Shake Shack, the nationwide burger and ice cream chain, will return the $10 million loan it received from the federal government as part of the Paycheck Protection Program (PPP). The federal program was touted as a way to help out small businesses that could otherwise be crushed by the effects of the coronavirus, but its $349 billion budget quickly ran dry.
A growing backlash pervaded the media over the method by which the Small Business Administration administered the PPP funds, which were intended to assist small, community businesses, but were also allotted to several national chain restaurants, hoteliers, and publicly-traded corporations. It didn’t help that the S.B.A. used a “first-come, first-served” model for doling out the funds, which caused their cashflow to run dry after only two weeks while countless small businesses still desperately needed the money.
With 189 outlets and nearly 8,000 employees, Shake Shack was able to gain access to money through other means, and has thus decided to return the funding it received from the US government in the hopes that it will be reallocated to smaller businesses.
In an open letter Monday, Shake Shack chairman Danny Meyer and CEO Randy Garutti wrote that they were “thankful” for the government’s assistance, but have “decided to immediately return the entire $10 million PPP loan we received last week to the S.B.A. so that those restaurants who need it most can get it.”
The company said in a filing that it planned to secure some $75 million from investors by selling shares.
The company also called-out what it saw as inherent flaws in the Paycheck Protection Program, including the risk that businesses will be pitted against each other if funding remains scarce. It also encouraged the S.B.A. to scrap its June forgiveness date in exchange for a staggered forgiveness date in different areas of the country that will witness virus peaks at different times.