The Paycheck Protection Program (PPP) was meant to be a government lifeline to small businesses, authorizing $349 billion in forgivable loans to companies with fewer than 500 employees (pdf) so they could keep paying employees amid the Covid-19 pandemic.
But some that received money were comparatively large restaurant chains such as Potbelly and Shake Shack, a publicly traded, international fast-food company with nearly 8,000 employees and total revenue of nearly $600 million in 2019. Shake Shack alone got $10 million. As PPP quickly ran out of funds, the company came under fire for taking the money.
Now it says it’s giving the entire amount back to the government, because it was able to get the funds it needed on the public markets.
In an open letter posted to LinkedIn yesterday, Shake Shack CEO Randy Garutti and Danny Meyer, who founded Shake Shack with his Union Square Hospitality Group, explained that the company qualified for a loan since, technically, it didn’t have more than 500 employees per location, averaging about 45 employees instead. “The onus was placed on each business to figure out how, when, or even if to apply,” they wrote. “The ‘PPP’ came with no user manual and it was extremely confusing.”
Shake Shack, which does not franchise its restaurants, had operating losses of more than $1.5 million each week as it kept its doors open amid the sharp drop in business from the pandemic, according to Garutti and Meyer. The company decided it “could and should apply to protect as many of our employees’ jobs as possible,” they wrote.
As news spread that Shake Shack and other comparatively large companies received PPP loans, outrage spread online.
But Garutti and Meyer said that on April 17, the day after PPP ran out of money, they found a new source of money. “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,” they wrote. “We’re thankful for that and we’ve decided to immediately return the entire $10 million PPP loan we received last week to the [Small Business Administration] so that those restaurants who need it most can get it now.”
It’s unclear if other comparatively large companies will follow Shake Shack’s lead and find other sources of capital so they can return their loans. The US senate is reportedly on the brink of working out a deal that would provide another $310 billion for PPP to help small businesses in need. Meanwhile many are struggling to stay alive around the US, and even as more funds do appear, there’s likely to be a similarly confusing scramble among them to get loans.