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It looks like a Shake Shack IPO could hit the market in late 2014 or early 2015, after last week's news that the company selected underwriters for its public offering. Reuters reported last Thursday that Shake Shack selected JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS) as lead underwriters for the IPO.
Shake Shack was founded in 2004, when owner Danny Meyer opened a kiosk-style restaurant in New York's Madison Square Park. The chain has developed a loyal following for its "Shackburgers," "Flat-Top" hot dogs, and namesake milkshakes, with customers sometimes waiting in line for more than an hour during peak times.
Meyer had originally planned on just opening the one location, and five years passed before the company opened a second spot. Now, the chain operates 46 locations in New York, New Jersey, Connecticut, Pennsylvania, Florida, and Massachusetts. It has also opened its doors internationally in London, Istanbul, Moscow, Dubai, and more.
Union Square Hospitality Group LLC is the majority owner of Shake Shack, but the private equity firm Leonard Green & Partners LP also owns a 39.5% stake in the company.
The restaurant chain does not franchise its locations and according to Reuters has no plans to do so. The company is now led by Chief Executive Randy Garutti, a former general manager for Union Square Hospitality.
Shake Shack will be joining numerous casual-restaurant chains that have held IPOs in the last 12 months. El Pollo Loco Holdings Inc. (Nasdaq: LOCO), Papa Murphy's Holdings Inc. (Nasdaq: FRSH), and Zoe's Kitchen Inc. (NYSE: ZOES) have all gone public recently with mixed results.
Since their IPOs, LOCO stock and ZOES stock have gained 105% and 104% from their offer prices, respectively. FRSH has gone the opposite direction, down more than 20%. Across the entire 2014 IPO market, stocks have averaged a gain of nearly 14%.
But Shake Shack has a strong chance to outperform the competition. It's not a traditional casual-restaurant chain – there are many factors setting this business apart…