Shake Shack, the fast-food burger chain worth over $1.6 billion, has decided to return the $10 million Paycheck Protection Program (PPP) loan that it was awarded after it applied for emergency funds that were aimed at helping small businesses through the economic effect of the COVID-19 pandemic. The PPP program originally set out $349 billion for small businesses, but all the funds ran dry last week.
Shake Shack founder and chairman Danny Meyer and CEO Randy Garutti posted an open letter on LinkedIn announcing the company was returning the funds. In that letter the pair explained why Shake Shack applied for the “extremely confusing” PPP loan in the first place:
The onus was placed on each business to figure out how, when, or even if to apply. The “PPP” came with no user manual and it was extremely confusing. Both Shake Shack (a company with 189 restaurants in the U.S., employing nearly 8,000 team members) and Union Square Hospitality Group (with over 2,000 employees) arrived at a similar conclusion. 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.
While the program was touted as relief for small businesses, we also learned it stipulated that any restaurant business – including restaurant chains – with no more than 500 employees per location would be eligible. We cheered that news, as it signaled that Congress had gotten the message that as both as an employer, and for the indispensable role we play in communities, restaurants needed to survive. 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.”
As CNN points out, Shake Shake was hardly the only company with millions in revenues that took advantage of the PPP loan program. Other chain restaurants including Potbelly and Ruth’s Chris Steak Houses also took the loans, as did coal mining company Hallador Energy. Computer storage device maker Quantum also took the PPP loan. The company had $400 million in sales last year and paid its CEO $2.3 million.
While the Paycheck Protection Program’s $349 billion in funds evaporated last week, the fact that many companies that can’t really be considered a small business took the PPP loans anyway caused disbelief among small and local business owners who were left with nothing to apply for. As that chorus grew over the weekend, Shake Shack decided to return its PPP funds.
The official reason the company decided to return the funds, Meyer and Garutti stated, was because “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.” Due to that, the company made the choice to return its PPP money “so that those restaurants who need it most can get it now.”
Let’s hope other large companies follow suit.