Danny Meyer Returns Shake Shack's $10 Million Small Business Loan
The company was under fire for receiving funds when many smaller, independent restaurants were left with no support.
Since its passing on March 27, the CARES Act has caused concern among restaurant industry leaders that it failed to adequately address the needs of small, independent restaurants, which have been hardest hit by the coronavirus crisis. A major part of the stimulus package, known as the Paycheck Protection Program (PPP), offered $349 billion in loans to companies with fewer than 500 employees, yet much of that money went to massive corporations. The small business lending program almost immediately ran out of funds, with national chains like Ruth's Chris steakhouses receiving $20 million.
So when Shake Shack, a multinational, publicly traded company with over 8,000 employees and a reported revenue of 600 million in 2019, received a $10 million small business loan, many restaurant industry workers and advocates felt that this short-changed the operations that desperately needed relief. After significant industry-wide backlash, Shake Shack CEO Randy Garutti and Danny Meyer, founder of Shake Shack and Union Square Hospitality Group, posted an open letter on Sunday, April 19, announcing that they would "return" the loan.
"Late last week, when it was announced that funding for the PPP had been exhausted, businesses across the country were understandably up in arms," they wrote on LinkedIn. "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."
They made the decision to return the entire $10 million loan because last Friday, Shake Shack was "able to access the additional capital we needed to ensure our long term stability through an equity transaction in the public markets." According to CNN, Shake Shack has roughly $100 million in cash on hand. The company had qualified for the loan because they have roughly 45 employees per location (less than the required 500), which is how many other major chains received funding, too.
There was no mention of whether Union Square Hospitality, which Meyer says closed all its restaurants in March and laid off more than 2,000 workers, would be returning its loan as well.
In their letter, Garutti and Meyer called on the Small Business Administration to add more funding to the program. "We are an industry of 660,000 restaurants with nearly 16 million employees," they wrote. "While it is heartening to see that an additional $310 billion in PPP funding is about to be approved, in order to work for restaurants, this time we need to do it better." After adding more funds, they insisted that Congress "eliminate the arbitrary June forgiveness date for PPP loans" and help assign applying restaurants to local banks, which is a requirement of eligibility.
How, exactly, will the giving-back work, and how will the $10 million be redistributed?
That remains to be seen. Garutti told CNN, "By returning our $10 million, that $10 million can go back into the pot and go to the people that deserve it. We hope it can go inspire the next round."
The news comes days after the ill-fated announcement of Trump's economic council for restaurants, for which he tapped exclusively chain restaurant CEOS and a handful of fine-dining chefs.