Federally backed loans under the Paycheck Protection Program (PPP) helped chain restaurants stay open. But the same can’t be said for smaller franchises and mom-and-pop shops, according to loan data released by The Small Business Administration in July.
One-third of the Top 500 concepts received over $42 billion in PPP loans. Well-known establishments such as P.F. Chang’s, Ruby Tuesday, and T.G.I. Friday’s received loans between $5 million and $10 million. However, the Nobu group of luxury sushi restaurants backed by actor Robert De Niro received over 14 loans, some for as much as $28 million according to a report by CNBC.
Other chains such as Shake Shack and Ruth’s Chris Steakhouse also received loans between $5 million and $10 million in April but returned them after facing wide-spread public backlash.
However, small franchises like Boloco in Massachusetts and The Roanoker in Roanoke, Virginia still felt the brunt of the coronavirus pandemic.
John Pepper, owner, and chief executive of the Boloco franchise, told Florida Politics that his PPP loan couldn’t save the two locations he had to permanently close. Boloco’s sales are down nearly 70 percent since March and Pepper’s staff has quickly dwindled from 125 to 50.
“A lot of this is out of our hands at this point,” he said. “At this moment, I don’t see getting my full payroll back.”
Butch Craft, who owns The Roanoker, echoed this story in The Roanoke Times. He said his loan helped keep the lights on but wasn’t able to save the 40 jobs he had to cut.
“People think, ‘Well that’s a big restaurant, it’s been in business all these years,’” Craft told the newspaper. “But when you drop your incoming sales to about a quarter of what they were, [and] you’re still getting the bills in for electricity and rent and all of that, it would have been impossible to last this long if we hadn’t had the PPP.”
The disparity grew larger between Black-owned businesses and white-owned or unidentified. Delish recently reported that of the nearly 49,000 restaurants that received PPP loans over $150,000, just 130 identified as being Black-owned.
Similarly, The Detroit Free Press found just one Black-owned restaurant received a loan of $150,000 or more out of 785 restaurants in Michigan.
These disparities are part of the reason why restaurants around the country are calling on Congress to help support them as the coronavirus wreaks havoc on the foodservice industry.
Several prominent groups in the industry including the Independent Restaurant Coalition, a nonprofit advocacy group, are calling on Congress to enact the RESTAURANTS Act to provide over $120 billion in funding for restaurants that are not publicly traded and earn less than $1.5 million in annual revenue.
Congress, on the other hand, seems to be moving in the opposite direction.
Last week, Senate Republicans announced that part of their stimulus plan includes allowing small to medium-sized businesses with under 300 employees who can prove a 50 percent loss in quarterly gross profits to apply for the second round of PPP loans.
The National Restaurant Association (NRA) contends this plan would make over half of the industry ineligible for the loans.
In response, the NRA sent a letter to Congress on August 3 asking for a second draw in PPP loans with partial forgiveness and enhancements to the Employee Retention Tax Credit and Work Opportunity Tax credit to help stabilize the hard-hit industry.
“The restaurant and foodservice industry, the nation’s second-largest private-sector employer, continues to face unique challenges. Since July 1, nearly 100,000 restaurant dining rooms have been shut down a second time by government mandate. The number of restaurants forced to close permanently continues to increase and unfortunately, we remain on track to lose $240 billion in revenue this year,” the letter reads.
The economic outlook of the industry is dire at best, some analysts warn if Congress fails to pass supportive legislation.
Recently, the Bureau of Labor Statistics found that of the 20 million jobs lost since April, over one-quarter were in the restaurant industry. At the time, the NRA predicted the industry would lose approximately $120 billion, but has since doubled its prediction.
Furthermore, a recent survey from The Hospitality Alliance found that most independent restaurants are struggling to make ends meet financially. Over half of the 509 restaurants polled reported they paid half or less than half of their monthly rent. Only one-in-five reported paying the full amount.
Independent restaurants make up over 60 percent of annual restaurant sales in the US, meaning that without some meaningful assistance, the industry’s cash cow will become another grazing sheep.
Closing independent restaurants would also take a lifeline away from those entering the workforce and from immigrant families.
“Neighborhood restaurants we love are closing every day, knocking a rung off the ladder of someone’s American dream,” Andrew Zimmern, a founding member of the Independent Restaurant Coalition, said in a press release.
“Nearly 40% of independent restaurants are owned by immigrants. They are America’s favorite first job, the top employer of non-white managers, and employ over one million single moms. They are passion projects and community lifelines. They are our family, and we hope this ad reminds Congress of the stakes facing their communities during the pandemic. Independent restaurants simply cannot generate enough revenue to stay open and continue employing 16 million people around the country without relief from Congress.”
