Shake Shack will close nine company-owned restaurants by Sept. 25, the fast-casual restaurant said Tuesday, citing underperformance and possible cannibalization of other locations in the 527-unit system.
In a filing with the Securities & Exchange Commission, the New York City-based fast-casual chain said that over the course of its regular portfolio evaluation it identified restaurants in California, Ohio, and Texas that were underperforming “in part due to changes in the trade area and, in some cases, are negatively impacting other Shacks within their proximity by cannibalizing sales,” it said.
It said the closures were not expected to impact the company’s plans for further expansion in those states and that it doesn’t plan on closing other restaurants “for the foreseeable future.”
It said management at the restaurants slated for closure will be offered jobs at neighboring Shake Shacks. Hourly employees, and managers who do not accept a transfer, would receive 60 days’ pay, it said.
Those affected by the closures were informed on Tuesday, according to the filing.
A Shake Shack spokesperson said the restaurants closing were in the Los Angeles communities of Bunker Hill, Downtown Culver City, Koreatown, and Silverlake, as well as the Westfield Topanga Mall. Additionally, the Shake Shacks in Oakland, Calif., the Polaris Mall in Columbus, Ohio, the Houston Galleria, and Houston’s Montrose neighborhood are being closed.
Shake Shack said the cost of the closures would be between approximately $14 million and $15.2 million and total cumulative pretax charges would be between approximately $28 million and $30 million, including $12.8 million to $13.6 million in lease termination costs and future lease obligations. Employee-related costs are expected to be around $1 million to $1.2 million.
In its most recent earnings report, for the quarter ended June 26, Shake Shack reported same-store sales growth of 4% compared to a year earlier, and earnings of $9.7 million, or 23 cents per share. It opened 12 company-owned restaurants and 11 licensed restaurants during the quarter. For the year it anticipated opening a total of 40 company-owned and 40 licensed restaurants.
Contact Bret Thorn at [email protected]
