Shake Shack’s success depends on whether Canadians will shell out for a pricier burger

Abdullah Barez obtained to Shake Shack vibrant and early on Thursday morning, just a few hours earlier than the U.S. burger joint opened its first Canadian location in Toronto’s Yonge-Dundas Sq..

Barez, who labored a morning shift, was out entrance by 7:45 a.m. ET. He stated the Tim Hortons breakfast he had very first thing ought to tide him over whereas he spends the remainder of the morning in line ready to seize Shake Shack for lunch.

“I am like, you realize what, why not attempt it out for the primary time? I am simply trying ahead to attempting new meals,” he stated.

The favored fast-casual restaurant, beloved for its smash burgers, crinkle cheese fries and frozen custard,  is dipping a toe into the Canadian market — however its success might depend upon clients keen to fork out greater costs.

The chain is beginning with a lone restaurant, with plans to increase throughout Canada with 35 areas by 2035.

“Canada’s been on our radar for about eight years or so,” stated Michael Kark, president of world licensing at Shake Shack, in an interview with CBC Information.

He famous that Shake Shack first examined Canadian waters in 2017 with a pop-up, however stated the chain was taking its time with an entry right here till it discovered the suitable native companions. Toronto-based companies, reminiscent of chocolatier ChocoSol and bakery Brodflour, are amongst its native suppliers.

“We did not wish to observe those that have are available in and handled [Canada] just like the 51st state,” he stated.

The corporate was initially conceived in New York in 2001 as a high-end scorching canine cart earlier than it opened its first restaurant in 2010. It now has over 500 areas worldwide.

There is not any denying that Shake Shack is promoting a barely pricier burger — its signature ShackBurger goes for $8.49, or $12.49 for a double patty.

Kark stated the upper prices are partly attributable to Shake Shack sourcing a few of its elements domestically. That additionally makes it stand out from different chains — it is “extra like a fine-dining restaurant than a quick-serve restaurant.”

The corporate will serve a handful of things distinctive to its Toronto location, like a maple salted pretzel shake, and it’ll additionally diverge from different fast-casual joints by serving Ontario wine and native beer from Toronto-based Bellwoods Brewery.

“We predict that we will ship an expertise,” stated Kark.

A U.S. burger joint in Canada requires ‘good planning’: analyst

Canada has been a scorching ticket for premium informal eating places like Blaze Pizza, Chick-fil-A, Chipotle and now Shake Shack, based on Robert Carter, an business analyst with the StratonHunter Group.

Eating places in that quick-service class symbolize about $40 billion to $50 billion of the $90-billion restaurant market in Canada, which is in any other case dominated by main fast-food chains like McDonald’s. 

“In occasions of financial uncertainty, there’s some shifting happening,” stated Carter. “Perhaps folks aren’t going out to the higher-end eating places as a lot, however the fast service does fairly effectively.”

Nonetheless, Canada has seen some colossal failures.

Asian fusion restaurant P.F. Chang’s is fashionable within the U.S., however its few areas in Canada “sadly failed miserably,” stated Carter — partly attributable to an absence of demand for such a sequence in a various market the place smaller eating places focus on ethnic cuisines. And a number of other Carl’s Jr. areas have closed throughout Canada in recent times attributable to points with franchisees.

The important thing to working a profitable U.S. chain in Canada, stated Carter, comes right down to a robust understanding of the market.

“It requires good planning, and requires [a] good Canadian accomplice to assist establish and just be sure you perceive the market.”

Shake Shack is working with Canadian non-public funding companies Harlo Leisure and Osmington, which Kark stated has made the chain’s entrance into Canada “fairly clean.”

Carter famous that almost all eating places are reluctant to move greater prices onto their clients — as a substitute, manufacturers will introduce varied reductions to drive visitors whereas nonetheless providing a deal. 

That dynamic is taking part in out within the U.S. proper now, as McDonald’s, Burger King and Wendy’s supply equally packaged offers within the $3 to $5 US vary. CBC Information reached out to a number of chains to see if related offers have been provided in Canada; Wendy’s was the lone chain to supply a $5 breakfast deal.

“That is actually a pass-through from the precise prices of meals, the price of labour, the price of hire. So it is turning into a way more tough setting to achieve success.”

Shake Shack can also be hoping to face out by providing alcohol. However as Carter notes, Canadian customers are ingesting much less and alcohol gross sales by quantity have been on the decline in Canada, having slipped by 1.1 per cent in 2022-23 for the second consecutive 12 months, based on Statistics Canada.

What does that imply for Shake Shack? “I feel they will rapidly notice that it doesn’t should be a basic a part of their enterprise mannequin,” he stated, noting that youthful clients are extra all for “fancy drinks,” just like the custard milkshakes that it presents.

The chain’s plan to open about 35 shops throughout the nation will not have a lot of an impression on different established manufacturers, Carter stated.

“It will be extra among the mom-and-pop unbiased burger locations that will really feel among the pinch.”