Bloomberg News

Shake Shack Comes to Russia Two Decades After McDonald’s (2)

December 18, 2013

Restaurateur Danny Meyer thinks Muscovites are ready to stand in line for a burger again.

More than two decades after McDonald’s Corp. (MCD:US) opened its first Russian outpost, leading 30,000 to stand for hours in the cold to savor a Big Mac, Meyer is in Moscow for Shake Shack’s local opening tomorrow. The New York burger joint known for its queues will sell ShackBurgers for 235 rubles ($7.15), about 50 percent more than in New York and almost triple the price of a local Big Mac.

Meyer, chief executive officer of the closely held Union Square Hospitality Group that owns Shake Shack, thinks it’s a bargain.

“It’s very inexpensive, given we ship our hamburger buns from the U.S. by airplane and, of course, all of our beef comes from Australia and our pickles are from Brooklyn,” the 55-year-old said in an interview yesterday, adding that he expects a lot of demand for the restaurant’s offerings such as the Shack-cago hot dog.

Shake Shack has developed from a single hot-dog cart to a fast-food chain that offers the self-proclaimed “most delicious” hamburgers and ranks in New York’s top 25 most popular restaurants, according to review publisher Zagat. Since 2011, Shake Shack has expanded globally to cities including Jeddah, Saudi Arabia, where it opened last week, and Dubai.

Growing Competition

Moscow residents have been getting their taste of American burgers since 1990, when the opening of McDonald’s first Russian restaurant was a world news event. While Russia’s fast-food market has grown increasingly crowded, with Burger King Worldwide Inc. (BKW:US), Subway Restaurants and Yum! Brands Inc. (YUM:US) all aiming to woo diners, the country today has just one restaurant per 930 inhabitants, versus one per 150 in the U.S., according to researcher Business Analytica.

“If we were opening a fast-food chain, we would be too late for Russia,” Meyer said, adding that he considers Shake Shack to be restaurant-quality food in a casual setting. His restaurants the Modern and Gramercy Tavern have Michelin stars.

Still, the Russian consumer food-service market is forecast to grow 5 percent this year to $20.1 billion, according to Euromonitor International research company. That’s about $140 in annual revenue per capita versus more than $1,000 in western Europe and over $1,500 in the U.S., data from Euromonitor show.

Local Palate

Shake Shack is adapting its menu for the local palate. Its deep-fried shallots are dipped in batter and Russian beer while the custard has incorporated a preference for walnuts and marshmallows. The pork sausage and bacon are sourced locally, Meyer said.

“Having been to Shake Shack in Brooklyn, I’m looking forward to trying their Moscow offerings,” John Heisel, vice president of sales and trading at Renaissance Capital in Moscow, said in an e-mailed comment. “The prices look to be higher than the U.S. at first glance, but sadly this seems reasonable. Having lived here for over a decade, I’m used to everything costing more.”

Moscow will be Shake Shack’s last major international opening for now as the company focuses on expanding from the East Coast of the U.S. toward the west, Meyer said. The chain has plans to open next year in cities including Chicago and Austin, Texas, and on the Las Vegas strip by 2015.

Meyer, who started Union Square Cafe in October 1985, at the age of 27, now operates other New York restaurants including Blue Smoke and Maialino. He has no plans to open fine-dining restaurants in Moscow until Shake Shack proves itself, and won’t commit to expanding that model until the first outlet is successful.

“First, let’s make this work,” he said.

To contact the reporters on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net; Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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Companies Mentioned

  • MCD
    (McDonald's Corp)
    • $91.67 USD
    • 0.65
    • 0.71%
  • BKW
    (Burger King Worldwide Inc)
    • $31.65 USD
    • 1.07
    • 3.38%
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