Shake Shack Will Return A $10 Million Small Business Loan
Shake Shack has announced that he will repay the $ 10 million he received as a small business loan from the federal government last week after he was able to raise additional capital.
Company CEO Randy Garutti and founder Danny Meyer, who is also CEO of Union Square Hospitality Group, confirmed the return in an open letter posted on LinkedIn this weekend. The pair explained the company’s rationale for applying for a Paycheck Protection Program (PPP) loan under the Coronavirus Aid, Relief and Economic Security Act, and qualified the loan process. of “extremely confusing”.
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“It was up to each company to determine how, when or even if to apply “, the letter read as follows:
The “PPP” came without a user manual and it was extremely confusing. Shake Shack (a company with 189 restaurants in the United States, employing nearly 8,000 team members) and Union Square Hospitality Group (with more than 2,000 employees) came to a similar conclusion. The best chance to keep our teams active, out of the unemployment line and to re-hire our employees on leave and laid off, would be to apply now and hope that things will be clarified in time.
Last week, many people criticized Shake Shack for requesting and receiving a loan when many small chains and operations were unable to request or receive loans until the funding for PPP ran out. The loans were designed to relieve some of the financial pressures faced by small businesses (such as restaurants) in the midst of the COVID-19 epidemic.
“If this law was written for small businesses, how is it possible that so many independent restaurants whose employees needed so much help could not have received funding?” questioned the letter. “We now know that the first phase of the PPP was underfunded, and many of those who need it most have received no assistance.”
In the letter, Danny and Randy said that Shake Shack immediately repaid the entire $ 10 million loan after receiving additional capital “through a public market transaction”. In addition to this news, the letter contained suggestions for improving the process receiving P3 loans, including increasing funding. They did not respond directly to the criticism received by the company, but urged Congress to implement some adjustments so that restaurants and other small businesses are not opposed to each other.
“If this health crisis and the economic shock associated with it have taught us anything, it is that we are all in the same boat,” they wrote: “The restaurants and their employees are thirsty for when we can resume our activities safely and bring our customers back to the table. ”