By MA Yue
US fast-food chain Shake Shack saw revenue of US$276 million (2 billion yuan) in Q3, up 21.2 percent. Direct sales amounted to US$265 million, with US$11.2 million in revenue generated through franchise licensing agreements.
Shake Shack primarily expands in markets outside of the United States through franchising. In the Chinese mainland and Hong Kong, Shake Shack's agency rights belong to Maxim's Caterers. The chain opened 15 new franchising stores in Q3, and four in Q4 so far. It now has 219 franchise stores worldwide, up 24 percent. Among them, 44 are in China, 26 of which opened after 2022.
Beyond the comfort zone
Despite apparently rapid expansion, Shake Shack’s growth in China has been slowing since August and it is anticipated that pressure will persist through Q4 and into 2024.
Shake Shack is high-end Western fast food. The shack emphasizes quality ingredients and cool stores. This gives the impression of being expensive, and it is. Some burgers are priced above 80 yuan, while a Big Mac is around 25 yuan.
An Online survey by iMedia Consulting showed only 5 percent of Chinese internet users are willing to pay more than 70 yuan for Western fast food. This means that Shake Shack exceeds the customers' comfort zone, and that is part of Shake Shack’s strategy.
Targeting middle-class consumers in first-tier cities, Shake Shack has forked out serious money for high rents in premium commercial districts.
But people are not as interested in high-priced dining as before. And as Shake Shack expands its stores, its social media profile falls.
Been there, done that
Long queues in Shanghai and Beijing that used to cause common online commotions, are no longer seen. Most people have tried it already. While selfies remain as popular as ever, backdrops change all the time. This is a problem faced by most internet-famous eateries.
Additionally, and perhaps the worst news of all, in September of this year, Shake Shake was fined for using expired ingredients, among other issues. For a celebrity brand that relies on a healthy image and a capricious customer base, this could be a huge misstep.
