Shake Shack to return $10million in loans it secured as part of stimulus package

The company made more than $20million in profits in 2018

Executives at the burger chain said applying for the money was 'confusing'

Many small business owners have expressed despair over not getting any money

Yet, publicly traded companies with hundreds of millions in sales won big

Ruth's Chris and Taco Cabana chains have not said if they are keeping the money

Potbelly Sandwiches have promised to see that all their workers are paid in full

President Donald Trump brought up the exclusion of his own family business from a coronavirus bailout Monday when pressed about big public companies getting multi-million dollar loans from taxpayers.

The president indicated some big businesses that got bailouts under the government's Paycheck Protection Program might have to give funds back.

ADVERTISEMENT

'Well I know one thing – I didn’t get any that’s for sure,' the president huffed at his daily press briefing, when asked about companies including Ruth's Chris that got multi-million loans under the program.

'Well I know one thing – I didn’t get any that’s for sure,' Donald Trump said Monday, when asked about large chains benefitting from a small business lending program

The president indicated officials are giving a look back at the program. 'We are looking at individual things and some people will have to return it if we think it is an appropriate,' the president said.

Trump noted that under the law, administered by the Small Business Administration, private banks make loans to qualifying businesses. The program is meant to keep small business employees on the payroll.

'It is being done by great professionals, banks all over the country. That is what they do, they loan money and they are supposed to do it according to not only criteria but according to what we think is right,' Trump said. 'If somebody got something we think is inappropriate, we will get it back,' he said.

The Trump Organization is furloughing employees at Mar a Lago and other properties

He told a reporter who asked about the program and whether it was fair to small businesses: 'good point.'

Congress could act as soon as this week on billions more for the program, which reached a $349 billion cap in less than two weeks.

Qualifying businesses were capped 500 full-time employees, but chains got a carveout in the law that was backed by the restaurant industry.

Trump properties have laid off more than 2,000 employees since the coronavirus outbreak hit – including 153 at Mar-a-Lago, where Trump visited last month and where members of a Brazilian delegation later tested positive for the virus.

There were also 237 layoffs at Trump's Washington, D.C. hotel, 552 at his Las Vegas casino, and 560 at his Doral Golf Course – which at one point was to have hosted the G7 summit.

Trump stepped away from management of the Trump Organization after winning the White House, putting sons Don Jr., Eric, and an executive in charge.

Democrats insisted on provisions signed into law by the president prohibiting Trump from getting bailout cash in coronavirus response legislation, although his holdings in golf, hotels, and real estate are among sectors that have been hard hit by the outbreak.

Trump's statement that the administration was 'looking' at certain loan recipients comes after large publicly traded companies were revealed to have gotten millions from the small business program.

ADVERTISEMENT

Burger chain Shake Shack which received $10 million in federal loans that was meant to help small businesses is to return all of the money back to the government so that it can be redistributed.

The New York-based burger company had a revenue of $459 million last year and is even on the New York Stock Exchange - and about as far from a small business as one could imagine, which was whom the stimulus money was aimed at.

The money was granted as part of the Paycheck Protection Program.

Shake Shack to return $10million in loans it secured as part of stimulus package

Randy Garutti, chief executive officer of Shake Shack, left, and Danny Meyer, its founder said that applying for the federal stimulus money was 'extremely confusing'

The loan program set aside $349 billion in a stimulus law called the CARES Act and was designed to help small businesses keep their workers on the payroll but it appears more than 25% of the total pot went to fewer than 2% of the firms that got relief.

They include a number of publicly traded companies such as Shake Shack, with thousands of employees and hundreds of millions of dollars in annual sales.

The program has already run out of money but on Sunday night Shake Shack's founder, Danny Meyer said the company only applied for the loan because the law stipulated it was open to any restaurant location with no more than 500 employees.

Globally, there are thought to be around 6,000 workers at Shake Shack's 189 U.S. restaurants.

Click here to resize this module

Shake Shack is not exactly a small business with 6,000 employees across 170 locations

The company made more than $20million in profits in 2018 but have been hit by coronavirus

'The 'PPP' came with no user manual and it was extremely confusing,' the company wrote in a statement.

The program offered to forgive the loans if furloughed and laid-off workers were rehired by June.

The company said the loan was 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.'

However, the company say that they have now been able to secure additional funding and have 'decided to immediately return the entire $10 million' so restaurants that 'need it most can get it now.'

Potbelly has 474 and employed 6,000 people at the end of 2019. 'Every penny will be used to financially support the employees in our shops,' said Potbelly´s Chief People Officer Matt Revord

'We now know that the first phase of the PPP was underfunded, and many who need it most, haven't gotten any assistance,' Meyer wrote while urging Congress to ensure that 'all restaurants no matter their size have equal ability to get back on their feet and hire back their teams.'

ADVERTISEMENT

'Our people would benefit from a $10 million PPP loan, but we're fortunate to now have access to capital that others do not,' he wrote. 'Until every restaurant that needs it has had the same opportunity to receive assistance, we're returning ours.'

Ruth's Chris steakhouse which has around 5,000 employees in more than 100 locations and Potbelly Sandwich Shop which employs 6,000 workers across around 500 locations both received $10million handouts. Neither company has so far announced any intention of returning the cash.

Taco Cabana, a fast food restaurant chain with more than 160 stores specializing in Mexican cuisine, with locations in Texas, Oklahoma and New Mexico, has also not said whether they will forgo the handout.

The loans from the U.S. Small Business Administration - totaling $342.3 billion - went to companies in all 50 states, the District of Columbia and five U.S. territories, and were spread across all 20 of the main industry sectors.

Ruth's Chris have yet to comment on whether they will return the money meant for struggling businesses

Congress directed the SBA to award $349 billion to struggling businesses with 500 or fewer workers as part of a $2.3 trillion coronavirus aid package that President Donald Trump signed into law on March 27.

The Payroll Protection Program (PPP) was crafted to keep Americans off unemployment benefits, by giving small and mid-sized companies forgivable loans for keeping employees on the books.

The SBA does not make the loans directly but instead backs loans made by participating financial firms.

The three biggest state economies - California, Texas and New York - accounted for 23% of the loans, more than $82 billion. Meanwhile, businesses in a number of small, rural states that have avoided the brunt of the outbreak took home a disproportionate share of the pie.

The business sector receiving the most money was construction, with 13% of the total.

Taco Cabana which operate restaurants in Texas, New Mexica and Oklahoma run more than 160 locations. It has also not stipulated whether any of the bailout money will be returned

Companies on the front line of the virus - in the accommodation and food services sector - received about 9% of the pot.

At least 60 publicly traded firms have claimed a share of the total, according to Securities and Exchange Commission filings. There is no prohibition in the CARES Act against money going to publicly listed firms.

Some - including the holding companies for well known restaurant chains Shake Shack and Ruth's Chris Steak House - appear to have taken advantage of a provision in the CARES act that allows companies with more than 500 workers overall to get loans.

The exemption allows for businesses in the accommodation and food services industry to participate so long as they do not exceed 500 employees per physical location.

Shake Shack, Ruth's Chris, Potbelly Sandwiches and Texas Taco Cabana all borrowed $10 million under the program through JP Morgan Chase & Co, SEC filings show.

Shake Shack has closed 63 of its 120 locations worldwide, and furloughed or laid off more than 1,000 employees after sales fell 28.5% in March, it said in a filing April 17. It was unclear how many of its 100 U.S. stores remain open, but filings showed that it employed 7,600 at the end of 2019.

The company, which generated $595 million in sales and a $20 million net profit in 2019, said it will continue to pay all general managers and cover all employees' health insurance.

Texas Taco Cabana operates 164 outlets from Houston to Albuquerque. Fiesta, which also runs a chain of chicken restaurants in Florida and posted $661 million in sales last year and a net loss of $84.4 million, employed 10,480 at the end of 2019. It did not immediately respond to an inquiry about the number of employees that would be covered under the loan.

Potbelly had 474 shops in 32 states, including 48 franchisees, and employed 6,000 people at the end of 2019, filings showed. Sales last year totaled $410 million, though it posted a net loss of $24 million.

ADVERTISEMENT

'Every penny will be used to financially support the employees in our shops,' said Potbelly´s Chief People Officer Matt Revord.