Shake Shack returned its $10 million small business loan as thousands of small businesses were shut out of the program. (Photo by Ben Gabbe/Getty Images)
“It doesn’t make them look any better. They had an opportunity to get free money and they exploited it before looking at other possibilities,” Jason Kaplan, a New York City-based restaurant consultant, told FOX Business Monday of the company’s response to the backlash. “It all boils down to PR — they knew this would have been a defining point which is the fact that they took money from the small business guy.”
SHAKE SHACK RETURNS PPP LOAN
Shake Shack CEO Randy Garutti and chairman Danny Meyer said in an open letter on Monday they no longer needed the funding for their publicly-traded company, writing they are “fortunate to now have access to capital that others do not.” Shake Shack said Friday in a filing it’s slated to raise up to $75 million from investors.
Ticker Security Last Change Change % SHAK SHAKE SHACK INC 46.43 +2.93 +6.74% RUTH RUTH’S HOSPITALITY GROUP 7.92 -0.58 -6.88%
“They should have thought about it before they [applied for the money] because it’s not like they really needed it. And now the headlines are ‘Shake Shack gave back the money,’ but it’s really 'Shake Shack first took the money,’” Kaplan said.
The $2.2 trillion CARES Act passed at the end of March established nearly $350 billion Paycheck Protection Program, administered by the Small Business Administration through participating banks and intended to give cash to small businesses financially devastated by the coronavirus pandemic.
Shake Shack, which runs 189 restaurants and employees nearly 8,000 workers in the United States and reported nearly $600 million in revenue in 2019, said the money it received could be reallocated to the independent restaurants "who need it most."
Potbelly Sandwich Shop, which has 400 restaurants, was approved for a $10 million loan from JP Morgan Chase on April 6, and Ruth’s Hospitality Ince, which has more than 5,000 workers and owns the high-end Ruth’s Chris Steakhouse chain, was granted $20 million in loans on April 7, according to a securities filing.
A Small Business spokesperson for JP Morgan Chase said Monday: “The money will go back in the fund. However, new loans can’t be made against those funds until Congress authorizes new funds.”
Last week, the SBA reported there were more than 1.6 million applications for PPP loans totaling more than $339 billion in funding across 4,900 lending institutions. Those who were approved received checks within a week, however, the funding ran out last Thursday after just 13 days.
And regional restaurant owners who were shutout expressed outrage upon learning that national chains like Shake Shack, steakhouse chain Ruth’s Chris and Potbelly Sandwich Shop received funding while thousands were left in the dark.
“All these big corporations are getting paid and I have business accounts with Chase and Wells Fargo and both gave me nothing,” Sammy Musovic, who owns Sojourn restaurant in Manhattan, said of applying for a $10,000 loan, which would have helped him to hire back some of his staff.
“Me and my son are open and working seven days a week doing a service to the community and risking our lives and we haven’t got anything for it," he said.
CORONAVIRUS DISASTER LOAN CUTOFF LEAVES MANY SMALL BIZ OWNERS WITHOUT FINANCIAL RELIEF
Similarly, André Vener, partner at Dog Haus, a West Coast-based franchise with the majority of its restaurants independently owned specializing in hot dogs and chicken sandwiches had to lay off more than 400 employees across its 35 restaurant locations in 10 states. Vener said he applied for loans between $100,000 and $400,000 for the business with Chase and Bank of America and was shut out of both. Before the coronavirus shutdown, 86% of revenue came from in-person dining, Vener said. Now franchisees will have to pivot their business model, or close down altogether, he says.
“We’ve had the majority of our stores' transition into being pick-up and delivery-only, and turned some of them into mini grocery stores,” Vener said.
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