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Shake Shack is returning a $10 million federal loan to be distributed to other struggling businesses after the fast food chain secured additional funds.
The restaurant announced it was returning the loan on Sunday after the $350 million Paycheck Protection Program (PPP), authorized by Congress to sustain businesses struggling during the coronavirus pandemic, ran dry on Thursday. The chain has 189 restaurants with nearly 8,000 employees.
“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,” Shake Shack’s CEO Randy Garutti and founder Danny Meyer wrote in a statement posted to LinkedIn. “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 Association] so that those restaurants who need it most can get it now.”
Shake Shack was the target of several media reports over the weekend for receiving emergency funds meant for small businesses while posting annual revenues of $100 million. PPP rules allow any business with less than 500 employees per location to apply for emergency funding, however.
“Few, if any restaurants in America employ more than 500 people per location. That meant that Shake Shack – with roughly 45 employees per restaurant – could and should apply to protect as many of our employees’ jobs as possible,” Garutti and Meyer wrote. “The immediate drop in business due to the virus had caused the company to face operating losses of over $1.5 million each week, simply by keeping our doors open with the goal of paying our people and feeding our communities.”
The restaurant chain and Meyer’s Union Square Hospitality Group, which operates a number of restaurants and cafés around New York City, had furloughed or laid off thousands of employees in the early weeks of coronavirus-induced lockdowns, the executives said.
Garutti and Meyer slammed lawmakers for underfunding the program and called for Congress to approve additional emergency relief to save the small businesses that missed out on the first wave of aid and are teetering on the edge of bankruptcy.
“Late last week, when it was announced that funding for the PPP had been exhausted, businesses across the country were understandably up in arms. 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? We now know that the first phase of the PPP was underfunded, and many who need it most, haven’t gotten any assistance,” the businessmen wrote.
Lawmakers are haggling over an extension to the PPP program this week. Congressional Democrats blocked Republican attempts to pass a clean funding bill for the program last week, demanding an additional $251 billion be earmarked for certain businesses, such as those owned by women, minorities, and veterans.
The move elicited harsh criticism from Republicans that say House Speaker Nancy Pelosi is holding emergency funds for small businesses “hostage.”
“I always like to say that the Democrats who are holding this up, realize you’re not negatively impacting businesses, as much as you’re negatively impacting people’s ability to pay their rent, to pay their utilities, to feed their kids,” Sen. Tim Scott (R-SC) said on Sunday. “This is a serious situation, that we shouldn’t have a lapse in funding for the PPP program. We should tell Ms. Nancy Pelosi, please give us our paychecks. People need their paychecks. And stop holding it hostage in order to do something else.”