Burger chain Shake Shack will return the $10-million loan it was granted under the Paycheck Protection Program.
Aakriti Bhalla reported the news for Reuters:
Shake Shack Inc (SHAK.N) will return the small business loan it received from the U.S. government, the burger chain’s chief executive said on Monday, making it the first major firm to hand back money aimed at helping small businesses ride out the coronavirus impact.
The company will immediately return the entire $10 million SBA loan as it was able to raise additional capital, CEO Randy Garutti and founder Danny Meyer said here in a blog post on Monday. Last week, it raised about $150 million in an equity offering.
Low-paid workers in the retail, restaurant and hotel industries have been among the hardest-hit by the coronavirus pandemic. Of the $342 billion small business bailout fund, the combined industry was allocated 18% of the total fund.
SBA, which is a key part of the government’s $2.2 trillion aid package, is aimed at helping small companies keep paying their employees and their basic bills during the shutdowns, so that they are able to reopen quickly when public health allows.
Michelle Toh from CNN wrote:
Shake Shack (SHAK) is returning a $10 million loan it received from the US government under an emergency program that was touted as a way to help small businesses pay workers and keep their operations running during the coronavirus crisis.
The burger chain was awarded the loan as part of the Paycheck Protection Program (PPP). The $349 billion stimulus package, overseen by the Small Business Administration (SBA), ran out of funding last week.
Over the last few days, there has been a growing backlash over the distribution of the funds. Several media outlets have revealed how large chunks of the package were taken up by chain restaurants, hoteliers and publicly traded corporations, rather than small, local businesses.
Union Square Hospitality Group, another food and beverage business that is run independently by Meyer, has received “some” of the loans it’s applied for, the executives said. They said all of those restaurants closed last month and the company was forced to lay off more than 2,000 workers. They did not specify whether that company would be returning any funds as well.
CBS’s Stephanie Ruhle and Alex Johnson reported:
In a statement Sunday night on LinkedIn, Danny Meyer, Shake Shack’s founder and CEO of its parent company, Union Square Hospitality Group, and Randy Garutti, Shake Shack’s CEO, said the company pursued the loan because the law stipulated that it was open to any restaurant location with no more than 500 employees — which describes Shake Shack’s 189 individual U.S. restaurants.
“The ‘PPP’ came with no user manual and it was extremely confusing,” they wrote.
The program offered to forgive the loans if recipients rehired furloughed and laid-off workers by June, and because Shake Shack and its parent company had already furloughed hundreds of employees, they said, they gambled that “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.”
