It's not often that a company refuses free money. That's why it's extraordinary that Shake Shack has said that it will return the $10 million it received under the Paycheck Protection Program (PPP). Intended to help small businesses, it turns out that the coronavirus stimulus went to companies that stretch that definition a bit.
Sure, there's some flexibility in the definition of what actually constitutes a 'small' business. But, I think we can all agree that a publicly-traded company worth $1.6 billion is probably not what most of us think of as a small business.
I'm not the guy to comment on what this means from a financial perspective. Presumably, it's good news for Shake Shack that the company was able to secure the capital it needs to weather the current economic storm. In its statement, linked above, the company had said it had raised $150 million in a private equity offering.
Not many small businesses have that kind of opportunity.
That's why, from a brand perspective, the money came at a huge cost. The company, like others, had faced intense criticism for accepting money that was meant to help small businesses. The $10 million given to Shake Shack--the maximum available under the program--was money that didn't go to other businesses that missed out when the program ran out of funds last Thursday morning.
The company's founders announced their decision in a statement on LinkedIn:
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 market...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.
Shake Shack wasn't the only restaurant to come under scrutiny for participating in the program. Ruth's Chris Steakhouse has been criticized for accepting $20 million in PPP loans. Meanwhile, restaurants are closing their doors across the country as Americans are forced to stay home.
The company is technically qualified since the eligibility requirements stated that businesses must have less than 500 employees at any one location. Under that standard, every restaurant qualifies. Still, that doesn't mean they should take funds that were clearly intended to help businesses that had no other financial options.
There's a lesson here for every business, which is that you have to count the cost. Sometimes the cost to your brand in terms of credibility or trust is far greater than the benefit of free money.
Sometimes doing the right thing isn't the easy thing. Sometimes, it costs you upfront. That doesn't change that it's still the right thing. In the midst of a global pandemic, we could all be better off if everyone just focused on doing the right thing.