But the money has run out. And this week, after the U.S. Small Business Administration (SBA) released its list of 101,004 businesses that received grants, an unsettling feeling settled in. 177,300 applicants, or 64% of the pool, didn’t get anything. Did the small neighborhood restaurants that the fund purported to help — the unsung greasy spoons, the century-old pubs, the strip-mall pho joints — get left behind yet again?
I combed through the list to examine how Bay Area restaurants fared, and some names are comforting to see. Oakland Chinatown community hub and dim sum destination Peony Seafood, which many speculated would close last year, received $1,986,679. Family-owned Fremont Afghan Kabob Restaurant, a favorite in the Bay Area’s halal food scene, got $285,303. Point Reyes’ Station House Cafe, an essential stop for vacationers, netted $1,138,550.25.
Those seemed to align with the purported values of the fund, which politicians and bodies like the National Restaurant Association promoted as targeted assistance for small, “local,” “mom-and-pop” essential businesses.
But many of the Bay Area recipients of the most generous grants don’t fit that image: Locations of well-known businesses such as Panera Bread, Ladle Leaf and Peet’s received significant amounts, through companies Pangenera, LLC, San Francisco Soup Company and Gotham Enterprise, LLC that are licensed partners or franchises of the chains. Others, like the local chain of Lori’s Diners, appear to be permanently closed, which may mean that their funds would have to be returned, though it is unclear whether that money would then go to other applicants. Nearly all of these places received the full maximum of $10 million apiece.
While Panera Bread is technically a “local” restaurant in that it exists here in the Bay Area and employs locals, the financial status of the billion-dollar corporation (and the well-off franchisees that rely on it for marketing, investment help and bulk bread bowl purchases) is a far cry from the independent restaurants that have largely had to deal with the pandemic on their own. (Fun fact: To open a Panera franchise, you must have a net worth of $7.5 million.)
The reality is that despite the fund’s folksy marketing, it wasn’t written to primarily help small, independent restaurants. Restaurants weren’t the only eligible businesses; any entity involved with food, including a bowling alley chain and sports arena concessions providers, was able to apply. Additionally, just 17% of the fund was specifically allocated for restaurants that pulled in profits of $500,000 or less in 2019, while the rest was set to be distributed in proportion to other businesses’ annual gross receipts. That means the overwhelming bulk of the $28.6 billion pot was earmarked for the biggest earners, not the little guys.
A maximum award of $10 million also meant that a small number of applicants could gobble up a lion’s share of the money. According to postmortem data released by the Small Business Administration, 5.2% of grant recipients received awards in excess of $1 million (totaling 39% of the entire pot), while the average award was around $283,000. And flexible allowances for businesses with multiple locations (in this case, no more than 20), meant that 10% of the $28.6 billion fund went to businesses that were franchises of national brands, such as chains like Hilton Hotels.
Worse, thousands of food businesses owned by historically underserved groups will not get any money from this fund unless it is replenished. One stopgap written into the law prioritized businesses owned by gender and racial minorities, economically disadvantaged people and veterans, in the hope of evening the scales after the Paycheck Protection Program faced backlash for allowing publicly traded companies, like Ruth’s Chris Steak House and Shake Shack, to receive crisis aid. The business administration paid about 72,000 priority applicants before the measure failed spectacularly thanks to intervention from right-wing activists who sued on the basis of discrimination against white and male applicants. According to the New York Times, “tens of thousands” of priority applicants ended up in limbo, and close to 3,000 restaurateurs had their grants rescinded.
Ironically, Bob Freeman, owner of San Francisco’s Buena Vista Cafe and a white man, told Eater that he was among those whose offer was taken back because he and his business partner applied in the priority group as veterans. While the court ruling only prohibited the factoring of race and sex from the applications, it appears that even veterans got caught in the legal dragnet.
Priority applicants who were told that they would receive a much-needed shot in the arm, who were ready to rehire staff and pay back rent and overdue bills, had their offers rescinded and will receive nothing. During an appearance on Restaurant Business podcast “A Deeper Dive,” National Restaurant Association representative Sean Kennedy said, “By all accounts, SBA has put down their pencils.” The business administration has frozen its online application portal, and applicants can’t even check on the status of their applications anymore.
No single fund was ever going to solve everything for restaurants. Our political leaders knew that; on a March call with the Independent Restaurants Coalition, Rep. Blumenauer acknowledged that, compared to the $120 billion initially proposed for the plan, the $28.6 billion wouldn’t be nearly enough to meet the needs of the industry.
Still, Blumenauer’s plan could have done plenty to allay the shortage and implement the vision that was sold to us — the one of “mom-and-pop” essential businesses. The $10 million maximum grant cap could have been reduced significantly, freeing up more money for the wider pool of applicants. Corporate chains could have been excluded to prioritize scaled grants to independent businesses that normally draw in smaller profits than businesses with a dozen or more locations. And the funding could have been more specific to actual restaurants, and not event spaces and hotels.
In the early days of the pandemic, it was clear that without help for independent restaurants, we’d be facing a period of monopoly in the industry, with chains taking up more space in our culinary landscape as places closed. The back rent, late utility bills and other debts accrued during lockdown caused many small restaurants to shutter, as they had few means to pay without taking on even more debt. It’s easy to imagine a world where more restaurant real estate is snapped up by financially steady chains, with fewer individuals and families able to sustain food businesses on their own.
This fund was supposed to help. Yet the “help” has not only been disappointing, it has also tangibly worsened the situation for many restaurants. A caterer in Chicago, who spent the pandemic feeding people in need, told industry publication Restaurant Hospitality that the rescinded funding has forced her to finally dissolve her business. An ice cream shop owner in Seattle told the publication the reversal caused “complete chaos” for her business, which ramped up operations and purchased more inventory in anticipation of getting the much-needed funding. As it stands, 2021 may continue to be a brutal year for restaurants. The results have confirmed one of the darker sentiments about American culture: that our system as it is now is not built to support smaller businesses, let alone the 99%.
There is still room to correct course. A proposed bill with more than 180 congressional co-sponsors seeks to allocate $60 million more to the fund. In the meantime, the bill’s leaders have continued to use romantic small town imagery to boost their effort. In a statement on the new bill, congressional co-sponsor Rep. Brian Fitzpatrick, R-Pa., said, “The mom and pop diners and delis on Main Street all across America still need our help, and we must act urgently to save our local restaurants.” But unless the language of the fund changes significantly, I’m not sure there’s much hope of such salvation.
This story has been updated to clarify the relationship between Gotham Enterprise, LLC and Peet’s.
Soleil Ho is The San Francisco Chronicle’s restaurant critic. Email: email@example.com Twitter: @hooleil