Fast-casual burger chain Shake Shack has reached an agreement with Engaged Capital, reportedly to stop a proxy battle that the minority shareholder was threatening.
The New York City-based chain appointed former Domino’s Pizza chief financial officer Jeffrey Lawrence to the board and has agreed to hire an operational consulting firm and enhance corporate governance.
Lawrence is currently the CFO of technology enabled healthcare staffing firm ShiftKey.
Shake Shack also said in a release announcing the agreement that founder Danny Meyer “and certain of his affiliates have agreed to step down their director designation rights over time,” without specifying what exactly that means.
The Wall Street Journal reported that Engaged, which owns around 6.6% of Shake Shack stock, wanted to appoint three board members and hire a consulting firm to help improve operational efficiencies.
It also wanted Shake Shack to make changes in its super voting share structure, which give additional votes to company founders, according to the Journal, which noted that Shake Shack’s share price is currently around half of what it was at its high point in early 2021.
Shake Shack said that apart from the appointment of Lawrence, it would work with Engaged to identify another independent director.
Engaged had recommended former Noodle & Company CEO Kevin Reddy, former AlixPartners executive Joel Bines, and Engaged’s own co-founder and director of research Christopher Hetrick, according to the Journal.
Shake Shack CEO Randy Garutti said in a statement that he was pleased with the agreement.
“We appreciate our constructive dialogue with Engaged Capital and believe the appointment of Jeff [Lawrence] and another new director will benefit our Company and stockholders,” he said. “We are executing our strategic plan and share Engaged Capital’s view that Shake Shack can drive additional profit growth. We look forward to continuing to increase stockholder value.”
In his most recent earnings call discussing Shake Shack’s earnings, Garutti said the chain’s strategic plan included recruiting, rewarding, and training team members; improving the guest experience; executing a targeted development strategy; and improving unit-level profitability.
Meyer praised Lawrence for his experience.
“Jeff is a seasoned leader in the restaurant industry, and we are excited to welcome him to the Board,” he said in a statement. “It became clear that Jeff is an ideal addition to our Board after an extensive search that began in January 2023 led by the Nominating & Corporate Governance Committee of the Board. Given his expertise in scaled operations, digital and international expansion, as well as his strong financial leadership experience, we believe he will be able to make immediate and impactful contributions to Shake Shack. I am also pleased that we reached an agreement with Engaged Capital, one of our largest stockholders, that I believe will further our mutual goal of enhancing stockholder value.”
Engaged Capital’s founder and chief investment officer, Glenn Welling, also said he was pleased with the agreement.
“We are pleased to have aligned with the Board on a constructive path forward to helping Shake Shack achieve its potential,” he said in the release. “Due to its strong brand, elevated product and uplifting guest experience, Shake Shack has a unique opportunity for substantial profitable growth. Jeff and an additional director with expertise successfully scaling profitable restaurant concepts will be tremendous additions to the Board as the company continues to improve the guest experience, Shack [restaurant] and company profitability and returns on capital.”
Lawrence praised Shake Shack for its brand mission.
"I am honored to join the Board of such an outstanding global brand, a brand whose mission to Stand for Something Good resonates strongly with me,” he said. “I have long admired Shake Shack and could not be more excited to partner with Danny [Meyer], Randy [Garutti] and the rest of the team to continue to build real and sustainable value for all of our important stakeholders.”
Also as part of the agreement, Engaged has agreed to support the board’s slate of directors at Shake Shack’s annual meeting.
Apart from his work for Domino’s and ShiftKey, Lawrence also was CFO of healthcare clothing firm FIGS Inc., where he led that company’s initial public offering. He is a certified public accountant in the state of Michigan and earned an MBA at the University of Michigan’s Ross School of Business.
There are currently more than 450 Shake Shack restaurants systemwide, including more than 290 units in the United States.
Contact Bret Thorn at [email protected]