Emerging headlines have revealed that Shake Shack, the beloved burger brand, is set to close down six of its California franchises that have been performing below par. This decision comes in the wake of the recently implemented $20 minimum wage in the state. The imminent shutdown is not merely a reaction to the new wage law, however, but instead the conclusion of a regular review of the performance of their company-owned outlets, as disclosed in their Tuesday filing with the Securities and Exchange Commission.
The document filed elucidates that these specific branches of Shake Shack are not on track to generate sustainable profits in the near term. Understandably, the decision to close businesses is paramount to a company’s financial health and longevity. The new development is a stark indicator of the business adjustments brought about by the wage changes.
Five of the Shake Shack spots marked for closure are nestled in the sprawling urban spaces of Los Angeles. An additional site in Oakland will also be closing its doors for good. This dramatic move correlates with the recent hike in the minimum wage of fast-food employees to $20 on the first day of April, which has caused reverberations across the industry.
In the history of the fast-food chain, this marks the inaugural instance of entire locations being shut down for reasons unrelated to physical construction or renovation. Prior to this, closures were typically tied to premises upgrading or refurbishment as noted by a representative for Shake Shack during a discussion with the industry magazine, Restaurant Business, who initially broke the news.
The company, at this time, has not openly communicated regarding the matter, leaving stakeholders, employees, and loyal clientele waiting for official statements. Still, the restaurant closures, while unfortunate, offer a perspective on the evolving fast food industry.
Shake Shack currently anticipates a complete operational shutdown of all nine identified locations by the 25th of September. This definitive step is seen as a necessary move to optimize business operations and align with the financial realities of the marketplace.
For the employees who are affected by this decision, the firm has formulated a support plan. Those who wish to continue their professional journey with Shake Shack can opt to reposition within the company by accepting positions at other locations. This consideration for their workforce displays Shake Shack’s dedication to their employees amidst challenging economic times.
Employees who, for various reasons, choose not to or cannot relocate to other Shake Shack outlets will receive monetary compensation. More specifically, these employees will be eligible for income for a period of 60 days. This approach amalgamates business savviness with a respectful regard for employee livelihoods during transitions.
The fast-casual dining brand boasts an impressive portfolio of 330 outlets scattered across the U.S., along with over 180 international branches. This wide network of stores signifies the magnitude of the impact any significant operational changes may have.
Shake Shack’s closure plan, as noted in the filing, is centred around strategic positioning for future growth, reflecting the essence of diligent business practice. It is also intended to have no bearing on the brand’s overall growth strategy irrespective of the imminent closures.
Adapting to adverse conditions, the company has signaled its intent to broaden its reach within the same demography, demonstrating resilience in the face of challenges. Their filing emphasized that these changes won’t interrupt forward plans to inaugurate new outlets in the same regions where closures are taking place.
Through these measures, Shake Shack illustrates a flexible and proactive approach to forging its path forward, even during disruptive times. In essence, the maneuvers depict not just a closure but a calculated strategic move aimed at sustainable and robust growth.
In this dynamic fast-food industry, the situation warrants a watchful eye on the unfolding developments. Not only for other fast food chains that might be considering a similar route but also for stakeholders of Shake Shack eagerly awaiting the aftereffects of this brave decision.