By Bailey Chenevert
A survey published in June revealed that 15.2% of small businesses shut their doors permanently in the face of the COVID-19 pandemic. Nearly half of the small businesses surveyed reported laying off employees to cope with the economic impact. The pandemic has devastated the already struggling economy of mom-and-pop shops.
In an effort to relieve small businesses, the U.S. Treasury unveiled a plan to loan them $349 billion called the Paycheck Protection Program (PPP). Businesses then tapped into more than $521 billion before the program ended on Aug. 8, 2020. After pressure was placed on the Treasury to be more transparent about the program’s recipients, controversy sparked as the data showed corporations worth billions of dollars getting their own pieces of the pie. Here are a few of those companies that borrowed small business funds and how they got away with it.
1.) RCI Hospitality
RCI Hospitality, the parent company of one of the largest strip club chains in the U.S., received $5.4 million in PPP loans. The strip club chain called Rick’s Cabaret made headlines not only because it grossed more than $181 million last year, but because strip clubs were specifically barred from receiving PPP loans. Still, RCI Hospitality received the relief funds because ten restaurants under its ownership were included in their application. Those ten restaurants accounted for $4.2 million of the loans received, with the remaining going toward an unnamed subsidiary under RCI Hospitality’s umbrella.
2.) Ruth’s Hospitality Group
Formerly known as Ruth’s Chris’ Steakhouse, this restaurant company borrowed $20 million in PPP loans. The group amassed over $468 million in 2019 and employs over 5,000 people. Although the program specified that small businesses are those that employ less than 500 people, many conglomerates like Ruth’s Chris’ Steakhouse were still eligible for loans since any single restaurant in the chain meets that requirement. Ruth’s Hospitality Group is one of a few public companies that returned their PPP loans after media backlash.
3.) Shake Shack, Inc.
Another large restaurant company that said it would return its PPP loan (to the tune of $10 million) is the burger restaurant chain Shake Shack, Inc. Shake Shack employs around 8,000 people and borrowed the maximum amount of funds it was eligible for. Like Ruth’s Chris’ Steakhouses, any one location in the Shake Shack franchise employs way fewer than 500 people. After announcing his plan to return the loan, CEO Randy Garutti heavily criticized the program, calling it’s guidelines “extremely confusing.”
4) Los Angeles Lakers
Like Shake Shack, news of the small business fund’s depletion pressured the Los Angeles Lakers to return a borrowed $4.6 million. A statement released by the eighth most valuable sports team in the world stated they returned the loan “so that financial support would be directed to those most in need.” The Lakers employ just over 300 people and are valued at $4.4 billion, more than any other company on this list.
5) Yeezy
Kanye West’s clothing company, Yeezy, received more than $2 million in PPP loans. West has complete ownership over the clothing brand which employs a little over 100 people and earned $1.3 billion in the last fiscal year. The news of the billion dollar company’s relief funding was released shortly after West announced his presidential candidacy, which was seen by some as a plan to bolster Donald Trump’s reelection campaign. The timing is important – when PPP data was released, the media noted that some of the multimillion dollar companies that received funding also had ties to President Trump.
These multimillion dollar companies are not the only ones that received funds more than 50 times the size of the average PPP loan ($107,000). Other notable recipients include J. Alexander’s Holdings, U.S. Autoparks Network, and Rocky Mountain Chocolate Factory. Forbes reported that around 410 public companies borrowed over $1 billion and only a fraction of that was returned after media backlash. Meanwhile, over 100,000 small businesses have closed due to the pandemic. Without the connections to banks that larger companies have, small businesses were always at a disadvantage when applying for PPP loans. Individuals can safely support their local economy by shopping online, buying gift cards, writing reviews and donating to small businesses nearby.
Bailey Chenevert is a freelance journalist and guest editorial contributor for Cluey Consumer. As a recent 2020 college graduate from the University of Louisiana at Lafayette, Bailey supplemented her studies as both a research assistant and a student editor at La Louisiane. Bailey is passionate about impartial reporting on consumerism and the impacts that fashion brands have on our modern world
