Shake Shack will close six locations in California, including five in Los Angeles, following the state's $20 minimum wage hike for fast-food workers. According to a filing with the Securities and Exchange Commission on Tuesday, the burger chain is shutting down nine locations overall after a periodic review of its company-operated units.
“These Shacks are not projected to provide acceptable returns in the foreseeable future,” the filing stated.
Five of the affected locations are in the Los Angeles area, and one is in Oakland, reducing the company’s presence to 37 locations in California. The wage increase took effect on April 1, raising fast-food worker pay to $20 per hour.
The company noted that the closures are partly due to “changes in the trade area.” All nine locations are expected to close by September 25.
Shake Shack said employees from the affected locations will have the opportunity to transfer to other locations. Those who choose not to transfer will be eligible for 60 days of pay.
With 330 locations in the U.S. and over 180 internationally, Shake Shack emphasized that the closures are meant to optimize growth and will not affect plans to open new stores in these areas in the future.
California's wage increase has pushed several major fast-food chains, such as McDonald’s, Burger King, and In-N-Out Burger, to raise prices to cover the higher wages. Some have also reduced employee hours or accelerated automation efforts.
