No Deal Yet On U.S. Small Business Loan Funding; Shake Shack Returns $10 Million Emergency Loan To U.S. Government; Campaign Urges People To Share Travel Memories Online
QUEST: Hello, welcome back. More QUEST MEANS BUSINESS in just a moment. We'll hear from the CEO of Shake Shack about why they decided not to take one of the small business loans in America, even though they were eligible. And Sir Richard Branson on why he'll be prepared to mortgage his private island, Necker Island to help save Virgin Atlantic, which he says is in desperate need of money. Before that, this is CNN, and on this network, the facts always come first. Canadian official say at least 19 people were killed in the deadliest mass shooting in that country's history. They fear the death toll will rise. A gunman disguised as a police officer went around the province of Nova Scotia over the weekend shooting people and setting homes on fire. The gunman died whilst being apprehended. More than a year of political deadlock has been broken in Israel, the Prime Minister Benjamin Netanyahu and the opposition leader Benny Gantz have agreed to form a national emergency government. It means Israel will avoid a fourth consecutive election between the two candidates. Prince Harry and Meghan, the Duke and the Duchess of Sussex have cut off all contact with four British tabloids. The couples say they believe in free press but accuse the tabloids of lying and racism. Four papers being cut off are the Daily Mail, The Sun, The Mirror, and The Express. Shake Shack, the fast food burger and milkshake company said it's returning a part of the $10 million loan that it received from the government. Shake Shack said they got the money as part of the SBA, the Small Business Administration's Payroll Protection Plan, but that program has now run out of money. There had been many critics who said that Shake Shack should not have been eligible as firstly it had other pots of money from investors. And secondly, that money was designed for small businesses. The CEO said they weren't taking the money.</s>RANDY GARUTTI, CEO, SHAKE SHACK: I think that what we've learned from this crisis is that no business and no restaurant, no matter its size, is unsinkable. That is the scary reality of where we are. And I think as we looked at</s>QUEST: So let's look at this particular program which has become so controversial. After many businesses said they were left out, it was the PPP, the Payroll Protection Plan. Now, any company with less than 500 employees was eligible. Now Shake Shack has a thousand in total, but less than 500, just 45 at each location. So under a loophole in the plan, they qualified. You were able to get 2-1/2 times the monthly payroll to a maximum of $10 million. Data shows most money went to largest eligible companies. They were first in line, they had everything ready, they filed quickly and their banks were ready. 45 percent went to firms asking for more than a million dollars, 17 percent went to firms asking for less than 150,000. So why were big companies able to do so well? They first of all had the legal teams necessary to navigate a complex procedure and were able to get there fast. They had existing relationships with the banks, they had access to other funding. And for example, Shake Shack can raise $75 million from other investors. Scott Galloway is with me, professor at Stern Business School. They didn't do anything wrong these businesses, did they? They actually -- you know, I mean, there's a strong argument for saying they have employees too. And that the law or the program was designed for anybody with under 500 employees.</s>SCOTT GALLOWAY, PROFESSOR, NYU STERN SCHOOL OF BUSINESS: Oh, sure. So, look, we needed to move quickly. It's -- you can empathize the notion of flattening the curve around unemployment. And Richard, there's what you can do and there's what you should do and I think this reflects a lack of character and code on the part of the CEO and the board of Shake Shack. This is a company that had a multi-billion dollar market capitalization. And in general, I would argue, they're the poster child today which is probably a little bit unfair.</s>GALLOWAY: But over the next six months, we're going to see thousands of instances. People who come from what is one of the wealthiest groups in the world and that small businesses, there's a cartoon of a single mother who owns a cupcake shop. But the reality is there are more billionaires from real estate and small business than anywhere else in America. And I think you're going to find that a lot of that $250 billion went to small businesses who quite frankly would have survived. And as is everything we do in this nation, it was largely a bailout or a flattening of the curve of the people who need it the least. We need to be in a position where we're protecting people not businesses, a lot of these businesses quite frankly should just go away.</s>QUEST: Alright, OK. So, I've read your article a Capitalists or Cronyists. Are you suggesting that in the case for example of the airlines and the really big businesses, that the correct thing to do is to go into Chapter 11 and restructure as a result during all this process, rather than saying the airlines cases where they've had some grants, some loans and they're going to get more loans?</s>GALLOWAY: I think that's exactly right. Airlines have gone bankrupt 66 times over the last 10 years. They were still able to get in in aluminum tube with re-circulated air and get where we need to get for less money than it cost 20 years ago. The CEO -- the CEOs of United, Delta and Carnival Cruises took 150 million in total compensation over the last five years. United took 96 percent of its free cash flow and use it to repurchase shares which inflates the stock price, which inflates the compensation of the CEO. They want rugged individualism and capitalism on the way up, and then on the way down, we're socialists and we're all in this together and they have their hand out. If Carnival Cruises goes out of business, it means the debt holders take control of the assets, the boats, there will be some temporary job loss. But as long as they keep making seniors, cruises are going to do just fine. And the debt holders on the company, they restructure. It's the equity that gets wiped out, Richard, not the jobs.</s>QUEST: But Scott, I get your argument, I get your point. But that becomes capitalism at its most brutal at the thing -- in the teeth of a crisis. The Carnival example is yes, you're right, somebody will pick it up, but not before lots of people would have lost their jobs arguably, permanently. And this will be brutal capitalism.</s>GALLOWAY: That's exactly right. And the way we stopped brutal capitalism is we protect people, not companies. That 250 billion is about to become 500 billion, there are 100 million households in the U.S., take the bottom half that needed the most. That is -- that is I believe -- that'll be 10 -- that would be $5,000 per household. You could give a $5,000 check to any household in America in the lower medium. These small businesses aren't suffering because of over employment or under employment, they're suffering because of demand destruction, protect people not jobs. All we're doing here, we have the worst type of capitalism that is cronyism. And that is you're going to find the majority of that $250 billion went to pumping up with steroids. A lot of businesses that a, shouldn't probably rent be around, or b, insuring that pop pop got to held on to all five dry cleaners instead of four. What happens in an economic crisis? Prices should drop to their natural level and then people like myself in the 2009 cries -- 2009 crisis get to buy Netflix at $12.00 a share. There is a whole generation of young people that we are borrowing money against to try and do the same thing we always do, and that is keep baby boomers rich. We need to protect people, not businesses.</s>QUEST: Scott, controversial but excellent to have you on the program. We'll talk more about this.</s>GALLOWAY: Thanks, Richard.</s>QUEST: As always, thank you, sir for taking time to joining us. Now, talking of the very rich, Richard Branson. Sir Richard Branson's offering to mortgage his private Caribbean Island. He says he would do so as collateral to help save Virgin Atlantic. Virgin Atlantic and Virgin Australia are in badly need of capital. And governments have said they will help asking the U.K. government for a loan. There's been no disclosing of the amount but Branson says he will repay. Meanwhile, the travel and tourism industry is represented by the WTTC is looking forward to the future with a new campaign about keeping the spirit of travel alive.</s>UNIDENTIFIED MALE: Join us as we gather together in travel and celebrate what travel means to each of us. Share your stories, your most prized memories or greatest adventures, your favorite images, videos.</s>QUEST: Gloria Guevara is the CEO and president of World Travel & Tourism Council joins me, it's the new campaign. Gloria, before we talk about the campaign, and it does look as though this crisis is going to last quite a bit longer because the opening up is going to be much slower than perhaps we first thought, and travel and tourism is going to be one of those the last ones. So we're looking well into the end of the year, and possibly next.</s>GLORIA GUEVARA, CEO AND PRESIDENT, WORLD TRAVEL & TOURISM COUNCIL: Well, hopefully, there's going to be before that, Richard, and thank you for having me. We believe that there are two phases depending on the vaccine and depending of the solutions that we find from the health perspective. We might do something before the vaccine is ready and our travel experience is going to change. And we are going to have a different trial experience after the vaccine, so everything depends. From our view, I'm sure that you have seen that we're looking to technology, and we're looking to those solutions to see how do we can start traveling domestic and leisure. And then in a second phase, business and international. That being said, I think the way that we see these, there is an opportunity to have a coordinated approach. And that's already engaging with governments, because what you say is very important, we need to figure out how can we open these in a coordinated approach and work together the government, the health experts and the travel experts so that we do this right, and we don't delay the recovery further.</s>QUEST: What are you hoping to achieve from this new campaign where people can submit sort of their favorite, if you like, places, their favorite videos and stories of their -- of their trips?</s>GUEVARA: Well, first of all, we had a campaign two weeks ago to thank the heroes from travel and tourism. The one that they're offering their hotels, the one that they're offering food and a lot of initiatives to protect the healthcare workers and to help with COVID-19 and the crisis that we're living. Now with this campaign, what basically we know that people are in their house, they should stay in their house, that's the priority to stay home. But at the same time, that doesn't mean that you cannot continue dreaming. That doesn't mean that you don't share your best memories. In reality, when we ask the citizens, the travelers of the world, where are your best memories? Where do you have your best experiences? And most of them will tell you traveling. And this is an opportunity for them to dream again, to share that experience with loved ones, to talk about the community that we all build together in the travel and tourism industry. And the importance of these sectors so that they can increase their bucket list, they can restart planning and dreaming because that's something that is going to come back sooner or later. We're all going to be traveling again.</s>QUEST: Gloria, finally, where are you -- where are you looking forward to go once we can all travel again? Where's your first destination going to be?</s>GUEVARA: Well, my next destination that I hope to travel is to Mexico. And the reason is because we're also organizing hopefully there our next global summit as you know. And I would like to visit that location and also celebrate a lot of accomplishments with friends and family. But I have a long bucket list, there are places that I want to visit all over the world. And of course, my children also play an important role because that generation for them is to write and they want to travel and they want to see a lot of places. So we're negotiating right now. But we have still a lot of time of course to negotiate.</s>QUEST: Gloria, we'll talk more, thank you. Together in travel, I appreciate it.</s>GUEVARA: Thank you.</s>QUEST: In a moment, after the break, we'll be in South Africa. The voice of the crisis, it's the wedding company. Well, obviously there are no weddings at the moment, but the interesting thing is what they are managing to do. How do you prepare so that when people start getting married again, you're off to the races? In a moment.