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Big Restaurant Chains Face Backlash Over PPP Cash Grab

A number of large chain restaurants managed to obtain emergency funding through the $350B Paycheck Protection Program, which was billed as a way to help sustain small businesses during the pandemic.

Rendering of a Shake Shack in New York

The payments have earned the chains some backlash, especially since many small restaurant operators were unable to obtain funds at all because the program ran out of money on April 16, Politico reports. Negotiations have been underway on Capitol Hill since then to renew the fund, but it hasn't happened yet.

The CARES Act, which created the PPP in late March, specified that relief would be for companies that employed fewer than 500 workers, in the form of forgivable loans from the Small Business Administration.

But language of the bill also said that in the case of restaurants, that meant fewer than 500 workers per location, thus allowing large chains to participate in the program. The maximum a company could receive through the PPP was $10M.

Two subsidiaries of Ruth's Hospitality Group, which owns or franchises 159 restaurants, received a total $20M in SBA loans under the PPP, according to Shake Shack received $10M, as did Texas Taco Cabana and Potbelly.

At least one chain, Shack Shake, agreed to return the funding it received. Shake Shack CEO Randy Garutti and Chairman Danny Meyer said in a post on LinkedIn on Sunday that the company had obtained $150M in funding in the capital markets that would help it get through the crisis.

"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 post said. "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?"

Garutti and Meyer called on Congress to re-fund the PPP and make sure that it is accessible to all restaurants. The National Restaurant Association has asked Congress to go even further by setting up a $240B fund specifically for the industry.

The fund, called the Restaurant and Foodservice Industry Recovery Fund, would help restaurants pay for immediate needs such as payrolls, rent and rehiring workers while they readjust to stricter health and safety standards, QSR reports.

The restaurant industry is also lobbying Congress to force insurance companies to cover business interruption claims caused by the pandemic, the Wall Street Journal reports. The insurance industry is counter-lobbying Congress to prevent that from happening, asserting that most business interruption policies issued before the pandemic exclude losses from such an event.