On April 16, the $349 billion first round of the government’s Paycheck Protection Program (PPP) for small business coronavirus relief loans ran out of money after just 13 days.
Many people were quickly outraged to learn that while so many small businesses were shut out of getting a loan, publicly-traded restaurant chains received loans. These included Shake Shack ($10 million), Ruth’s Chris Steakhouse ($20 million), Potbelly Sandwich Shop ($10 million), Taco Cabana ($10 million), and J. Alexander’s ($15.1 million).
The PPP guidelines defined a small business as having fewer than 500 full-time employees, but large chains with fewer than 500 employees per location were able to qualify thanks to a carveout that gave restaurant and hotel chains an exemption. (President Trump is expected on Friday to sign off on another $320 billion for a second round of PPP.)
By April 19, Shake Shack announced in a LinkedIn post that it would return its PPP loan.
Shake Shack CEO Randy Garutti and Union Square Hospitality Group CEO Danny Meyer wrote that the PPP “came with no user manual and it was extremely confusing,” and said Shake Shack applied early on in the process, before it was able to obtain alternate funding by issuing $140 million of new Class A shares.
Now some of the other large chains that got PPP loans are following suit—at first by choice, and soon by demand, after the Treasury Department on Thursday issued new guidance asking publicly traded companies to return their PPP 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” that it needs the loan to survive, Treasury wrote in an FAQ document.
Yahoo Finance is tracking these companies and will continue to update the list below.
Sweetgreen announced on April 22 that it will return its $10 million loan, becoming the first chain after Shake Shack to make the move. In a Medium post, the salad chain’s cofounders wrote that on the same day the chain learned it got a PPP loan, “We learned that the money had run out and so many small businesses and friends in the industry who needed it most did not receive any funds. Knowing that, we quickly made the decision to return the loan.” Sweetgreen has more than 100 locations and has not yet gone public; its latest private valuation is reportedly $1.6 billion.
Kura Sushi announced later on April 22 that it will return its $6 million loan. “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,” wrote CEO Jimmy Uba in a letter on the homepage of the company’s web site. Kura Sushi has 25 locations in the U.S. and is publicly traded, with 2019 revenues of $64.2 million.
Ruth’s Chris announced on April 23 that it will return the $20 million loan it received by applying for PPP on behalf of two different subsidiaries. In a statement to press, the company said, “We intended to repay this loan in adherence with government guidelines. As we learned more about the funding limitations of the program and the unintended impact, we have decided to accelerate that repayment... It is our hope that these funds are loaned to another company to protect their employees, just as we intended.” Ruth’s Chris has 150 locations (75 are franchised) and 5,740 employees, with $468 million in revenue last year.
Potbelly announced on April 25 in a very brief statement that it is returning its $10 million PPP loan “after further clarification from the Treasury Department. We will continue to seek alternatives to help support our employees and enable them to return to work so they can serve our loyal customers.”
Daniel Roberts is an editor-at-large at Yahoo Finance. Follow him on Twitter at @readDanwrite.
Read more on the Paycheck Protection Program for small businesses: