After opening the first storefront in Seoul, South Korea last summer, Shake Shack — an American food chain famous for its burgers — opened a second last December. When the first store opened in July, 1500 people lined up as early as the night before, with crowds waiting two to three hours on average. The first store sold 400 thousand burgers — $2.4 million in sales — in its first 100 days. The second store was also bustling with people right from its opening day, and expects to see continued popularity. The restaurants are located in Gangnam and Cheongdam-dong, the two largest commercial districts in Seoul, and popular spots for young people. The first store is now the top performing Shake Shack in the entire world, selling 3,000 to 3,500 burgers daily. The second store also ranks within the top three as Danny Meyer, the founding chairman of Shake Shack announced during his visit to Seoul in February.
Shake Shack chose to use a local partner, SPC group, meaning the chain will be operated locally, while royalties from sales will be paid to the headquarters in the US. This is a common strategy for foreign food chains entering the Korean food services market. Aside from the licensing payment, royalties paid to foreign food chains in Korea are usually four to five percent of total sales. Considering that SPC group is importing ingredients from the US — such as Pennsylvania beef — American profits for Shake Shack are expected to be higher.
While food chains from the US already enjoy a large share of the market in South Korea, Shake Shack’s popularity shows the possibility of successful landings for new US vendors in the country. Although ‘Shake Shack Fever’ has abated, 3000 people in Seoul still eat at the restaurant daily. SPC group aims to open 25 stores in Korea by the close of 2025.
US food chains have been successful so far in South Korea. Starbucks Coffee Korea has the fourth highest sales among the food services market in the country, and Baskin Robins/Dunkin Doughnuts takes sixth. The food service industry in Korea has grown 6% annually over the last 7 years, from $57 billion to $71 billion.
Jaichung Lee is a Research Intern at the East-West Center in Washington and an Asan Washington Young Fellow with the Asan Academy in Seoul.