ST. LOUIS — Part of the CARES Act is the “Paycheck Protection Program”, which aims to help small business owners pay employees and overhead through June, as long as they go back to business as normal after that. But the program's $349 billion have already run out before many of these suffering small businesses could even apply.
“It's hard to determine whether or not you need it and whether or not you might be taking on debt that you might need to later worry about,” said Washington University's Peter Boumgarden, who helps local restaurateurs navigate COVID-19-related policy. “In the process of slowing down to be able to make a decision around whether or not to go forward in something, some may have found themselves left out.”
Because fewer than 500 people work in each location around the country, Shake Shack applied for and got $10 million in funding. After after a lot of backlash toward it and other chains, leadership announced Monday it's leaving the federal money on the table.
"Until every restaurant that needs it has had the same opportunity to receive assistance, we're returning ours,” reads part of the open letter from the CEO.
Shake Shack leaders also acknowledged they have access to investors and other resources that most don't.
"Shake Shack was fortunate last Friday to be able to access the additional capital we needed to ensure our long term stability through an equity transaction in the public markets. We’re thankful for that and we’ve decided to immediately return the entire $10 million PPP loan we received last week to the SBA so that those restaurants who need it most can get it now."
Boumgarden knows Shake Shack founder and St. Louis native Danny Meyer personally. While he hasn't had the chance to discuss this business move with him yet, Boumgarden said it makes a lot of sense from his perspective.
“My guess, it is very much a values-based decision he is making for the company,” said Boumgarden, “but also one that they think might change the conversation around what needs to happen with funding more broadly.”
Boumgarden agreed that the problems with the current PPP go beyond a lack of money.
“I think there are two issues. One is the total amount of funding, which I do think is limited,” he said. "But the second part of this story is really trying to decide who needs it most and figure out who's being hit hard in this particular space.”
A second round of money could be coming, as Congress is considering releasing another $310 billion for PPP. In the Shake Shack open letter, they describe three ways things can be done "better": adequate funding, better access to local banks and the June forgiveness deadlines for the loans.
"If this health crisis and the associated economic shock has taught us anything, it is that we are all in this together," reads the letter. "Restaurants and their employees are craving the moment when we can safely be back in business and bring our guests back to the table. With adequate funding and some necessary tweaks, the PPP program can provide the economic spark the entire industry needs to get back in business."
Boumgarden hopes the money is more targeted and comes with the recognition that “going back to normal” is going to look a little different for everyone.
“What I think is unique about the restaurant industry is that there might still be some social norms that make people feel a little uncomfortable going back to a crowded restaurant even once the economy has opened.”