Shake Shack To Return $10 Million PPP Loan To U.S. Government
Burger chain Shake Shack Inc. said it will return a $10 million small business loan that it received from the U.S. government under an emergency program, as the company was able to raise additional capital from the public markets.
The company received the loan under the Paycheck Protection Program or PPP, which is part of the $2.2 trillion CARES Act. The loan is intended to help small businesses, including restaurants, as they struggle to run their operations amid the coronavirus pandemic.
The program is overseen by the Small Business Administration or SBA. However, the $349 billion stimulus package ran out of funding last week.
In a joint letter posed to LinkedIn, Shake Shack Chief Executive Randy Garutti and Danny Meyer, CEO of Union Square Hospitality Group as well as the Founder of Shake Shack, said that the company was “fortunate to now have access to capital that others do not.”
The executives noted that Shake Shack was able to access the additional capital it required through an equity transaction in the public markets.
On Friday, Shake Shack said it raised $150 million gross proceeds of new equity capital, including $140 million from the sale of shares of its Class A common stock.
The PPP came with no user manual and was extremely confusing, the Shake Shack executives said. However, Shake Shack and Union Square Hospitality Group or USHG decided to apply for the PPP in order to protect as many of their employees’ jobs as possible.
An immediate drop in business due to the coronavirus caused Shake Shack to face operating losses of more than $1.5 million each week. Meanwhile, with all of USHG restaurants closed on March 13, and no revenue, the company was forced to lay off over 2,000 employees.
However, Shake Shack said it is returning the entire $10 million PPP loan it received last week to the SBA so that those restaurants who need it most can get it now.
They also called on the SBA to fund the program adequately and to assign a local bank to each applying restaurant in order to streamline the process.
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