Shake Shack IPO is hot but can it match Chipotle?

(Reuters) - Growth-hungry investors are lining up for shares of burger chain Shake Shack , which plans to price its initial public offering after the U.S. stock market closes on Thursday.

The IPO market lately has been particularly fruitful for so-called fast-casual chains such as Shake Shack rival Habit Restaurants Inc and others that hope to replicate the red-hot growth of burrito chain Chipotle Mexican Grill Inc .

Preliminary demand on Wednesday prompted Shake Shack to raise its expected IPO price to a range of $17 to $19 per share from between $14 and $16.

Shake Shack, which traces its beginnings to a hot dog cart in a public park in New York City, has 63 restaurants, with more than half outside the United States. Customers in Manhattan and Chicago often wait in long lines to get a taste of its rich milkshakes and hormone- and antibiotic-free burgers.

"It's a cult," said Bob Goldin, an executive vice president at consulting firm Technomic.

The chain attracts a relatively affluent clientele, which spends roughly $30 for a meal for two. That is significantly more than what diners spend at struggling fast-food giant McDonald's Corp , whose shares have languished as its business has struggled.

Shake Shack's challenge, Goldin and other experts said, is not to expand too quickly. Ubiquity, they said, often works against cult chains.

Shake Shack, founded by New York restaurateur Daniel Meyer in 2001, waited five years to open its second restaurant.

In filings, it said it planned to open 10 U.S., company-operated restaurants each year and that it could eventually grow to at least 450 locations.

When Chipotle went public in 2006, it had almost 500 U.S. restaurants. The chain is known for its simple, customizable food made from antibiotic-free meats and fresh produce.

Investors love Chipotle's rapid growth. The company had roughly 1,700 U.S. restaurants at last count and is known for cranking out ever-higher unit sales without increasing costs.

While Shake Shack has been slower to add restaurants, its domestic average annual sales of $5 million per location for 2013 were about double Chipotle's current level of more than $2.4 million.

Shake Shack's Manhattan shops brought in an average of $7.4 million, while those outside the city generated about $3.8 million.

Since the vast majority of future Shacks will be outside Manhattan, the company forecast average unit revenue in the $2.8 to $3.2 million range.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Lisa Von Ahn)

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