Shake Shack Returns Small Business Loan
Burger chain Shake Shack Inc will return the small business loan from the U.S. government. It is the first major firm to hand back money aimed at helping small businesses. Particularly, companies whose stocks and finances which suffered under the coronavirus pandemic.
Last week, it received a $10 million loan under the federal Payroll Protection Program. However, Shake Shack was able to raise additional capital and about $150 million in an equity offering.
CEO Randy Garutti and founder Danny Meyer said the company will immediately return the entire $10 million SBA loan.
The Small Businesses Administration (SBA) is a key part of the government’s $2.2 trillion aid package. The government intends it to help small companies in paying their employees and their basic bills during the shutdowns. Also, so that they are able to reopen quickly when public health allows.
Low-paid workers in the retail, restaurant and hotel industries have been among the hardest-hit by the COVID-19 pandemic. Out of the $342 billion small business bailout fund, 18% of the total fund was allocated to the combined industry.
Shake Shack said the loan it received could be reallocated to the independent restaurants who need it most. Or to those who haven’t gotten any assistance.
Shake Shack, its Outlets and Employees
The company owns around 189 restaurants in the United States, with about 45 employees in each outlet. It has reported nearly $600 million in revenue for 2019.
The fast-casual burger chain revealed about the devastating impacts of the coronavirus on its business affecting stock trading as well.
After sales fell 28.5% in March, Shake Shack has closed about half of its 120 locations worldwide. In addition, it has furloughed more than 1,000 employees the company said in a filing on April 17. On Friday said it would be raising funds through a stock sale on the stock market to generate cash.
On a blog post on Monday, Garutti and Meyer said the company was fortunate. It was lucky to be able to access the additional capital it needed to ensure their long-term stability. And it was through an equity transaction in the public markets.
Shake Shack is thankful for that and have decided to immediately return the entire $10 million PPP loan they received last week. They will give it back to the SBA so that those restaurants who need it most can get it now.
President Donald Trump defended restaurant chains, hotel operators and hedge funds accessing funding meant for small businesses in the U.S.
More than 25% of the $350 billion already allocated went to fewer than 2% of the firms that got relief. They included publicly traded companies. Those with thousands of employees, highly paid executives and hundreds of millions of dollars in annual sales.
Trump said on Sunday U.S. Democrats and Republicans are close to an agreement on extra money to help small businesses. The deal under discussion with Congress would include $300 billion more for the Paycheck Protection Program for small businesses.
