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Shake Shack's Chairman's Poor Response To Trans Bathroom Ruling

Summary

Danny Meyer said he wouldn't open a Shake Shack in North Carolina because of the trans bathroom legislation.

This is an extreme position because it does nothing to advance the cause of inclusiveness and hurts shareholder value.

Shake Shack should follow Target's lead and continue to do business in the South while maintaining inclusive policies.

I have been a close follower of Shake Shack (NYSE:SHAK) since before the IPO because it is a New York-based company and I am a New Yorker. The tasty burgers certainly add to the allure of following the stock. I had recommended catching the early wave of the stock. Then I recommended selling it in the high $50s, right before the final wave of buying when it peaked in the $90s shortly afterwards. At the peak the stock was the most richly valued stock on a PE basis in the entire market.

I think the market has come to its senses as the stock has gone from insanely valued to moderately over-priced, but this article isn't about this. The article is about the business decisions Danny Meyer is making, particularly his point about not doing business in North Carolina over political issues. As an investor, I am against any controversy surrounding the business. It is a basic responsibility of the leader of a firm to not draw attention to the company that could hurt its reputation. The recent battle between Mark Zuckerberg and Donald Trump over immigration issues is the exact type of conflict companies should be avoid. The goal of a business should be to have consistent values, but "picking your spots" is critical to keep a good image.

In Shake Shack's situation, Danny Meyer recently said Shake Shack will not do business in North Carolina because of the H2 bill, which effectively makes it so that transgendered individuals have to use the bathroom of the gender that is on their birth certificate. I'm not going to pass judgment on whether this is a good or bad idea, however Danny Meyer certainly didn't pull any punches as you can see from the screenshot below.

I think it would be reasonable for him to express personal qualms with the legislation, but the idea of Shake Shack not doing business in a...


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