No, the big chain restaurants, you can’t take millions of dollars going for small businesses and expect people not to hate you
Did you see a lot of online hate for Shake Shack and Ruth’s Chris Steakhouse last weekend? We were doing.
Shake Shack, Danny Meyer’s New York-based upscale burger chain, has received $ 10 million in aid from the paycheque protection program. Yes that would be the $ 349 billion federal program it was designed to help small enterprises corn lack of money within two weeks of starting accepting applications.
The program, which is part of the CARES law, allows companies with less than 500 employees (this will be important later) to apply for loans. If they use the money to cover payroll and some other expenses without laying off employees, that loan becomes a free grant.
Many small businesses were refused PPP loans. Others facing snags and snafus try to fill out the papers. Still others filled out requests and never heard back. Some believe that the smaller companies were will never have a good chance because of the way the program is put together.
The US Small Business Administration, which began accepting PPP requests on April 3, announced on April 16 that it had stopped accepting them. That same day, he published a report revealing how the money had been distributed.
Shake Shack was one of several multi-million dollar restaurant chains that received large infusions of PPP money, Bloomberg reports.
Ruth’s Hospitality Group Inc., the parent company of the Ruth’s Chris steakhouse chain, has received $ 20 million in loans although it “made $ 468 million in sales last year and employed around 5,700 people,” according to Bloomberg.
After being criticized for requesting and receiving the money, the company announced on April 23 that it repay his $ 20 million PPP loan.
Potbelly, a sandwich chain with nearly 500 locations, primarily in the Midwest and East Coast, received $ 10 million.
After petitions and much public shame, Potbelly decided to pay back PPP money.
Closer to home, the Irvine-based Kura Sushi chain, which has 25 branches, $ 24 million in cash and access to an additional $ 20 million thanks to a loan from its majority shareholder, received $ 6 million. After widespread outrage, the channel announced that it was returning the money.
Shake Shack, Meyer’s popular hamburger chain, received $ 10 million.
Cue the backlash – and that’s understandable.
As a chef, restaurateur and revolutionary in California cuisine, Jeremiah Tower said on Instagram, “. !!! “
The PPP was intended to help small businesses. So how did Shake Shack, which has 189 restaurants in the United States and made $ 143 million in revenue in Q1 2020, qualify for this program?
Because although it employs nearly 8,000 people, Shake Shack employs only about 45 people at each site. The PPP defines small businesses as businesses with fewer than 500 full-time employees, an exception that hotels and large restaurant chains have called for, according to the Wall Street newspaper. Thus, each Shake Shack restaurant could be considered a small business under the PPP.
It all makes sense, but it hasn’t appeased anyone. After coming under fierce criticism for two days, Randy Garutti, CEO of Shake Shack, and Danny Meyer, CEO of Union Square Hospitality Group. posted a letter on LinkedIn Sunday night, announcing that Shake Shack will immediately repay its $ 10 million PPP loan.
The letter also explained their thought process when applying for PPP loans – it was confusing, we were just following the rules, we had no idea the money was running out.
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The letter says, in part:
“The ‘PPP’ came without a user manual and it was extremely confusing… The best chance to keep our teams at work, off the unemployment line and rehire our on leave and laid off employees, would be to apply now and to hope that things would happen to be clarified in time.
While the program was touted as a relief for small businesses, we also learned that it stipulated that any catering business – including restaurant chains – with no more than 500 employees per location would be eligible … There was no little typeface anywhere that suggested, “Apply now, or we’ll run out of money by the time you finally line up.” ““
In the letter, the company also states that it was fortunate “to be able to access the additional capital we needed to ensure our long-term stability through a public market share transaction.”
Let’s see how the second round of small business loans is going.
Editor’s Note: This story has been updated to include new information about various restaurants returning their PPP loans.