\u2018We\u2019re fortunate to now have access to capital that others do not,\u2019 CEO Randy Garutti and chairman Danny Meyer say in letter<\/p>\n
Ron Ruggless<\/a> | Apr 20, 2020<\/p>\n Shake Shack Inc. will be returning the $10 million loan that the company received through the Paycheck Protection Program intended to help restaurants get through closures in coronavirus pandemic, the company\u2019s executives said in a letter posted Sunday to LinkedIn.<\/p>\n In the open letter,<\/a> Randy Garutti, CEO of Shake Shack, and Danny Meyer, concept founder and chairman and CEO of Union Square Hospitality Group, said the New York City-based burger brand would be returning the loan through the program that was launched on April 3 after Congress approved a $2 trillion Coronavirus Aid, Relief and Economic Security, or CARES Act.<\/p>\n Related:<\/strong> Coronavirus toll on Shake Shack: 29% plunge in same-store sales, 20% cut in corporate staff<\/a><\/p>\n The CARES Act included the $349 billion PPP loan program, which the Small Business Administration said Thursday had run out of funds and would stop taking applications.<\/p>\n Shake Shack has been able to access additional capital through an equity transaction in the public markets, Garucci and Meyer wrote. \u201cWe\u2019re thankful for that,\u201d they said, \u201cand we\u2019ve decided to immediately return the entire $10 million PPP loan we received last week to the SBA so that those restaurants who need it most can get it now.\u201d<\/p>\n A number of other large restaurant companies received loans through the PPP program, including: Winter Park, Fla.-based Ruth\u2019s Hospitality Group, parent to the Ruth\u2019s Chris Steakhouse brand; Chicago-based Potbelly Corp., parent to the sandwich chain; Dallas-based Fiesta Restaurant Group Inc., parent to the Pollo Tropical and Taco Cabana brands; and Nashville, Tenn.-based J. Alexander\u2019s Holdings Inc.<\/p>\n Garutti and Meyer noted that \u201cShake Shack, like all restaurant businesses in America, is doing the best we can to navigate these challenging times. We don\u2019t know what the future holds. Our people would benefit from a $10 million PPP loan, but we\u2019re fortunate to now have access to capital that others do not. Until every restaurant that needs it has had the same opportunity to receive assistance, we\u2019re returning ours.\u201d<\/p>\n Meyer and Garutti said they, like many restaurateurs, had been relieved when Congress and the White House agreed March 27 on the $2.2 trillion CARES Act.<\/p>\n \u201cThis pandemic, and the consequential shut-down of an entire industry that relies upon the gathering of people \u2014 at a moment when people cannot gather \u2014 had already shown that no restaurant is unsinkable,\u201d Garutti and Meyer said.<\/p>\n \u201cWith slim margins in our industry to begin with, restaurants of all sizes and flavors were vulnerable and laying off people by the hundreds,\u201d they said. \u201cIndeed, both Shake Shack and Union Square Hospitality Group needed to make those tough decisions too, furloughing or laying off hundreds of team members throughout our respective companies \u2014 one a publicly traded company, the other an independent restaurant group.\u201d<\/p>\n Shake Shack on Friday said it had furloughed or laid off more than 1,000 workers<\/a> at its restaurants and its New York City headquarters. Union Square Hospitality Group laid off about 2,000 people, or 80% of its workforce,<\/a> in mid-March.<\/p>\n \u201cRestaurants function as the lifeblood of the U.S. economy and the nation’s spirit,\u201d Garutti and Meyer wrote. \u201cThe bulk of the over $800 billion that restaurant-goers spend on dining out flows right back into the economy with much of that impact going to the very small businesses this PPP loan was intended to reach. The CARES Act was touted as the largest economic stimulus package in U.S. history and on its initial face, for restaurants, there seemed to be a lot to like in the bill.\u201d<\/p>\n They said the legislation arrived \u201cin the nick of time.\u201d<\/p>\n \u201cThe onus was placed on each business to figure out how, when or even if to apply. The \u2018PPP\u2019 came with no user manual and it was extremely confusing,\u201d the letter said. \u201cBoth Shake Shack (a company with 189 restaurants in the U.S., employing nearly 8,000 team members) and Union Square Hospitality Group (with over 2,000 employees) arrived at a similar conclusion. The best chance of keeping our teams working, off the unemployment line and hiring back our furloughed and laid off employees, would be to apply now and hope things would be clarified in time.\u201d<\/p>\n Garutti and Meyer said the act\u2019s stipulation that it would cover small businesses, those with no more than 500 employees per location, signaled \u201cCongress had gotten the message that as both as an employer, and for the indispensable role we play in communities, restaurants needed to survive.\u201d<\/p>\n They noted that few U.S. restaurants employ more than 500 people per location.<\/p>\n \u201cThat meant that Shake Shack \u2014 with roughly 45 employees per restaurant \u2014 could and should apply to protect as many of our employees\u2019 jobs as possible,\u201d they said. \u201cThe immediate drop in business due to the virus had caused the company to face operating losses of over $1.5 million each week, simply by keeping our doors open with the goal of paying our people and feeding our communities. Our teams have been heroic, pivoting our business to a new curbside pickup and delivery model, while keeping our teams and guests at a safe distance.\u201d<\/p>\n USHG restaurants closed on March 13. Garutti and Meyer said some USHG loans have been funded and \u201cwe await the day we\u2019re able to re-open.\u201d <\/p>\n When the SBA said last Thursday that the PPP funds had been exhausted, Garutti and Meyer said, \u201cbusinesses across the country were understandably up in arms. 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? We now know that the first phase of the PPP was underfunded, and many who need it most, haven\u2019t gotten any assistance.\u201d<\/p>\n Garutti and Meyer urged Congress to provide more funding for restaurants to they can hire back their teams.<\/p>\n \u201cWe are an industry of 660,000 restaurants with nearly 16 million employees,\u201d they said. \u201cWhile it is heartening to see that an additional $310 billion in PPP funding is about to be approved, in order to work for restaurants, this time we need to do it better.<\/p>\n They also said, \u201cIt\u2019s inexcusable to leave restaurants out because no one told them to get in line by the time the funding dried up. That unfairly pits restaurants against restaurants. This industry rises and falls together. And if there is a concern that once again the government will have not allocated adequate funding, then send business to the front of the PPP line which has more limited access to outside funding.\u201d<\/p>\n They also recommended eliminating the \u201carbitrary\u201d June forgiveness date for PPP loans. \u201cThis virus has moved in waves with a different timeline in different parts of our country. Instead, make all PPP loans forgivable if an adequate number of employees are rehired by a minimum six months following the date that a restaurant\u2019s state (or city) has permitted a full reopening to the public,\u201d they said.<\/p>\n \u201cIf this health crisis and the associated economic shock has taught us anything, it is that we are all in this together,\u201d they noted. \u201cRestaurants and their employees are craving the moment when we can safely be back in business and bring our guests back to the table. With adequate funding and some necessary tweaks, the PPP program can provide the economic spark the entire industry needs to get back in business.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" \u2018We\u2019re fortunate to now have access to capital that others do not,\u2019 CEO Randy Garutti and chairman Danny Meyer say … <\/p>\n