Sweetgreen announced Wednesday that it’s returning the $10 million it received from the Paycheck Protection Program.
The company wrote on Medium that it was approved for the loan on April 16—the day when the $349 billion program ran out of money.
The brand said it applied for the loan in response to “dramatically affected” revenues and to hire back furloughed employees.
"We learned that the money had run out and so many small businesses and friends in the industry who needed it most did not receive any funds,” said Sweetgreen founders Jonathan Neman, Nicolas Jammet, and Nathaniel Ru in a statement. “Knowing that, we quickly made the decision to return the loan.”
Many have criticized the Paycheck Protection Program because of larger chains’ ability to receive loans as opposed to smaller mom-and-pop shops. Big companies like Potbelly, Ruth’s Hospitality Group, Shake Shack, Kura Sushi USA, and J. Alexander’s announced the reception of loans.
Before running out, more than 1.6 million loans were distributed. An analysis by Forbes revealed that 71 publicly traded companies received funds. The program is intended for companies with 500 or fewer employees, but eligibility for the funds are based on location, not overall workforce, allowing larger brands to apply and receive monies.
On Thursday, the Small Business Administration, in conjunction with the U.S. Department of Treasury, released more guidance on Paycheck Protection Program loans, which appear to discourage larger companies from applying for funds.
The SBA and Department of Treasury released an extensive FAQ, that includes “Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?”
In the answer portion, the agencies said:
“Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”
Sweetgreen joins Ruth's Hospitality Group, Shake Shack, Kura Sushi, three other brands that returned their loans. Shake Shack returned its $10 million loan Monday, saying “those restaurants who need it most can get it now.”
Ruth’s Hospitality Group decided Thursday to return $20 million in PPP loans in response to the new guidelines. More than 250,000 people signed a petition demanding that Ruth’s Chris return the loans it received.
"We intended to repay this loan in adherence with government guidelines, but as we learned more about the funding limitations of the program and the unintended impact, we have decided to accelerate that repayment," said CEO Cheryl Henry in a statement. "It is our hope that these funds are loaned to another company to protect their employees."
Kura Sushi made its move Wednesday, reporting that it is returning a $6 million loan.
“With the Paycheck Protection Program, we assumed all restaurant employees would be able to continue being paid, regardless of where they worked, and that the funds would be enough for everyone,” Kura Sushi USA President Jimmy Uba said on the restaurant’s website. “This was a wrong assumption.”
“This was a difficult decision because our employees are extremely important to us, but it’s impossible to ignore the fact that our finances allow us to weather financial hardship for a longer period than independent restaurant owners,” continued Uba, who noted that the company has retained 65 percent of its workforce at full pay. “We hope that these funds will be shared equitably among deserving candidates.”
The SBA and Department of Treasury are giving other large companies the opportunity to make similar moves.
“Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith,” the FAQ read.
Meanwhile, Potbelly told Crain’s Chicago Business that it doesn’t intend to return the funds.
“Like many other restaurants, Potbelly applied for the PPP,” the brand’s Chief People Officer Matt Reyord told the outlet in an email. “Every penny will be used to financially support the employees in our shops. Congress specifically qualified restaurants for the PPP loan program because restaurant workers are vital to our economy.”
On Tuesday, the Senate passed a bill that would replenish the program with $310 billion. Of that amount, $60 billion would be earmarked for small and mid-sized lenders that assist customers in rural and underserved communities in an effort to get funds to the “unbanked” businesses.