Nathan’s Famous Hot Dogs, a global corporation has announced it is returning their $1.2 million COVID-19 stimulus loan obtained through a federal program intended for small businesses. The statement was not made publicly, but in an SEC filing required by law.
“On April 21, 2020, Nathan’s Famous, Inc. (“we”, “us”, “our”, the “Company” and the “Borrower”) was granted a loan (the “PPP Loan”) from a lender (the “Lender”) in the aggregate amount of $1,224,645 pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan is evidenced by a promissory note dated April 20, 2020 (the “Note”). The PPP Loan bears interest at a fixed rate of 1.0% per annum, with the first six months of interest deferred from the date of the Note, has an initial term of two years from the date of the Note, and is unsecured and guaranteed by the Small Business Administration,” the company wrote. “Up to 20% of the PPP Loan amount may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. The Borrower must pay all accrued interest if it prepays greater than 20% of the PPP Loan amount if the PPP Loan has been sold on the secondary market. The Note provides for customary events of default including, among other things, cross-defaults on any other loan with the Lender. The PPP Loan may be accelerated upon the occurrence of an event of default. The PPP Loan may be forgiven in accordance with the terms of the CARES Act. Principal amount of the PPP Loan not forgiven and accrued interest are to be repaid in 18 equal monthly installments beginning seven months from the date of the disbursement of the PPP Loan.”
The Company applied for the PPP Loan and received the amount of the PPP Loan prior to the issuance of the recent guidance from the United States Treasury Department and U.S. Small Business Administration on April 23, 2020. In light of the New Guidance, the Company has determined to repay and return the entire amount of the PPP Loan to the Lender.
The report continues:
We are reporting that since the implementation of “stay-at-home” and dining room closure orders in mid-March due to the rapidly evolving COVID-19 outbreak, operations at our Company-owned restaurants and our franchisees’ restaurants have been disrupted. Only three of our four Company-owned restaurants are currently open, and those three Company-owned restaurants are only offering food through take-out and delivery as we are prohibited from offering dine-in seating and service at our restaurants. The majority of our franchised locations have been temporarily closed due to their locations in venues that are closed (such as shopping malls and movie theaters) or venues operating at significantly reduced traffic (such as airports and highway travel plazas). Such closures and disruptions have materially impacted revenues at our Company-owned restaurants with significant declines since the middle of March 2020, as compared to the same period last year. We expect that franchised locations and the royalty revenue we receive from our franchisees will be negatively impacted. We are principally focused on the well-being and safety of our guests, franchisees, restaurant associates and all other employees. Since the situation around the COVID-19 virus is constantly changing, we may implement additional measures to ensure the safety of our team members and guests over time.
We also expect to realize declines in sales and profits from our Branded Product Program during this period as many of our customers operate in venues that are currently closed and may be slow to reopen, such as professional sports venues, amusement parks, shopping malls and movie theaters.
During March 2020, royalties from license agreements were significantly higher than March 2019 due to significantly higher sales of consumer-packaged goods through grocery channels. During the continuation of shut-down regulations in response to COVID-19, we currently expect similar results although there can be assurance that this will continue to occur during such time.
The primary manufacturer of our hot dogs, Smithfield Foods, has recently announced the closure of four of its plants due to COVID-19. The only plant closure that has any relationship to our operations is the Sioux Falls plant which is currently scheduled to reopen during the week of April 27, 2020. In the event that the Smithfield Foods plant reopening is delayed, we do not anticipate that the rapidly evolving COVID-19 outbreak will have a material adverse effect on our supply of hot dogs over the next several months.