Pierce County restaurants received $84 million in PPP. Where did it end up?
More than 500 Pierce County restaurants received Paycheck Protection Program loans under $150,000, for a combined $26.7 million — a nearly identical total to the 10 area restaurants that received the largest loan amounts, according to data released in November by the U.S. Treasury Department.
All told, 657 Pierce County restaurants, bars, caterers and other food service businesses netted more than $84 million through the program, according to an analysis by The News Tribune. That number excludes grocery stores, food manufacturers like coffee roasters and dairy producers, and beverage manufacturers such as breweries or juicers.
Nearly half of that money landed in the accounts of the franchises of national chain restaurants, regional chains or restaurant groups with several locations of the same concept. The PPP, primarily intended to help small businesses cover payroll costs as the coronavirus shuttered entire industries last spring, made eligible not just traditional “small” businesses but also those with fewer than 500 employees per location.
Among the top-10 loans for food service businesses in Pierce County were companies that own franchised locations of Domino’s Pizza ($2.5 million), Jack in the Box ($2.3 million) and McDonald’s ($1.6 million). Regional chains including The Rock Wood Fired Pizza ($2.2 million), Farrelli’s Pizza ($1.6 million), El Rinconsito ($1.9 million) and Mama Stortini’s ($1 million) also were among the top-10 loan getters.
Another McDonald’s franchise owner in Sumner received $453,000. A Chick-fil-A at the Tacoma Mall snagged $770,600, and three KFC locations a total of more than $750,000.
Even under the $150,000 mark, restaurants tied to national chains claimed millions in PPP funds.
A local operator of at least four Dairy Queen locations in Pierce County claimed a combined $455,000. Dairy Queens, like many fast-food and quick-service restaurants, are owned by franchisees, but the brand’s parent company is Berkshire Hathaway, a publicly traded investment company valued at more than $500 billion.
Although quick-service and fast-food restaurants watched traffic dip at the height of lockdowns in the early days of the pandemic, sales had rebounded by July, according to data from software company Crunchtime. By fall, revenue neared and in some cases exceeded pre-pandemic levels. Meanwhile, independent restaurants continue to close — more than 100,000 already have, estimates the National Restaurant Association.
The Treasury had previously issued only ballpark figures for loans greater than $150,000 granted through the $659 billion PPP, passed in April through the CARES Act, the largest economic stimulus package in U.S. history. After litigation by several media organizations, the agency released granular data with exact dollar amounts and business names for every loan.
This emergency funding did not save every Pierce County restaurant that partook. The Swiss Pub, Pacific Grill and its catering arm, El Borracho and Bonney Lake Tavern claimed funds but have since closed. As The News Tribune reported in July, Tacoma Baking Company, mired in controversy over failure to properly pay employees and its equipment loan among other apparent transgressions, received a loan even after it had closed permanently.
In an email to The News Tribune last summer, SBA spokesperson Sean Wilson said he could not comment on individual loan applications. Asked specifically what happens when a loan recipient closes, or what would happen if a business had been closed for reasons aside from the pandemic before applying for the loan, he pointed to the agency’s network of local business counselors and the program’s parameters. The loans were intended primarily for payroll, but 25 percent could go toward mortgage interest, lease or utility payments.
The Government Accountability Office said the program was ripe for fraud last June, with the SBA’s inspector general admitting it had likely occurred in droves four months later.
Melanie Norton, SBA communications director for the Pacific Northwest region, said in an email that borrowers were expected to act in good faith.
PPP IN PIERCE COUNTY
The largest Pierce County restaurant loan of $8.5 million — shy of the $10 million per loan cap — went to RAM Restaurants, which operates 30 restaurants in seven states and is headquartered in Lakewood. It was also one of the first to be approved, on April 6.
A corporation under the name AJP Enterprises LLC, which operates 45 fast-food and quick-service restaurants, including several Jack in the Box locations, received the second-biggest restaurant loan at $4.23 million.
Four Our Families, Inc., received the third-largest restaurant loan of $2.55 million. The company, led by president Mike Brown according to his LinkedIn page, operates Domino’s Pizza franchises.
Regional restaurant groups also secured hundreds of thousands in PPP, including Cactus in Tacoma’s Proctor District ($358,940).
X Group, the company behind Asado, E9 Brewing and The Pine Room, was approved for $725,000 through two loans, money that owner John Xitco told The News Tribune kept employees on payroll for a few months. Once it ran dry and COVID-19 restrictions remained, the financial realities darkened. Engine House No. 9 on Sixth Avenue in central Tacoma has been closed since October and won’t reopen until at least early 2021.
The Sound Restaurant Family — the parent company of area diners including The Poodle Dog in Fife, Burs Restaurant in Lakewood, as well as Harvester, Hob Nob and Knapp’s in Tacoma — got more than $1 million, each with its own loan entry. Those restaurants are currently closed due to indoor dining restrictions.
Owner Dan Tweten told The News Tribune in an email that keeping staff and customers safe was most important. “It’s been a very strange year and not one we hope to ever repeat,” he said.
Restaurant groups structured to apply for individual loans per property, rather than one loan funneled through a corporate headquarters, in some cases made off with more than they might have otherwise.
Each of 10 Bigfoot Javas, a Washington state chain of coffee stands, in five Pierce County cities received loans of $65,500 to $86,300, totaling more than $735,000.
SMALLER PPP LOANS
Loans under $100,000 accounted for 74 percent of all loans to Pierce County restaurants, most of them independently owned and operated. Another 66 received between $100,000 and $150,000.
These smaller loans reached on the high end at $149,800 for Taqueria El Antojo in Tacoma’s McKinley neighborhood, to the smallest loan of $500 for the Sweet Tooth Fairy, a cupcake shop inside Freighthouse Square, also in Tacoma.
Restaurants in this group run the gamut in style and geographic location, though around 40 percent went to businesses in the county’s biggest city. Add in the neighboring towns of Gig Harbor, Ruston, Steilacoom, University Place and Fircrest, and that number jumps to above 60 percent.
A new round of $284 billion in PPP, signed into law Dec. 28 as part of a $900 billion spending bill and coronavirus relief package, allots up to $2 million per loan with enhanced provisions for restaurants, theaters and other industries hit hardest by restrictions.
Previously, businesses could apply to cover up to 2.5 times their payroll, but the recent bill ups that rate to 3.5 for restaurants. Those with fewer than 300 employees per location, and that can prove at least a 25 percent drop in sales, will be eligible to apply. The bill also assures that loan recipients can deduct the expenses paid for using the PPP funds, intended to stave off tax bills that might throw struggling businesses further into debt.
DID PPP WORK FOR RESTAURANTS?
Shortly after lockdowns befell the country last spring, independent restaurateurs and handfuls of prominent chefs banded together to form the Independent Restaurant Coalition. The group spent the rest of 2020 persuading Congress to pass its proposed RESTAURANTS Act, a package that would funnel money directly to an industry that employs some 11 million people nationwide.
Despite bipartisan support in the House and the Senate, the wish failed to come true.
Red Star Taco Bar secured a $218,345 loan in early April, but owners Padraic Markle and Billy Beckett said while it helped stem the sudden revenue loss, it did little to solve their long-term problems as the pandemic worsened.
“The PPP loan didn’t really work for restaurants; it wasn’t tailored for us,” Markle told The News Tribune in a January phone call, just as Gov. Jay Inslee announced a new COVID-19 reopening plan that, in its second phase, will bring back indoor dining at just 25 percent capacity.
“We have a unique situation in that we’re not just selling a good that people want no matter what,” he said. “They don’t need to go be a part of the situation to want those clothes. You want to go to a restaurant that has ambiance. All of that has been stripped out from underneath us.”
The money helped them retain employees at both their Tacoma and Seattle locations, but he said, “To do what? To clean the floor?”
Sometimes employees just stood around, they said. Other restaurants have shared similar experiences with The News Tribune.
A second round is welcome, continued Markle — and they have no choice but to apply and hope for the best — but they have other debts “stacking up that don’t qualify for PPP usage. It puts us in a super tenuous position.”
They remain optimistic.
“We’re still paying all of our fixed rents,” said Beckett. “We will keep going and clawing and fighting.”
The alternative — shutting down and ending their dream — means they lose their homes, their cars, their livelihood.
“Billy and I aren’t corporate masterminds of a corporate sprawling business,” said Markle. “We are the definition of small business. We are going down with the ship if it goes down.”
“It will be years before we’re whole again,” added Beckett, “but we’ll make it.”
This story was originally published January 11, 2021 at 5:00 AM.