Shake Shack on Tuesday said it would hire an operational consulting firm and appoint former Domino’s Pizza CFO Jeff Lawrence to its board of directors in a deal with the activist investor Engaged Capital.
The New York-based chain and the hedge fund will also work to find another person with restaurant operations experience to join the board of directors.
The deal comes just two days after the Wall Street Journal first reported Engaged Capital’s activism against Shake Shack, saying that the investor and the company have been in talks for several weeks. Engaged apparently owns 6.6% of Shake Shack stock.
Much of the discussion was over profitability. Shake Shack spends more to build new locations than many of its rivals and the company recently has said it is focused on improving the prototype to lower its opening costs.
“We appreciate our constructive dialogue with Engaged Capital and believe the appointment of Jeff and another new director will benefit the company and stockholders,” CEO Randy Garutti said in a statement. “We are executing our strategic plan and share Engaged Capital’s view that Shake Shack can drive additional profit growth.”
The consulting firm will apparently work to assist Shake Shack’s efforts to improve restaurant execution, cost structure and profitability. In addition, Shake Shack Chairman Danny Meyer has agreed to “step down” their rights to designate directors over time.
“Shake Shack has a unique opportunity for substantial profitable growth,” Glenn Welling, founder and chief investment officer at Engaged Capital, said in a statement.
Engaged Capital in exchange has agreed to vote in Shake Shack’s nominees for the board and has also agreed to not amass more shares of Shake Shack.
Lawrence has more than 25 years of experience and is currently the CFO with ShiftKey. He spent more than 20 years with Domino’s. His appointment to the board is effective immediately.
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