Shake Shack plans to return a $10 million loan it received under an emergency small business rescue program, amid a growing backlash against big businesses that got the money before $350 billion in funding lapsed last week. The burger chain was just one of several large restaurant operators and publicly traded companies that secured tens of millions of dollars in “Paycheck Protection Program” loans before the Trump administration announced Thursday that the funding was exhausted because of the high demand.
Other chains that reported receiving the loans include Potbelly, Ruth’s Hospitality Group, Taco Cabana and J. Alexander’s. The disclosures infuriated small business owners who were unable to get loans in time. The program, which is intended to avert massive layoffs during the coronavirus pandemic, is focused on businesses with fewer than 500 employees but allowed large restaurant operators to also apply.
In a post on LinkedIn, Shake Shack CEO Randy Garutti and Chairman Danny Meyer said the company was fortunate on Friday to raise more capital in the markets — $150 million — and that it planned to return its entire Paycheck Protection Program loan “so that those restaurants who need it most can get it now.” They called on Congress to adequately fund the program, as lawmakers near an agreement on an additional $300 billion.
“There was a lot of anger and frustration,” said Andrew Rigie, executive director of the New York City Hospitality Alliance. “We need to get the money into the hands of independent restaurant owners.” Mr. Abrams, the restaurant owner in New York, said the episode recalled the 2008 financial crisis, when big banks were bailed out by the federal government while small businesses suffered. “It felt a little bit like déjà vu,” he said.
As soon as the loans became available, Mr. Abrams said, he sent the relevant documents to his bank, Capital One, to start applying. But Capital One was unable to process his application before the funds were exhausted. “It just doesn’t seem equitable,” Mr. Abrams said.
Practically overnight, the pandemic has upended restaurants across the United States. Many large chains and well-funded restaurant groups have the resources to ride out a protracted shutdown. But independent restaurants, which make up about two-thirds of the American dining landscape, may not survive.