Dive Brief:

• The federal Paycheck Protection Program has approved $13 million in relief funds to Famous Dave’s of America and Granite City Food & Brewery. According to Restaurant Business, Famous Dave’s borrowed $7.2 million, while Granite City borrowed $5.8 million. Both are owned by BBQ Holdings.
• These loans come on the heels of new restrictions on lending to public companies — restrictions that were put into place after the initial $349 billion round of funding dried up.
• "We are extremely thankful to be able to access the PPP loan program,” BBQ Holdings CEO Jeff Crivello said in a statement. “As a nano-cap public restaurant company, our access to capital differs greatly from our larger competitors. We require these funds to retain, recall, and pay our loyal employees."

Dive Insight:

Nano-cap companies are traded at a smaller market price than other publicly traded companies, with capitalization below $50 million. For comparison, Shake Shack, which generated plenty of controversy when it accessed the first round of PPP loans, has a market cap of about $2 billion. This disparity is reason enough for BBQ Holdings to be insulated from a similar controversy, as interpreted by Crivello’s statement.

As Restaurant Business reports, the U.S. Department of Treasury's qualifications for PPP loans include a public company's ability to demonstrate those funds are critical to the business’ survival. In addition, any loan of $2 million or more would be analyzed to ensure the borrower’s size and finances warranted a loan. Crivello said his company is able to certify those requirements with a “high level of confidence.”

Some may not feel the same way. The second round of funding was drafted to better support small businesses and independents after the initial round sparked backlash for favoring large, public companies. Granted, Famous Dave’s doesn’t have access to cash like Ruth’s Chris does, but the 130-unit, small-cap barbecue concept does has more leverage than the mom-and-pop shop down the street struggling to pay rent.

The National Restaurant Association has forecast that as many as 44% of all restaurants have closed at least temporarily as of March 25, and as many as 11% could stay closed permanently. Millions of employees have lost their jobs, and the recovery isn’t expected to be swift.

In other words, it’s likely that mom and-pop-shop isn’t alone in struggling to pay the rent. As some analysts have opined, the issue isn’t with the companies, big or small, going after these funds, but rather the murky language outlining the program’s eligibility.

And while that first round drew the ire of the Independent Restaurant Coalition specifically, which noted that the program won’t help the country’s 500,000 independent locations reopen, the restaurant industry has struggled to procure PPP dollars in general. Less than 10% of this money has gone to “accommodations and food services.”

So, while Famous Dave’s could risk some reputational damage by securing the loan, companies in this environment are playing for survival.