In the burger wars, Shake Shack invaded Los Angeles years ago from the east.
Now, it’s shutting down some of its West Coast outposts.
The popular fast-casual chain announced it is closing nine underperforming locations this month, including five in the Los Angeles area.
Fans who sought out the company’s milkshakes and burgers with tangy ShackSauce at locations in Bunker Hill downtown, Culver City, Koreatown, Silverlake and the Westfield Topanga mall will need to look elsewhere. A Shake Shack in Oakland will also close, as well as two in Texas and one in Ohio, the company said.
Some of the closing spots “are negatively impacting other Shacks within their proximity by cannibalizing sales,” the company said in a Securities and Exchange Commission filing last week, and “are not projected to provide acceptable returns in the foreseeable future.”
The closures come during a tough period in general for restaurant chains as consumers weary of increased prices pushed up by years of high inflation have pulled back on spending. Customer traffic at fast-food restaurants fell 2% in the first half of the year compared with last year, the Associated Press reported, and burger giant McDonald’s saw its same-store sales drop in July for the first time since 2020.
Shake Shack has performed relatively well amid the belt-tightening. The company recently reported revenue of $316.5 million in the second quarter of 2024, up 16.4% from 2023. Same-shop sales were up 4% compared with 2023. Shares of the New York City-based company closed Wednesday at $99.25, up 1.5%. The stock has dropped about 5% in the last six months.
Shake Shack said that 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 considerable growth with a plan to open 40 new company-owned Shacks and 40 more licensed Shacks this year,” said Chief Executive Rob Lynch in a statement. “We’ve made the tough decision to close a small group of Shacks due to various factors, including underperformance.”
After starting as a hot dog cart in New York City’s Madison Square Park to support a public arts program about two decades ago, Shake Shack grew quickly into a dominant player on a crowded field of competitors. Often described at the In-N-Out of the East, the company arrived on 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 for rehire 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 closures by Sept. 25. The Shake Shack in downtown Culver City already was locked and dark Wednesday. Inside, empty tables sat next to a partially dismantled kitchen and an unlighted neon sign that said online pickup.
The closures will cost the company between $14.2 million and $15 million, according to the filing, including $12.8 million to $13.6 million of pretax charges related to lease termination and future lease obligations and $1 million to $1.2 million of 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’re committed to sustainable growth and providing the best possible experience for our guests.”
