In the burger wars, Shake Shack invaded Los Angeles years ago from the east.
Now, it is closing some of its West Coast outposts.
The popular fast-food chain announced it will close nine underperforming locations this month, including five in the Los Angeles area.
Fans who were looking for the company's shakes and burgers topped with spicy ShackSauce 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 will also close, as will two in Texas and one in Ohio, the company said.
Some of the closing locations “are negatively impacting other nearby Shacks by cannibalizing sales,” the company said in a Securities and Exchange Commission filing. applying last weekand “are not expected to provide acceptable returns in the foreseeable future.”
The closures come during a tough period overall for restaurant chains as consumers, tired of increased prices brought on by 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 with last year, according to the report. The Associated Press reportedand burger giant McDonald's saw its same-store sales fall in July for the first time since 2020.
Shake Shack has performed relatively well amid the austerity. The company recently reported revenue of $316.5 million in the second quarter of 2024, up 16.4% from 2023. Comparable-store sales rose 4% compared with 2023. Shares of the New York City-based company closed Wednesday at $99.25, up 1.5%. The stock has fallen about 5% over the past six months.
Shake Shack said it does not expect to close additional stores in the near future and that the closures will not affect expansion plans in California, Texas and Ohio.
“Shake Shack is in a period of significant growth and plans to open 40 new company-owned locations and 40 additional licensed locations this year,” CEO Rob Lynch said in a statement. “We have made the difficult decision to close a small group of locations due to a number of factors, including poor performance.”
After starting out as a hot dog stand in New York City’s Madison Square Park to support a public art program roughly two decades ago, Shake Shack quickly became a dominant player in a crowded field of competitors. Often described as the In-N-Out of the East, the company came to the West Coast in 2016 when it opened its West Hollywood location. It currently operates more than 350 locations in the U.S. and 190 locations internationally.
Employees affected by the closures were notified on Aug. 27. Managers at closing locations will be offered a position at another Shack, the company said in the filing, and hourly team members will be eligible to be rehired at other Shacks. Hourly employees and managers who do not accept a transfer will receive up to 60 days of pay.
The company said it expects to complete the closures by Sept. 25. The Shake Shack in downtown Culver City was already closed and dark Wednesday. Inside, empty tables sat next to a partially gutted kitchen and an unlit neon sign that read “online pickup.”
The closures will cost the company between $14.2 million and $15 million, according to the filing, including between $12.8 million and $13.6 million in pretax charges related to lease termination and future lease obligations and between $1 million and $1.2 million 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 sustainable growth and providing the best possible experience for our guests.”
