Can the Paycheck Protection Program Really Save Independent Restaurants?

The CARES Act is the largest economic relief package in U.S. history, with $349 billion in aid earmarked for small business loans. Those loans, dispersed through the Paycheck Protection Program (PPP), will even be forgiven if strict guidelines are followed. But can those rules be followed under the current mandated dine-in restaurant closures, and will the loans actually help restaurants re-open and stay open?

With carryout and delivery remaining the only option for operating restaurants right now, there has been overwhelming demand for PPP loans; the Small Business Administration has reported that it processed 14 years’ worth of loans in less than 14 days. But many independent restaurants aren’t giving PPP loans rave reviews.

Critics of the program, like the Independent Restaurant Coalition (IRC), take issue with some of the loan forgiveness guidelines, specifically that 75 percent of the funds must be used to pay employees and the money must be spent within eight weeks of receiving it. The IRC says that the eight-week spending period is too short, especially considering that restaurant PPP recipients who have already received their loans still aren’t able to open for in-person dining. Also, if businesses fail to meet the forgiveness requirements, the loan repayment period is just two years. The IRC and others would like to see that extended to 10 years to give restaurants time to return to pre-pandemic capacity and sales.

There’s another problem: The accommodation and food services sector, certainly one of the hardest hit industries by coronavirus closures, received less than nine percent of available PPP loans. In Colorado, 91 percent of restaurants surveyed by the Colorado Restaurant Association applied for those loans, but only 15 percent were approved in the first round of funding.

Beth Gruitch’s group, Crafted Concepts (Rioja, Bistro Vendôme, Ultreia, Stoic & Genuine), was able to secure a PPP loan. She says that she was almost embarrassingly tenacious with the loan process, jumping on the application early and using her longstanding relationship with a bank to the group’s advantage. (It probably didn’t hurt that co-owner Jennifer Jasinski is a James Beard Award–winning chef.) “We were super excited. We thought, ‘We got the money! This is great!’” she says. “But the more we were digging into it, there seemed to be a lot of red tape.”

Still, Crafted Concepts did what they were supposed to do with the money—the company rehired employees; diversified its offerings with takeout and delivery; and is gearing up for dine-in re-opening. But no one knows when that re-opening will take place, or how restricted it will be, so it’s challenging for the business, which feels like it’s on the clock, to spend the PPP money. “In essence, we’re paying for people to stay home. It’s tough to spend [75 percent on payroll] when we don’t have the work. We have all this money to do training and hire people back, but we’re only going to open with maybe 50 percent of our seats,” she says.

PPP loans also won’t be particularly helpful for small businesses in the future when rents, invoices, and other bills come due. “Rents aren’t being forgiven; they’re being deferred. It’s great and fine that Xcel isn’t charging a penalty for our late charges, but all of this stuff is just being pushed to the end of the year,” Gruitch says. How do operators pay those bills when revenue most likely will not have returned to pre-virus normals?

Christopher Nicki of Hank’s Texas Barbecue on East Colfax hasn’t heard anything about his restaurant’s PPP application. “We applied for every form of relief that was introduced,” Nicki says. “We haven’t received any funding or help. I check the bank account every day hoping to see money. We don’t know what to do at this point, and just hope the next round goes smoother.”

Hank’s Texas Barbecue, with its single location and independent ownership, is the type of business that PPP loans were designed to help. But its small status and relative newness (it opened in February 2019) may work against it. With neither a longstanding relationship with a bank nor large sales to leverage, businesses like Hank’s seem to be getting left out of the PPP.

Juan Padro, founder and partner of the Culinary Creative Group (Bar Dough, Highland Tap and Burger, Señor Bear, and others) is more optimistic. His group received loans and have used them to rehire workers, do nonprofit work, and even launch a new concept—Jabroni & Sons, an Italian sandwich spot inside Bar Dough. He’s not as worried about the loan forgiveness and repayment requirements as others. His experience with Hurricane Maria relief in his father’s native Puerto Rico taught him that government bills are usually refined with time, so the language in the current CARES Act may not be final.

“Maybe it’s because I’ve seen bills get passed for disaster relief before,” Padro says. “These things get pushed through and then they get worked on. [The PPP loans] are a remarkable accomplishment, really. There’s a lot of criticism about it, but the bottom line is that 75 percent of loans were for $150,000 or less, so that’s all small business.”

Still, the PPP’s stringent forgiveness and payback requirements were too much for Becky Panasewicz, co-owner of Quiero Arepas. She bypassed the PPP application process, trying instead for a James Beard Foundation (JBF) grant. Quiero Arepas was one of three Colorado restaurants, along with Crawfish Boil Co. in Centennial and Lucky Dumpling in Colorado Springs, to receive the no-strings-attached $15,000 grant. “We’ve always operated debt free, so dipping into something like [the PPP loans] with the time period they set out, it was not within our character of how we’ve run our business for 10 years,” Panasewicz says.

She, along with her husband and co-owner Igor, applied for the JBF grant on March 30. The couple was shocked to get an email five days later saying they’d received the money. “I read the email like three times before I even said anything. I was like, ‘I think we got the James Beard grant!’ And then I started crying. Igor was next to me—he looked up the bank account and it was in there. Then he started crying. It was very surreal,” Panasewicz says. “(The JBF) was the first group out there doing something tailored for restaurants and they did exactly what they set out to do. It was hard to believe that it was real.”

The JBF grant has allowed Quiero Arepas to stay current on their rent and insurance payments while running a lean takeout business. Panasewicz says they’re in no hurry to re-open their three locations (with a fourth on the way) in the midst of the pandemic uncertainty, another reason why she felt uncomfortable taking out loans she wasn’t sure she’d be able to pay back. “I’m really nervous for a lot of (restaurants) six months from now,” she says. “They have all their people back but the business isn’t there to support it, and all of a sudden payments are due.”

Crafted Concepts’ Gruitch agrees that a day of reckoning is coming for many restaurants, and she worries that the PPP loans won’t help long-term. “It’s heartbreaking to watch an industry that works so hard for pennies to have it all go away,” she says.