Why Sweetgreen Joined Shake Shack and Other Restaurant Chains to Return Its PPP Loan

Now that we’ve exhausted the essential/nonessential debate, retail’s moved on to another semantics battle: Which businesses are small enough to qualify for Paycheck Protection Program loans?

Define “small”

At first, “small business” included Sweetgreen, architect of the superior harvest salad (I said it) and the lone restaurant unicorn (with a private valuation of around $1.6 billion) as of January 2020.

• Sweetgreen made $300+ million in revenue in 2019 across 102 locations.

As 20-something urbanites backed off the Kale Caesars while WFH, Sweetgreen’s revenue took a hit. Sweetgreen applied for and last week received a $10 million loan through the Paycheck Protection Program.

Days later, Sweetgreen’s cofounders are returning the funds, even though the company planned to pay employees with its loan. The reason? Corporations that have long grown out of their small beginnings came under fire for receiving loans, while smaller local businesses hadn’t gotten any before funding for PPP ran out.

Aye, there’s the steak rub

Restaurant chains including Shake Shack and the parent company of Ruth’s Chris Steakhouse also received PPP loans. After a verbal thrashing from the Twitterati, those two chains are among the handful returning their funds.

• Many restaurants are organized as franchises with independent owners and small teams. Ruth’s Chris said it was directing these funds to those employees.
• Still, those businesses are publicly traded—giving them a large well of outside capital to sustain operations. On Thursday, the Small Business Administration updated its PPP guidance to discourage public companies from applying.

Hot take: “The PPP’s original sin was not that it was available to franchises, but that it was way too small to serve all qualifying businesses,” the Atlantic’s Derek Thompson writes.

My takeaway: Times are hard for everyone in the restaurant biz, but public corporations and VC-backed startups have options beyond PPP.

The $484 billion relief bill the House passed yesterday will fund more desperate small businesses. But brace for déjà vu: Funding could again run out before everyone gets what they need.