- Shake Shack said it would return the $US10 million US government loan it received as part of the coronavirus stimulus package after facing criticism that it was taking money meant for struggling small businesses.
- Less than two weeks after the Paycheck Protection Program was introduced, the government department in charge ran out of money, and small-business owners complained about being frozen out of the package.
- Shake Shack operates more than 200 locations around the world, employs thousands of people, and last year had nearly $US595 million in revenue.
- The decision to return the check also came two days after the company raised $US150 million in an equity offering.
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Shake Shack said it would return a $US10 million loan it received from the US government as part of the coronavirus stimulus package after being among a few big chains criticised as taking money from a program meant to help struggling small businesses.
Shake Shack is one of the most popular burger chains in the world, operating more than 200 restaurants across various countries. Last year it had nearly $US595 million in revenue.
In a statement posted on LinkedIn on Monday, Chairman Danny Meyer and CEO Randy Garutti said that while their company qualified to receive assistance as part of the Paycheck Protection Program, they had no idea that the fund would run out in less than two weeks and would return their loan to help businesses that need the money more.
Before the announcement, Shake Shack had received criticism for getting PPP funding when so many businesses were shut out of the program. Other big chains like Ruth’s Chris Steakhouse, Potbelly Sandwich Shop, and Taco Cabana were also called out for taking advantage of the program.
My friends who run small businesses have applied for ppp and heard back from their banks that they “ran out of money” and they aren’t able to release funds for ppp…yet this. This is why strings needed to be attached to the stimulus money.https://t.co/QBaHTjg2op
— Yuh-Line Niou (@yuhline) April 18, 2020
The critics piled on Shake Shack more on Friday, when the company announced it had raised $US150 million in an equity offering.
Shake Shack raising $150 million as it gets a $10 million PPP loan days after the program ran out is … something.
— Jonathan Maze (@jonathanmaze) April 19, 2020
Apparently Shake Shack raised $150 million in an equity offering yesterday, along with getting the $10 million in PPP loans other small businesses desperately need and weren't able to get. Seriously?! H/T @HowardWPenney https://t.co/bisQAl2KW1 pic.twitter.com/0szb7G0aPv
— tae kim (@firstadopter) April 18, 2020
— Thomas Thornton (@TommyThornton) April 18, 2020
In their statement, Meyer and Garutti said that the PPP application “was extremely confusing” and that the “onus was placed on each business to figure out how, when, or even if to apply” for the loan.
To qualify for the loan, a business could have no more than 500 people working at a single location, meaning Shake Shack – as well as almost any other restaurant in America – was eligible.
As Shake Shack had laid off or furloughed hundreds of workers during the coronavirus crisis and was operating at a loss of $US1.5 million a week, Meyer and Garutti said they decided to apply for the loan “to protect as many of our employees’ jobs as possible.”
But what they didn’t realise, they said, is that the program was “underfunded” and that “many who need it most, haven’t gotten any assistance.”
“There was no fine print, anywhere, that suggested: ‘Apply now, or we will run out of money by the time you finally get in line,'” Meyer and Garutti wrote.
Meyer and Garutti said they decided to return the loan in full after securing what they believe is enough money to keep them afloat for now.
“Shake Shack was fortunate last Friday to be able to access the additional capital we needed to ensure our long term stability through an equity transaction in the public markets,” they said.
“We’re thankful for that and we’ve decided to immediately return the entire $US10 million PPP loan we received last week to the SBA so that those restaurants who need it most can get it now,” they added, referring to the Small Business Administration, which processes PPP loans.
Meyer and Garutti acknowledged the criticism of their getting the loan in the first place, saying that “businesses across the country were understandably up in arms” when PPP funding ran out in just 13 days.
They added that they were glad Congress is about to approve another round of PPP funding but that businesses that need the money most should be put at the front of the line this time.