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Shake Shack to shut 6 California locations, including 5 in LA, after state’s $20 minimum wage hike
ByTaylor Herzlich and
Josh Kosman
Published Aug. 28, 2024
Updated Aug. 28, 2024, 6:27 p.m. ET
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Shake Shack will shutter six underperforming California locations — the latest fast food chain to close restaurants after the state enacted its controversial $20 minimum wage.
The burger chain, which will close nine Shake Shacks overall, said the move was a result of a periodic evaluation of its portfolio of company-operated units, according to a filing with the Securities and Exchange Commission on Tuesday.
“These Shacks are not projected to provide acceptable returns in the foreseeable future,” the filing said.
Five of the doomed locations are in the Los Angeles area and another is in Oakland, lowering its total to 37 in the state — where wages for fast-food workers shot up to $20 an hour on April 1.
The company said its decision was based “in part due to changes in the trade area,” according to its filing
Shake Shack declined to comment further on California’s $20 minimum wage law when contacted by The Post.
It’s the first time the chain will close restaurants for purposes that were not construction-related, a spokesperson told trade publication Restaurant Business, which first reported the news.
The other closures include two in Texas and one in Ohio.
Shake Shack said Tuesday it will be closing nine underperforming restaurants — including at least six in California.AP
Shake Shack said it expects all nine locations to close their doors by Sept. 25.
Employees at those restaurants can be rehired at other Shake Shack locations. If employees do not want to transfer locations, they will be eligible for 60 days of pay.
The company — which has 330 locations in the US and more than 180 abroad — said its closures will maximize growth and will not impact plans to open stores in those areas in the future, according to the filing.
California’s $20 minimum wage hike has forced several major chains – including McDonald’s, Burger King, and even low-cost favorite In-N-Out Burger – to jack up prices to offset the higher wages.
CEO Rob Lynch took the helm in May with a plan to change the company’s image with an emphasis on speed and value.Jamie Germano/Rochester Democrat and Chronicle / USA TODAY NETWORK
Many had to cut employee hours, and some have fast-tracked a move toward automation.
Rubio’s California Grill closed 48 of its nearly 134 locations at the end of May, citing the “rising cost of doing business” in the state for the closures and filed for bankruptcy in June.
Earlier this month, recently hired CEO Rob Lynch said he didn’t want Shake Shack to appeal to “only the highest-income burger eaters.”
Instead, he said he wants the brand to become “a Friday night staple for the family.”
3Shake Shack will be closing locations in Ohio, Texas and California — including five in Los Angeles.David P. Willis/Asbury Park Press / USA TODAY NETWORK
He argued the company needed more drive-thru locations to tweak its perception as an urban, walk-in restaurant.
Lynch took the helm in May after stints at Papa John’s, Arby’s and Taco Bell.
Same-store sales rose 4% in the second quarter – mostly due to higher price points. Traffic dropped less than 1% during the same period.
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