Shake Shack will close nine company-owned restaurants by September 25, the fast-casual chain announced on Tuesday, citing performance deficits and possible cannibalization of other locations in the 527-store system.
In a filing with the U.S. Securities & Exchange Commission, the New York-based fast-casual chain said that as part of its regular portfolio evaluation, it had identified restaurants in California, Ohio and Texas that “underperformed, in part, due to changes in the trading area and, in some cases, negatively impacted other shacks in their vicinity by cannibalizing sales,” it said.
It said the closures are not expected to impact the company’s expansion plans in those states and that no additional restaurant closures are planned “in the foreseeable future.”
Management at the restaurants to be closed will be offered jobs at neighboring Shake Shacks. Hourly workers and managers who do not accept a transfer will receive 60 days’ pay, it said.
Those affected by the closures were informed on Tuesday, the file says.
A Shake Shack spokesperson said the restaurants in the Los Angeles communities of Bunker Hill, Downtown Culver City, Koreatown and Silverlake, as well as at Westfield Topanga Mall, have been closed. In addition, Shake Shacks in Oakland, California, the Polaris Mall in Columbus, Ohio, the Houston Galleria and Houston’s Montrose neighborhood have been closed.
Shake Shack said the cost of the closures would be between $14 million and $15.2 million, and total cumulative pre-tax costs would be between $28 million and $30 million, including $12.8 million to $13.6 million in lease termination costs and future lease obligations. Personnel costs are expected to be approximately $1 million to $1.2 million.
In its latest earnings report for the quarter ended June 26,Shake Shack reported 4% year-over-year revenue growth and earnings of $9.7 million, or 23 cents per share. It opened 12 company-owned restaurants and 11 licensed restaurants during the quarter, and plans to open a total of 40 company-owned and 40 licensed restaurants for the year.
Contact Bret Thorn at (email protected)
