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To be clear, this was not a loophole, it was a carve out. They specifically and intentionally excepted restaurants and hotels from the affiliation rule. It wa

To be clear, this was not a loophole, it was a carve out. They specifically and intentionally excepted restaurants and hotels from the affiliation rule. It wasn't a drafting error, it was a clear and purposeful choice. Personally, I don't have any huge problem with that, I think it makes sense to protect workers at both Ruth's Chris Steak House and a local family-run steak shop, and we should fund the program at the levels necessary to do that. But I keep hearing the word loophole, including from Congress members. It is not that. This was by design, and it wasn't buried in some dense text. It was an unambiguous exemption in a two page rule. [1] [1] It may not be perfectly clear to the average reader, but it certainly was clear for the rulemakers at Treasury. "Waiver. The affiliation rules described above are waived for (1) any business concern with not more than 500 employees that, as of the date on which the loan is disbursed, is assigned a North American Industry Classification System code beginning with 72;" Businesses with an industry classification code beginning with 72 include all restaurants and hotels. https://www.sba.gov/document/support--affiliation-rules-paycheck-protection-program https://www.sba.gov/document/support--affiliation-rules-payc...

dd36 7y ago
I think it’s because many (most?) people would prefer Ruth’s Chris failing over their local mom and pop. I think I’m in that boat and I like Ruth’s Chris, except the one in SF - was not impressed.
- arkanciscan 7y ago
  I can put a stick of butter on a New York Strip at home for less than $100. Who needs Ruth's Chris.
  - tedunangst 7y ago
    Who needs any restaurant?
    - _curious_ 7y ago
      Fair point...certainly seems to be more supply than demand even before CV19
    - RHSeeger 7y ago
      There's a lot of things we don't _need_ that we still enjoy. In fact, the vast majority of things fall into that category.
- crispyambulance 7y ago
  The thing about large restaurant chains is that they can easily borrow money, their scale is such that their banks will lend them money regardless of the pandemic (even if that's simply because they've previously borrowed). Ruth's Chris isn't in nearly as much danger of going out of business as, say, a 1000 or so single-location restaurants that didn't get the time of day from JP Morgan when they called.
  - dd36 7y ago
    Right. I agree.
IG_Semmelweiss 7y ago
You are correct in your assertion. However your conclusion is wrong. First, the waiver got in due to major lobbying by corporations with cash. Second, it is not correct to state that is is appropriate for larger employers to take PPP. Here is why: although at first glance it would make sense to support workers via PPP, the sad reality is that these workers have already been laid off. As such, PPP will turn into a loan. A cheap loan at that, which is basically a cheaper source of capital funds that any public co has. Public co.s can tap the capital market or existing banking relationships to survive. Small biz cannot tap capital markets and banks are not extending credit at this time. For larger orgs, cheap PPP subsidized loans are literally taking precedence over life and death funds for small biz. So institutional investors, PEs, and banks are being bailed out, while mom and pops and their staff are getting destroyed. Laeger orgs already laid off staff. Mom and pops were hoping for PPP.... to keep staff.
js2 7y ago
It was reported at the time before the bill was signed: > Many of these special-interest provisions would be impossible for a casual reader of the legislation to identify. For example, on Page 15 of the bill, there is a section with the title “Business Concerns With More Than 1 Physical Location.” It says this change in federal law will apply to companies that fit “a North American Industry Classification System code beginning with 72” — a reference that turns out to mean the hotel and restaurant industry. https://www.nytimes.com/2020/03/25/us/politics/virus-fineprint-stimulus-bill.html https://www.nytimes.com/2020/03/25/us/politics/virus-finepri... Edit: This NYT article is the only one I've found in a cursory search that mentions it.
crispyambulance 7y ago
A loophole is a loophole whether it's expressed in obfuscated language or not. There's a reason why the administration fired Glenn Fine on 4/7 who was the inspector that was supposed to oversee the 2T rescue plan. The administration and their cronies are doing a classical "shock doctrine" move to even further concentrate wealth while the opportunity is hot.
- _curious_ 7y ago
  "The administration and their cronies are doing a classical "shock doctrine" move to even further concentrate wealth while the opportunity is hot." Agreed; buckle up folks if there's another four years to come :/
- jlmorton 7y ago
  I get your point, but loophole has a specific meaning that implies taking advantage of an ambiguity, unexpected complexity, or oversight in drafting to reach an unintended result. This was not unintentional, and I think that's important to say.
- JeremyNT 7y ago
  The difference between "loophole" and "carveout" here is basically intent. Occam's razor suggests that, of course, members of a corrupt and self-interested Federal government would intend for their allies at megacorps to have a safe landing, and they would prioritize their wellbeing over others. They look after the people who pay their bills, of course.
abnry 7y ago
What most people don't understand about hotels, chain restaurants, or any business that runs on the franchise model is that the majority of such outlets are run by small businesses. McDonalds isn't a burger and fries company, it is a real estate company. This is because they buy the properties each restaurant is located on and rent them out to small business owners who front the capital and run the operation (with stipulations). You may think there are flaws in this setup (which you could argue, though the exchange is a tested business model and logistics network in exchange for franchise fees) but the point is that small business owners are HEAVILY involved in these chain businesses. It's the same with something like Dunkin Donuts. Here in MA, the profits from the coffee you buy at one location will go into the pockets of one small business owner while down the street it will go into another.
- jlmorton 7y ago
  Note that the rule separately exempts franchise models. This is a bit different than that. This exempts restaurants and hotels that are all owned by a single entity, as long as the individual restaurant, or hotel is a subsidiary with fewer than 500 employees.
  - abnry 7y ago
    Thank you for that information, I didn't know that.

dd36 7y ago

I think it’s because many (most?) people would prefer Ruth’s Chris failing over their local mom and pop. I think I’m in that boat and I like Ruth’s Chris, except the one in SF - was not impressed.

arkanciscan 7y ago
I can put a stick of butter on a New York Strip at home for less than $100. Who needs Ruth's Chris.
- tedunangst 7y ago
  Who needs any restaurant?
  - _curious_ 7y ago
    Fair point...certainly seems to be more supply than demand even before CV19
  - RHSeeger 7y ago
    There's a lot of things we don't _need_ that we still enjoy. In fact, the vast majority of things fall into that category.
crispyambulance 7y ago
The thing about large restaurant chains is that they can easily borrow money, their scale is such that their banks will lend them money regardless of the pandemic (even if that's simply because they've previously borrowed). Ruth's Chris isn't in nearly as much danger of going out of business as, say, a 1000 or so single-location restaurants that didn't get the time of day from JP Morgan when they called.
- dd36 7y ago
  Right. I agree.

IG_Semmelweiss 7y ago

You are correct in your assertion. However your conclusion is wrong. First, the waiver got in due to major lobbying by corporations with cash. Second, it is not correct to state that is is appropriate for larger employers to take PPP. Here is why: although at first glance it would make sense to support workers via PPP, the sad reality is that these workers have already been laid off. As such, PPP will turn into a loan. A cheap loan at that, which is basically a cheaper source of capital funds that any public co has. Public co.s can tap the capital market or existing banking relationships to survive. Small biz cannot tap capital markets and banks are not extending credit at this time. For larger orgs, cheap PPP subsidized loans are literally taking precedence over life and death funds for small biz. So institutional investors, PEs, and banks are being bailed out, while mom and pops and their staff are getting destroyed. Laeger orgs already laid off staff. Mom and pops were hoping for PPP.... to keep staff.

js2 7y ago

It was reported at the time before the bill was signed: > Many of these special-interest provisions would be impossible for a casual reader of the legislation to identify. For example, on Page 15 of the bill, there is a section with the title “Business Concerns With More Than 1 Physical Location.” It says this change in federal law will apply to companies that fit “a North American Industry Classification System code beginning with 72” — a reference that turns out to mean the hotel and restaurant industry. https://www.nytimes.com/2020/03/25/us/politics/virus-fineprint-stimulus-bill.html https://www.nytimes.com/2020/03/25/us/politics/virus-finepri... Edit: This NYT article is the only one I've found in a cursory search that mentions it.

crispyambulance 7y ago

A loophole is a loophole whether it's expressed in obfuscated language or not. There's a reason why the administration fired Glenn Fine on 4/7 who was the inspector that was supposed to oversee the 2T rescue plan. The administration and their cronies are doing a classical "shock doctrine" move to even further concentrate wealth while the opportunity is hot.

_curious_ 7y ago
"The administration and their cronies are doing a classical "shock doctrine" move to even further concentrate wealth while the opportunity is hot." Agreed; buckle up folks if there's another four years to come :/
jlmorton 7y ago
I get your point, but loophole has a specific meaning that implies taking advantage of an ambiguity, unexpected complexity, or oversight in drafting to reach an unintended result. This was not unintentional, and I think that's important to say.
JeremyNT 7y ago
The difference between "loophole" and "carveout" here is basically intent. Occam's razor suggests that, of course, members of a corrupt and self-interested Federal government would intend for their allies at megacorps to have a safe landing, and they would prioritize their wellbeing over others. They look after the people who pay their bills, of course.

abnry 7y ago

What most people don't understand about hotels, chain restaurants, or any business that runs on the franchise model is that the majority of such outlets are run by small businesses. McDonalds isn't a burger and fries company, it is a real estate company. This is because they buy the properties each restaurant is located on and rent them out to small business owners who front the capital and run the operation (with stipulations). You may think there are flaws in this setup (which you could argue, though the exchange is a tested business model and logistics network in exchange for franchise fees) but the point is that small business owners are HEAVILY involved in these chain businesses. It's the same with something like Dunkin Donuts. Here in MA, the profits from the coffee you buy at one location will go into the pockets of one small business owner while down the street it will go into another.

jlmorton 7y ago
Note that the rule separately exempts franchise models. This is a bit different than that. This exempts restaurants and hotels that are all owned by a single entity, as long as the individual restaurant, or hotel is a subsidiary with fewer than 500 employees.
- abnry 7y ago
  Thank you for that information, I didn't know that.