Shake Shack gains first foothold in Israel

Shake Shack Tel Aviv credit: Uri Ovrutzky
Shake Shack Tel Aviv credit: Uri Ovrutzky

The US hamburger chain opened its first branch near Tel Aviv's Dizengoff Center last week.

One week after its festive launch in Israel, there are still long lines outside of US burger chain Shake Shack's first branch in the country next to Tel Aviv's Dizengoff Center. The plan is to open 15 branches in Israel by 2033 with the next two outlets believed to be opening in Tel Aviv Port and Rishon Lezion.

In recent years, the hamburger industry in Israel has grown rapidly, and estimates are that it generates about NIS 2.5 billion annually. Shake Shack's entry was made possible following a business initiative in 2021, when a group of investors led by Poalim Equity, Harel Insurance and Finance and Harel Wiesel purchased 49% of the catering arm of Yarzin-Sella Group, at a company valuation of NIS 100 million.

The location where the chain chose to launch is not accidental. "Dizengoff Center has become Israel's Times Square, and the preferred location for international brands," notes Uri Ovrutzky, a lecturer in innovation at Netanya Academic College, who visited the place and tried variety of dishes on the menu.

Ovrutzky stresses the branding thinking of the chain, which invests in local connection. "Tel Aviv is reflected in the icons, the menu and the shirts of the employees, and this is compared with McDonald's, for example, which when it launched tried to present itself as American.

"Is this the next thing, and will Israelis take to it in particular? In the current economic situation, the answer is no. Tel Avivians who live in the area will come. The prices are also relatively high for fast food in Israel, and you see reactions to this on social networks. The buzz, as Wiesel knows how to do, is much greater than the sum of its parts. But unless price adjustments are made, I don't see this vibe continuing, and it will remain another colorful option.

"Curiosity led many there, but a week after the opening there is already a forced line that is built like a path with red tape. This is not the opening volume of McDonald's in Israel, which had to close after two hours because they ran out of buns. Are we facing a revolution? In my eyes, no. The Israelis are already at the peak of the hamburger trend and in two months, there will no longer be a line."

"For a food chain whose prices are not cheap, this is a challenging time to enter Israel," says Motti Elbaz, CEO of strategic marketing consulting firm Success Code. "We are in the middle of a war with inflation and high interest rates along with an expected increase in taxes, so Shake Shack will have to take a lot of marketing measures to achieve distinctiveness."

The network's penetration strategy is purely branding, Elbaz stresses, and its success is as much a social phenomenon as a culinary one. "It's a chain worth $4.5 billion and growing at a crazy rate every year. To attract customers, it uses several marketing elements. The first - creating a long line by reducing cash registers, in order to position the product as desirable and make people buy more.

"The second thing is an anti-chain positioning: putting local foods and produce on the menu, depending on the location of the branch (in Israel: a pistachio-flavored shake). The third thing is investing in developing community ties, to maintain the image of the neighborhood restaurant. This creates an emotional connection, which you don't feel towards McDonald's or Burger Ranch."

Shake Shack, which was founded in 2004, has 520 branches in 20 countries with annual sales of $1.7 billion. The chain plans opening 85 new branches worldwide in 2024 including in Israel.

Published by Globes, Israel business news - - on March 5, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Shake Shack Tel Aviv credit: Uri Ovrutzky
Shake Shack Tel Aviv credit: Uri Ovrutzky
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018