Burger joint Shake Shack announced on Sunday that it will return its $10 million loan obtained through the Paycheck Protection Program, or PPP.
The PPP authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. The fund was quickly exhausted, one reason Shake Shack said it will return the funds.
“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,” Randy Garutti, CEO of Shake Shack, said in a statement posted to LinkedIn about why the loan was initially sought. “Our teams have been heroic, pivoting our business to a new curbside pickup and delivery model, while keeping our teams and guests at a safe distance.”
While noting that its employees would benefit from a $10 million PPP loan, “we’re fortunate to now have access to capital that others do not. Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours.
“We urge Congress to ensure that all restaurants no matter their size have equal ability to get back on their feet and hire back their teams. We are an industry of 660,000 restaurants with nearly 16 million employees. While it is heartening to see that an additional $310 billion in PPP funding is about to be approved, in order to work for restaurants, this time we need to do it better.”
Treasury Secretary Steven Mnuchin said the Trump administration and Congress are working toward an agreement on a coronavirus aid package the Senate could take up as soon as Tuesday. The deal would add more than $450 billion to boost the PPP loan program.
PPP specifics
The loan amounts will be forgiven if:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the eight-week period after the loan is made; and
- Employee and compensation levels are maintained.
Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. Loan payments will be deferred for six months.