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.
Senator Rick Scott, a Florida Republican, 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.’’
Senator Marco Rubio, a Florida Republican who is chairman of the committee overseeing small businesses, addressed the criticism Monday on CNBC, saying that hotels and restaurants are some of the first and hardest-hit companies and that many of their locations are owned by true small businesses or individuals.
But he said that there have been ‘‘some people approved, some companies, that I believe should not have been, even under the intent of the law, and that comes down to the certification process and how they were certified into the system.’’
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 more applications poured in from traditional small businesses.
The PPP program was intended to benefit workers at businesses and nonprofit employers with fewer than 500 employees that are unable to obtain credit elsewhere, according to the Small Business Act, which formed the basis for the program.
But after intensive lobbying by the restaurant and hotel industries during the weeks leading to the passage of the $2 trillion Cares Act economic stimulus package, Congress allowed separate subsidiaries and locations to apply as businesses, even if they were part of a national or international chain.
Thus multiple Ruth’s Chris locations could apply under separate entities even though the parent company employed about 5,740 people at the end of last year, according to public filings. Other industries and advocates lobbied against affiliation rules as well, including the private equity industry.
Mnuchin has called the PPP a success, saying in a statement Friday that the program provided funding to more than 1.6 million small businesses in all 50 states.
Source: Thanks https://www.bostonglobe.com/business/2020/04/20/shake-shack-will-return-its-entire-million-government-loan/PusGjFIjUrnaTDqaPyLppM/story.html