MOD Pizza and other chains grab slices of aid meant for small businesses
The federal Paycheck Protection Program was created to help small outfits hit by the Covid-19 pandemic, but big businesses have eaten big chunks of these relief funds as well.
In Washington state, Bellevue-based MOD Pizza—with nearly 8,000 employees at 475 restaurants—received a loan between $5 million and $10 million. Other restaurant chains including Burgerville, Anthony’s and western Washington Pizza Huts received similar-sized loans from the Small Business Administration.
“That makes absolutely no sense,” said Reetu Gupta, a tech entrepreneur who struggled to obtain a loan of less than $25,000 for her Bellevue-based startup, CirkledIn. “If they have 8,000 employees, how do they qualify for ‘small business?’” she asked.
After launching in April, the loan program ran out of money in 13 days. Many actual small businesses were left in the lurch until the government opened up a second round of funding.
Since March, Gupta’s staff has shrunk to four from eight.
“We haven’t even paid our rent for the last four months,” she said. “Right now, we are watching every single dollar.”
The loans have pumped $12.3 billion into the Washington economy and temporarily spared 900,000 jobs at 15,850 employers, according to data released last week. Those employers include five Washington-based restaurant chains:
- MOD Pizza, with nearly $500 million in sales last year
- Vancouver-based Burgerville, with 1,480 employees in 42 locations
- Woodinville-based Northwest Restaurants, owner of 160 KFC, Taco Bell and A&W franchises in 5 states
- Mukilteo-based Emerald City Pizza, owner of 61 Pizza Hut franchises in western Washington
- Kirkland-based Anthony’s, with 22 seafood restaurants in 3 states
Through a spokesperson, MOD Pizza CEO Scott Svenson declined to be interviewed.
“We feel it’s our responsibility to protect as many jobs as possible,” MOD Pizza spokesperson Charlotte Wayte said in an email.
“We concluded that the PPP funding was necessary to support our operations and provide jobs to the thousands we employ,” she wrote.
Wayte declined to reveal the amount of MOD Pizza’s loan.
Representatives of Burgerville, Northwest Restaurants, Emerald City Pizza and Anthony’s did not respond to interview requests.
Small Business Administration PPP loans to Washington businesses. Loans less than $150,000 were not disclosed. (May take several seconds to load. View in separate window here.)
The Paycheck Protection Program is “designed to provide a direct incentive for small businesses to keep their workers on the payroll,” according to the Small Business Administration website.
To benefit small employers unlikely to have access to other financing, PPP loans in most sectors are limited to firms with 500 or fewer employees.
But the hospitality industry lobbied for an exemption—and got it.
The Congressional stimulus package that created the loan program allows restaurant and hotel chains of any size to get PPP loans as long as no more than 500 people work at any one location.
MOD Pizza’s Svenson told the Puget Sound Business Journal in April that his company got its loan within a week of applying.
Rebecca Rice, who owns Arthur’s, a West Seattle cafe with six employees, said she was turned down when she applied in April.
“They ran out of funds,” she said.
Rice said she did receive a loan in the second round of funding, but not until she had liquidated personal assets to pay her cafe’s bills.
Rice said she had mixed feelings about her much larger competitors for government aid.
“These companies technically qualified for these particular loans, and they did their due diligence, and they got them,” she said. “I can appreciate a good businessperson.”
Still, Rice said, as the pandemic drags on, “we’re going to need more help, more loans, and those big huge companies taking the money away again is a really unfortunate situation for people like us.”
“We are not out of the woods yet,” loan recipient Amanda Powter, owner of four-employee Perfect Copy & Print on Capitol Hill, said in an email. “But I'm committed to avoid laying anyone off as long as I can keep the business standing.”
Business and nonprofit leaders of various sizes say PPP loans have helped their operations prevent layoffs.
Most of the 101,000 loans made in Washington through the end of June were for less than $150,000.
The South Park Senior Center received its $32,000 loan in May.
Demand for the center’s meals for low-income seniors, often immigrants and refugees, had tripled with the pandemic.
“More and more people needed hot meals delivered so they could stay home,” interim director Dagmar Cronn said.
She said one man had not eaten for three days when the nonprofit delivered his first hot meal. “He was terrified to leave his house and get sick,” she said.
Cronn said the loan has helped keep her center open, delivering 235 meals a day, for two more months.
After shrouding the loans in secrecy, the Trump Administration published the names of recipients of at least $150,000 in July. It did not disclose actual amounts, only ranges such as “$5-10 million.”
Media organizations have sued for more detail on this vast distribution of taxpayer dollars, more than $500 billion to date.
National restaurant chains including Applebee's, P.F. Chang's, Ruby Tuesday and TGI Fridays got “small business” loans between $5 million and $10 million, according to NPR.
Some loans had been revealed in April, in publicly traded firms’ filings with the Securities and Exchange Commission.
“Ruth’s [Chris] Steak House got $10 million. Seriously?” Gupta said.
In fact, the 100-restaurant, Florida-based steakhouse chain received two $10 million loans.
“They should not qualify for any stimulus made for small and medium business,” Gupta said.
After a public backlash, Ruth’s Chris Steak House announced in April that it would return its loans.
So did Shake Shack, a chain with 189 restaurants nationwide—less than half as many as MOD Pizza.
When asked whether MOD Pizza was considering giving up its small-business loan as other large chains had, spokesperson Charlotte Wayte did not directly address the question.
“Unlike Shake Shack and Ruth’s Chris, MOD is a private company, and given the economic climate, it is unlikely we would have been able to secure private investment in the necessary time frame,” Wayte said by email.
Businesses and nonprofits have until Aug. 8 to apply for the current round of PPP loans.
Federal officials have said they will audit all applications for loans of $2 million or more.