Now that funds for the Paycheck Protection Program (PPP) have already run dry, popular burger chain Shake Shack has announced it will relinquish its loan to small businesses who need it more than they do.
Shake Shack is one of several large chain restaurants to be granted federal loans under the coronavirus stimulus law. Funds available through this initiative are meant to keep small businesses afloat throughout the pandemic.
The New York-based burger chain said Sunday night it will return $10 million in federal loans to be redistributed to smaller establishments that are really hurting right now.
The CARES act enabled lawmakers to set aside $349 billion to help small business owners keep workers on payroll, but the program ran out of money in less than two weeks.
More than a dozen companies with annual revenues in the hundreds of millions have received money through the PPP. Recipients include chain restaurants, hoteliers, publicly-traded corporations, and other businesses that are not exactly mom and pop shops.
Shake Shack CEO Randy Garutti and chairman Danny Meyer say Shake Shack applied for the loan because, with no more than 500 employees per restaurant location, the chain is eligible.
“The ‘PPP’ came with no user manual and it was extremely confusing,” they wrote in an open letter released Sunday on LinkedIn. They said they took a chance and applied for the loan.
“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.” But then the fund ran out of money as the chain was able to secure separate funding last week.
In a filing Friday, the company expected to raise up to $75 million from investors purchasing shares. “We’ve decided to immediately return the entire $10 million” so restaurants that “need it most can get it now.”
After hearing stories from small business owners who were denied the loan, Garutti told CNN it didn’t seem right.
“As we watched this opportunity play out over the weeks, it was very clear that the program was underfunded and wasn’t set up for everyone to win,” Garutti said on CNN Newsroom.
Shake Shack’s decision to return the money was lauded by Treasure Secretary Steven Mnuchin in a tweet Monday.
“Our people would benefit from a $10 million PPP loan, but we’re fortunate to now have access to capital that others do not,” they wrote. “Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours.”
Garutti and Meyer now call for the SBA to increase funding for the PPP program. They hope their 10 million will lay the groundwork for a second round of funding that could be announced soon.
President Donald Trump said Sunday, ”We are continuing to negotiate with the Democrats to get our great workers and small businesses all over the country taken care of.”
“I think we are getting close to a deal. It could happen. It could happen,” Trump said. “A lot of good work has been going on and we could have an answer tomorrow and we are going to see what exactly does take place.”
Meanwhile, folks on Twitter are pressuring other large, profitable companies who’d also received the loan to do the right thing too.
.@RuthsChris had $42.2 million in profits last year, spent $5.2M buying its own stock, and pays its CEO $6.1M— Judd Legum (@JuddLegum) April 20, 2020
It has $86M in cash reserves
It just received $20M in taxpayer money from a fund meant to keep "small businesses" afloat
But it gets worsehttps://t.co/nDAhzjAnvq
Shake Shack began as an art installation/ hot dog cart at Madison Square Park in 2001 and is now a publicly traded corporation operating 189 individual restaurants across the U.S. The burger chain employs 8,000 workers.