Shake Shack is closing six underperforming locations in California, becoming the latest fast-food chain to shutter restaurants after the state enacted a controversial $20 minimum wage.
The burger chain, which is closing nine Shake Shack locations, said in a filing with the Securities and Exchange Commission on Tuesday that the move comes as a result of a routine evaluation of its portfolio of company-operated locations.
“These shacks are not expected to generate acceptable revenue in the foreseeable future,” the filing states.
Five of the closures are in the Los Angeles area and one is in Oakland, bringing the total to 37 in the state, where hourly wages for fast-food workers jumped to $20 on April 1.
The company said in the filing that the decision was “due in part to changes in trade geographies.”
Shake Shack declined to comment further about California's $20 minimum wage law when contacted by The Washington Post.
A spokesperson told industry publication Restaurant Business, which first reported the news, that this is the first time the chain has closed a restaurant for reasons unrelated to construction.
The other closures include two in Texas and one in Ohio.
Shake Shack said it plans to close all nine of its locations by September 25th.
Employees at these restaurants may be rehired at other Shake Shack locations. If employees do not wish to transfer locations, they will be eligible to receive 60 days of pay.
The company operates 330 stores in the United States and more than 180 internationally, and said in the filing that the store closures are to maximize growth and will not affect future plans to open stores in those regions.
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 raise prices to offset the wage increase.
Many businesses have been forced to cut employee hours, and some have accelerated the shift to automation.
Rubio's California Grill closed 48 of its nearly 134 locations at the end of May, citing “rising costs of doing business” in the state, and filed for bankruptcy in June.
Earlier this month, recently hired CEO Rob Lynch said Shake Shack doesn't want to appeal to “just high-income burger lovers.”
Instead, he said he wants the brand to become a “Friday night staple for families.”
He argued that the company needed to open more drive-through locations to revamp its image as a walk-in restaurant in urban areas.
Lynch took over the helm of the company in May after stints at Papa John's, Arby's and Taco Bell.
Same-store sales rose 4% in the second quarter, driven primarily by higher prices, while foot traffic declined less than 1% during the same period.
The chain's shares are up 43% so far this year.
Shake Shack's market capitalization is $4.45 billion.
