“PPP is so screwed up that it’s virtually unusable,” says TaKorean founder Mike Lenard. The fast-casual restaurateur was one of few local small business owners to secure a Paycheck Protection Program loan in the first wave of funding created under the CARES Act. Congress approved $349 billion for the program, but that sum went quickly. Only 3,200 loans were awarded in the District. The program will be replenished with an additional $310 billion as early as Monday.

Those who applied but weren’t approved may balk at Lenard’s tone, but a strong contingent of small, independent restaurants across the country agree with his message. Groups like the National Restaurant Association (NRA) and the Independent Restaurant Coalition (IRC) are calling on Congress to tweak the terms of the loan to better suit one of the industries hit hardest by COVID-19. Restaurants are on track to lose $80 billion in sales by the end of April and $240 billion by the end of the year. 

PPP, which the Small Business Administration administers, is designed to incentivize businesses to keep employees on payroll for eight weeks. The loan converts into a grant if recipients use 75 percent of the money to fund payroll and restore full-time employment and salary amounts to levels similar to the time period between Feb. 15 and April 26. The remaining 25 percent of the loan can be used on expenses like rent and utilities. 

The clock starts when money lands in participants’ bank accounts, but most bars and restaurants aren’t in the position to rehire given they’re either closed or operating with just a few employees who prepare food and drink for take-out and delivery. It remains unclear when restaurants and bars will be able to gradually reopen. At her Thursday press briefing, Mayor Muriel Bowser said the city needs to record a steady decline of new cases over a two week period before anything can change. 

For this reason, the IRC is pushing for increased flexibility that would allow the loan to kick in once businesses can fully reopen. The stakes are somewhat high. If a restaurant can’t finagle a way to use PPP funds in the exact way the CARES Act prescribes, the loan won’t convert into a grant. Recipients will be on the hook to repay the 1 percent interest rate loan within two years. More debt is the last thing business owners want right now.

Four hospitality industry business owners in D.C. who received PPP loans have varying opinions on how useful the money will prove to be, as well as suggestions for how to make PPP friendlier to restaurants and bars. 

“This bill was written at a different time,” Lenard says. The CARES Act was signed into law on March 27. Restaurants and bars have been closed to on-premise consumption for a full month since then. Each day that goes by with little to no revenue feels like a year. “We thought things were going to bounce back to normal in May,” he says. “If that were the case, we wouldn’t need to be stimulated at all.”

Lenard’s most significant complaint is having to spend the money in eight weeks. “Let’s say we open in June, July, and August on a limited basis,” he says. “But then in September a new wave [of the virus] comes and we close again. Do we want all these fully staffed businesses for a couple of months this summer and then in the fall people are laid off again because PPP ran out?”

Applying for unemployment has been difficult for much of D.C.’s hospitality industry workforce. Most people were laid off around March 15 and benefits are only just now starting to trickle in. It’s not a process workers would want to repeat. 

Sachin Mahajan, the managing partner of Karma Modern Indian in Penn Quarter, agrees with Lenard that PPP isn’t structured ideally for restaurants. “The eight week period should not be considered from the time you get the loan,” he says. “It should be expanded to 12 weeks or 16 weeks for it to be fully utilized.” 

At first, Karma Modern Indian decided not to dabble in take-out and delivery, citing the location of the restaurant and lack of previous experience doing high volume take-out business. But now that the restaurant received a PPP loan, Mahajan needs something for staff to do once he rehires them. Bringing back a full staff to only do “30 percent of revenue” is unsustainable. 

“We have to pay bills, not just salaries,” Mahajan adds, wishing he had more than 25 percent of the PPP loan to use on costs other than labor. There won’t be any jobs if restaurants lose their leases. 

Moreland’s Tavern in 16th Street Heights is having better luck using its PPP loan. Receiving one, according to co-owner Matt Croke, has lifted spirits. The neighborhood spot has remained open serving food and alcohol to-go, which requires staff. He’s hoping to extend their hours and bring back more employees to perform tasks like deep cleaning.

“I can see the eight-week frustration, but we’re at the point that we’ll take what we can get,” Croke says. “Having the option to use it when we reopen would be good, but we don’t know when that’s going to happen.” 

Some bar and restaurant operators are worried that convincing former employees to give up unemployment and come back to work will be a challenge. Croke hasn’t had that problem. “They don’t want to be using the support system of employment,” he says. 

The issue isn’t a lack of work ethic, but rather the fact that unemployment for some hospitality industry employees is a raise. Those who successfully applied should now be receiving a maximum of $444 per week from D.C., plus an additional $600 per week in Pandemic Unemployment Insurance from the federal government. Weekly benefits of $1,044 amount to a $54,288 annual salary. According to 2020 Glassdoor data, line cooks in D.C. earn an average annual salary about half that.

This conundrum is something Denizens Brewing Co. co-founder Emily Bruno has been thinking about since securing a PPP loan. “Unemployment is generous,” she says. “Bar and restaurant people are not making $52,000. You could debate whether that’s fair or right. But the private sector is now being asked to offer what was normal pay that can’t compete with unemployment.”

Bruno also notes that the workforce “is so much more fluid” at bars, restaurants, and breweries. Workers change jobs frequently or even exit the industry to explore other sectors or return to school. “I’m having trouble getting commitments from some people,” she says. “Some of my staff moved. They’ve gone to live with their parents. It’s not as easy as a law firm where people can keep working at home and have a much higher barrier to changing jobs.” 

She developed a strategy to offer bonuses to those employees who come back to work, which is permitted by PPP so long as no one covered by the loan brings in $100,000 annually. That’s good news because Denizens needs the manpower. The company adapted its business model to deliver beer directly to consumers located near its breweries in Silver Spring and Riverdale Park. “We’re barely covering costs, but it’s kept us alive,” she says. 

PPP has been beneficial. “I can understand why a restaurant or bar that was minimally operating or closed wouldn’t feel the same way,” Bruno says. “It’s a clear relief for us because we have some of our core expenses covered. Rent is covered for two months. Payroll is covered for two months. We don’t have to be panicked about buying new raw materials to make beer.” 

D.C. businesses that still believe PPP would help them and are hoping to get a piece of the $310 billion pie once it becomes available next week shouldn’t get their hopes up. Banks are warning that the additional installment could run dry in as little as two days. So far the aid restaurants and bars have been counting on haven’t panned out as expected, creating bleak future projections. The pressure is on for groups like IRC to convince Congress specialized aid is needed. 

“The last stimulus bill included a special $25 billion carve-out to keep 750,000 airline employees working,” the coalition said in a statement earlier this week. “Why not make a few changes to help independent restaurants, who employ 15 times more people? No one wins when one of America’s biggest and most beloved industries fails. If Congress is serious about putting the economy on track and reducing unemployment, they need to act on a package that helps independent restaurants survive this crisis.”

“Money in the wallet” by Image Genie is licensed under CC BY-SA 2.0