A California investment firm is seeking to acquire three seats on Shake Shack’s board of directors as part of a plan to save the burger chain as customers cut spending.
Shake Shack’s share price was skyrocketing at the start of 2021, but took a hit as the rate of workers returning to big city offices after the pandemic slowed.
On Monday, it was trading at around $70 after rising 50% last year, but still well below its all-time high of $130 in February 2021.
“Activist investor” Engaged Capital now wants three board seats to implement changes it says will double profits in two years, the the wall street journal reported Sunday. On Monday afternoon, its stock price was up about 8%.
Engaged proposed changes to Shake Shack’s “real estate strategy, store design, workforce planning and supply chain”. He did not respond to a request from DailyMail.com for the elaboration of these strategies.
A California investment firm is seeking to acquire three seats on Shake Shack’s board of directors as part of a plan to save the burger chain as customers cut spending. Pictured is a Shake Shack restaurant in New York
Shares of Shake Shack were trading at around $70 on Monday, having risen 50% in the past year but still well below its all-time high of $130 in February 2021.
Activist investors like Engaged buy small stakes in public companies and try to change the way they are run by appointing people to the company’s board of directors.
Sometimes they wield this power to advance worker welfare and other social causes, but often the goal is only to maximize shareholder value.
Shake Shack has struggled to bring lunchtime diners back to the big cities as fewer people commute to the office daily.
It had a market capitalization of around $3 billion as of Monday – Engaged has a stake of around 6.6%.
Engaged has been in talks with Shake Shack management for more than six months and sent a letter to the company’s board in March detailing its proposal for new directors, according to the Journal.
“So far, management has been reluctant to commit to a timeline to regain lost profitability,” committed founder and chief investment officer Glenn Welling said in the letter, which was seen by the Journal.
The chain’s founder, Danny Meyer, currently controls the voting shares, giving him the final say on key issues, but Engaged wants to appoint three people to the board.
The first nominee is Kevin Reddy, an established investor in the restaurant industry who was formerly CEO of Noodles & Co.
The second is Joel Bines, who led the global retail practice at consulting firm AlixPartners and has a background in consumer-focused retail, brands and businesses.
The final candidate is Christopher Hetrick, co-founder of Engaged and its research director.
One of Engaged Capital’s board nominees is Kevin Reddy (pictured), who served as CEO of Noodles & Co.
Another candidate is Christopher Hetrick (left), co-founder of Engaged and director of research for the company. Joel Bines (right) is also nominated for a seat on the board. He led the global retail practice at consultancy AlixPartners
Engaged also proposed that Shake Shack get rid of its staggered board, which means not all directors are elected at the same time, the Journal reported.
“For the company to reach its full growth potential and profitably expand this brand in the United States and globally, we believe that significant adjustments to the company’s real estate strategy, store design, workforce planning and supply chain framework will be required,” Welling said.
In a statement to DailyMail.com, Shake Shack referenced its current share price.
“Our stock is up more than 50% year-to-date and we are well positioned to continue to improve shareholder value,” a spokesperson for the burger joint said.
“Looking ahead, we expect 2023 to be a banner year…with expectations of restaurant-level margins returning to 19-20%,” they said.
“We are executing our strategic plan and making substantial operational and financial progress.”
Shake Shack’s annual meeting of shareholders is scheduled to be held in June.