Large Restaurant Companies taking SBA/PPP Funds (Covid-19)

https://www.politico.com/news/2020/04/2 ... oar-195928

Shake Shack plans to return a $10 million loan it received under an emergency small business rescue program, amid a growing backlash against big businesses that got the money before $350 billion in funding lapsed last week.

Altruism, pressure or a combination of both?

jnm123 wrote:Altruism, pressure or a combination of both?

"Our people would benefit from a $10 million PPP loan, but we’re fortunate to now have access to capital that others do not," they said. "Until every restaurant that needs it has had the same opportunity to receive assistance, we’re returning ours."
-Danny Meyer

CSD

jnm123 wrote:Altruism, pressure or a combination of both?

Whichever it is, they still didn't have to do it and it's the right thing to do, so they have my respect for doing so.

As for Ruth's Chris who is in the same position, I'm waiting...

nsxtasy wrote:As for Ruth's Chris who is in the same position, I'm waiting...

Well said. You'd think it might occur to them that in markets with lots of steakhouses, people will be spending their steak-eating dollars at places that didn't take loans away from small businesses.

nsxtasy wrote:

jnm123 wrote:Altruism, pressure or a combination of both?

Whichever it is, they still didn't have to do it and it's the right thing to do, so they have my respect for doing so.

As for Ruth's Chris who is in the same position, I'm waiting...

Government watchdogs reportedly cried foul at the fact that such big restaurant firms got through the loan pipeline while many small businesses were left waiting for Congress to approve more money for the program.

What a slap in the face to the untold thousands of legitimate small businesses that will not survive this crisis, many because they couldn’t get the help they were promised from the president soon enough, if at all.

CSD

Well, this phenomenon is not escaping the glare of the national media...

White House, GOP face heat after hotel and restaurant chains helped run small business program dry (Washington Post)

...or that of thousands of commenters on social media:

Ruth's Chris Facebook page

I was a loyal Potbelly customer (once a week during bowling season) and now they'll never see a dime of my money again because they took $10 million away from small businesses that needed it.

It's amazing, just from a PR point of view, that Ruth's Chris and Potbelly have let another day go by without returning the money.

As noted here, "Fogo de Chão Inc. also got $20 million, and casual-dining company J. Alexander’s Holdings Inc. received $15.1 million."

Here are the largest public companies taking payroll loans meant for small businesses (CNBC)

nsxtasy wrote:Here are the largest public companies taking payroll loans meant for small businesses (CNBC)

Kura Sushi is on that list. (I looked up who they are. They're a national conveyor-belt sushi chain with heavy concentration in California.) They have returned the money.

https://la.eater.com/2020/4/22/21232165 ... on-dollars

Facing furor, Ruth's Chris high-end steak chain returns $20M small-business loan (NBC News)

The only one I’m gonna miss is Fogo de Chao. I had already committed to spending my gastrotainment dollars at small businesses; this just makes it clear to me that it was the right decision.

Eta: some Austrian place came up with the term first but I’m still claiming it for my purposes.

Although I am glad this was moderated out of the Shake Shack thread to give the topic room for discussion, the title has lead to Yelp!-like discourse, slamming the subject and not really looking far beneath the surface.

Let me start out here with.... I GET IT. Big Business, the squeezing out the little guy, corporate versus family business, etc... but before we slam everything based on the headline, is there any room for discourse on the subject?

I'm not "for" big business. Nor against "family" business. But since this topic is one in which I see both sides as part of my profession, I am surprised at how this site has completely swung only one way, to defend a headline, versus really exploring all sides, which is what LTH use to do.

So I'll look at the subject from a couple angles, to see if there is room for discourse.

Big business versus family business. Debt markets.

One of the reasons large restaurants had and "advantage" to securing funding from this program was that the relationship between the banker and the company already existed. After 9/11, the Patriot Act, KYC regulations, and more recently the FinCen regulations, had all companies complying with government mandates going back to 2001. If you had an existing relationship with a bank, you have up to date compliance with all these areas and you can go right to the loan application process. The "mom and pop" that everyone loves to side with might not have had a true banking presence and had to start from scratch. This isn't a drawback, its just a comment on why the 14 day vetting process skewed towards firms with established bank relationships.

Next, there is also a galvanizing of opinion here that family business was intentionally left out of the process. Lets take a step back. This is a RESTAURANT centric site. Restaurants were deemed essential. They are open for business in limited fashion. The family owned restaurants in my area (West Suburbs) are more likely to be open than the chain restaurants. Since they are open, they are still able to pay their employees.

How many restaurant families, the mom and pops defended here, DISDAIN debt and other outside (bank) involvement? They may just not want the loan that you are posting they deserve.

Next point is the employee. Let's call her Jenny. Let's call him Tim. It doesn't matter. Jenny works at a mom and pop italian Ice Place on Snoosevelt called Wario's. Tim works at Fogo de Whatever in River North, a place that survives on tourist dollars.

Wario's, as a seasonal location, just doesn't have the full years data to go along with the PPP application. That's okay though, as Wario's owner doesn't care fore bank debt anyway, and wants to own his own.

The PPP, Payroll Protection Program was created to protect payroll. So Wario's is able to continue business with some modifications, but Fogo de Whatever has to close because no tourism in Chicago.

If Wario's or Fogo's has to furlough people, they both should still have access to unemployment. But Wario's probably could do a limited reopen, when Fogo could not.

So now you get down to the employee level of Fogo and Wario. Jenny and Tim are married. They both work in the food service industry. One is able to work, with limited hours and social guidance, and the other is out of work. But wait, its the mom and pop family run business that can operate/adapt, while the large corporate devil cannot.

So lets take a step back again and briefly look at economic class. I'll use a name. Tim. Jenny. Miguel. Maria, Sven, it doesnt matter. If Sven works for mom and pop, and the PPP is put in place to help the worker be ret ained and paid through 9/30 employment, who the hell cares if Sven works for Large Corp or Family business.

My point in all this is, can we put emotions aside and have a true discussion on a topic like this, or is this board strictly a one way ticket?

Lastly, I'm sure you've all seen this, but this altruistic little guy beats the big guy is not how the world always works.

Check out this SBA story from the past 24 hours
https://www.nbcnewyork.com/news/coronav ... s/2387019/

I don't believe we will get a good discourse on this. But that's okay. I still like your reviews.

Take care

In my opinion, everything that you said does not negate the fact that this program was designed by Congress for small companies that do not have access to credit markets. The fact that these large publicly held companies found a loophole in the law does not make what they did right. If you want Congress to institute a program for publicly held restaurant companies, then send your arguments to your representative, not to LTH.

lougord99 wrote:In my opinion, everything that you said does not negate the fact that this program was designed by Congress for small companies that do not have access to credit markets. The fact that these large publicly held companies found a loophole in the law does not make what they did right. If you want Congress to institute a program for publicly held restaurant companies, then send your arguments to your representative, not to LTH.

Lou,

I want to remind you that no perspective on this matter is more or less suitable for discussion here. In other words, one need not agree with the OP's premise to post here. That said, I do agree with you that it was the fact that these entities knowingly and willfully exploited loopholes that makes what they did, um, unpalatable. This, in spite of the fact that their goal very well may have been to protect their employees' livelihoods.

=R=

You are correct. ‘Not to LTH’ should not have been in my post.

lougord99 wrote:You are correct. ‘Not to LTH’ should not have been in my post.

No worries. We're all just chatting here.

Thanks,

=R=

When the corporate restaurant CEOs and boards furlough themselves to pay the employees and the number still don’t add up, I’ll be fine with them getting a loan. But that isn’t what happened. All of these companies took loans intended for independent businesses that are integral parts of communities for the purposes of preserving their profit margins and maintaining the lavish pay of people who do jack shit.

Potbelly is returning their PPP money.

https://www.chicagotribune.com/coronavi ... story.html

From article Dave linked just above:

The Chicago-based company’s announcement followed an advisory Thursday from the Small Business Administration that companies that could not prove their eligibility for the funds should give back the money by May 7.

“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,” the SBA said. “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 hammer is coming down on these companies.

nsxtasy wrote:As for Ruth's Chris who is in the same position, I'm waiting...

I think Ruth's Cris is a franchise operation. I'm willing to see a difference between corporately owned chains and chains comprised of franchisees.

Rick T. wrote:

nsxtasy wrote:As for Ruth's Chris who is in the same position, I'm waiting...

I think Ruth's Cris is a franchise operation. I'm willing to see a difference between corporately owned chains and chains comprised of franchisees.

1. Ruth's Chris is a mix of company-owned and franchisee-owned locations, with locations split approximately 50-50 between the two categories. They list all the Ruth's Chris locations by ownership category in their annual report.

2. The $20 million loan was going to the corporate ownership, not to individual franchisees.

3. As noted above, Ruth's Chris gave the money back.

nsxtasy wrote:3. As noted above, Ruth's Chris gave the money back.

It's just funny to me that even after these past decades of crisis-management-lessons-learned of all stripes, someone at top management at Ruth's Chris didn't say to his/her colleagues: "Guys, we're going to have to give the money back anyway. There's no way we get out of this with our reputation alive if we don't. Wouldn't it be better to do that today instead of, like, 5 days from now?"

The Italian market chain Eataly, which bills itself as “the world’s largest artisanal Italian food and beverage marketplace,” appears to be one of a number of large companies to have secured a loan through the federal government’s Payroll Protection Program.

https://www.grubstreet.com/2020/04/eata ... -loan.html

I just heard on CNN that the LA Lakers got money too. They just gave it back though.

Viewing it from the sidelines, it seems all the big recipients wait to be outed by a social-media uproar before they do anything. Even Shake Shack, the first of these companies to do the right thing, only did so after a hue and cry went up. They were smart to do it quickly, which gave them the appearance of "pro-activity" unlike some, who give off the appearance of doing the right thing only because they've been dragged into ethical behavior kicking and screaming. But one thing all have in common is that it seems they hope to remain under the radar. That's disappointing. Wouldn't it be refreshing if a company said to the public, "You know, no one has made a stink about us taking the money, but it was clearly wrong for us to have done so--and we would not have even applied for it had we known it would deprive more needy recipients--so we're giving it back."

riddlemay wrote:Wouldn't it be refreshing if a company said to the public, "You know, no one has made a stink about us taking the money, but it was clearly wrong for us to have done so--and we would not have even applied for it had we known it would deprive more needy recipients--so we're giving it back."

Here's one I hadn't heard about:

https://ny.eater.com/2020/4/28/21239788 ... l-ppp-loan