Shake Shack to Open Hong Kong Location Ahead of Expansion in China

Chefs' Take: Shake Shack's rapid expansion is changing the face of American burgers across the world.
— Kristen Hawley

(Bloomberg) — Shake Shack Inc., the burger-and-fries chain founded in New York, will open its first location in Hong Kong next year, setting the stage for a push into the fast-food hotbed of mainland China.

The restaurant will be opened with licensee Maxim’s Caterers Ltd. and a total of 14 locations are planned in Hong Kong and Macau through 2027, Shake Shack said Wednesday. The chain’s upscale burgers and fries will appeal to the population there, and the restaurants will provide a base for eventually going into China, according to Chief Executive Officer Randy Garutti.

“You’re seeing changing preferences for what was traditional fast food,” he said in an interview. “There’s a continued thirst for great brands and a premium level of food at an approachable price.”

While about 90 percent to 95 percent of the menu will be the same as in the U.S., there may be more chicken items, said Garutti, who sees opportunities in mainland China, where Maxim’s operates other dining brands including Cheesecake Factory Inc.

Shake Shack may look to grow overseas as the U.S. market becomes increasingly saturated with restaurants offering fast-food burgers. The company’s same-store sales fell 2.5 percent in the latest quarter, missing analysts’ projections, as cold weather hurt some locations. A recent report also found that the chain is suffering from a lack of customer loyalty in the U.S. despite its more upscale image.

Shares of the company have declined 3 percent this year through Tuesday’s close, while the Standard & Poor’s 500 Restaurants Index has jumped 17 percent.

China Challenges

Expanding into China comes with challenges as other fast-food companies have faced supply-chain scandals and anti-Western sentiment there. Last year, Yum! Brands Inc. spun off its China unit to focus on turning around its U.S. business. The owner of KFC and Pizza Hut had struggled to boost sales in China as local competitors offer discounted prices and gain market share.

Shake Shack already has some locations in Asian countries, including Japan and South Korea, among its 135 restaurants. Still, Garutti said the U.S. is its main avenue for growth.

Domestic sales will be the “lion’s share” of the business going forward, he said. “We have massive growth ahead here in the states.”

 

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This article was written by Leslie Patton and Vinicy Chan from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].

Photo credit: Shake Shack will open locations in Hong Kong before (eventually) heading to China. / Bloomberg