Shake Shack, popular across the U.S for its signature burgers, shakes, and fries, said on Tuesday, the 27th of August that it will close some of its locations. This is not exactly surprising as more restaurants continue to close some of its locations in the U.S given the economic situation in recent times. However, for lovers of shake shack this news may be disappointing.
Why is Shake Shack closing some locations in the U.S.?
Shake shack is closing some “underperforming” locations in the United States. According to a filing by the brand to the U.S. Securities and Exchange Commission, the company stated that they regularly evaluate the performance of its locations, thus identifying locations that are underperforming. According to the company’s words “Shack Inc. (the “Company”) regularly evaluates its portfolio of Company-owned and operated Shack restaurants (“Shacks”). As a result, it has identified locations that are underperforming at the Shack level in part due to changes in the trade area and, in some cases, are negatively impacting other Shacks within their proximity by cannibalizing sales. These Shacks are not projected to provide acceptable returns in the foreseeable future”.
As a result of this, the company is determined to close nine of its store locations across different states.
Due to this closure, the company expects to record cumulative pretax charges of approximately $28 to $30 million during the third quarter which ends by September 25, 2024.
The company is expects to spend between $28 million to $30 million total cash to cover other charges incurred as a result of the closure, this include lease termination charges – $12.8 million to $13.6 million, part of the cash will also go to employees – $1 to $1.2 million, other possible cost related to the closing expenses is capped at – $0.2 to 0.4 million. Non-cash costs such as assets are capped at approximately $14 to $14.8 million.
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This closure will significantly impact the finances of Shake Shack, possibly affecting their cash flow. However, the company is determined to close these underperforming locations while channeling their resources to more profitable locations.
Which locations is Shake Shack closing in the U.S?
Shake shack will be closing nine underperforming locations in total across three states, California, Ohio and Texas. This will help the company to focus more on high performing locations and maximize profit.
What will happen to workers in closed locations?
According to the document released by the company, employees affected in the closed locations will be offered positions in the next close shake shack location, this provision covers hourly employees as well. Managers who do not accept this recent developments will receive up to 60 days pay.
Shake shack closed locations by state
According to a report by Restaurants Business, here shake shack locations slated to close:
California
- Oakland,
- Bunker Hill, downtown Los Angeles
- Downtown Culver City in Los Angeles
- Koreatown in Los Angeles
- Silverlake in Los Angeles
- Westfield Topanga, in Woodland Hills.
Ohio
- Polaris
Texas
- Houston Galleria
- Montrose
