NEW EVENT - Gearing Up
Over the weekend, we moved SHAK up the Best Idea shortlist, but we also agree with Engaged Capital.
We have been saying for years that SHAK is mismanaged and will likely never be profitable because the company generates a low return on capital (cash-on-cash returns don't count). As an aside, over the years we have been writing on other names that engaged has been involved with like BRCC, STKL and HAIN. We will be hosting a June 6th @ 10am Black Book to discuss what Engaged might be thinking and why now?
We have been short SHAK for years as the company is structurally unprofitable because the company is mismanaged; the company exec comp structure does not align with generating generating ROIIC. According to the WSJ, Engaged has worked out how to double Shake Shack's profitability within two years and believes the company should remove its staggered board. The article notes that Engaged has been negotiating with Shake Shack management for more than six months and sent a letter to the board in March with its proposal for new directors and other changes to help boost the share price; however, there has been no agreement. This is easy. How do you double the profitability of SHAK in two years? Stop growing units aggressively as management is paid to do, but that is also why investors love the SHAK story.
The Digital Restaurant Assoication
In October, Financial Times published a story linking the DRA to CloudKitchens’ parent company City Storage Systems. It would make complete sense for CloudKitchens’ founder Travis Kalanick to leverage Tusk’s brass knuckles to help him avenge the very platform he once built.
Matt Newberg of HNGRY is reporting that last month, the Digital Restaurant Association (DRA) finally launched a year after its incorporation. The non-profit says its mission is to advocate and enact public policy to protect and promote restaurants' digital businesses against the status quo of third-party delivery apps. Specifically, it is interested in lobbying for legislation that forces online food platforms to share customer data with restaurants and brings transparency to various fees such marketplaces charge. Its Executive Director, Joe Reinstein, has recently appeared at Restaurant Leadership Conference and Food On Demand, befriending restaurateurs and tech startups to recruit them as members and advisors. This may not seem like a controversial mandate until you look at how the DRA was incorporated, who is behind it, and what its financial incentives are. The organization was set up in March '22 by Tusk Holdings, a government relations firm focused on helping disruptive companies navigate political headwinds. Tusk is run by Bradley Tusk, a political strategist (aka "fixer") who is known for Michael Bloomberg's reelection for NYC mayor as well as Uber's political victories in ridesharing.
More to come on this.
Telehealth meets the Restaurant industry.
Whole Foods co-founder John Mackey, former co-CEO Walter Robb, and former SVP Betsy Foster just opened their first "food as medicine" plant-based restaurant in Culver City, CA that also sells integrated telehealth services under the Love.Life brand. The menu is as follows:
30-min telehealth session: $175
Tahini Caesar Salad: $17
Rebel Margherita Pizza: $21
