Reorganization Form 8 K

Item 2.05 Costs Associated with Exit or Disposal Activities.

Shack Inc. (the "Company") regularly evaluates its portfolio of Company-owned and operated Shack restaurants ("Shacks"). As a result, it has identified locations that are underperforming at the Shack level in part due to changes in the trade area and, in some cases, are negatively impacting other Shacks within their proximity by cannibalizing sales. These Shacks are not projected to provide acceptable returns in the foreseeable future.

As a result of this evaluation, the Company has determined to close nine Company-owned and operated Shacks in California, Ohio and Texas. These closings are expected to optimize the Company's footprint in these states and maximize profitable growth moving forward, and are not anticipated to impact the Company's plans to open additional Shacks in these states. The Company currently does not anticipate closing any additional Shacks based on this evaluation for the foreseeable future.

Management in these Shacks will be offered a position in neighboring Shacks and hourly team members will be eligible for rehire at other Shacks, and hourly team members (and any managers who do not accept a transfer) will receive up to 60 days pay. This Shack closure plan was communicated to impacted employees on August 27, 2024 and is expected to be completed by September 25, 2024, subject to finalizing third-party agreements and other contingencies.

The Company expects to record cumulative pretax charges in a range of approximately $28.0 to $30.0 million during the third quarter ending September 25, 2024 as a result of these Shack closures. Cash costs are expected to be in a range of approximately $14.0 to $15.2 million. Included in these cash costs are pretax charges currently expected to be in a range of $12.8 to $13.6 million related to lease termination costs and future lease obligations; employee-related costs currently expected to be in a range of approximately $1.0 to $1.2 million; and other cash costs currently expected to be in a range of approximately $0.2 to $0.4 million, which will primarily consist of charges related to Shack-related closing expenses. Non-cash costs are expected to be in a range of approximately $14.0 to $14.8 million and primarily consist of asset impairment, accelerated depreciation, and asset write-offs.

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