Economic News
Shake Shack to Return Paycheck Protection Program Loan to SBA
Last week when it was announced that the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) had run through its original $349 billion in funding, there was plenty of anger to be found all around. While some were frustrated with Congress for not authorizing additional funding and with the SBA for not providing clearer instructions for banks to follow, others were upset to find that some national chains such as Ruth’s Chris and Potbelly had been approved for loans. Among those taking flack in that category was Shake Shack. As a result, the company now says it plans to return its loan.
In a post released on LinkedIn, Shake Shack CEO Randy Garutti and Union Square Hospitality Group CEO Danny Meyer first explained their rationale in applying for PPP funding before sharing their reasons for giving back their approved funds. The duo noted, “While the program was touted as relief for small businesses, we also learned it stipulated that any restaurant business – including restaurant chains – with no more than 500 employees per location would be eligible. We cheered that news, as it signaled that Congress had gotten the message that as both as an employer, and for the indispensable role we play in communities, restaurants needed to survive, adding, “There was no fine print, anywhere, that suggested: ‘Apply now, or we will run out of money by the time you finally get in line.'”
The post went on to urge Congress to make changes to the program for the future, including offering adequate funding, assigning applicants to a local bank, and removing the current June cut-off date by which business owners will need to rehire their staffs in order to be eligible for loan forgiveness. Closing out their letter, Garutti and Meyer stated, “Shake Shack, like all restaurant businesses in America, is doing the best we can to navigate these challenging times. We don’t know what the future holds. Our people would benefit from a $10 million PPP loan but we’re fortunate to now have access to capital that others do not. Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours.”
Reactions to Shake Shack’s announcements were mixed, with some grateful for their latest move and others angry that they were approved in the first place. Those in the former camp included Treasury Secretary Steven Mnuchin, who simply tweeted, “I was glad to see that @shakeshack will be returning the #ppploan.” Elsewhere, in a video posted to Twitter, Senator Marco Rubio admitted that some of the businesses that received funding were not who Congressional leaders meant to include when writing the bill. However he noted that the program was put together quickly, stating, “When you do something like that, you’re always going to have things that happen that you didn’t intend and things you couldn’t foresee.”
Once again, the popularity of the Paycheck Protection Program — issuing more loans in less than two weeks than the SBA typically does in 14 years — demonstrates what a complicated spot the United States economy currently finds itself in. Moreover, this particular controversy is a reminder that businesses of all sizes have been battered by this pandemic. While Shake Shack’s gesture of returning their $10 million loan is unlikely to make a much of a dent in the problem, hopefully this episode will give leaders more incentive to fix some of the issues that faced the program in its initial form and get a new round of funding ready for businesses that truly need it.
