Shake Shack on Friday revealed further devastating impacts of the coronavirus on its business, disclosing that it had laid off or furloughed more than 1,000 employees and that it would be raising funds through a stock sale to generate cash.
The fast-casual burger chain said it has $112 million in cash on hand and that it is burning through $1.3 million to $1.5 million per week. That weekly burn rate includes about $800,000 of cash rent payment for which the company is discussing deferrals or abatements with landlords.
For its Q1 ended March 25, Shake Shack’s same-store sales dropped 12.8%, with March comps falling 28.5% over the previous year due to the impacts of COVID-19.
The company has temporarily closed 17 U.S. locations.
Currently, just 57 of Shake Shack’s 120 licensed global units remain open, with all locations in the U.K., Turkey, Japan and U.S. stadium venues currently closed. Most U.S. airport locations are also closed.
The chain’s dining rooms are now open in Korea, Hong Kong and mainland China, with Singapore now open for off-premise business after weeks of closures, along with some units in the Philippines and in the Middle East.
Last week, Shake Shack received a $10 million loan under the federal Payroll Protection Program. The company previously announced that it drew down on its $50 million in revolving credit last month.
Shake Shack’s layoffs and furloughs affect employees in restaurants and at its headquarters. Corporate staff members have taken pay cuts for an undetermined period. General managers will continue to be paid, even if their stores are closed, the company said.
The company also announced Friday that it planned to raise up to $75 million through a stock sale to generate cash to compensate for its sales decline.
With its dining rooms temporarily closed to slow the spread of COVID-19, the chain has focused on curbside pickup and delivery. It previously announced that it had abandoned its exclusive delivery partnership with Grubhub to work with other third-party services.
“Given the ongoing impact of COVID-19 on our business, our Shack teams have demonstrated their entrepreneurial spirit and continued to adapt our operating models and business strategy,” CEO Randy Garutti said in a statement. “As a result, we’ve seen strong sequential sales increases on a weekly basis since the last week in March. We’ve taken this time to double down on our digital toolbox, and have increased engagement and messaging in our own channels over recent weeks, while also successfully expanding new and existing integrated delivery partnerships with DoorDash, Uber Eats, Caviar and Postmates.”
Shake Shack’s own digital channels make up the largest proportion of its sales, the company said.
New store development is currently halted, but the company said it has 33 signed leases and that it plans on opening the stores “as soon as the business environment improves to more normalized levels.”
It also intends to take advantage of new real estate that may come available next year as a result of coronavirus-related closures.
The company will report its full Q1 earnings on May 4.