our leases, we are obligated under letters of credit totaling $160 as of September 27, 2017. The letters of credit expire in April 2018 and February 2026. In addition, in December 2013, we entered into an irrevocable standby letter of credit in conjunction with our home office lease in the amount of $80. The letter of credit expires in September 2018 and renews automatically for one-year periods through September 2019. In September 2017, we entered into an irrevocable standby letter of credit in conjunction with our new home office lease in the amount of $603. The letter of credit expires in August 2018 and renews automatically for one-year periods through January 2034.
Purchase Commitments
Purchase obligations include legally binding contracts, including commitments for the purchase, construction or remodeling of real estate and facilities, firm minimum commitments for inventory purchases, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts. These obligations are generally short-term in nature and are recorded as liabilities when the related goods are received or services rendered. We also enter into long-term, exclusive contracts with certain vendors to supply us with food, beverages and paper goods, obligating us to purchase specified quantities.
Legal Contingencies
In November 2015, we participated in a voluntary mediation with counsel representing two former Shake Shack managers, who alleged that we improperly classified our restaurant managers as exempt from overtime protections. At the conclusion of the mediation, the parties mutually agreed to fully and finally resolve the matter by settling, rather than litigating. In connection with the settlement, the parties entered into a memorandum of understanding, pursuant to which we agreed to create a settlement fund in the amount of $750 and, in exchange for their participation in the settlement fund, all participating employees (current and former) were required to release Shake Shack from all federal and/or state wage and hour claims that may have existed through the settlement date. In March 2016, the parties entered into a settlement agreement in the amount of $750. In May 2017, we paid to the claims administrator $774 in full satisfaction of the amounts owed by us under the settlement agreement and related expenses.
We are subject to various legal and regulatory proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. As of September 27, 2017, the amount of ultimate liability with respect to these matters was not material.
Liabilities under Tax Receivable Agreement
As described in Note 10, we are a party to the Tax Receivable Agreement under which we are contractually committed to pay certain of the members of SSE Holdings 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of certain transactions. We are not obligated to make any payments under the Tax Receivable Agreement until the tax benefits associated with the transactions that gave rise to the payments are realized. Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) future changes in tax laws. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related TRA Payments. During the thirty-nine weeks ended September 27, 2017 and September 28, 2016, we recognized liabilities totaling $12,918 and $90,776, respectively, relating to our obligations under the Tax Receivable Agreement, after concluding that it was probable that we would have sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits. As of September 27, 2017 and December 28, 2016, our total obligations under the Tax Receivable Agreement, including accrued interest, were $283,961 and $272,482, respectively. There were no transactions subject to the Tax Receivable Agreement for which we did not recognize the related liability, as we concluded that we would have sufficient future taxable income to utilize all of the related tax benefits.
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
 
Union Square Hospitality Group
The Chairman of our Board of Directors serves as the Chief Executive Officer of Union Square Hospitality Group, LLC. As a result, Union Square Hospitality Group, LLC and its subsidiaries, set forth below, are considered related parties.
USHG, LLC
Effective January 2015, we entered into an Amended and Restated Management Services Agreement with USHG, LLC ("USHG"), in which USHG provides reduced management services to SSE Holdings comprised of executive leadership from members of its senior management, advisory and development services and limited leadership development and human resources services. The initial term of the Amended and Restated Management Services Agreement is through December 31, 2019, with renewal periods.
No amounts were paid to USHG for general corporate expenses during the thirteen weeks ended September 27, 2017 and $1 was paid to USHG during the thirteen weeks ended September 28, 2016. Total amounts paid to USHG for general corporate expenses during the thirty-nine weeks ended September 27, 2017 and September 28, 2016 were $6 and $7, respectively. These amounts are included in general and administrative expenses on the Condensed Consolidated Statements of Income.
No amounts were payable to USHG as of September 27, 2017. Total amounts payable to USHG as of December 28, 2016 were $1, which is included in other current liabilities on the Condensed Consolidated Balance Sheets. No amounts were due from USHG as of September 27, 2017 and December 28, 2016.
Daily Provisions
In May 2017 we began purchasing coffee cake from the restaurant Daily Provisions to offer as a breakfast item at our Madison Square Park Shack. Amounts paid to Daily Provisions during the thirteen and thirty-nine weeks ended September 27, 2017 were $4. No amounts were paid to Daily Provisions during the thirteen and thirty-nine weeks ended September 28, 2016. Total amounts payable to Daily Provisions as of September 27, 2017 were $1, which are included in accounts payable on the Condensed Consolidated Balance Sheets. No amounts were payable to Daily provisions as of December 28, 2016.
Hudson Yards Sports and Entertainment
In fiscal 2011, we entered into a Master License Agreement (as amended, "MLA") with Hudson Yards Sports and Entertainment LLC ("HYSE") to operate Shake Shack branded limited menu concession stands in sports and entertainment venues within the United States. The agreement expires in January 2027 and includes five consecutive five-year renewal options at HYSE's option. As consideration for these rights, HYSE pays us a license fee based on a percentage of net food sales, as defined in the MLA. HYSE also pays us a percentage of profits on sales of branded beverages, as defined in the MLA. Amounts paid to us by HYSE for the thirteen and thirty-nine weeks ended September 27, 2017 were $193 and $328, respectively. For the thirteen and thirty-nine weeks ended September 28, 2016 amounts paid to us by HYSE were $174 and $277, respectively. These amounts are included in licensing revenue on the Condensed Consolidated Statements of Income. Total amounts due from HYSE as of September 27, 2017 and December 28, 2016 were $75 and $11, which are included in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.
Madison Square Park Conservancy
The Chairman of our Board of Directors serves as a director of the Madison Square Park Conservancy ("MSP Conservancy"), with which we have a license agreement and pay license fees to operate our Madison Square Park Shack. Amounts paid to Madison Square Park Conservancy as rent amounted to $199 and $531 for the thirteen and thirty-nine weeks ended September 27, 2017, respectively. Amounts paid to Madison Square Park Conservancy as rent amounted to $195 and $585 for the thirteen and thirty-nine weeks ended September 28, 2016, respectively. These amounts are included in occupancy and related expenses on the Condensed Consolidated Statements of Income. No amounts were due to MSP Conservancy as of September 27, 2017. Total amounts due to MSP Conservancy were $1 as of December 28, 2016. These amounts are included in accrued expenses on the Condensed Consolidated Balance Sheets.
Additionally, we received tenant improvement allowances from MSP Conservancy related to a reconstruction project which ended in 2015. No amounts were paid to us from MSP Conservancy during the thirteen weeks ended September 27, 2017. During the
thirty-nine weeks ended September 27, 2017 amounts paid to us from MSP Conservancy totaled $200. No amounts were paid to us during the thirteen and thirty-nine weeks ended September 28, 2016. No amounts were due to us from MSP Conservancy as of September 27, 2017. Total amounts due from MSP Conservancy as of December 28, 2016 were $200, which are included in accounts receivable on the Condensed Consolidated Balance Sheets.
Share Our Strength
The Chairman of our Board of Directors serves as a director of Share Our Strength, for which Shake Shack holds the "Great American Shake Sale" every year during the month of May to raise money and awareness for childhood hunger. During the Great American Shake Sale, we encourage guests to donate money to Share Our Strength's No Kid Hungry campaign in exchange for a coupon for a free cake-themed shake. All of the guest donations we collect go directly to Share Our Strength.
During the thirty-nine weeks ended September 27, 2017 and September 28, 2016 the Great American Shake Sale raised $631 and $587, respectively, for Share Our Strength. No amounts were raised for both the thirteen weeks ended September 27, 2017 and September 28, 2016. All proceeds were remitted to Share Our Strength in the respective years. We incurred costs of approximately $29 and $148 for the thirteen and thirty-nine weeks ended September 27, 2017, respectively, and $17 and $115 for the thirteen and thirty-nine weeks ended September 28, 2016, respectively, which represent the cost of the free shakes redeemed. These costs are included in general and administrative expenses on the Condensed Consolidated Statements of Income.
Mobo Systems, Inc.
The Chairman of our Board of Directors serves as a director of Mobo Systems, Inc. (also known as "Olo"), a platform we use in connection with our mobile ordering application. Amounts paid to Olo during the thirteen and thirty-nine weeks ended September 27, 2017 were $19 and $57, respectively, which are included in other operating expenses on the Condensed Consolidated Statements of Income. No amounts were paid to Olo for the thirteen and thirty-nine weeks ended September 28, 2016. No amounts were payable to Olo as of September 27, 2017 and December 28, 2016.
Square, Inc.
In July 2017, our Chief Executive Officer joined the Board of Directors of Square, Inc. ("Square"). We currently use certain point-of-sale applications, payment processing services, hardware and other enterprise platform services in connection with the processing of a limited amount of sales at certain of our Shacks, sales for certain off-site events and in connection with our kiosk technology. Additionally, in March 2017, we partnered with Caviar, Square’s food ordering service, for a limited-time delivery promotion. 
Tax Receivable Agreement
As described in Note 10, we entered into a tax receivable agreement with certain members of SSE Holdings that provides for the payment by us of 85% of the amount of tax benefits, if any, that Shake Shack actually realizes or in some cases is deemed to realize as a result of certain transactions. No payments were made to the members of SSE Holdings pursuant to the Tax Receivable Agreement during the thirteen weeks ended September 27, 2017. During the thirty-nine weeks ended September 27, 2017, payments of $1,471, inclusive of interest, were made to the members. No amounts were paid to the members during the thirteen and thirty-nine weeks ended September 28, 2016. As of September 27, 2017 and December 28, 2016, total amounts due under the Tax Receivable Agreement were $283,961 and $272,482, respectively.
Distributions to Members of SSE Holdings
Under the terms of the SSE Holdings LLC Agreement, SSE Holdings is obligated to make tax distributions to its members. During the thirteen and thirty-nine weeks ended September 27, 2017 distributions paid to non-controlling interest holders were $13 and $2,392, respectively. No distributions were paid to non-controlling interest holders for the thirteen weeks ended September 28, 2016. For the thirty-nine weeks ended September 28, 2016 tax distributions of $1,602 were paid to non-controlling interest holders. No tax distributions were payable to non-controlling interest holders as of September 27, 2017. As of December 28, 2016 tax distributions of $607 were payable to non-controlling interest holders.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Sep. 27, 2017
Accounting Policies [Abstract]
 
Basis of Presentation
Text Block 
Fiscal Year
Text Block 
Use of Estimates
Use of EstimatesThe preparation of these condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. 
Recently Adopted and Issued Accounting Pronouncements
Text Block 
Basis of Presentation 
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Shake Shack Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 28, 2016, as amended ("2016 Form 10-K"). In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Certain reclassifications have been made to prior period amounts to conform to the current year presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
The accompanying Condensed Consolidated Balance Sheet as of December 28, 2016 has been derived from the audited financial statements at that date but does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our 2016 Form 10-K.
SSE Holdings is considered a VIE. Shake Shack Inc. is the primary beneficiary as we have the majority economic interest in SSE Holdings and, as the sole managing member, have decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights. As a result, we consolidate SSE Holdings. The assets and liabilities of SSE Holdings represent substantially all of our consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement. As of September 27, 2017 and December 28, 2016, the net assets of SSE Holdings were $189,581 and $158,845, respectively. The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreements. See Note 7 for more information.
Fiscal Year 
Fiscal YearWe operate on a 52/53 week fiscal year ending on the last Wednesday in December. Fiscal 2017 contains 52 weeks and ends on December 27, 2017. Fiscal 2016 contained 52 weeks and ended on December 28, 2016. Unless otherwise stated, references to years in this report relate to fiscal years.
Recently Adopted and Issued Accounting Pronouncements 
Recently Adopted Accounting Pronouncements     
We adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal 2017. The effects of adoption did not have a material impact on our consolidated financial statements.
Accounting Standards Update (“ASU”)
Description
Date
Adopted
Improvements to Employee Share-Based Payment Accounting
(ASU 2016-09)
This standard simplifies certain aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, certain classifications on the statement of cash flows, and an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur. Upon adoption, we made such policy election. The adoption methodology applied varied based on each applicable provision of the standard, and none of the provisions had a material impact on our consolidated financial statements.
December 29, 2016
Simplifying the Measurement of Inventory (ASU 2015-11)
This standard applies to inventory measured using methods other than last-in, first-out (LIFO) or the retail method, and requires entities to measure such inventory at the lower of cost or net realizable value. It was applied prospectively.
December 29, 2016
Recently Issued Accounting Pronouncements       

Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Statement of Cash Flows: Classification of Certain Cash Receipts and Payments (ASU 2016-15)
This standard provides guidance on eight specific cash flow issues with the objective of reducing diversity in practice. It should be applied retrospectively to each period presented, subject to certain conditions.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 28, 2017

Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Recognition and Measurement of Financial Assets and Financial Liabilities
(ASU 2016-01)
For public business entities, this standard requires: (i) certain equity investments to be measured at fair value with changes in fair value recognized in net income; (ii) a qualitative assessment to identify impairment of equity investments without readily determinable fair values; (iii) elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (iv) use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) separate presentation of financial assets and liabilities by measurement category and form of financial asset in the financial statements; and (vii) an entity to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The standard should be applied by means of a cumulative-effect adjustment to the balance sheet at the beginning of the fiscal year of adoption. Early adoption is permitted, subject to certain conditions resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 28, 2017
Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Revenue from Contracts with Customers and related standards
(ASU’s 2014-09, 2015-14, 2016-08, 2016-10, 2016-12, 2016-20)
This standard supersedes the existing revenue recognition guidance and provides a new framework for recognizing revenue. The core principle of the standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard also requires significantly more comprehensive disclosures than the existing standard. Guidance subsequent to ASU 2014-09 has been issued to clarify various provisions in the standard, including principal versus agent considerations, identifying performance obligations, licensing transactions, as well as various technical corrections and improvements. This standard may be adopted using either a retrospective or modified retrospective method. Early adoption is permitted.

We are currently in the process of evaluating the impact this standard is expected to have on our consolidated financial statements.

Based on our preliminary assessment, we believe that the pattern and timing of revenue recognition related to the fixed fees associated with our licensing agreements (such as restaurant opening and territory fees) will differ from current policy. Currently, restaurant opening fees are recorded as deferred revenue when received and proportionate amounts are recognized as revenue when a licensed Shack is opened and all material services and conditions related to the fee have been substantially performed. Territory fees are recorded as deferred revenue when received and recognized as revenue on a straight-line basis over the term of the license agreement, which generally begins upon execution of the contract. Under the new standard, we will likely identify the licenses granted to each restaurant under each licensing agreement as separate performance obligations. Accordingly, we would allocate the opening and territory fees to each restaurant and recognize such fees as revenue on a straight-line basis over the individual restaurants’ license terms, which generally begin when the restaurant opens. We do not expect the accounting for the sales-based royalties of our licensing agreements to change from current policy. 

We are still in the process of assessing whether any sales promotions or discounts we currently offer related to our Shack sales could be considered separate performance obligations.

We plan to adopt the standard on December 28, 2017, and we have not yet selected a transition method.

December 28, 2017
Leases
(ASU 2016-02)

This standard establishes a new lease accounting model, which introduces the recognition of lease assets and liabilities for those leases classified as operating leases under previous GAAP. It should be applied using a modified retrospective approach, with the option to elect various practical expedients. Early adoption is permitted.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 27, 2018

FAIR VALUE MEASUREMENTS (Tables)
Schedule of Cash and Cash Equivalents 
The following tables summarize our cash, cash equivalents and marketable securities by significant investment categories as of September 27, 2017 and December 28, 2016:
 
 
September 27, 2017
 
 
Cost Basis

 
 Gross Unrealized Gains

 
 Gross Unrealized Losses

 
 Fair Value

 
 Cash and Cash Equivalents

 
Marketable Securities

Cash
$
21,862

 
$
—

 
$
—

 
$
21,862

 
$
21,862

 
$
—

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
5,025

 
—

 
—

 
5,025

 
5,025

 
—

 
Mutual funds
60,769

 
60

 
—

 
60,829

 
—

 
60,829

Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities(1)
2,493

 
2

 
(25
)
 
2,470

 
—

 
2,470

Total
$
90,149

 
$
62

 
$
(25
)
 
$
90,186

 
$
26,887

 
$
63,299

 
 
December 28, 2016
 
 
Cost Basis

 
 Gross Unrealized Gains

 
 Gross Unrealized Losses

 
 Fair Value

 
 Cash and Cash Equivalents

 
Marketable Securities

Cash
$
6,322

 
$
—

 
$
—

 
$
6,322

 
$
6,322

 
$
—

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
5,285

 
—

 
—

 
5,285

 
5,285

 
—

 
Mutual funds
60,232

 
—

 
—

 
60,232

 
—

 
60,232

Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities(1)
2,473

 
3

 
(30
)
 
2,446

 
—

 
2,446

Total
$
74,312

 
$
3

 
$
(30
)
 
$
74,285

 
$
11,607

 
$
62,678

(1)
Corporate debt securities were measured at fair value using a market approach utilizing observable prices for identical securities or securities with similar characteristics and inputs that are observable or can be corroborated by observable market data
Schedule of Unrealized Loss on Investments 
The following tables summarize the gross unrealized losses and fair values for those investments that were in an unrealized loss position as of September 27, 2017 and December 28, 2016, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:
 
 
September 27, 2017
 
 
 
Less than 12 Months
 
 
12 Months or Greater
 
 
Total
 
 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Money market funds
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
Mutual funds
—

 
—

 
—

 
—

 
—

 
—

 
Corporate debt securities
1,638

 
(9
)
 
322

 
(16
)
 
1,960

 
(25
)
Total
$
1,638

 
$
(9
)
 
$
322

 
$
(16
)
 
$
1,960

 
$
(25
)
 
 
December 28, 2016
 
 
 
Less than 12 Months
 
 
12 Months or Greater
 
 
Total
 
 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Money market funds
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
Mutual funds
—

 
—

 
—

 
—

 
—

 
—

 
Corporate debt securities
1,244

 
(10
)
 
540

 
(20
)
 
1,784

 
(30
)
Total
$
1,244

 
$
(10
)
 
$
540

 
$
(20
)
 
$
1,784

 
$
(30
)
Schedule of Other Income From Available for Sale Securities 
A summary of other income from available-for-sale securities recognized during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
September 27
2017

 
September 28
2016

 
September 27
2017

 
September 28
2016

Available-for-sale securities:
 
 
 
 
 
 
 
 
Dividend income
$
222

 
$
133

 
$
591

 
$
133

 
Interest income
19

 
22

 
58

 
68

 
Loss on investments
(12
)
 
(4
)
 
(27
)
 
(4
)
Total other income, net
$
229

 
$
151

 
$
622

 
$
197

Schedule of Available-for-sale Securities and Gross Realized Gains and Losses 
A summary of available-for-sale securities sold and gross realized gains and losses recognized during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
September 27
2017

 
September 28
2016

 
September 27
2017

 
September 28
2016

Available-for-sale securities:
 
 
 
 
 
 
 
 
Gross proceeds from sales and redemptions
$
584

 
$
176

 
$
1,212

 
$
498

 
Cost basis of sales and redemptions
597

 
180

 
1,239

 
502

 
Gross realized gains included in net income
1

 
—

 
1

 
1

 
Gross realized losses included in net income
(13
)
 
(4
)
 
(28
)
 
(5
)
 
Amounts reclassified out of accumulated other comprehensive loss
14

 
3

 
28

 
3

INVENTORIES (Tables)
Inventories
Inventories as of September 27, 2017 and December 28, 2016 consisted of the following:
 
September 27
2017

 
December 28
2016

Food
$
774

 
$
543

Wine
55

 
47

Beer
75

 
58

Beverages
102

 
79

Retail merchandise
121

 
79

Inventories
$
1,127

 
$
806

PROPERTY AND EQUIPMENT (Tables)
Property, Plant and Equipment
Property and equipment as of September 27, 2017 and December 28, 2016 consisted of the following:
 
September 27
2017

 
December 28
2016

Leasehold improvements
$
146,939

 
$
120,629

Landlord funded assets
6,555

 
—

Equipment
28,139

 
23,194

Furniture and fixtures
9,082

 
7,342

Computer equipment and software
10,966

 
8,710

Construction in progress (includes assets under construction from deemed landlord financing)
25,608

 
13,510

Property and equipment, gross
227,289

 
173,385

Less: accumulated depreciation
52,600

 
37,121

Property and equipment, net
$
174,689

 
$
136,264

SUPPLEMENTAL BALANCE SHEET INFORMATION (Tables)
Supplemental Balance Sheet Information
The components of other current liabilities as of September 27, 2017 and December 28, 2016 are as follows:
 
September 27
2017

 
December 28
2016

Sales tax payable
$
1,539

 
$
1,324

Current portion of liabilities under tax receivable agreement
3,140

 
4,580

Gift card liability
1,003

 
1,153

Deferred compensation
2,400

 
—

Other
1,735

 
3,116

Other current liabilities
$
9,817

 
$
10,173

NON-CONTROLLING INTERESTS (Tables)
Schedule of ownership interests in SSE holdings 
The following table summarizes the ownership interest in SSE Holdings as of September 27, 2017 and December 28, 2016.
 
September 27, 2017
 
 
December 28, 2016
 
 
LLC Interests

 
Ownership%

 
LLC Interests

 
Ownership %

Number of LLC Interests held by Shake Shack Inc.
26,161,111

 
71.2
%
 
25,151,384

 
69.1
%
Number of LLC Interests held by non-controlling interest holders
10,567,792

 
28.8
%
 
11,253,592

 
30.9
%
Total LLC Interests outstanding
36,728,903

 
100.0
%
 
36,404,976

 
100.0
%
Schedule of non-controlling interest 
The following table summarizes the effects of changes in ownership of SSE Holdings on our equity during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016.
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
September 27
2017

 
September 28
2016

 
September 27
2017

 
September 28
2016

Net income attributable to Shake Shack Inc.
$
4,997

 
$
3,766

 
$
12,143

 
$
8,526

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Unrealized holding gains (losses) on available-for-sale securities
47

 
(5
)
 
45

 
(10
)
Transfers (to) from non-controlling interests:
 
 
 
 
 
 
 
 
Increase in additional paid-in capital as a result of the redemption of LLC Interests
841

 
4,708

 
2,883

 
15,086

 
Increase in additional paid-in capital as a result of activity under stock compensation plans
78

 
17

 
3,580

 
421

Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.
$
5,963

 
$
8,486

 
$
18,651

 
$
24,023

EQUITY-BASED COMPENSATION (Tables)
Schedule of equity-based compensation expense recognized
A summary of equity-based compensation expense recognized during the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
 
September 27
2017

 
September 28
2016

 
September 27
2017

 
September 28
2016

Stock options
$
816

 
$
1,085

 
$
2,643

 
$
3,168

Performance stock units
345

 
492

 
1,029

 
649

Restricted stock units
128

 
—

 
151

 
—

Equity-based compensation expense
$
1,289

 
$
1,577

 
$
3,823

 
$
3,817

Total income tax benefit recognized related to equity-based compensation
$
47

 
$
53

 
$
142

 
$
117

INCOME TAXES (Tables)
Schedule of effective income tax rate reconciliation
A reconciliation of income tax expense computed at the U.S. federal statutory income tax rate to the recognized income tax expense is as follows:
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
September 27 2017
 
 
September 28
2016
 
 
September 27 2017
 
 
September 28
2016
 
Expected U.S. federal income taxes at statutory rate
$
3,627

35.0
 %
 
$
3,139

34.0
 %
 
$
9,609

35.0
 %
 
$
7,734

34.0
 %
State and local income taxes, net of federal benefit
630

6.1
 %
 
533

5.8
 %
 
1,638

6.0
 %
 
1,277

5.6
 %
Foreign withholding taxes
292

2.8
 %
 
148

1.6
 %
 
705

2.6
 %
 
505

2.2
 %
Tax credits
(399
)
(3.8
)%
 
(243
)
(2.6
)%
 
(777
)
(2.8
)%
 
(369
)
(1.6
)%
Non-controlling interest
(1,132
)
(10.9
)%
 
(1,134
)
(12.3
)%
 
(3,114
)
(11.3
)%
 
(3,089
)
(13.6
)%
Other
(524
)
(5.1
)%
 
—

—
 %
 
(524
)
(2.0
)%
 
—

—
 %
Income tax expense
$
2,494

24.1
 %
 
$
2,443

26.5
 %
 
$
7,537

27.5
 %
 
$
6,058

26.6
 %
EARNINGS PER SHARE - Schedule of Antidilutive Securities(Tables)
Schedule of earnings per share
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the thirteen and thirty-nine weeks ended September 27, 2017 and September 28, 2016.
 
 
 
Thirteen Weeks Ended
 
 
Thirty-Nine Weeks Ended
 
 
 
 
September 27 2017

 
September 28
2016

 
September 27 2017

 
September 28
2016

Numerator:
 
 
 
 
 
 
 
 
Net income
$
7,870

 
$
6,789

 
$
19,916

 
$
16,689

 
Less: net income attributable to non-controlling interests
2,873

 
3,023

 
7,773

 
8,163

 
Net income attributable to Shake Shack Inc.
$
4,997

 
$
3,766

 
$
12,143

 
$
8,526

Denominator:
 
 
 
 
 
 
 
 
Weighted-average shares of Class A common stock outstanding—basic
26,024

 
24,023

 
25,733

 
22,310

 
Effect of dilutive securities:
 
 
 
 
 
 
 
 
 
Stock options
411

 
531

 
486

 
495

 
 
Performance stock units
26

 
—

 
24

 
—

 
 
Restricted stock units
16

 
—

 
5

 
—

 
Weighted-average shares of Class A common stock outstanding—diluted
26,477

 
24,554

 
26,248

 
22,805

 
 
 
 
 
 
 
 
 
 
Earnings per share of Class A common stock—basic
$
0.19

 
$
0.16

 
$
0.47

 
$
0.38

Earnings per share of Class A common stock—diluted
$
0.19

 
$
0.15

 
$
0.46

 
$
0.37

SUPPLEMENTAL CASH FLOW INFORMATION (Tables)
Schedule of Cash Flow Information
The following table sets forth supplemental cash flow information for the thirty-nine weeks ended September 27, 2017 and September 28, 2016:
 
 
Thirty-Nine Weeks Ended
 
 
 
September 27
2017

 
September 28
2016

Cash paid for:
 
 
 
 
Income taxes, net of refunds
$
1,936

 
$
1,292

 
Interest, net of amounts capitalized
684

 
40

Non-cash investing activities:
 
 
 
 
Accrued purchases of property and equipment
10,138

 
5,792

 
Capitalized landlord assets for leases where we are deemed the accounting owner
9,095

 
—

 
Accrued purchases of marketable securities
307

 
51

 
Capitalized equity-based compensation
86

 
107

Non-cash financing activities:
 
 
 
 
Class A common stock issued in connection with the redemption of LLC Interests
—

 
5

 
Cancellation of Class B common stock in connection with the redemption of LLC Interests
—

 
(5
)
 
Establishment of liabilities under tax receivable agreement
12,918

 
90,776

 
Accrued distributions payable to non-controlling interest holders

—

 
607

NATURE OF OPERATIONS (Details) (USD $)
0 Months Ended
Sep. 27, 2017
Restaurant
Dec. 28, 2016
Feb. 4, 2015
IPO
Common stock
Class A Common Stock
Feb. 4, 2015
IPO
Common stock
Class A Common Stock
Sep. 27, 2017
United States
Company-operated
Restaurant
Sep. 27, 2017
United States
Licensed
Restaurant
Sep. 27, 2017
Non-United States
Licensed
Restaurant
Class of Stock [Line Items]
 
 
 
 
 
 
 
Shares issued during the period (in shares)
 
 
5,750,000 
 
 
 
 
Shares issued, share price (in dollars per share)
 
 
 
$ 21.00 
 
 
 
Ownership percent of noncontrolling interest
71.20% 
69.10% 
 
 
 
 
 
Number of restaurants
143 
 
 
 
79 
10 
54 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (Variable Interest Entity, Primary Beneficiary, USD $)
In Thousands, unless otherwise specified
Sep. 27, 2017
Dec. 28, 2016
Variable Interest Entity, Primary Beneficiary
 
 
Variable Interest Entity [Line Items]
 
 
Net assets held by SSE holders
$ 189,581 
$ 158,845 
FAIR VALUE MEASUREMENTS - Cash, Cash Equivalents and Marketable Securities (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 27, 2017
Dec. 28, 2016
Sep. 28, 2016
Dec. 30, 2015
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cost Basis
$ 26,887 
$ 11,607 
$ 12,227 
$ 70,849 
Cash and cash equivalents fair value
26,887 
11,607 
 
 
Gross Unrealized Gains
62 
3 
 
 
Gross Unrealized Losses
(25)
(30)
 
 
Fair Value Including Mutual Funds
90,186 
 
 
 
Fair Value
 
74,285 
 
 
Fair value of marketable securities
63,299 
62,678 
 
 
Total cost basis including Mutual Funds
90,149 
74,312 
 
 
Level 1 |
Mutual funds
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Mutual funds
60,769 
60,232 
 
 
Fair value of marketable securities
60,829 
60,232 
 
 
Level 2 |
Mutual funds
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Gross Unrealized Gains
60 
 
 
 
Level 2 |
Corporate debt securities
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Corporate debt securities
2,493 
2,473 
 
 
Gross Unrealized Gains
2 
3 
 
 
Gross Unrealized Losses
(25)
(30)
 
 
Fair value of marketable securities
2,470 
2,446 
 
 
Cash
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cost Basis
21,862 
6,322 
 
 
Cash and cash equivalents fair value
21,862 
6,322 
 
 
Money market funds |
Level 1
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cost Basis
5,025 
5,285 
 
 
Cash and cash equivalents fair value
$ 5,025 
$ 5,285 
 
 
FAIR VALUE MEASUREMENTS - Additional Information (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Dec. 28, 2016
Fair Value Disclosures [Abstract]
 
 
 
 
 
Available-for-sale Securities, Accumulated Gross Unrealized Loss, before Tax
$ 37 
 
$ 37 
 
$ 27 
Fair value of investments with unrealized losses
25 
 
25 
 
30 
Change in net unrealized holding losses
$ 53 1
$ (11)1
$ 36 1
$ (19)1
 
FAIR VALUE MEASUREMENTS - Other Income From Available For Sale Securities (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Available-for-sale securities
 
 
 
 
Other Income
$ 229 
$ 151 
$ 622 
$ 197 
Available-for-sale Securities
 
 
 
 
Available-for-sale securities
 
 
 
 
Dividend income
222 
133 
591 
133 
Interest income
19 
22 
58 
68 
Loss on investments
(12)
(4)
(27)
(4)
Other Income
$ 229 
$ 151 
$ 622 
$ 197 
FAIR VALUE MEASUREMENTS - Available for Sale Securities and Gross Realized Gains and Losses (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Available-for-sale securities:
 
 
 
 
Gross proceeds from sales and redemptions
$ 584 
$ 176 
$ 1,212 
$ 498 
Cost basis of sales and redemptions
597 
180 
1,239 
502 
Gross realized gains included in net income
1 
0 
1 
1 
Gross realized losses included in net income
(13)
(4)
(28)
(5)
Amounts reclassified out of accumulated other comprehensive loss
$ 14 1
$ 3 1
$ 28 1
$ 3 1
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS - Unrealized Loss on Investments (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 27, 2017
Dec. 28, 2016
Gain (Loss) on Investments [Line Items]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
$ 1,638 
$ 1,244 
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss
(25)
(30)
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss
(9)
(10)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
322 
540 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss
(16)
(20)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
1,960 
1,784 
Corporate debt securities
 
 
Gain (Loss) on Investments [Line Items]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
1,638 
1,244 
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss
(25)
(30)
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss
(9)
(10)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
322 
540 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss
(16)
(20)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
$ 1,960 
$ 1,784 
INVENTORIES (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 27, 2017
Dec. 28, 2016
Inventory [Line Items]
 
 
Inventories
$ 1,127 
$ 806 
Food
 
 
Inventory [Line Items]
 
 
Inventories
774 
543 
Wine
 
 
Inventory [Line Items]
 
 
Inventories
55 
47 
Beer
 
 
Inventory [Line Items]
 
 
Inventories
75 
58 
Beverages
 
 
Inventory [Line Items]
 
 
Inventories
102 
79 
Retail merchandise
 
 
Inventory [Line Items]
 
 
Inventories
$ 121 
$ 79 
PROPERTY AND EQUIPMENT (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 27, 2017
Dec. 28, 2016
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 227,289 
$ 173,385 
Less: accumulated depreciation
52,600 
37,121 
Property and equipment, net
174,689 
136,264 
Leasehold improvements
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
146,939 
120,629 
Buildings, Deemed Landlord Financing [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
6,555 
0 
Equipment
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
28,139 
23,194 
Furniture and fixtures
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
9,082 
7,342 
Computer equipment and software
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
10,966 
8,710 
Construction in progress (includes assets under construction from deemed landlord financing)
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 25,608 
$ 13,510 
SUPPLEMENTAL BALANCE SHEET INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 27, 2017
Dec. 28, 2016
Other Liabilities, Current
 
 
Sales tax payable
$ 1,539 
$ 1,324 
Current portion of liabilities under tax receivable agreement
3,140 
4,580 
Gift card liability
1,003 
1,153 
Deferred Compensation Liability, Current
2,400 
0 
Other
1,735 
3,116 
Other current liabilities
$ 9,817 
$ 10,173 
DEBT (Details) (USD $)
3 Months Ended 9 Months Ended 9 Months Ended 0 Months Ended 0 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Dec. 28, 2016
Sep. 27, 2017
Notes payable
Sep. 27, 2017
Letter of credit
Feb. 4, 2015
Revolving Credit Facility
Line of credit
Sep. 27, 2017
Revolving Credit Facility
Line of credit
Dec. 28, 2016
Revolving Credit Facility
Line of credit
Feb. 4, 2015
Revolving Credit Facility
Line of credit
Sep. 27, 2017
Revolving Credit Facility
Letter of credit
Line of credit
Feb. 4, 2015
Revolving Credit Facility
Letter of credit
Line of credit
Sep. 27, 2017
Revolving Credit Facility
Minimum
Line of credit
London Interbank Offered Rate (LIBOR)
Sep. 27, 2017
Revolving Credit Facility
Minimum
Line of credit
Prime rate
Sep. 27, 2017
Revolving Credit Facility
Maximum
Line of credit
London Interbank Offered Rate (LIBOR)
Sep. 27, 2017
Revolving Credit Facility
Maximum
Line of credit
Prime rate
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
 
 
 
$ 50,000,000 
 
$ 10,000,000 
 
 
 
 
Current borrowing capacity
 
 
 
 
 
 
 
 
 
 
20,000,000 
683,000 
 
 
 
 
 
Term to maturity
 
 
 
 
 
 
1 year 
5 years 
 
 
 
 
 
 
 
 
 
Basis spread on variable rate
 
 
 
 
 
 
 
 
 
 
 
 
 
2.30% 
0.00% 
3.30% 
0.80% 
Amount available under revolving credit facility
 
 
 
 
 
 
 
 
19,317,000 
 
 
 
 
 
 
 
 
Notes payable
 
 
 
 
 
0 
 
 
 
0 
 
 
 
 
 
 
 
Deemed landlord financing
13,162,000 
 
13,162,000 
 
2,007,000 
 
 
 
 
 
 
 
 
 
 
 
 
Interest costs incurred
(527,000)
(89,000)
(1,260,000)
(267,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
475,000 
89,000 
1,144,000 
267,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest costs capitalized
$ 51,000 
$ 0 
$ 115,000 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
NON-CONTROLLING INTERESTS - Ownership Interest in SSE Holdings (Details)
Sep. 27, 2017
Dec. 28, 2016
Noncontrolling Interest [Abstract]
 
 
Number of LLC Interests held by Shake Shack Inc. (in shares)
26,161,111 
25,151,384 
Number of LLC Interests held by Shake Shack Inc. (as a percentage)
71.20% 
69.10% 
Number of LLC Interests held by non-controlling interest holders (in shares)
10,567,792 
11,253,592 
Number of LLC Interests held by non-controlling interest holders (as a percentage)
28.80% 
30.90% 
Total LLC Interests outstanding (in shares)
36,728,903 
36,404,976 
Total LLC Interests outstanding (as a percentage)
100.00% 
100.00% 
NON-CONTROLLING INTERESTS - Narrative (Details)
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Noncontrolling Interest [Line Items]
 
 
 
 
Non-controlling interest holders' weighted average ownership percentage
29.10% 
33.90% 
29.70% 
38.50% 
Units acquired during the period (in shares)
 
 
1,009,727 
 
Number of units redeemed (in shares)
 
 
685,800 
4,706,663 
Redemption or Exchange of Units
 
 
 
 
Noncontrolling Interest [Line Items]
 
 
 
 
Units acquired during the period (in shares)
 
 
685,800 
4,706,663 
Employee Stock Option
 
 
 
 
Noncontrolling Interest [Line Items]
 
 
 
 
Units acquired during the period (in shares)
 
 
323,927 
101,837 
NON-CONTROLLING INTERESTS - Changes in Ownership Interests in SSE Holdings (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Noncontrolling Interest [Line Items]
 
 
 
 
Net Income (Loss) Attributable to Parent
$ 4,997 
$ 3,766 
$ 12,143 
$ 8,526 
Net unrealized losses related to available-for-sale securities
67 
(8)
64 
(16)
Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.
5,963 
8,486 
18,651 
24,023 
Redemption or Exchange of Units
 
 
 
 
Noncontrolling Interest [Line Items]
 
 
 
 
Increase (decrease) in additional paid-in capital
841 
4,708 
2,883 
15,086 
Employee Stock Option
 
 
 
 
Noncontrolling Interest [Line Items]
 
 
 
 
Increase (decrease) in additional paid-in capital
78 
17 
3,580 
421 
Accumulated Other Comprehensive Loss
 
 
 
 
Noncontrolling Interest [Line Items]
 
 
 
 
Net unrealized losses related to available-for-sale securities
$ 47 
$ (5)
$ 45 
$ (10)
EQUITY-BASED COMPENSATION - Schedule of compensation expense recognized (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Equity-based compensation expense
$ 1,289 
$ 1,577 
$ 3,823 
$ 3,817 
Total income tax benefit recognized related to equity-based compensation
47 
53 
142 
117 
Stock options
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Equity-based compensation expense
816 
1,085 
2,643 
3,168 
Performance stock units
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Equity-based compensation expense
345 
492 
1,029 
649 
Restricted Stock Units (RSUs) [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Equity-based compensation expense
$ 128 
$ 0 
$ 151 
$ 0 
INCOME TAXES - Reconciliation of Income Tax Expense (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Income Tax Disclosure [Abstract]
 
 
 
 
Document period end date
 
 
Sep. 27, 2017 
 
Expected U.S. federal income taxes at statutory rate, percentage
35.00% 
34.00% 
35.00% 
34.00% 
Expected U.S. federal income taxes at statutory rate
$ 3,627 
$ 3,139 
$ 9,609 
$ 7,734 
State and local income taxes, net of federal benefit
630 
533 
1,638 
1,277 
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Percent
6.10% 
5.80% 
6.00% 
5.60% 
Foreign withholding taxes
292 
148 
705 
505 
Effective Income Tax Rate Reconciliation, Foreign Income Tax Rate Differential, Percent
2.80% 
1.60% 
2.60% 
2.20% 
Tax credits
(399)
(243)
(777)
(369)
Effective Income Tax Rate Reconciliation, Tax Credit, Percent
(3.80%)
(2.60%)
(2.80%)
(1.60%)
Non-controlling interest
(1,132)
(1,134)
(3,114)
(3,089)
Effective Income Tax Rate Reconciliation, Noncontrolling Interest Income (Loss), Percent
(10.90%)
(12.30%)
(11.30%)
(13.60%)
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount
(524)
0 
(524)
0 
Effective Income Tax Rate Reconciliation, Tax Credit, Other, Percent
(5.10%)
 
(2.00%)
 
Income tax expense
$ 2,494 
$ 2,443 
$ 7,537 
$ 6,058 
Effective income tax rate reconciliation (in percentage)
24.10% 
26.50% 
27.50% 
26.60% 
INCOME TAXES - Narrative (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Dec. 28, 2016
Income Tax Contingency [Line Items]
 
 
 
 
 
Effective income tax rate reconciliation (in percentage)
24.10% 
26.50% 
27.50% 
26.60% 
 
Noncontrolling Interest, Ownership Percentage by Parent, Weighted Average
70.90% 
66.10% 
70.30% 
61.50% 
 
Units acquired during the period (in shares)
 
 
1,009,727 
 
 
Deferred tax asset recognized as a result of investment in partnership
 
 
$ 9,883,000 
 
 
Deferred Tax Asset, Investment in Partnership
216,285,000 
 
216,285,000 
 
 
Valuation allowance, deferred tax asset
15,679,000 
 
15,679,000 
 
 
Deferred tax asset related to additional tax basis
 
 
5,216,000 
 
 
Uncertain tax positions
0 
 
0 
 
 
Percentage of tax benefits due to equity owners
85.00% 
 
85.00% 
 
 
Tax Receivable Agreement Payments To Related Parties
0 
0 
1,471,000 
0 
 
Percentage of tax benefits expected to be realized
15.00% 
 
15.00% 
 
 
Establishment of liabilities under tax receivable agreement
 
 
12,918,000 
90,776,000 
 
Liabilities under tax receivable agreement
283,961,000 
 
283,961,000 
 
272,482,000 
Current portion of liabilities under tax receivable agreement
$ 3,140,000 
 
$ 3,140,000 
 
$ 4,580,000 
Redemption or Exchange of Units
 
 
 
 
 
Income Tax Contingency [Line Items]
 
 
 
 
 
Units acquired during the period (in shares)
 
 
685,800 
4,706,663 
 
EARNINGS PER SHARE - Schedule of Earnings Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Numerator:
 
 
 
 
Document period end date
 
 
Sep. 27, 2017 
 
Net income
$ 7,870 
$ 6,789 
$ 19,916 
$ 16,689 
Less: net income attributable to non-controlling interests
2,873 
3,023 
7,773 
8,163 
NET INCOME ATTRIBUTABLE TO SHAKE SHACK INC.
$ 4,997 
$ 3,766 
$ 12,143 
$ 8,526 
Denominator:
 
 
 
 
Weighted-average shares of Class A common stock outstanding—basic (in shares)
26,024 
24,023 
25,733 
22,310 
Effect of dilutive securities:
 
 
 
 
Weighted-average shares of Class A common stock outstanding—diluted (in shares)
26,477 
24,554 
26,248 
22,805 
Earnings (loss) per share of Class A common stock—basic (in dollars per share)
$ 0.19 
$ 0.16 
$ 0.47 
$ 0.38 
Earnings (loss) per share of Class A common stock—diluted (in dollars per share)
$ 0.19 
$ 0.15 
$ 0.46 
$ 0.37 
Performance stock units
 
 
 
 
Effect of dilutive securities:
 
 
 
 
Stock options (in shares)
26 
0 
24 
0 
Restricted Stock Units (RSUs) [Member]
 
 
 
 
Effect of dilutive securities:
 
 
 
 
Stock options (in shares)
16 
0 
5 
0 
Employee Stock Option
 
 
 
 
Effect of dilutive securities:
 
 
 
 
Stock options (in shares)
411 
531 
486 
495 
EARNINGS PER SHARE - Antidilutive Securities (Details)
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Document period end date
 
 
Sep. 27, 2017 
 
Common stock |
Stock options
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive shares (in shares)
18,676 
0 
18,676 
0 
Common stock |
Performance stock units
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive shares (in shares)
86,396 
62,800 
86,396 
62,800 
Common stock |
Class B Common Stock
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive shares (in shares)
10,567,792 
11,754,078 
10,567,792 
11,754,078 
SUPPLEMENTAL CASH FLOW INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Cash paid for:
 
 
Income taxes, net of refunds
$ 1,936 
$ 1,292 
Interest, net of amounts capitalized
684 
40 
Non-cash investing activities:
 
 
Accrued purchases of property and equipment
10,138 
5,792 
Noncash Deemed Landlord Financing
9,095 
0 
Equity Securities Incurred But Not Yet Paid
307 
51 
Capitalized equity-based compensation
86 
107 
Non-cash financing activities:
 
 
Establishment of liabilities under tax receivable agreement
12,918 
90,776 
Accrued Distributions to Noncontrolling Interests
0 
607 
Redemption or Exchange of Units |
Class A Common Stock
 
 
Non-cash financing activities:
 
 
Class A common stock issued
0 
5 
Redemption or Exchange of Units |
Class B Common Stock
 
 
Non-cash financing activities:
 
 
Cancellation of Class B common stock
$ 0 
$ (5)
COMMITMENTS AND CONTINGENCIES (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 0 Months Ended 1 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Dec. 28, 2016
May 1, 2017
Exempt Classification Matter
Nov. 30, 2015
Exempt Classification Matter
manager
Sep. 27, 2017
Letter of credit
Sep. 27, 2017
Retail site
Sep. 27, 2017
Office building
Dec. 31, 2013
Office building
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
Letters of credit outstanding
 
 
 
 
 
 
$ 160 
$ 603 
$ 80 
Document period end date
Sep. 27, 2017 
 
 
 
 
 
 
 
 
Renewal term
 
 
 
 
 
1 year 
 
 
 
Number of former Shake Shack managers
 
 
 
 
2 
 
 
 
 
Settlement amount
 
 
 
 
(750)
 
 
 
 
Loss Contingency Accrual, Payments
 
 
 
774 
 
 
 
 
 
Percentage of tax benefits due to equity owners
85.00% 
 
 
 
 
 
 
 
 
Establishment of liabilities under tax receivable agreement
12,918 
90,776 
 
 
 
 
 
 
 
Tax receivable agreement liability
$ 283,961 
 
$ 272,482 
 
 
 
 
 
 
RELATED PARTY TRANSACTIONS (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 27, 2017
Sep. 28, 2016
Sep. 27, 2017
Sep. 28, 2016
Dec. 28, 2016
Related Party Transaction [Line Items]
 
 
 
 
 
Percentage of tax benefits due to equity owners
85.00% 
 
85.00% 
 
 
Tax Receivable Agreement Payments To Related Parties
$ 0 
$ 0 
$ 1,471,000 
$ 0 
 
Tax receivable agreement liability
283,961,000 
 
283,961,000 
 
272,482,000 
Distributions paid to non-controlling interest holders
13,000 
0 
2,392,000 
1,602,000 
 
Tax distributions payable to non-controlling interest holders
0 
 
0 
 
607,000 
Affiliated Entity
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Amount paid to USHG for general corporate expenses
0 
1,000 
6,000 
7,000 
 
Due from related parties, current
0 
 
0 
 
0 
Amounts due to related parties, current
0 
 
0 
 
1,000 
Share Our Strength [Member]
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Expenses from transactions with related party
29,000 
17,000 
148,000 
115,000 
 
Charitable campaign flow through
0 
0 
631,000 
587,000 
 
Daily Provisions
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Amounts due to related parties, current and noncurrent
1,000 
 
1,000 
 
 
Revenue from related parties
 
0 
4,000 
0 
 
Amounts due to related parties, current
 
 
 
 
0 
Subsidiary to Affiliated Entity [Member]
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Number of renewal terms
 
 
5 
 
 
Renewal option period
 
 
5 years 
 
 
Concession Income [Member] |
Subsidiary to Affiliated Entity [Member]
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Due from related parties, current
75,000 
 
75,000 
 
11,000 
Revenue from Related Parties
193,000 
174,000 
328,000 
277,000 
 
Rent Expense [Member] |
Madison Square Park Conservancy
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Expenses from transactions with related party
199,000 
195,000 
531,000 
585,000 
 
Amounts due to related parties, current
0 
 
0 
 
1,000 
Tenant Improvement Allowance [Member] |
Madison Square Park Conservancy
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Accounts Receivable, Related Parties, Current
0 
 
0 
 
200,000 
Related Party Transaction, Other Revenues from Transactions with Related Party
0 
0 
200,000 
0 
 
Mobo Systems, Inc. [Member] |
Board of Directors Chairman
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Expenses from transactions with related party
19,000 
0 
57,000 
0 
 
Amounts due to related parties, current
$ 0 
 
$ 0 
 
$ 0