Shake Shack to return US government’s coronavirus loan
The company says it was able to raise capital and small firms sidelined by state aid need the money more
Bengaluru — Shake Shack said it will return the small business loan it received from the US government, making it the first big firm to hand back money provided to help businesses ride out the coronavirus lockdown.
The company will immediately return the entire $10m Small Business Administration (SBA) loan as it was able to raise additional capital, CEO Randy Garutti and founder Danny Meyer said in a blog post on Monday. Last week, it raised about $150m in an equity offering.
The SBA, which is an important part of the US government’s $2.2-trillion aid package, is aimed at helping small companies keep paying their employees and their basic bills during the shutdowns so that they are able to reopen quickly when public health allows.
More than 25% of the $350bn fund went to fewer than 2% of the firms that got relief, including a number of publicly traded companies with thousands of employees and hundreds of millions of dollars in annual sales. This led to a backlash from smaller establishments and mom-and-pop restaurants, one of the hardest-hit sectors as diners stay at home due to lockdowns.
Ruth Hospitality , Potbelly and Fiesta Restaurant’s Texas Taco Cabana are among the chains that have borrowed money. Several franchises of McDonald’s and Dunkin’ Brands are also said to have applied for the loan.
“If this act were written for small businesses, how is it possible that so many independent restaurants whose employees needed just as much help were unable to receive funding?” Garutti and Meyer wrote. Shake Shack said the money it received could be reallocated to the independent restaurants “who need it most, [and] haven’t gotten any assistance”.
Shake Shack runs about 189 restaurants in the US, with about 45 employees at each outlet. The company closed about half of its 120 locations worldwide, and furloughed or laid off more than 1,000 employees after sales fell 28.5% in March.
On Sunday President Donald Trump defended restaurant chains, hotel operators and hedge funds accessing funding meant for small businesses. US Democrats and Republicans are nearing an agreement on additional money to help small businesses, Trump said on Sunday.
Treasury secretary Steven Mnuchin said on CNN the deal being discussed with Congress would include $300bn more for the Paycheck Protection Program for small businesses.
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