Burger chain Shake Shack will give back its $10 million small business loan from the federal government, the company’s senior leadership said Sunday, following criticism that large restaurant chains were able to obtain funds before the loan program had been depleted—seemingly shutting out much smaller restaurants.
Shake Shack CEO Randy Garutti and parent company owner, Danny Meyer’s Union Square Hospitality Group, posted a letter to LinkedIn Sunday night explaining their decision to return their loan.
Calling the Paycheck Protection Program “confusing” and without a “user manual,” Garutti and Meyer wrote that while Shake Shack met the government’s criteria for a loan, they now understand that the program was underfunded.
Citing Shake Shack’s ability to “access the additional capital we needed . . . through an equity transaction in the public markets,” Meyer and Garutti said they are returning their entire $10 million loan.
Reports surfaced last week that large restaurant chains, such as Ruth’s Chris Steakhouses, Potbelly and J. Alexander’s, along with Shake Shack, received funds from the $349 billion pot Congress created as part of the CARES Act to fight economic fallout from coronavirus.
Meanwhile, reports of independent restaurant owners with much smaller operations and staff being denied PPP loans surfaced, raising questions and criticism about who was able to access the funds before money ran out.
The Small Business Administration, which is running PPP, said in an April 16, 2020, report that it approved 1.66 million loans, with 4,412 approved for $5 million or more.
“Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours,” wrote Garutti and Meyer on LinkedIn.
71. That’s how many publicly traded companies received PPP funds before the money ran out, according to Securities & Exchange Commission filings.
What to watch for
A second phase of small business assistance. Treasury Secretary Steve Mnuchin said Sunday that “we are very close to a deal” on a small business package that would include additional aid.
The restaurant industry has been particularly hard-hit by the coronavirus pandemic. Restaurants typically operate with slim margins, according to Eater, and rely on the now-impossible public gatherings to generate much of their revenue. According to Bloomberg, over a dozen restaurants with revenues topping $100 million were able to apply for PPP loans. It took about 13 days for PPP funds to be exhausted.
Shake Shack Is Returning Its PPP Loan. Here’s Why (LinkedIn)
Shake Shack Returning $10 Million Government Loan Meant For Small Businesses (NBC News)
Shake Shack Gets $10M Federal Loan For Small Businesses Affected by COVID-19 (Eater)
Seventy-One Publicly Traded Companies Got Paycheck Protection Funding Before Money Ran Out (Forbes)
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Source: Thanks https://www.forbes.com/sites/lisettevoytko/2020/04/20/shake-shack-returns-10-million-ppp-loan-amid-criticism-of-restaurant-chains-receiving-stimulus-funds/