7 Restaurant Chains Shamed into Returning Multimillion-Dollar Loans
A growing number of national restaurant chains are returning multimillion-dollar federal relief loans that were designed to help small businesses struggling as a result of this global pandemic.
The COVID-19 outbreak has cratered the U.S. economy, and arguably, no industry has been hurt worse than restaurant and foodservice businesses. Lockdown guidelines have shuttered nearly every restaurant across the country, which has made those that are locally-owned particularly vulnerable.
To help out, the federal government launched a historic bailout of small businesses in the form of a $350 billion loan program, but it didn't exactly get off to the great start: A lot of the money designed to help the "little guy" ended up in the hands of bankers and their "big guy" corporate clients.
Yes, national chains have also been hit hard, but many of those are owned and operated by publicly traded corporations and enjoy larger profit margins and have a standard "six-month operational budget in the bank" approach to weather an unforeseen storm like the one we are seeing right now.
The public relations shame of "Goliath" restaurant chains taking critical resources from small-time mom and pop restaurants are leading these corporations to return that federal cash. Here are a handful of examples of big restaurant chains that are doing the right thing by returning the loans they received. And, to keep yourself informed, sign up for our newsletter to get daily coronavirus food news delivered straight to your inbox.
The national high-end burger chain was the first to become the "poster child" of apparent corporate restaurant greed, receiving $10 million from the Paycheck Protection Program (PPP). Amid the backlash, however, founder Danny Meyer and CEO Randy Garutti announced on LinkedIn their plans to return the cash.
"Shake Shack was fortunate to be able to access the additional capital we needed to ensure our long term stability through an equity transaction in the public markets. We're thankful for that and we've decided to immediately return the entire $10 million PPP loan we received to the SBA so that those restaurants who need it most can get it now."
Ruth's Chris Steak House
The national steak house chain also got a lot of attention in the past week, some of which was on the floor of the House of Representatives, but it was not the sort of brand awareness that marketers ever seek. The once humble 60-seat steak house that started in New Orleans is returning the $20 million in funds it received from the stimulus package.
Nathan's Famous is a small business designed for a government bailout? Well, according to the NY Post, "Nathan's Famous joined the slew of companies returning small-business loans amid an outcry over big firms getting coronavirus aid." The Coney Island hot dog brand "plans to return the $1.2 million loan it received through the Paycheck Protection Program meant to help Main Street merchants cover payroll and other expenses during the pandemic."
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In a post published on Medium, the healthy salad and grain bowl chain posted "At the end of last week, we were approved for a $10M loan through the program. That same day, 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."
The LA-based national sushi chain received $6 million in a small business loan, but returned it. The CEO wrote, "Today, we made the decision to return our PPP 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. We hope that these funds will be shared equitably among deserving candidates."
Potbelly announced over the weekend their plans to return the $10 million loan from the Paycheck Protection Program intended for small businesses. The national sandwich chain received the maximum loan amount, despite boasting of a current market cap of $71.2 million.
The parent company of the national restaurant chain obtained two Paycheck Protection Program loans totaling $15.1 million. Late last week, however, they announced their decision to return the full amount in a filing with the U.S. Securities and Exchange Commission. Good for them, and the rest of these restaurant chains for knowing the right thing to do during these tough times.