Tyler Cowen wonders whether the Shake Shack IPO means it is time to stop eat there?
After an IPO, the equity share of the original creators — in this case Danny Meyer — is diluted. Meyer’s incentive to maintain quality standards and his personal brand name is weakened. The subsequent public shareholders are more likely to insist on a less risky and more mass market approach…In other words, both the signaling and the moral hazard arguments suggest that soon you should stop eating at Shake Shack.
I actually think Tyler is late to the party on this: the IPO signals we already should have stopped going.
When Shake Shack opened at New York’s JFK airport in 2013 (and then opened a second JFK location, 14 gates down from the original), and when Delta started serving Danny Meyer’s Blue Smoke on-board in international business class, it became clear that Meyer had traded on reputation and accepted lower quality.
You can’t reprise the same quality in an airport and in-flight is even harder.
Here’s why airport restaurants tend to be so bad:
- Restaurants have to bring everything in through security
- There are limits on when things can be brought in, they can’t generally bring supplies down the concourse at peak travel times. So you don’t get the freshest just-in-time delivery.
- And space limitations are huge. Not only can’t you bring things in whenever you want, you often don’t have a lot of space for storage at least compared to a standard retail location. And you may not have room for specialized equipment.
- The airport may not permit gas ovens, so everything has to get re-created using electric.
- Security constrains your chefs, their knives frequently have to be tethered to a wall to prevent being taken (and inventoried every day).
When you run a restaurant inside an airport you have a large number of people who need to be served quickly — you need to prepare for quick service even trumping quality because of the pressures of flight departures.
Your customers have varying tastes, they didn’t travel to your location to eat your food they are at your location in order to travel. But you need to cater to their varied preferences.
You need to make up high rents with limited ingredients because of cost and space. So you focus on a few menu items, and make them accessible to the largest number of people. And then your restaurant, which is known for lunch and dinner, needs to try to do breakfast, too.
And as a restaurant owner you have to do all of this within price points that may be contractually set with the airport, e.g. that prices have to be the same as outside the airport or at a modest premium of (say) 10%-15%.
And how to overcome all of these challenges? Many restaurants partner with concessionaires with plenty of experience working with airports, big names like HMSHost — which helps them operate more efficiently, but reduces the local character of what they offer.
There are still good airport restaurants which is to say they are better than average, or better than you’d expect in an airport. Take Tortas Frontera at O’Hare. We all have our favorites. But very few airport location restaurants are dining venues we’d seek out outside the airport.
So if your theory is that you want to stop frequenting a restaurant once it compromises quality to meet varied tastes wherever they are, you want to drop a restaurant once it opens an airport location. And you probably want to eat Blue Smoke barbecue on a plane (because it’s better than what Delta would otherwise serve you) but you may not want to eat it in the restaurant.
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never really got the hype about Shake shack to be honest, and I’ve been going there since they first opened in Madison Sq park. It’s better than mcdonalds or Wendy’s but that’s not saying much. I can’t see how the quality will really take a nosedive. As for Danny Meyer’s reputation, I don’t think it’s going to suffer. Blue Smoke is overpriced crap but Maialino, Marta and Gramercy Tavern are solid without a doubt. I think as long as his top-tier restaurants maintain their level of quality, he won’t overextend himself. The guy’s been at this for a long time.
Agree though that 90% of airport food is crap. Tortas Frontera is heads and shoulders above the rest.
While this post might make sense for upscale-ish “real” restaurants (including Blue Smoke) it’s kind of silly to say that Shake Shack will suffer in airports because “inside an airport you have a large number of people who need to be served quickly”. I understand from family the situation in DC is different, but Shake Shack’s New York locations are already trough-feeding type operations with volume considerably higher than I imagine one would see in an airport. They still manage to have completely consistent quality.
I think the situation is completely different for owner-operated establishments and cases in which the name is licensed to another operator. What’s the case with Blue Smoke — is that Meyer owned and operated or just a license situation?
I’m pretty sure that Meyer still controls Shake Shack; and I know that large-scale expansion was always part of the plan for these restaurants. The whole process is engineered to be replicable. I can’t really see that their presence is airports is likely to change much.
But you are correct that once private equity takes over a business profit and growth are stressed over any vestigial notions of quality. Most recently we’ve seen that with the Fairway markets in the New York area.
Living in Chicago I try to hit Tortas Frontera every time I fly American – it is one of the best airport restaurants anywhere! I’ve seen Rick Bayless there working with the employees, which shows me he wants it to be a high quality like his other establishments.
Thankfully there are exceptions–Beechers at Seatac being one of them–that show you don’t *have* to sacrifice quality to be successful in an airport location. That’s what frustrates me so much about bad airport food. Beechers and other places at Seatac such as Dish D’lish and even Anthony’s have shown it’s possible to do good food at an airport. I think too many people accept that for the reasons you’ve listed, it has to be bad and that’s simply not the case. Are you listening LAX????
Interesting points related to airport dining but I have to disagree. Overall, I think most would agree that dining options at airports have improved greatly in recent years.
As a big Shake Shack fan and one that frequently dines there, I’d say that the locations at JFK (and Citi Field as another example) are quite good and seem just as high in quality as regular locations. As for Shake Shack adding breakfast at the airport, I’ve tried both options which are reasonably priced and enjoyable too. The Shack at Grand Central has just started serving breakfast and hopefully all of the others will soon follow.
I do hope that with the IPO they don’t start expanding too rapidly since then I’d worry about quality control.
As for other top airport (fast food) dining options, Tortas Frontera is awesome and I look forward to trying it again. Another favorite is Chick fil-A in ATL.
I am looking forward to checking out the big changes coming to United’s Terminal C at EWR which I wrote about: http://michaelwtravels.boardingarea.com/2014/11/getting-taste-uniteds-new-newark-airport-experience/#sthash.w0VIB12N.dpbs
The second Blue Smoke dis in as many weeks! Perhaps Gary ought to give Delta’s BusinessElite Blue Smoke meals a try before commenting further.
@Mark S – How am I dissing on Delta’s meals? Quite the contrary, I’ve suggested that this is going to be quite good for airplane food !
Tortas Frontera at O’Hare! Yes!
If I’m flying into O’Hare, I pick up a meal there before I leave the airport, either on a connecting flight or landing.
Hogwash. The reason airport restaurants are bad is because they can be. They don’t care about repeat business and they have a captive audience. Thus no incentive to make good food, just maximize profits by paying minimum wage, reduce quality to bare minimum to meet health standards, and of course speed is key as customers are in a rush.
It’s really a difficult situation to remedy from the consumer point of view, though yelp reviews will hopefully help the better operations. I find that the local restaurants who have an outpost at the airport are far more likely to have good food, because they want to preserve their brand image with locals who fly. As opposed to regional or national chains or HMS host, who don’t have any incentive to produce good food.
PDX at least has excellent restaurants on the pre-screening to take advantage of with usually short lines, giving one ample time to eat before passing through to one’s gate.
Having had it multiple times, Delta’s inflight Blue Smoke may not be as good as the best barbecue you’d get on the ground, but it’s excellent food even by on-the-ground standards, which makes it quite an accomplishment in flight, and I would argue therefore reflects better on the parent brand. Everyone knows that inflight food means tradeoffs and will judge accordingly. The challenge of an airport concourse location is more risky for the parent restaurant, though.
Shake Shack was always discusting — right back to the Madison Park original. How it became “a thing” is a mystery. Union Sq. Cafe is good food. Shake Shack is shit,
Let’s point out that high rents are the #1 problem causing low quality restaurant food. #2 problem is limited competition and a captive audience. The sooner people make a stand and STOP eating the overpriced garbage food the better. But let’s be realistic, not everyone has lounge access and during delays or layovers, sometimes you just have to eat there, especially with no free food on domestic flights.
I just bring a box of granola bars to last me through the trip. I won’t eat a $10+ junk burger out of principle.
@ms. Coffe — the quote ”
Nobody ever went broke underestimating the intelligence of the American people
” explains it all. Here in Austin, I tried Shake Shack and it’s overpriced junk, we have much better gourmet burger places, but there’s always a line. Stupid people…..
I just wish there were McDonald’s in Canadian airports. For some reason they seem to stay away from the airports.
As a cook who works in the busiest restaurant in the post-security area of an airport, I can attest that every single reason is 100% true. Security ties up everything, affecting things beyond the freshness of food. Maintenance and equipment quality suffer, and despite a small bump in pay as opposed to a local restaurant; frustration with endless rules and protocols leads to a rapidly high turnover of talent. It’s unfortunate, but true. We do our best with what we have to satisfy our customers, but stepping out into the public and hitting a local establishment (before departure, or after arrival) is an easy way to enjoy a fresher, higher quality meal for a lower price.
Ever traveled via Heathrow Gary?
Heston Blumenthal’s Perfectionists’ Cafe and Gordon Ramsay’s Plane Food are amazing … just to name a few.
When going through DFW, you should eat at Pappsito’s Cantina or Pappadeaux in Terminal A. Whenever I fly (about 6 or 7 times a year), I always fly through DFW just to eat there. They may be behind security, and the quality isn’t as good as in the standalone restaurants, but, man, is it still good. I had a friend of mine tell me that it was the best meal he had ever eaten, and he ate at the one IN THE AIRPORT.
I had severe issues with a “concession” of an excellent New York steakhouse at one of the terminals at JFK Airport. The ambience of the places in New York (or their offshoots in Washington DC) is pure “steakhouse”, with adaptations for the respective city. The one at JFK has the same colour scheme, the wood, and even TVs at the bar tuned to various sports events. But the waitstaff is not authentic and sadly they lack the New York steakhouse attitude that makes the “real” places stand out. Perhaps it’s an unrealistic expectation- and 99.9% of the folks going through the terminal don’t appreciate/ don’t care/ can’t tell the difference. But nevertheless I find it an embarrassment to the real brand. I will just go to fast food at JFK Airport, because I am among the 0.1 % who have experienced and enjoyed the real NY steakhouses.