Shake Shack said it will return the small business loan it received from the U.S. government, making it the first major firm to hand back money provided to help businesses ride out the impact of the coronavirus lockdown.
The company will immediately return the entire $10 million 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 $150 million in an equity offering.
Shares of Shake Shack, which raised about $150 million in an equity offering last week, fell about 3% to $42 on Monday morning.
The company runs around 189 restaurants in the United States, with about 45Â employees in each outlet, and reported nearly $600 million in revenue for 2019.Â
It has 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, the company said in a filing on April 17.
Low-paid workers in the retail, restaurant, and hotel industries have been among the hardest-hit by the coronavirus pandemic. Of the $342 billion small business bailout fund, the combined industry was allocated 18% of the total fund.Â
SBA, which is a key part of the 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.Â
More than 25% of the $350 billion already allocated went to fewer than 2% of the firms that got relief, and they included publicly traded companies with thousands of employees, highly paid executives 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 Group, Potbelly and Fiesta Restaurant Group'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."
Treasury Secretary Steven Mnuchin in a tweet said he was "glad to see" that Shake Shack would return the loan.
Mnuchin told CNN on Sunday that a deal being discussed with Congress would include $300 billion more for the Paycheck Protection Program loan program for small businesses.
On Sunday, President Donald Trump defended restaurant chains, hotel operators, and hedge funds accessing funding meant for small businesses.
U.S. Democrats and Republicans are nearing an agreement on extra money to help small businesses, Trump said on Sunday. Treasury Secretary Steven Mnuchin said on CNN the deal being discussed with Congress would include $300 billion more for the Paycheck Protection Program loan program for small businesses.
