Kura Revolving Sushi Bar, the 25-location restaurant chain based in Irvine, has decided to return the $6 million Paycheck Protection Program (PPP) loan it had received as a part of the federal CARES Act. The move echoes Shake Shack, which received $10 million in federal loans before a public outcry compelled the New York City-based burger chain to return the funds.
Kura Revolving Sushi Bar is a publicly traded company with more than two dozen locations across the country, 11 of which are in the Southern California area. Its current market value is $87 million dollars; it disclosed earlier this month that it had $24 million in cash reserves, along with a $20 million loan from its Japanese parent company, Kura Sushi, Inc.
Kura president and CEO Jimmy Uba wrote a letter today on the restaurant’s website explaining that the company’s intention was to use the $6 million federal loan to keep its non-furloughed workers employed for as long as possible. Kura closed most of its restaurants on March 18, following nationwide dining room closures in response to the ongoing coronavirus pandemic.
When the announcement for PPP went public, Uba says the company was initially excited to keep remaining staff on payroll and even re-hire furloughed employees, who represented about 35 percent of the company’s workforce. However, competition for the $350 billion set aside for the PPP loans was fierce, and seems to have favored well-connected entities — leading to multiple lawsuits against banks issuing the loans — including numerous large, highly capitalized restaurant chains, such as Ruth’s Chris Steakhouse. Countless independent restaurants in LA and across the country were shut out of the program as a result.
Uba hopes that the returned funds will go to businesses and potentially other restaurant owners who aren’t as well capitalized as Kura:
With the Paycheck Protection Program, we assumed all restaurant employees would be able to continue being paid, regardless of where they worked, and that the funds would be enough for everyone. This was a wrong assumption.
Today, we made the decision to return our PPP loan. This was a difficult decision because our employees are extremely important to us, but it’s impossible to ignore the fact that our finances allow us to weather financial hardship for a longer period than independent restaurant owners. We hope that these funds will be shared equitably among deserving candidates.
The PPP was initially intended to help small businesses with fewer than 500 employees pay employees during the coronavirus pandemic, keeping workers on the payroll and off of unemployment. However, the bill allowed businesses with fewer than 500 workers per location to qualify, which meant that large chains like Shake Shack, which potentially have thousands of employees, could secure PPP funds. As long as 75 percent of the loan is used for payroll expenses, the government-backed loans will be forgiven.
Ruth’s Chris Steakhouse, Potbelly, and other sizeable restaurant chains have not returned funds. Ruth’s Chris Steakhouse in particular, which was able to get twice the maximum of $10 million through the use of two subsidiaries, is being petitioned to refund federal loan funds so that the money could go to “true small businesses.”
Congress passed another aid bill this afternoon with $310 billion to replenish the Paycheck Protection Program; $30 billion was specifically set aside for community-based lenders, with another $30 billion for mid-sized banks and credit unions, which should increase the number of small businesses who can quality for the federal loans.