As the country continues to face the novel coronavirus pandemic, people are understandably worried about their health and minimizing contact with others. While shuttering restaurants is certainly best for slowing the spread of the virus, closing nonessential businesses, or moving to take-out or to-go models only, threatens to tank small businesses, not to mention livelihoods of the low-wage employees who ordinarily rely on tips. One solution? The Paycheck Protection Program (PPP), a coronavirus relief stimulus package managed by the Small Business Administration (SBA). The fiscal stimulus package rang in at nearly $350 billion and actually exhausted its funds as of Thursday, making its life span less than two weeks. Many small business owners have taken to social media to express anxiety about not receiving the emergency funds, in spite of being seemingly eligible. Who did receive the money? Of the restaurants that benefited, a little chain you might have heard of made the cut: cult-favorite Shake Shack.
Now, after considerable public outcry, Shake Shack is giving the funds back “immediately.” How much did the New York-based fast-casual burgers, fries, and shakes chain get, to begin with? A cool $10 million.
In an open letter published to LinkedIn early on Monday, Shake Shack CEO Randy Garutti and Chairman Danny Meyer explained that the company was giving back the money because they are "fortunate to now have access to capital that others do not." They wrote: “Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours.” Giving back the money is great. But the fact that this happened at all illuminates a bigger-picture problem.
In their letter, the pair stressed that the application process was “extremely confusing.” The letter states: “The onus was placed on each business to figure out how, when, or even if to apply.” There was “no user manual,” they added. The letter then goes on to elaborate on the confusion.
“While the program was touted as relief for small businesses,” the writers acknowledge, “we also learned it stipulated that any restaurant business – including restaurant chains – with no more than 500 employees per location would be eligible.” That explanation seems to be the reason why Shake Shack, and others, were technically eligible. Potbelly Sandwich Shop, for example, also received a $10 million loan. Fiesta Restaurant Group Inc., the owner of chain Taco Cabana, also received a federal loan. Of course, technically being allowed on the basis of a loophole does not make a choice ethical.
The company tweeted out the letter, as well.
And for actual small business owners? For many, the wait continues. Congress is on the brink of finalizing a deal to add $300 billion more to the program, whose funds should help small businesses pay workers and keep the lights on. Of course, it remains to be seen if publicly owned companies will again benefit first.
“Restaurants function as the lifeblood of the U.S. economy and the nation's spirit,” the executives note in their open letter. There’s certainly some truth to that. Hopefully, the independently owned restaurants, especially those owned by women and people of color, already chronically disenfranchised, will see some funds to keep their lifeblood going.