Years ago, during the civil wars, Shake Shack invaded Los Angeles from the east.
Now it is closing some of its West Coast outposts.
The popular fast-casual chain announced it will close nine underperforming locations this month, including five in the Los Angeles area.
Fans who have been looking for the company's milkshakes and burgers with spicy Shack sauce at locations in downtown Bunker Hill, Culver City, Koreatown, Silverlake and the Westfield Topanga mall will have to look elsewhere. A Shake Shack in Oakland, as well as two in Texas and one in Ohio, will also close, the company said.
Some of the closures “negatively impact other Shacks in their area by cannibalizing sales,” the company said in a Securities and Exchange Commission filing Filed last weekand “are not expected to generate acceptable returns in the foreseeable future.”
The closures come at a generally difficult time for restaurant chains as consumers, tired of rising prices due to years of high inflation, have cut back on spending. Customer traffic at fast-food restaurants fell 2% in the first half of the year compared to a year ago, the release said Associated Press reportedand burger giant McDonald's reported a decline in same-store sales in July for the first time since 2020.
Shake Shack has done relatively well despite austerity measures. The company recently reported second-quarter 2024 revenue of $316.5 million, up 16.4% from 2023. Same-shop sales increased 4% compared to 2023. Shares of the New York City-based company closed at $99.25 on Wednesday, up 1.5%. . The stock is down about 5% in the last six months.
Shake Shack said it does not expect to close any additional stores in the near future and that the closures will not impact expansion plans in California, Texas and Ohio.
“Shake Shack is in a period of significant growth and plans to open 40 new company-owned Shacks and 40 additional licensed Shacks this year,” Chief Executive Rob Lynch said in a statement. “We have made the difficult decision to close a small group of Shacks due to a variety of factors, including poor performance.”
After starting out about two decades ago as a hot dog cart in New York's Madison Square Park to support a public art program, Shake Shack quickly became a dominant player in a crowded field. Often described as the In-N-Out of the East, the company came to the West Coast in 2016 with the opening of its West Hollywood location. The company currently operates more than 350 locations in the United States and 190 locations internationally.
Employees affected by the closures were notified in August. 27. Managers at closure sites will be offered a position at another smelter, the company said in the filing, and team members working on an hourly basis will be eligible for rehire at other smelters. Hourly employees and managers who do not agree to a transfer will receive up to 60 days of pay.
The company said it expects to complete the closures by September. 25. The Shake Shack in downtown Culver City was already locked and dark on Wednesday. Inside, empty tables sat next to a partially dismantled kitchen and an unlit neon sign that read “Online Pickup.”
According to the filing, the closures will cost the company between $14.2 million and $15 million, including $12.8 million to $13.6 million in pre-tax costs related to lease termination and future lease obligations and $1 million to $1.2 million Millions of dollars in employee-related costs.
“We remain focused on supporting our team members through this transition and look forward to … opening many more locations across the country,” Lynch said. “We are committed to growing sustainably and offering our guests the best possible experience.”
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