Shake Shack returns $10M paycheck protection loan to the government
Shake Shack is returning a $10 million loan it received from the U.S. government as part of the Paycheck Protection Program (PPP).
In an open letter, Shake Shack founder Danny Meyer and CEO Randy Garutti say the company was eligible for the loan under rules written by Congress and that the chain faced operating losses of over $1.5 million a week when the decision was made to apply. What they didn’t know was how complicated applying for the loan would be and that, because the funds allocated for Congress would go to larger companies such as their own, Potbelly ($10 million) and Ruth’s Chris Steak House ($20 million), many smaller employers would be left high and dry.
“Late last week, when it was announced that funding for the PPP had been exhausted, businesses across the country were understandably up in arms,” the two wrote. “If this act were written for small businesses, how is it possible that so many independent restaurants whose employees needed just as much help were unable to receive funding? We now know that the first phase of the PPP was underfunded, and many who need it most, haven’t gotten any assistance.”
In an interview on SiriusXM Business Radio’s “Leadership Matters” program yesterday, Mr. Meyer defended the decision by his company to seek the loan and expressed pride in the decision to return it. “We will all be remembered for ‘who were we?’ and ‘what choices did we make?’ at this time,” he said. “And if there’s any silver lining in this besides getting to spend more time with my family, it’s that this is a platform to lead and to make choices, and they’re not always easy.”
The burger chain with 189 locations was able to raise the funds it needs through an equity transaction. Shake Shack’s share price was up 6.74 percent in trading yesterday, closing at $46.43.
Sean Kennedy, executive vice president for public affairs at the National Restaurant Association, defended larger chains receiving PPP funds in a New York Times interview. “This pandemic is a tidal wave that is crashing against every restaurant, no matter how big, small or well-funded it may be,” he said.
Treasury Secretary Steve Mnuchin and Congressional leaders are in talks about legislation that would make more money available for small business.
- Shake Shack is returning its PPP Loan. Here’s why: – LinkedIn
- Danny Meyer Says “We Will All Be Remembered For ‘Who We Were’ & ‘What Choices Did We Make’” – SiriusXM/YouTube
- Danny Meyer Explains Why Shake Shack Chose To Return It’s $10 Million PPP Loan – SiriusXM/YouTube
- White House, GOP face heat after hotel and restaurant chains helped run small business program dry – The Washington Post
- ‘The Big Guys Get Bailed Out’: Restaurants Vie for Relief Funds – The New York Times
DISCUSSION QUESTIONS: What do you think of Shake Shack’s decision to return the $10 million loan it received as part of the Paycheck Protection Program? What do you see as the problems with the program to date, if any, and what should Congress do next?