Two Shake Shack Locations Are Calling It Quits in Houston
The fast-casual burger giant plans to close its Houston outposts in the Galleria and Montrose neighborhood this September after “underperformance” issues
New York City’s fast-casual burger chain Shake Shack plans to close its two Houston locations in the Galleria Mall and Montrose neighborhood this September, citing underperformance issues. Its locations in Minute Maid Park, Downtown Houston, Rice Village, the Katy area, Webster, and The Woodlands, however, will stay put.
Nation’s Restaurant News first reported Wednesday, August 28, that the closures are a part of the burger company’s larger move to close locations that are not reeling in enough profit.
Shake Shack stated Tuesday, August 27, in a filing with the Securities and Exchange Commission that nine of its locations in Texas, Ohio, and California were “underperforming at the Shack level in part due to changes in the trade area and, in some cases, are negatively impacting other Shacks within their proximity by cannibalizing sales.” As a result, these nine locations are slated to close by September 25.
Shake Shack, which owns more than 500 locations around the country, stated that it decided to close the locations after learning that they do not expect to make enough “returns” or profit. The company reportedly notified employees affected by the coming closures on Tuesday, August 27. In the case of the pending closures in California and Ohio, the company will offer managers a transfer to neighboring Shake Shacks. Those who do not accept a transfer will receive two months’s pay.
Shake Shack, which opened at least 20 restaurants last quarter, predicted in the filing that the closures will cost the company a minimum of $28 million in pre-tax charges and at least another $14 million in cash costs, which is largely due to terminating its leases or other “lease obligations.” Roughly another $1 million will be spent on employee-related costs.
Shake Shack said it does “not anticipate” any more closures in the “foreseeable future” and that these set of closures will not impede its plans to open additional outposts in the states where the closures are happening, which means more Shake Shacks could still be coming to Texas.
A representative for Houston’s Shake Shack locations stated that they had no comment at this time about the closures, leaving diners to speculate about the deeper cause of Shake Shack’s local closures. One can deduce, though, that the city already has various quality burger options, though it seems to be an industry trend that burger chains aren’t doing as well as hoped as diners seek more affordable options.
Fast food chain McDonald’s reported in July a drop in its sales worldwide and a 15 percent decrease in its sales this year, according to a Reuters report. Its sales rose by 4 percent, however, after debuting a $5 value meal in June. Wendy’s also reported in August that its sales decreased after increasing the prices of its meals.
