The hospitality group behind Ruth’s Chris Steak House — operator or franchiser of 159 restaurants — showed a profit of $42 million on $468 million in revenue in 2019 and a workforce topping 5,000, according to The Wall Street Journal. Yet, the company is one of many big conglomerates that bagged forgivable loans from the government’s $350 billion Paycheck Protection Program (PPP).
Ruth’s Hospitality Group snagged $20 million in Small Business Administration (SBA) loans on April 7, according to multiple reports that cited a securities filing, including Reuters. The PPP launched on April 3 and ran out of money on April 16.
The loans, with just 1 percent interest rate, were intended for small- to medium-sized businesses (SMBs) with less than 500 employees, but the $2 trillion stimulus bill enabled restaurants and hotel chains to take part in the program as long as each physical location did not exceed 500 employees, according to the WSJ.
The PPP fund ran out of money before many SMBs owners even heard back from their banks about qualifications. The SBA indicated that 1.1 million applications were approved by April 14 for $263 billion, with the average loan size roughly $239,000.
Over 25 percent of the money from the PPP went to less than 2 percent of the firms that got loans, according to Reuters. Further, the report indicated that the SBA loans “appeared to reach a greater proportion of businesses in Republican-leaning states that have imposed the lightest restrictions on business and have had relatively few confirmed coronavirus cases.”
According to a Reuters analysis of SBA and Census Bureau data, 583 loans were extended for every 1,000 businesses in North Dakota. Comparatively, 149 of every 1,000 businesses in California received loans.
“I’m hard-pressed not to think that this is political,” Rep. Jackie Speier of California said on Twitter. “Blue states like California got a pathetic number of loans issued.”
Shake Shack, which made $595 million in sales with a $20 million net profit in 2019, got $10 million. Texas Taco Cabana, which has 164 outlets from Houston to Albuquerque plus a chain of chicken restaurants in Florida, posted $661 million in sales last year with a net loss of $84.4 million and got $10 million. Potbelly, which has 474 shops in 32 states, including 48 franchisees, had $410 million in revenue with a $24 million loss and got $10 million. Another $10 million went to the coal mine operator Hallador Energy.
“What a slap in the face to the untold thousands of legitimate small businesses that will not survive this crisis, many because they couldn’t get the help they were promised from the president soon enough, if at all,” Derek Martin of the watchdog group Accountable.US told Politico.
The top three states by economy — California, Texas and New York — got $82 billion or 23 percent of the loans. Construction is the segment that got the most loans — 13 percent — although it represents less than 9 percent of firms with fewer than 500 employees, Census data indicates.
The hospitality sector got about 9 percent of total loans and represents almost 14 percent of people who work in companies with less than 500 people. A minimum of 60 publicly traded firms got loans, according to Securities and Exchange Commission filings.
Lawmakers and business leaders had high hopes that the PPP would help keep SMBs afloat. It may not be sufficient, however, given the 9 percent drop in retail sales in March, and the average SMB expecting to run out of cash two months prior to the pandemic’s end, even with government help, according to PYMNTS data.
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