USA – Shake Shack, a New York-based causal restaurant chain, has raised an aggregate of US$150 million in new equity capital to strengthen its balance sheet as it battles COVID-19 setbacks.
The the burger fast casual raised approximately US$140 million gross proceeds from the sale of shares of its Class A common stock in an underwritten offering and US$10 million credit facility under the Paycheck Protection Program.
The Paycheck Protection Program is part of the first federal stimulus package that seeks to help small restaurants pay their employees, utilities, rent and other expenses during the ongoing COVID-19 crisis.
Shack Shack said that it intends to use the proceeds to strengthen its balance sheet – which would include use for general corporate purposes.
The company also plans to use the kitty to further enhance the its ability to resume execution of its long-term strategic growth plan.
Shake Shack, which has 280 locations, reported a total revenue of US$143 million in the first quarter of its 2020 financial year. However, the company’s sales decreased 12.8% in the quarter versus the same period last year.
According to the company’s financial report, performance in the three months period was significantly impacted in March – which saw an immediate and acute impact from COVID-19, leading to a decrease of 28.5% compared to March 2019.
January and February performance was in line with management expectations, the company said.
Given the ongoing impact of COVID-19 on the fast food business globally, Shake Shack said that it is continually reviewing the performance of all domestic company-operated to ensure the sales justify keeping the business open.
As of April 17, the fast food chain had closed 17 outlets in the US and further intends to furlough or lay off more than 1,000 employees across Shack operations and the Home Office on account of reduced operations and temporary Shack closures.
However, the noted that its own channels continue to represent the largest proportion of Shack sales, with digital channels (mobile application and web) having experienced significant growth over recent weeks.
Randy Garutti, Shake Shack CEO, said that the company has also successfully expanded new and existing integrated delivery partnerships with DoorDash, UberEats, Caviar and Postmates.
“We’re encouraged that these and other crucial business pivots have driven an improvement in recent sales trends, and continued to leverage the strength of our brand.” Garutti said.
The company further revealed that it has secured 33 additional signed leases and intends to complete and open these Shacks as soon as the business environment improves to more normalized levels.
Shack has also identified pipeline of leases in negotiation for continued growth in 2021 and beyond, and believes additional and improved development opportunities may be available over time due to the impact of COVID-19 on the overall retail and real estate environment.
Shack currently operates more than 280 locations in the US including more than 95 international locations across London, Hong Kong, Shanghai, Singapore, Philippines, Mexico, Istanbul, Dubai, Tokyo, Seoul among other international markets.