In a filing Thursday with the Securities and Exchange Commission, the company said it was returning the money.
“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,” Uba said. “We hope that these funds will be shared equitably among deserving candidates.”
The founders of fast-salad chain Sweetgreen also decided to return funds to the program, saying that it had been approved for $10 million at the end of last week but found out at the same time that the program had run out of funds.
“Knowing that, we quickly made the decision to return the loan,” wrote founders Nicolas Jammet, Nathaniel Ru and Jonathan Neman.
Sweetgreen has been valued at well over $1 billion by Wall Street investors. Unlike loans to publicly traded firms, the Sweetgreen money had not been disclosed because the company does not have publicly traded shares.
Executives at Shake Shack similarly decided earlier this week to cancel a $10 million loan, saying when it was announced that funding had been exhausted, “businesses across the country were understandably up in arms” and they were thankful to have access to private-sector financing.
Based in Irvine, Calif., Kura Sushi USA serves popular Japanese cuisine on a rotating conveyor belt. The company, with more than 400 locations in the United States as well as in Japan and Taiwan, closed all of its restaurants March 18 and has not been able to offer takeout or delivery.
By most definitions, however, Kura Sushi USA is not a small business. It is worth $88 million and is the U.S. subsidiary of a Japan-based conglomerate that has more than 400 restaurants and 35 years of brand history, according to the company’s public filings.
Yet because of rules baked into the Cares Act economic stimulus legislation, Kura Sushi USA subsidiaries were allowed to apply independently for small-business funds despite having the same corporate parent. As a result, more than 80 publicly traded companies received money from the Paycheck Protection Program, meant for companies with fewer than 500 employees.
Uba said in his statement that he applied for the funds because policymakers had clearly allowed such an exemption for the restaurant industry, which has been one of the hardest hit of any in the country.
More than 8 million restaurant and food workers have lost their jobs since the pandemic began, according to a survey released Monday by the National Restaurant Association, which is pushing Congress to provide the industry with greater financial relief. Restaurant spending declined nationally by 26 percent from February to March and has dropped by 90 percent in New York, one of the epicenters of the virus.
When the small-business relief measure passed, “we were genuinely excited for all restaurants — more restaurant jobs were lost than in any other industry, and this was great news for everyone in our industry,” Uba wrote.
Once the money ran out last week, details emerged about large chains — including Ruth’s Chris Steak House, Potbelly Sandwich Shops and big hotel owners — receiving millions of dollars in funds before the money was exhausted. The blowback from the public, small-business advocates and lawmakers in both parties was fierce.
The Cares Act contains no requirement that information about which companies receive small-business loans be made public, though details have trickled out about some recipients. The SBA has previously released such information about loan recipients and says it intends to release additional information in the future.
Uba said he initially thought the program would allow employees at all of the country’s restaurants to be paid. When he learned that wasn’t the case, Uba said, he decided to cancel the 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,” he said. “This was a wrong assumption.”
Money that is returned to the government from the program is made available to other companies that are waiting, according to the Small Business Administration.
“Canceled loan approval dollars get put back into the PPP program and can be reused once the PPP program receives funding,” said agency spokesman Jim Billimoria.
Officials from both parties have agreed to bar larger companies with multiple affiliates from receiving the funds as they ready to approve another enormous round of economics relief. On Tuesday, the Senate passed a $484 billion deal to replenish the program, and the House is expected to approve the measure Thursday.
Asked about bigger companies getting the funds, President Trump said Tuesday that “if somebody got something that we think is inappropriate, we’ll get it back.” Treasury Secretary Steven Mnuchin said “the intent of this money was not for big public companies” and larger firms would be blocked from getting funds from the program.
Source: Thanks https://www.washingtonpost.com/gdpr-consent/?next_url=https%3a%2f%2fwww.washingtonpost.com%2fbusiness%2f2020%2f04%2f23%2fkura-sushi-sba%2f