Shake Shack CEO Randy Garutti on Monday said that the company returned its $10 million loan from the Paycheck Protection Program after accessing other kinds of capital through the public markets.
“We’ve ensured our long-term stability, now it’s time for us to help our friends in the industry do the same,” Garutti said on CNBC’s “Squawk on the Street.”
The burger chain disclosed in a regulatory filing on Friday that it had received $10 million from the federal program. Shake Shack also said Friday that it is planning on selling up to $75 million in shares to strengthen its cash position.
Garutti said that the company initially applied for a PPP loan to keep as many of its employees as possible. Shake Shack has furloughed more than 1,000 employees and closed 17 company-operated U.S. locations, as of Friday.
On Sunday evening, Garutti and Shake Shack’s founder and chairman Danny Meyer, who owns roughly 7.8% of the company’s shares, said that the chain would be returning the $10 million.
“Our understanding is that by giving it back, which we will do, is that it will go back into the pot,” Garutti said on Monday.
While the program was intended for small businesses, large restaurants and hotel chains won an exemption for locations with less than 500 employees. The $349 billion fund ran out of money on Thursday, but Democrats and Republicans are nearing a deal that would inject $310 billion more into the program.
The disclosure from Shake Shack, along with similar ones from Ruth’s Chris Steak House and Potbelly, sparked backlash as some small business owners missed out on receiving any funds from the program. Ruth’s Chris received $20 million — double the maximum amount — by applying through two subsidiaries. The majority of Potbelly and Ruth’s Chris locations are run by the company, although both chains have franchisees, who may have also applied for PPP loans.
Chris Allieri, founder and principal of communications consulting firm Mulberry & Astor, said that consumers will remember the large corporations that applied for PPP loans during the coronavirus pandemic. Returning the money might not make a difference in their eyes.
“I’ll tell you today, on April 20, it doesn’t so much matter who returned the money and who didn’t,” Allieri said. “The point is that the application was made. There’s a broader problem in your brand — what are the actions that led to this application?”
Although some restaurants across the United States have remained open for takeout and delivery, same-store sales across the industry plunged 62.3% in the week ended April 5, according to data from industry tracker Black Box Intelligence. Shake Shack’s same-store sales fell 12.8% during its first quarter compared to a year ago.
Shares of the company, which has a market value of $1.74 billion, rose 6% in morning trading on Monday. The stock has fallen 22% so far this year.