Minnesota-based restaurant chain BBQ Holdings, Inc., one of the state's top 60 publicly traded companies, will not return $13 million in Paycheck Protection Program (PPP) loans that may be repaid by the U.S. Small Business Administration (SBA).
BBQ Holdings, which includes the Famous Dave's and Granite City chains, received the money May 1, according to a Securities and Exchange Commission filing.
If the money goes to payroll, rent or mortgage, and utilities over the next eight weeks, the SBA will pay back the bank which loaned the company the money.
In a statement, CEO Jeff Crivello maintained that BBQ Holdings, which had $82.3 million in total revenue in fiscal 2019, needed government help because it had such limited access to loans for working capital. The company reported a $649,000 loss for its fiscal year ended Dec. 29, 2019, compared with a profit of $4.9 million for the same period in 2018.
Crivello's company must certify to the SBA that it lacks access to working capital under a new PPP rule. Congress encouraged the SBA to issue this new guidance after publicly traded companies received hundreds of millions of dollars from a program supposedly designed to keep small businesses fully employed during the coronavirus pandemic.
All public companies that received PPP loan approvals are supposed to return their forgivable loans by May 7 or certify their need, a move that makes their claims subject to government review.
"As a nano-cap public restaurant company, our access to capital differs greatly from our larger competitors," Crivello's statement read. "We require these funds to retain, recall, and pay our loyal employees."
"After a thorough review and consultation, pursuant to the guidance provided by SBA, we are able to certify with a high level of confidence that we meet the requirements of the loan," Crivello added.
He pointed to the government-ordered shutdown of restaurant dining rooms to help control the spread of COVID-19 as a source of the company's problems.
BBQ Holdings' 2019 annual report says the company "employed approximately 1,677 team members of which approximately 172 were salaried full-time employees."
The company received more than the $10 million maximum PPP loan because Crivello said the SBA required it to apply with separate employer numbers of two wholly owned subsidiaries — one application for Famous Dave's and one for Granite City.
A single big company getting more than the presumed legal limit for PPP funding caused outrage among many smaller business owners shut out of the loan program. Congressional members who passed the COVID-19 relief bill also expressed anger and frustration, saying the PPP was intended to help businesses with very few employees and no other sources of working capital.
"Congress enacted the PPP to help small businesses keep workers on payroll during this unprecedented crisis — not to bail out large, publicly traded corporations that have other ways to access capital," Sen. Tina Smith, D-Minn., told the Star Tribune. "Many small businesses have been struggling for more than a month to get PPP loans, and the Small Business Administration and Department of Treasury should have been doing more, and must still do more, to make sure these funds get to the small businesses and workers for whom they were intended by Congress."
The outcry led the Shake Shack restaurant chain to return $10 million and Ruth's Chris Steakhouse to return $20 million in PPP funds.
Publicly traded companies played a large role in draining a $350 billion PPP allocation in just 13 days. This forced Congress to appropriate an additional $310 billion in hopes that a fair share of the 88% of American small businesses with fewer than 20 employees benefited.
BBQ Holdings' decision to keep its PPP loans may or may not threaten its brand, said Akshay Rao, a branding specialist at the University of Minnesota's Carlson School of Management.
If Famous Dave's and Granite City customers think the loans are OK because they are legal, then the chains' reputations are not at risk, Rao said.
If consumers want their brands to be "moral," Rao continued, customers can view this as the big guys getting theirs, while the little guys didn't. In that case, "your brand equity might suffer in the long term."
BBQ Holdings Inc. is one of at least five publicly traded Minnesota companies to receive PPP loans. It received the largest amount reported so far. Nortech Systems, a medical device company with $116.3 million in sales in 2019 and more than 700 employees, is second with $6.1 million. Nortech has not announced whether it will return its loan or certify its need to the SBA by May 7.
Other Minnesota public companies that have received PPP loans include screen printing and custom printing business Ikonics Corp. with $1.2 million. Several small public companies received six-figure PPP loans. Additional public companies may reveal PPP loans in future securities filings.
The SBA has told the Star Tribune that it cannot yet provide a list of individual companies in the state that received forgivable loans and the amounts of each loan.
