A global fast food chain has announced that it is closing several California branches it believes are no longer providing “acceptable returns”.
The chain overall had reported increased sales but, over the same period, foot traffic had dipped slightly.
Fast Food Struggles
The fast food industry has struggled in recent months as consumers struggle to reconcile new price points for what used to be a fast, budget eating option.
Rubio’s Coastal Grill recently filed for bankruptcy due to the “rising cost of doing business” in California.
Fewer Consumers
Price hikes in recent months in fast food stores has led to consumers not only turning away from certain brands, but fast food as a whole.
McDonald’s CFO, speaking in May, said that “everybody’s fighting for fewer consumers” as major chains across the board posted fewer sales.
Shake Up
Now, Shake Shack, too, are having to deal with reduced revenues, and they have chosen to shutter several stores in response.
They will close 6 stores in total, which includes 5 stores in Los Angeles, and one in Oakland.
Unprecedented For The Chain
The chain is moving into uncharted territory, having never taken such drastic action in the past.
As reported in Restaurant Business, this is the first time they are resorting to restaurant closures for reasons other than construction.
Reasons Given
Shake Shack’s reasons for the closure were given when they filed the decision with the Securities and Exchange Commission, earlier this week.
They said that the decision was made as part of a periodic evaluation, and that the shacks “are not projected to provide acceptable returns in the foreseeable future.”
Employee Outlook
Employees at the store do not appear to have received any of the blame for the move as the company has offered them 2 choices.
They can either be rehired at another location or, if that is not convenient or desirable, they can receive 60 days pay.
Growth Plan
Despite the bad news for workers and local fans, the company remains bullish about their future prospects, at least in one respect.
They claimed, in their filing, that the closures are intended to maximize growth, and that the decision will not affect strategies for future openings in those areas.
Target Market
Shake Shack’s recently appointed CEO, Rob Lynch, outlined his intentions earlier in August to target a specific subset of the population.
He wants his chain to become “a Friday night staple for the family,” and not exclude all but “the highest-income burger eaters.”
California Minimum Wage Rise
Although not directly cited by Shake Shack leadership, California’s recent minimum wage rise to $20 has been touted as a potential reason for the chain’s decision.
Governor Gavin Newsom’s bill was recently linked by his office to an increased number of jobs in the fast food sector.
