Outrage over big businesses exploiting the Paycheck Protection Program (PPP) to secure taxpayer-funded bailouts is proving to be an effective deterrent. Ruth’s Chris is just the latest organization to succumb to the pressure of a grassroots “bailout boycott.”
Marketed as a way to rescue small businesses devastated by coronavirus lockdowns, the program doled out loans to only 19% of eligible hospitality businesses before big corporations sucked up all available funds.
In less than two weeks, thousands of small businesses were left without support because they lacked the attorneys and major bank relationships necessary to get through the hoops faster than the big guys.
According to Reuters,
More than 25% of the total pot went to fewer than 2% of the firms that got relief. They include a number of publicly traded companies with thousands of employees and hundreds of millions of dollars in annual sales.
With $579 million in sales last year, Shake Shack is not some little shack that needed shoring up. Yet it received $10 million, which it couldn’t give back fast enough, ostensibly out of generosity.
Shake Shack said it applied because the PPP welcomed them:
While the program was touted as relief for small businesses, we also learned it stipulated that any restaurant business – including restaurant chains – with no more than 500 employees per location would be eligible…”
One has to wonder how the “per location” got worked into the CARES Act just for hospitality businesses. Are there any restaurants in the United States with more than 500 employees in one location? That sounds like the extra phrase lobbyists from some large restaurant corporations worked into the bill to make sure the big boys and girls couldn’t be disqualified.
Operators of large restaurant and hotel chains were specifically granted the chance to get Paycheck Protection Program loans…. “The restaurant industry is uniquely affected by this pandemic,” a National Restaurant Association executive, Sean Kennedy, told The Wall Street Journal several weeks ago, in discussing his trade group’s lobbying on the CARES Act. “We think we deserve a unique response from the federal government.”
Which politicians were looking out for some really big businesses when they approved “per location” — language that is applied under the act only to hospitality businesses… like the kind owned by President Trump?
I’m not the only one cynical enough to see its inclusion for hospitality alone was no accident:
Congress added one big exception: Restaurants and hotel chains can apply as long as they have fewer than 500 employees per location. This was an intentional carve-out, not a drafting error. The law is written to help most of the hospitality industry, including the Shake Shacks of the world…. It’s essentially a small-business rescue and quiet bailout of the restaurant industry grafted together.
Shake Shack qualified, even though it has thousands of employees, because its employees are spread over 189 U.S. locations.
Shake Shack got shamed into giving back its bailout, but they complained that grabbing bailouts intended for smaller companies was not their fault:
The onus was placed on each business to figure out how, when, or even if to apply. The “PPP” came with no user manual and it was extremely confusing…. Few, if any restaurants in America employ more than 500 people per location.
That is the way lobbyist’s loopholes work. Loopholes make the law more confusing, so only big corporations with expensive attorneys and accountants can see the loophole while politicians can claim it was an oversight.
Shake Shack turned their very public return of the money into skilled PR, making it sound as though refunding the money was their idea solely because they felt concerned about their competition. (Nice try guys.)
Late last week, when it was announced that funding for the PPP had been exhausted, businesses across the country were understandably up in arms.
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? We now know that the first phase of the PPP was underfunded, and many who need it most, haven’t gotten any assistance….
We’ve decided to immediately return the entire $10 million PPP loan we received last week to the SBA so that those restaurants who need it most can get it now.
Then they kindly lectured Congress on how the act could be redrafted and better-funded.
According to Shake Shack’s CEO, they took the bailout money for the sake of their heroic employees. In fact, they only operate restaurants for one reason – to create jobs! Theirs is a noble task, not one done primarily for profits.
The Small Business Community on Reddit saw things a little more cynically:
Shark Tank billionaire Mark Cuban saw it the same way:
Shake Shack didn’t give the money back because they didn’t want the money…. They saw what the public outcry was.
By returning the bailout money, Shake Shack shook off public criticism and received millions of dollars worth of free publicity about their noble concern for their competitors.
Like Shake Shack, Ruth’s Chris Steak House decided it had best fork over the $20 million bailout it grabbed from the PPP.
The restaurant chain has been under fire for accepting stimulus loans earmarked for struggling small businesses….
Ruth’s Chris also has less than 500 employees at each location, and like Shake Shack, public outrage caused them to turn their money grab into PR gold:
“We intended to repay this loan in adherence with government guidelines, but as we learned more about the funding limitations of the program and the unintended impact, we have decided to accelerate that repayment,” said [Cheryl Henry, CEO of Ruth’s Hospitality Group]. “It is our hope that these funds are loaned to another company to protect their employees.”
And just like Shake Shack, they blame the funding limitations. But who can believe they would have quickly given the money back if not for the public outcry that made taking it PR peril and giving it back PR platinum?
I call this the “bailout boycott” because these businesses are scared the public will not return when the coronacrisis ends if they don’t act responsibly and return funds the public clearly wants to see go only to genuinely small businesses.
The response from Ruth’s Chris came after a Texas resident rallied a quarter-million people to petition the restaurant to give the money back.
The public’s bailout boycott has accomplished what our leaders in Congress were not capable of — making sure all the money funnels into businesses with the least resources to weather a government-imposed business crisis.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.