Shake Shack Received, Then Returned, $10 Million in Stimulus Funding
Danny Meyer chain gives back SBA PPP loan after being criticized for taking money meant for struggling small businesses.
Shake Shack has decided to return a $10 million loan they received from the U.S. government as part of its coronavirus stimulus, after being among a few big chains criticized for taking money from a program meant to help struggling small businesses.
In a statement posted to LinkedIn Sunday night, chairman Danny Meyer and CEO Randy Garutti explained that while their company qualified to receive assistance as part of the Paycheck Protection Program (PPP), they had no idea that the fund would run out in less than two weeks, and are returning their loan to help businesses that need the money more.
Before the announcement, Shake Shack received criticism for winning 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
I’m not sure Shake Shack execs spent enough time thinking about how much restaurant lovers will resent them for that loan when so many small restaurants didn’t have a chance— Hillary Dixler Canavan (@hillarydixler) April 19, 2020
The critics started piling on Shake Shack more on Friday, when the company announced that it had raised $150 million in a private 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
In their Sunday 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.
In order to qualify for the loan, a business could have no more than 500 people working at a single location, which meant that Shake Shack — as well as almost any other restaurant in America — was eligible.
Having laid off or furloughed hundreds of workers during the coronavirus crisis, and operating at a loss of $1.5 million a week, Meyer and Garutti said they decided to apply for the loan so as "to protect as many of our employees's jobs as possible."
But what they didn't realize, they wrote, 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 their 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," the statement said.
"We're thankful for that and we've decided to immediately return the entire $10 million PPP loan we received last week to the SBA so that those restaurants who need it most can get it now," it added, referring to the Small Business Administration, which processes PPP loans.
Meyer and Garutti acknowledged the criticism of their having won the loan in the first place, saying "businesses across the country were understandably up in arms" when PPP funding ran out in just 13 days.
They added that they are glad Congress is about to approve another round of PPP funding, but wrote that businesses who need the money more should be put to the front of the line this time.