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Restaurant recovery cash in Louisiana misses businesses most in need

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Restaurant recovery cash in Louisiana misses businesses most in need

Sep 07, 2023 | 6:00 am ET
By Wesley Muller
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Restaurant recovery cash in Louisiana misses businesses most in need
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News of a homicide in New Orleans doesn’t always raise eyebrows. It’s not uncommon for residents to tune out frequent reports of crime, but one incident on July 28 caught the eye of restaurant owner Conrad Chura.

Chura, owner of two Wakin’ Bakin’ breakfast bistros in the city, recognized the name of one of the men police had arrested in connection with an alleged vehicle theft and fatal shooting. Jessie Carter, 31, had been one of Chura’s most reliable employees — a line cook whom he said came to work on time every day for the past two years at Wakin’ Bakin’. 

As Chura quickly processed the news of Carter’s arrest, he began to wonder how his own  decisions may have played a part in the incident. Not long before the shooting, Chura was forced to close his third location and lay off several employees due to declining revenues. One of those employees was Carter.

Chura wondered: If the allegations are true, had Carter turned to crime to make ends meet? News reports confirmed Carter and his alleged accomplice both have criminal records, but Chura acknowledged crime is very often a result of poverty and lack of opportunities.

“I can tell you for the two years he worked for me, nothing like that ever happened,” Chura said.   

Some restaurants have still not fully recovered since the coronavirus pandemic that began in 2020, and multiple hurricanes and other disasters that followed made things even worse for the hospitality industry in Louisiana. Chura obtained a Paycheck Protection Plan (PPP) loan that covered about two months compensation for what was then a 48-worker payroll, he said. He’s now down to nine full-time employees and has at times had to defer his personal mortgage payments to cover payroll, putting his home at risk if sales don’t improve. 

The 33-year-old proprietor said the July 28 shooting is an example of the indirect impacts to a community that loses its small businesses. 

Sunlight finds its way through an oak canopy to dapple the façade of the Mid-City location of New Orleans breakfast diner Wakin' Bakin.
The Mid-City location of New Orleans breakfast diner Wakin’ Bakin’, pictured on Sept. 8, 2023. (Greg LaRose/Louisiana Illuminator)

‘That relief didn’t show up’

A major point of frustration for Chura was watching the government seemingly pick and choose which restaurants to help and which ones to ignore with regards to disaster assistance and pandemic relief aid. The most egregious example, he said, was the Restaurant Revitalization Fund (RRF), a grant program Congress authorized through the American Rescue Plan Act of 2021. 

The RRF program offered grants of up to $5 million per physical location with a total limit of $10 million per applicant. Congress allocated $28.6 billion to the U.S. Small Business Administration to run the program. 

While his restaurants were forced to close under the city’s strict pandemic policies, Chura consulted with tax professionals and attended webinars to learn how to best prepare his RRF application. He applied to the program on the very first day it opened and was confident help was on the way. 

Upon submitting his application, the SBA’s website indicated one of his locations was eligible to receive $5 million while another was eligible for $500,000, he said. He watched as some other nearby restaurants and even corporate franchisees received the grants. Chura got nothing and said he never received an explanation why. 

“We have been in business 10 years before the pandemic [and] never expected or asked for a dollar of relief funds during this time,” he said. “As a business owner, I was told I was going to have relief to help bridge the gap, but then that relief didn’t show up and it caused a big issue. It would have been easier for us if we didn’t have our hopes up for relief… I could’ve closed three years ago and started something different and not have my house in jeopardy.” 

Similar stories have played out across the United States. Restaurant industry advocates have repeatedly criticized the SBA for a lack of transparency in how it awarded the grants. A group of restaurant owners from across the country banded together during the pandemic to form the Independent Restaurant Coalition, which continues to call on Congress to replenish and fix issues with the RRF. 

Most of the money went into the pockets of the few rather than the many. More than two-thirds of the 372,000 applicants nationwide got nothing, according to data that Congress published last year. 

‘Winners and losers’

Louisiana distributed a total of $396 million in RRF grants to 1,391 restaurants, but the lion’s share of that money — a combined $243 million of the state’s total — went to just 167 restaurants, or 12% of the grant recipients. The SBA calculated grant amounts based on gross sales, so for the most part, restaurants that were popular and thriving before the pandemic got some of the biggest government handouts.  

The list of the top grant recipients in Louisiana could double as a list of famous New Orleans eateries for a travel guide, though a few exceptions raise questions.

According to SBA documents, at the very top of the list with an award of $10 million is QED Hospitality. On its website, the company describes itself as a management group that operates restaurants at swanky hotels in New Orleans, Nashville and Kentucky. CEO Emery Whalen and chef Brian Landry co-own the company that operates Jack Rose restaurant, the Silver Whistle Café, Tin Roof rooftop bar and the Bayou Bar, all inside the Pontchartrain Hotel on St. Charles Avenue. 

The primary problem with the RRF program is that it was terribly underfunded. In their rush, they created opportunities for mistakes

– Erika Polmar, Independent Restaurant Coalition

News reports during the first wave of the pandemic highlighted how QED converted into a telehealth business and was able to offer new stay-at-home jobs to its entire 107-person workforce. Whalen’s brother, Ralph, an executive at a healthcare IT company, helped QED land a contract to perform patient screening and virtual appointment scheduling for telehealth practitioners. Roughly half of QED’s employees accepted the job offers, and company leaders told the Times-Picayune how some workers were earning even higher wages than before COVID.

It’s unclear how much revenue QED generated from its telehealth operations and whether the SBA took it into account when calculating QED’s grant amount. QED did not respond to a request for comment, and the SBA would not disclose information about individual grant recipients.

QED’s $10 million grant award stands out because it tops every other establishment on the list of Louisiana RRF recipients, even those with globally renowned names such as Café Du Monde, Pat O’Brien’s and Commander’s Palace. 

Café Du Monde ranked second to QED with an award of $8.1 million. Pat O’Brien’s and Commander’s Palace each received $5 million. 

The Politan Group got the third-highest grant award in the state at $7.8 million. According to SBA documents, the business listed its physical location as 2401 St. Claude Ave., in New Orleans. The address is the site of an empty building owned through an entity that has principles in common with Politan. It was listed for sale about six months after the company received its RRF grant, according to real estate listings.

Restaurant recovery cash in Louisiana misses businesses most in need
Politan Group’s empty building at 2401 St. Claude Ave., in New Orleans, was still for sale as seen in this March 27, 2023, photo. (Wes Muller/Louisiana Illuminator)

The SBA’s application rules for the program require companies to list the physical address from which the applicant conducts on-site sales of food or beverages. 

Politan Group also holds the lease at St. Roch Market, a city-owned, multi-vendor food hall directly across the street from its empty building. Each vendor subleases space from the company. One vendor, Laksa NOLA, applied for and received a roughly $40,300 RRF grant using St. Roch Market’s address. 

On its website, the Politan Group lists seven other food court projects: locations in Jackson, Mississippi; Lancaster, Pennsylvania; Miami; and four sites in the Atlanta area.

Politan Group owner Will Donaldson didn’t respond to multiple requests for comment. WWL-TV reported last week that St. Roch Market has struggled since the pandemic and has few remaining tenants, though one vendor has expressed interest in taking over the lease.

To Chura, the list of RRF recipients doesn’t make much sense. Most applicants were approved in May or June 2021, shortly after the program opened but a handful of others were approved in November 2022. 

Chura said it felt like the government was arbitrarily picking “winners and losers.”

“I’m not advocating for money,” he said. “I’m advocating for equal consideration.” 

Some corporate franchises seemed to do better than others. A total of 46 Subway shops in Louisiana got a combined $4.7 million, while six Smoothie King shops got a combined $722,636. Millions went to other businesses such as bowling alleys and event halls. Rick’s Cabaret, a Bourbon Street strip club, got $5 million. 

“A lot of money was given to places that don’t function like a restaurant,” Chura said. “My cost of goods sold is much different than that of a strip club, hotel group, holding company, bowling alley or the vacant building they funded, and the operations are not comparable.”

‘Opportunities for mistakes’

Erika Polmar, executive director of the Independent Restaurant Coalition, said Congress severely underfunded the RRF program and made mistakes in its haste to act quickly. Experts had calculated that roughly $120 billion was needed for the program, and the SBA gave very little scrutiny to the applications, she said.

“The primary problem with the RRF program is that it was terribly underfunded,” Polmar said. “In their rush, they created opportunities for mistakes.” 

In July 2022, the Government Accountability Office issued a report that revealed $180 million of RRF funds had remained unobligated. Following pressure from the Independent Restaurant Coalition and other advocates, the SBA released money to 169 new recipients.

The same report noted the SBA flagged 4,000 RRF grant recipients for suspected fraud or ineligibility but hadn’t taken timely action to address them. One alleged fraudster received $8 million from the program, the report said. In response, the SBA said it planned to review nearly 2,200 of those awards totaling $278.6 million.

Chura fears he is now going through a similar experience with Louisiana’s Restore Loan program for small businesses impacted by recent hurricanes. Louisiana’s Office of Community Development administers the program. 

Chura said he has been applying for a Restore loan since May 12 and has been asked to submit the same documents at least five times. After 100 days of back and forth with one of the loan servicers, Chura said he was denied because essentially his 2020 revenues were too low. He was unable to show that 2021 was a bad year compared to 2020 — the same year he was forced to shut down due to the pandemic. 

The program seemed to ignore the reality that many businesses suffered losses in both years from the pandemic and Hurricane Ida, Chura said. 

As of the end of July, 541 Restore Loan applications had been initiated, and 153 of those were completed in full. Ninety-eight applicants, or nearly two-thirds, have been denied, and 55 are still in the approval process, according to Office of Community Development spokesperson Marvin McGraw. 

The Office of Community Development has since updated the application policy to allow businesses to submit their 2019 tax returns in place of their 2020 tax returns, McGraw said. 

The change was welcomed news for Chura, who plans to request a review of his application under the new policy. 

The application period for the Restore Loan program closes Dec. 31.