A California investment firm is seeking three seats on Shake Shack’s board of directors in a plan to save the burger chain as customers spend less.
Shake Shack’s share price soared in early 2021, but took a major hit as fare workers returned to offices in major cities after the pandemic slowed down.
As of Monday, it was trading at around $70, after a 50 percent increase over the past 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 Wall Street Journal reported Sunday. On Monday afternoon, the share price was about 8 percent higher.
Engaged has proposed changes to Shake Shack’s “real estate strategy, store design, labor planning and supply chain.” It has not responded to a request from DailyMail.com to elaborate on these strategies.
A California investment firm is seeking three seats on Shake Shack’s board of directors in a plan to save the burger chain as customers spend less. Pictured is a Shake Shack restaurant in New York
As of Monday, Shake Shack shares were trading at around $70, after rising 50 percent over the past year, but still well below its all-time high of $130 in February 2021
Activist investors like Engaged buy small stakes in publicly traded companies and try to change the way they are run by appointing people to the company’s board.
Sometimes they use that power to advance employee well-being and other social causes, but often the goal is simply to maximize shareholder value.
Shake Shack is struggling to bring back lunchtime diners in larger cities as fewer people commute to the office every day.
It had a market cap of about $3 billion as of Monday — Engaged has a stake of about 6.6 percent.
Engaged has been in talks with Shake Shack management for more than six months and sent a letter to the company’s board of directors in March outlining the proposal for new directors, the Journal reported.
“So far, management has been reluctant to commit to a timeline for regaining lost profitability,” said founder and chief investment officer Glenn Welling in the letter, which was viewed by the Journal.
The chain’s founder, Danny Meyer, currently controls voting stock, giving him ultimate say on important 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 previously CEO of Noodles & Co.
The second is Joel Bines, who led the global retail practice at consulting firm AlixPartners and has experience in retail, brands and consumer-facing businesses.
The final nominee is Christopher Hetrick, co-founder of Engaged and its director of research.
One of the nominees from Engaged Capital’s board is Kevin Reddy (pictured), who has served as CEO of Noodles & Co
Another nominee is Christopher Hetrick (left), co-founder of Engaged and the company’s director of research. Joel Bines (right) is also nominated for a seat on the board. He led the global retail practice at consultancy firm AlixPartners
Engaged has also proposed that Shake Shack do away with its staggered board, meaning not all directors are up for election at the same time, the Journal reported.
“In order for the company to reach its full growth potential and grow this brand profitably in the U.S. and globally, we believe significant adjustments are needed to the company’s real estate strategy, store design, labor planning and supply chain framework. the company,” says Welling. said.
In a statement to DailyMail.com, Shake Shack referenced the current share price.
“Our stock is up more than 50% since the start of the year and we are well positioned to continue to drive shareholder value,” said a spokesman for the burger joint.
“Looking forward, we’re leading from full year 2023 to a record year … with restaurant-level margins expected to return to 19 to 20%,” they said.
“We are executing on our strategic plan and making substantial operational and financial progress.”
Shake Shack’s annual shareholder meeting is expected to be held in June.