Shake Shack Makes for a Yummy IPO

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By Jacob Maslow

Shake Shack in London
The first Shake Shack fast food restaurant in the UK, Covent Garden, London. April 16 2014

In yet another sad commentary on how far behind McDonald’s (NYSE:MCD) is as far as consumer tastes are concerned, the IPO for burger chain Shake Shack (NYSE:SHAK) is a resounding success. How successful was this hamburger and French fry restaurant’s initial public offering? Put it this way: The share prices of Shake Shack rocketed up more than 118% in its first day of trading. Not too shabby for a burger joint.

Just looking at the recent fortunes of McDonald’s competition, it appears that McDonald’s really needs to get its act together to stay relevant in the current fast-food market. Consumer tastes are changing. Unfortunately, McDonald’s has proven itself too big and too slow to respond to changing consumer taste. This should not be a surprise considering how big McDonald’s is. One of the biggest curses to strike very large American corporations is that the bigger they get, the slower they respond to changes on the ground. McDonald’s needs to move quickly because its shareholders are quickly becoming impatient. Simply blaming its problems on its CEO or management is not going to cut it. McDonald’s has to change its overall philosophy and market orientation while there is still time.

The success of Shake Shack and other similar burger joints points to key changes in the fast-food consumer market. One important change that McDonald’s really can’t afford to overlook is that people are willing to wait longer for their food, as long as they get quality. The great thing about McDonald’s has always been its speed. When you line up, after only a few minutes, you get your food. Modern consumers now are looking to trade in some of that speed for a higher level of quality. Some are also looking for a better ambiance or a better eating experience. These are going to be serious challenges for McDonald’s because convenience and a very diverse menu are pretty much seared into its corporate DNA.

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