Ruth’s Chris Steak House and other chains return federal loans amid criticism from public and the government
Ruth’s Chris Steak House is returning the $20 million in funds it received from the stimulus package’s Paycheck Protection Program, the latest in a line of major chains that have backpedaled on their acceptance of government loans amid a fierce backlash.
Publicly traded companies like Ruth’s Chris, Shake Shack, and Kura Sushi — all of whom, along with 100-plus location Sweetgreen, recently announced repayment of their PPP loans — have been criticized for taking up funds meant to help small businesses struggling during the pandemic. Companies like these were able to apply for the PPP loans thanks to a deliberate feature in the program that grants eligibility to hotels and restaurants with 500 or fewer employees per location (not per overall workforce). The problem, as Caleb Pershan wrote for Eater, is that funds are limited — the initial round of funding ran out on April 16, less than two weeks after the program was announced — and for every $10 million loan a major restaurant chain receives, there are multiple smaller restaurants that were denied that financial assistance.
Amid this criticism, the Treasury Department warned big publicly traded companies to reconsider applying for small-business loans, adding a new section to its FAQ that says businesses must ‘assess their economic need for a PPP loan” and “certify in good faith that their PPP loan request is necessary.” Given these requirements, the FAQ continues, “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, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”
Companies could be investigated and face penalties if they accept small-business loans against these stipulations. But, as the New York Times notes, this still doesn’t force companies to return the money, and it’s unclear how investigations of improperly given loans would work. Any borrower that applied for a PPP loan prior to April 23 and repays the loan by May 7 will be deemed to have “made the required certification in good faith,” according to the newly issued guidance.
And in other news…
- In light of President Trump’s suggestion to possibly take a UV light to one’s insides or inject oneself with disinfectant (???) to try to kill COVID-19, the FDA commissioner (along with Lysol and Dettol) says please don’t try to ingest disinfectant. [CNN]
- How did profitable major restaurant chains like McDonald’s and Yum Brands (parent company of Taco Bell and KFC) end up in a position where they didn’t have enough cash reserves on hand to weather the pandemic without needing to borrow money or extend lines of credit? Too much buying back of their own stock in previous years, a practice used to drive stock prices and benefit shareholders, the New York Times finds. [NYT]
- New York City is now considering capping delivery fees for third-party apps like Grubhub and DoorDash, following similar proposals and orders in San Francisco, Chicago, and LA. [Eater NY]
- Instacart now has 500,000 shoppers, with plans to hire another 250,000 to meet the record demand of people ordering groceries from home for at-risk workers to deliver. [The Spoon]
- Coronavirus could have dire consequences for the craft distilling industry, which relies on crowded bars, tasting rooms, face-to-face sales, and premium prices. [NYT]
- Gabrielle Hamilton on closing her restaurant Prune, and wondering whether there is still a place for it in a dining landscape that has changed radically over 20 years. [NYT]
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