(CNN Business) – Shake Shack repaid a $ 10 million loan that he received from the United States government, under the emergency program that has been presented as a way to help small businesses pay their employees and maintain operations during the coronavirus crisis. .
The hamburger chain received the loan as part of the Check Payment Protection Program (PPP). This $ 349 billion stimulus package, overseen by the Small Business Administration (SBA), ran out of funds last week.
In recent days, criticism has been increasing for the distribution of these funds. Several media outlets have revealed how large parts of the package went to restaurant chains, hotels, and publicly-traded companies, rather than ending up in small local businesses.
Shake Shack Chief Executive Randy Garutti and director Danny Meyer revealed in an open letter Monday their decision to return the funds. As they explained, the company that is listed on the New York Stock Exchange no longer needs the money because it is now “fortunate to have access to capital that others do not have.” The company said in documents filed Friday that it expects to be able to raise $ 75 million from investors through the sale of shares.
Entrepreneurs also shared their frustrations with PPP, arguing that many restaurants were unfairly excluded because the program “did not have a user manual and was extremely confusing.”
It didn’t seem “correct”
Garutti explained to CNN’s Poppy Harlow that the PPP was a “great opportunity” for restaurants to receive funds, but the company changed its mind and returned the loan after hearing stories of small business owners who failed to access the benefit.
“That doesn’t seem right to us,” Garutti said on CNN Newsroom. “As we watched this opportunity unfold for weeks, it became very clear that the program was underfunded and unprepared for everyone to win.”
Shake Shack has around $ 100 million in cash on hand. Harlow asked Garutti why the company initially applied for the loan, and the executive explained that his goal was to “take care” of his workforce and maintain liquidity. “Our team members have the same value as any other team member in the world,” he said.
“By returning our $ 10 million, that $ 10 million can go back to the boat and go to the people who deserve it. We hope it can inspire the next round ”, he completed.
The return of Shake Shack was praised by United States Secretary of the Treasury Steven Mnuchin, who tweeted This Monday he was “happy to see” that the hamburger chain returned the money.
A call to increase funds
Garutti and Meyer are now asking the Small Business Administration to increase funding for the program. They also want the agency to assign a local bank to work with each applicant and facilitate the process, as well as to make the forgiveness policy more flexible.
Union Square Hospitality Group, another food and beverage business independently run by Meyer, received “some” of the loans it applied for, executives said. And they explained that all those restaurants closed last month and the company was forced to lay off more than 2,000 workers. They did not specify whether that company would also return funds.
In the meantime, an agreement for additional funds could be announced soon in the PPP.
United States President Donald Trump said Sunday during the coronavirus task force briefing that “we continue to negotiate with Democrats so that our amazing workers and small businesses across the country are taken care of.”
“I think we are getting closer to a deal. It could happen. It could happen, “said Trump. “A lot of work has been done and we could have an answer tomorrow and we’ll see what exactly happens.”
Jordan Valinsky, Veronica Stracqualursi, Manu Raju and Alicia Wallace, all from CNN, contributed to this report.
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