Burger Joint Shake Shack Shimmies Into Shanghai

Another midsize fast-food chain is shaking the China bushes for new diners, seeking success where most before it have failed to find much appetite.

The latest to salivate at China is U.S. burger joint Shake Shack, which shook U.S. stock markets two years ago with a turbocharged initial public offering (IPO) that since then has run out of juice. The chain could be looking for new excitement by coming to the world’s largest dining market, where industry titans KFC and McDonald’s have found big success.

Shake Shack Inc. will open its first mainland Chinese outlet in Shanghai, China’s commercial capital known for its embrace of Western food. It will open the store in partnership with Hong Kong’s Maxim’s Caterers, which is already planning to open a Shake Shack in the former British colony next year. The Shanghai shop will open a year later.

“There’s incredible opportunity in China, and I couldn't think of a better place to begin this chapter of our story than Shanghai, a city that understands great brands, appreciates premium ingredients, and ultimately loves food,” Shake Shack CEO Randy Garutti said. “The city’s streets overflow with vibrant flavors and energy every day, and we can’t wait to join Shanghai’s thriving food community.”

Shake Shack added that it plans to open 25 outlets in Shanghai and eastern China by 2028, giving itself plenty of time to expand slowly during its first decade in the market.

China has become a notoriously difficult market for such midsize fast-food purveyors, which lack the name recognition, marketing dollars and other resources used by names like KFC, McDonald’s and Starbucks to find a place at a Chinese table with vastly different eating habits than those in the West. The slog has been especially tough for doughnut sellers, with Krispy Kreme and Dunkin Donuts both withdrawing from the market after initial tries, although Dunkin Donuts has since returned with a different partner.

The diner-style Denny’s restaurant chain did even worse, announcing it would enter the market in 2012, only to cancel the plan a year later. California-based Fatburger has managed to survive in China, but still has just a modest five restaurants in Beijing and Shanghai seven years after entering the market, according to its website.

Founded in 2004, Shake Shack itself has had an equally bumpy ride since becoming a publicly listed company in 2015. After selling shares at $21 apiece, the company stock jumped on its trading debut and soared to as high as $92 within half a year. But since then the shares have largely fallen back to earth, and now trade modestly above their IPO price at about $31. The company is relatively small by global standards, operating about 80 locations in the U.S. and another 50 in global markets.

Contact reporter Yang Ge (geyang@caixin.com)