Shake Shack Inc.SHAK
Shake Shack Inc. Stock Compensation Disclosure
EQUITY-BASED COMPENSATION
A summary of equity-based compensation expense by award type was as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Performance stock units | $ | 4,520 | $ | 2,611 | $ | 3,149 | ||||||||||||||
| Restricted stock units | 14,983 | 13,304 | 11,739 | |||||||||||||||||
| Equity-based compensation expense | $ | 19,503 | $ | 15,915 | $ | 14,888 | ||||||||||||||
| Total income tax benefit recognized related to equity-based compensation | $ | 496 | $ | 396 | $ | 391 | ||||||||||||||
Equity-based compensation expense recognized was as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| General and administrative expenses | $ | 17,514 | $ | 14,339 | $ | 13,587 | ||||||||||||||
| Labor and related expenses | 1,989 | 1,576 | 1,301 | |||||||||||||||||
| Equity-based compensation expense | $ | 19,503 | $ | 15,915 | $ | 14,888 | ||||||||||||||
The Company capitalized $450, $371 and $286 of equity-based compensation expense associated with the construction cost of our Shacks and certain digital and technology projects, during fiscal 2025, fiscal 2024 and fiscal 2023, respectively.
Restricted Stock Units
The Company is authorized to grant up to 6,707,843 restricted stock units and other equity-based awards to team members, directors and officers under the 2025 Incentive Award Plan (the “2025 Plan”). The restricted stock units granted generally vest equally over periods ranging from to five years. The fair value of restricted stock units is determined based on the closing market price of our Class A common stock on the date of grant. Compensation expense related to the restricted stock units is recognized using a straight-line attribution method over the vesting period.
A summary of restricted stock unit activity was as follows:
Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||||||||||
Outstanding and unvested as of December 28, 2022 | 395,853 | $ | 76.82 | |||||||||||
| Granted | 326,692 | 58.26 | ||||||||||||
| Vested | (147,163) | 70.29 | ||||||||||||
| Forfeited | (63,838) | 68.94 | ||||||||||||
Outstanding and unvested as of December 27, 2023 | 511,544 | 67.82 | ||||||||||||
| Granted | 199,345 | 102.77 | ||||||||||||
| Vested | (185,649) | 70.31 | ||||||||||||
| Forfeited | (82,436) | 73.41 | ||||||||||||
| Outstanding and unvested as of December 25, 2024 | 442,804 | 81.47 | ||||||||||||
| Granted | 201,723 | 109.32 | ||||||||||||
| Vested | (162,408) | 81.80 | ||||||||||||
| Forfeited | (86,337) | 86.81 | ||||||||||||
| Outstanding and unvested as of December 31, 2025 | 395,782 | $ | 94.37 | |||||||||||
The total fair value of shares vested during fiscal 2025, fiscal 2024 and fiscal 2023 was $13,285, $13,021 and $10,382, respectively. As of December 31, 2025, total unrecognized compensation expense related to unvested restricted stock units was $25,071, which is expected to be recognized over a weighted average period of 2.0 years.
Performance Stock Units
Under the 2025 Plan, the Company may grant performance stock units and other types of performance-based equity awards that vest based on the outcome of certain performance criteria that are established and approved by the Compensation Committee of the Board of Directors. The actual number of equity awards earned is based on the level of performance achieved over a predetermined performance period, relative to established financial goals.
Performance stock units granted during fiscal 2025 are subject to a requisite service period and the awards cliff vest over three years. The amount of awards that can be earned ranges from 0% to 200% of the number of performance stock units granted, based on the achievement of approved financial goals over a three-year performance period. Performance stock units granted during fiscal 2024 are subject to a requisite service period and the awards vest ratably over four years or cliff vest over three years. The amount of awards that can be earned ranges from 0% to 200% of the number of performance stock units granted, based on the achievement of approved financial goals over a -year or -year performance period. No performance stock units were granted during fiscal 2023.
Performance stock units containing market conditions are based on a Monte Carlo simulation, and related compensation expense is recognized using a graded attribution method over the vesting period and does not change regardless of the amount of shares received by the recipient based on achievement of the awards. The fair value of performance stock units not containing a market condition is determined based on the closing market price of the Company's Class A common stock on the date of grant. Compensation expense related to the performance stock units not containing a market condition is recognized using either a graded-vesting attribution method or straight-line over the vesting period based on the most probable outcome of the performance conditions.
A summary of performance stock unit activity was as follows:
Performance Stock Units | Weighted Average Grant Date Fair Value | |||||||||||||
Outstanding and unvested as of December 28, 2022 | 159,822 | $ | 92.22 | |||||||||||
| Vested | (25,494) | 91.36 | ||||||||||||
| Forfeited | (12,903) | 88.70 | ||||||||||||
Outstanding and unvested as of December 27, 2023 | 121,425 | 92.77 | ||||||||||||
| Granted | 95,624 | 103.98 | ||||||||||||
| Vested | (10,646) | 129.68 | ||||||||||||
| Forfeited | (33,957) | 91.73 | ||||||||||||
| Outstanding and unvested as of December 25, 2024 | 172,446 | 96.82 | ||||||||||||
| Granted | 73,057 | 106.87 | ||||||||||||
Performance achievement(1) | 3,093 | 107.25 | ||||||||||||
| Vested | (85,408) | 89.85 | ||||||||||||
| Forfeited | (9,225) | 107.84 | ||||||||||||
| Outstanding and unvested as of December 31, 2025 | 153,963 | $ | 105.00 | |||||||||||
(1)Represents the incremental awards earned and/or awards forfeited based on the achievement of performance conditions.
The total fair value of awards that vested during fiscal 2025, fiscal 2024 and fiscal 2023 was $9,136, $1,104 and $1,441, respectively. The weighted average grant date fair value of performance stock units granted during fiscal 2023 was nil. As of December 31, 2025, total unrecognized compensation expense related to unvested performance stock units was $8,471, which is expected to be recognized over a weighted average period of 2.0 years.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.