The popular burger joint Shake Shack announced its closing six underperforming stores in California following the state’s implementation of a mandatory $20 per hour minimum wage.
Shake Shack is slated to close nine stores nationwide, with six of them being in the golden state. According to a filing with the Securities and Exchange Commission (SEC), the business said the move was a result of periodic portfolio evaluations.
“These Shacks are not projected to provide acceptable returns in the foreseeable future,” the filing read.
In California, five of the closing locations are in Los Angeles, while one is in Oakland. It’s the first time Shake Shack is closing restaurants for non construction-related reasons. All nine locations are expected to be shuttered by September 25.
The burger joint said employees at the closing establishments can be rehired at other Shake Shack locations. If employees don’t want to transfer locations, they are eligible for 60 days of severance.
Shake Shack is among a litany of fast-food giants closing stores and hiking prices following the implementation of California’s minimum wage.
Rubio’s California Grill closed 48 of its nearly 134 locations at the end of May. The minimum wage law went into effect on April 1. Rubio’s California Grill cited the “rising cost of doing business” in the state as the main reason for shuttering stores. The company ultimately filed for bankruptcy in June.
The minimum wage hike also forced chains like McDonald’s, Burger King, and In-N-Out Burger to increase prices to offset the costs of higher wages. Ultimately, the consumers of once-affordable fast-food chains are paying the price for the increased minimum wage.
California Gov. Gavin Newsom believes the economy in his state is thriving.
“What’s good for workers is good for business, and as California’s fast food industry continues booming every single month our workers are finally getting the pay they deserve,” Newsom said. “Despite those who pedaled lies about how this would doom the industry, California’s economy and workers are again proving them wrong.”
This piece first appeared at TPUSA.
