From all accounts, it seems clear that the Payroll Paycheck Protection (PPP) program has been a mess for the restaurant industry. Originally intended to help small businesses stay afloat and keep people employed during the COVID-19 crisis, it has instead been riddled with controversy. Large chains, such as Ruth’s Chris Steakhouse, Shake Shack, and Potbelly, received money, then returned it. The $350 billion initially invested in the program ran out on April 16, less than two weeks after the stimulus was announced. Small business owners are now suing big banks, claiming they were unfairly passed over.
Here in Seattle, it’s not clear how many restaurants actually received PPP loans, but at least anecdotally, the reports aren’t any more encouraging than the national picture. Seattle Restaurants United — a coalition of local independent restaurants advocating for industry support — recently ran a survey of its members. Among those that responded, 66 said they applied for the PPP, but only four had received funds at the time they took the survey, ranging from April 14 to April 21.
On Monday, the PPP was replenished with $310 billion and reopened for applications, and there are new rules in place meant to close a loophole in the original language of the stimulus bill that let companies with 500 or fewer employees per location apply. Around $60 billion has been earmarked for smaller lenders for these purposes — but it remains to be seen whether or not things will improve for restaurants seeking a lifeline. In perhaps a bad sign, the Small Business-Administration’s site crashed almost immediately.
Eater discussed the PPP program with several local chefs and restaurateurs who applied and either got a loan on the first try, were denied, or are trying for the next round. All said there have been major issues with the program.
It seems nearly impossible to get a loan, even if one does everything right
James Beard Award-winning chef Edouardo Jordan of Salare, JuneBaby, and Lucinda Grain Bar, applied for a PPP loan in March, but never received money. Jordan says he’s had a good relationship with the bank he’s used for years, but adds that there was a lot of confusion. For instance, he was unaware that he could apply for the loan using any lender, not just the one with which he already had been doing business. He applied on paper, when there was an online portal being set up, perhaps resulting in costly delays.
“I know that I did everything properly, and for them to drop the ball, it’s kinda embarrassing and it sucks,” he says, referring to the program. “I just think about people who are less established than I am — they don’t really have a fighting chance.”
Destiny Sund, co-owner of Pike Place Market-based dessert maker The Confectional, had frustrations as well. Her business had employed just seven people before it temporarily closed, and qualified for just $71,000 in loan money — but still was shut out. “As soon as the application was available, we applied, but the funds ran out seemingly overnight, and our application didn’t even get reviewed,” she says. “It was heartbreaking ... Our business partner tried to call for a status update, and he was told he was like 2000-something in line to talk to the bank. They were overwhelmed.”
The deadline to hire most employees back seems unviable
Full forgiveness of the PPP loan is still contingent on businesses hiring most, if not all, of their employees back by June 30. Otherwise, the loan has a one percent interest rate on a 24-month timeline. Hitting that forgiveness cutoff for restaurants in Washington seems nearly impossible, with the state’s stay-at-home order in place until at least May 4 — and likely longer. “We actually didn’t end up submitting an application last go around, mostly because the timing felt too restrictive for us,” says Alex Pemoulie, director of finance for Sea Creatures (Renee Erickson’s group that includes Bateau, The Whale Wins, and other acclaimed restaurants). “But we submitted our application for a PPP loan [for the second round] over the weekend. No words or funds yet.”
Restaurateur Ethan Stowell (known for popular Mediterranean-leaning spots like Tavolata, How to Cook a Wolf, Cortina, and many others) was the only one Eater spoke to that actually received a PPP loan in the first round. He says he used a smaller bank, which helped his group secure the money — but the June 30 deadline for the forgivable portion will still include complications. He had 365 employees before the stay-at-home order and went down to 48, with only seven out of his 17 restaurants open in some capacity for takeout and delivery. “Servers wouldn’t come back and make what they’re making now,” he says, noting that with increased unemployment benefits, restaurant workers could understandably opt to stay home until the added unemployment cushion from the stimulus runs dry.
Stowell is not just sitting on the PPP loan — he’s using it to pay current payroll, and is considering if reopening other locations or starting a community kitchen would make sense. But getting to full capacity will prove challenging, no matter what, especially with so much uncertainty in the medium and long term. Even though the PPP loan doesn’t require a business to be fully open to receive the money, it still covers only eight weeks of payroll, and it’s difficult to determine what the restaurant landscape will look like later this summer, even if dining rooms are open again. “I hope [lawmakers] will understand how restaurants are a little bit more unique than a lot of businesses,” he says. “We know how best to support our employees, what they’re asking for, what they’re needing.”
Says Sund, “I think it’s pretty obvious that the June 30 deadline needs to be extended. Only one of my employees has successfully been able to get unemployment, and the rest are still waiting. But we can’t fund payroll — which is $12,000 to $15,000 every two weeks — while we’re closed. And reopening comes with plenty of other costs.”
Even if a restaurant gets a loan, it’s unclear how it will help long term
Stowell says that if the rules should be changed for the PPP to be more flexible, whether on the forgivable portion or the loan itself, that might help. “A two-year loan is really short,” he says, adding that a 10-year payback period would be more reasonable. But that’s still more debt, something that many restaurants just can’t bear. “I feel bad for everyone,” he says. “I get why people are calling for a bailout of the restaurant industry. For those just starting out, this must feel insurmountable.”
Like others Eater spoke to, Jordan says that, even if he’s successful securing money on this next try, he will not reopen locations unless he knows it’s completely safe. There’s also no guarantee that, even if dining rooms are allowed to reopen in Washington this spring, the virus won’t come back and force more closures down the line. “It would be like we’re opening from day one — retraining staff, purchasing food and product costs — then needing to just have working capital to pay some of the bills that have been lingering, plus ones coming up,” he says. “Can you imagine trying to do that two or three times over the course of the next four or five months? We would be done.”
Sund says she does 80 percent of her business during the summer months, but doesn’t know that reopening costs will make the effort worth it, given what may be available through the PPP program. “What are we reopening to? A ghost town? Nobody knows. We already have loans. We’re looking for grants, not loans,” she says, adding that the smaller restaurants — with 50 employees and fewer — are especially in for hard times. “There are many of us, and we feel like we’re just getting a shut out. It often feels like we’re just shouting into a void.”