Shake Shack announced that it will return the $10 million it received as a small business loan from the federal government last week after being able to secure additional capital.
The company's CEO Randy Garutti and founder Danny Meyer, who is also CEO of Union Square Hospitality Group, confirmed the return in an open letter published to LinkedIn this weekend. The pair explained the company's reasoning for applying for a Paycheck Protection Program (PPP) Loan as part of the Coronavirus Aid, Relief, and Economic Security Act, and called the loan process "extremely confusing."
"The onus was placed on each business to figure out how, when, or even if to apply," the letter read:
The 'PPP' came with no user manual and it was extremely confusing. Both Shake Shack (a company with 189 restaurants in the U.S., employing nearly 8,000 team members) and Union Square Hospitality Group (with over 2,000 employees) arrived at a similar conclusion. 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.
Shake Shack was criticized by many last week for applying for and receiving a loan when many smaller chains and operations were unable to apply or receive loans before funding for the PPP was exhausted. The loans were designed to alleviate some of the financial pressures small businesses (like restaurants) are facing amid the COVID-19 outbreak.
"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?" the letter questioned. "We now know that the first phase of the PPP was underfunded, and many who need it most, haven’t gotten any assistance."
In the letter, Danny and Randy stated that Shake Shack was immediately returning the entirety of the $10 million loan after receiving additional capital "through an equity transaction in the public markets." In addition to this news, the letter went on to outline suggestions for improving the process to receive PPP loans, including increased funding. They did not address the criticism the company received directly, but did urge that Congress implement some tweaks so that restaurants and other small businesses were not pit against each other.
"If this health crisis and the associated economic shock has taught us anything, it is that we are all in this together," they wrote: "Restaurants and their employees are craving the moment when we can safely be back in business and bring our guests back to the table."
