April 20, 2020
The federal government gave national hotel and restaurant chains millions of dollars in grants before the $349 billion program ran out of money Thursday, leading to a backlash that prompted one company to give the money back and a Republican senator to say that “millions of dollars are being wasted.”
Thousands of traditional small businesses were unable to get funding from the program before it ran dry. As Congress and the White House near a deal to add an additional $310 billion to the program, some are calling for additional oversight and rule changes to prevent bigger chains from accepting any more money.
Ruth’s Chris Steak House, a chain that has 150 locations and is valued at $250 million, reported receiving $20 million in funding from the small business portion of the economic stimulus legislation called the Paycheck Protection Program. The Potbelly chain of sandwich shops, which has more than 400 locations and a value of $89 million, reported receiving $10 million last week.
Shake Shack, a $1.6 billion burger-and-fries chain based in New York City, received $10 million. After complaints from small business advocates when the fund went dry, company founder Danny Meyer and chief executive Randy Garutti announced Sunday evening that they would return the money.
They said they had no idea that the program would run out of money so quickly and that they understood the uproar.
“Late last week, when it was announced that funding for the PPP had been exhausted, businesses across the country were understandably up in arms,” the two wrote in a letter posted online. “If this act were written for small businesses, how is it possible that so many independent restaurants whose employees needed just as much help were unable to receive funding?”
“We now know that the first phase of the PPP was underfunded, and many who need it most, haven’t gotten any assistance.”
Treasury Secretary Steven Mnuchin, who has tried to defend the program in recent days, wrote on Twitter that he was “glad to see” Shake Shack return the money.
In all, more than 70 publicly traded companies have reported receiving money from the program, according to filings with the Securities and Exchange Commission.
Sen. Rick Scott (R-Fla.) criticized the program, saying that “companies that are not being harmed at all by the coronavirus crisis have the ability to receive taxpayer-funded loans that can be forgiven.”
“I am concerned that many businesses with thousands of employees have found loopholes to qualify for these loans meant for small businesses,” Scott said. “Unfortunately, when it comes to the PPP, millions of dollars are being wasted.”
Some of the companies receiving money are clients of JPMorgan Chase, adding fuel to criticism that Wall Street banks had helped their clients obtain large amounts. The bank put out a statement Sunday saying that it is “proud to have secured more funding for small businesses than anyone else in the industry” and that 80 percent of its PPP loans have been for businesses with less than $5 million in revenue.
JPMorgan explained that larger companies may have been served more quickly because its commercial banking unit, which serves larger clients, was able to complete “most of the applications it received” while many more applications poured in from traditional small businesses.