Ruth's Chris Steak House will return the $20 million coronavirus small-business loan it procured from the government's $350 billion Paycheck Protection Program, the company announced Thursday.
The PPP was designed to throw a financial lifeline to the millions of small businesses who have seen revenues plunge due to social distancing lockdowns — but the hastily conceived program left thousands of applicants high and dry, after funds were snapped up in less than two weeks.
Ruth's Hospitality Group, which owns the Ruth's Chris Steak House brand, operates more than 100 steakhouses across the United States, Canada and Mexico. It managed to secure two $10 million loans, one for each of its subsidiaries.
Cheryl Henry, CEO of Ruth's Hospitality Group said in a statement that the company was eligible for the funds it had applied for in order to protect employees and their families.
"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 Henry. "It is our hope that these funds are loaned to another company to protect their employees."
With fewer than 500 employees at each location, the company argued that it does meet the eligibility requirements for the loan and has had to furlough some employees.
However, the chain has been under fire for accepting stimulus loans earmarked for struggling small businesses, not multimillion-dollar corporations.
A Change.org petition circulated this week demanding the chain return the funds drew over 250,000 digital signatures.
In Securities and Exchange Commission filings, other large publicly traded restaurants disclosed their receipt of program funds or intent to file for them. They included Carrols Restaurant Group, operator of more than 1,000 Burger King franchises; the Potbelly Sandwich Shop chain ($10 million); J. Alexander's Holdings ($15 million); and Kura Sushi ($6 million).
The sushi chain announced Thursday it will be returning the funds, saying "it’s impossible to ignore the fact that our finances allow us to weather financial hardship for a longer period than independent restaurant owners."
Salad chain Sweetgreen also announced Thursday it would be returning its $10 million loan.
"We learned that the money had run out and so many small businesses and friends in the industry who needed it most did not receive any funds. If this crisis has taught us anything, it is that we are all in this together and we believe strongly that the restaurant community needs more support and resources to weather this storm," its founders wrote in a memo.
After names of publicly traded companies which had received funds under the program started making headlines, Secretary of the Treasury Steven Mnuchin warned that the program was not intended for these kinds of companies and said there would be penalties unless they gave the money back.
During the application process, companies must certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”
“I think a lot of these big companies, it’s questionable whether they can make that certification,” Mnuchin told the Fox Business Network on Wednesday.
Shake Shack, another large restaurant chain that got a loan under the program, said earlier this week it would be returning the $10 million it had received, after it was able to raise more than that amount in the equity market.
"The PPP came with no user manual, and it was extremely confusing," the company said, also citing that funding was open to any location that had no more than 500 employees.
Shake Shack and Ruth's Chris both used JPMorgan Chase as their lender. In both cases, the money disbursed into company accounts will go back to their bank, which cancels the loan.
After Congress authorizes new funding for the overall program, the amount of loans the program is able to authorize will then increase by the canceled amount, according to the Small Business Administration.
On Thursday, the agency updated its PPP guidance, clarifying that “[I]t 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."
Companies that realize they cannot meet that certification should “pay back the money quickly,” Mnuchin said, otherwise the Treasury and the agency will have “no liability” to back the loan, and the company “could be subject to investigation.”
The Small Business Administration said any company that gives the money back before May 7 will be deemed to have acted in good faith.