Shake Shack, the U.S.-based burger chain, will return its entire $10 million loan from the U.S. government, the company’s leaders said in a statement, amid widespread criticism over who got access to the funds aimed at saving small businesses before they were depleted.
More than a dozen publicly traded companies with revenue topping $100 million received funds before the program ran out of money, according to a Bloomberg review of regulatory filings. Lawmakers in Congress are said to be near an agreement to top up the loan program, while also providing new funds for hospitals and coronavirus testing.
“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,” said Chief Executive Officer Randy Garutti and Danny Meyer, the founder and chairman of Shake Shack and CEO of Union Square Hospitality Group.
“We’re thankful for that and we’ve decided to immediately return the entire $10 million PPP loan we received last week,” the pair said, “so that those restaurants who need it most can get it now.”
The sight of big companies getting aid while mom-and-pops complained they’d been frozen out of funding has sparked criticism of who was rescued by taxpayer dollars and who wasn’t. Asked whether such large, publicly-traded companies should be eligible for PPP funds, President Donald Trump on Sunday spoke about the role of franchisees as small businesses.
“I don’t know much about any of those companies. But a lot of times they’re owned by franchisees, where they own one or two places,” Trump said at a White House press briefing. “So a lot of that would depend on what the formula is.”
Certain branches of Potbelly sandwich stores and Ruth’s Chris steak houses, which also received PPP funds, are operated as franchises. Shake Shack says on its website that it doesn’t franchise.
Shake Shack is one of the fastest-growing restaurant companies in America, with $595 million in annual sales as of the end of last year. The burger chain has about 45 workers at each site and nearly 8,000 in total, Garutti and Meyer said.
In a statement posted to Garutti’s LinkedIn page, and tweeted under his verified Twitter account, the pair said the U.S. program “came with no user manual and it was extremely confusing.” Shake Shack faced operating losses more than $1.5 million a week, while the clear language of the legislation allowed restaurant chains to apply for relief.
“Late last week, when it was announced that funding for the PPP had been exhausted, businesses across the country were understandably up in arms,” Garutti and Meyer said. “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.”
The U.S. Small Business Administration program, working with almost 5,000 lenders that disburse the loans, approved applications for $342.3 billion in just 13 days, with the rest of the $349 billion going for fees and processing.
An earlier statement from the SBA and the Treasury Department said that the “vast majority of these loans — 74% of them — were for under $150,000, demonstrating the accessibility of this program to even the smallest of small businesses.” But an SBA report showed that about 2% of the firms approved for loans accounted for almost 30% of the funding.