Escape Room locations sue SBA after missing out on pandemic relief funds

The Escape Room USA locations in Fishers and Indianapolis are suing the U.S. Small Business Administration, hoping to be recognized as live entertainment venues that qualify for pandemic relief funds.

After applying for Shuttered Venue Operators Grant, or SVOG, awards of $840,000 last August, the Indianapolis and Fishers sites were denied funding and subsequently denied on appeal.

According to lawsuits filed Jan. 14 in the U.S. District Court for the Southern District of Indiana, The Escape Room USA argues that financial assistance was “unlawfully withheld” and that the SBA gave no explanation for its rejection of the company’s applications.

Escape Room CEO Jennifer Harbron outlined the company’s attempt to have the SBA reconsider its rulings in a statement provided to IBJ.

“We, like many other entertainment venues, by government order, were shut down during COVID and suffered the losses associated with this,” Harbron said. “Our application for an SVOG was rejected, and our appeal denied, even though similar entertainment entities in the United States were approved and funded. We understand the Escape Room concept is still new to many people, but just want to be treated equitably by the SBA.”

The first Escape Room opened in 2015 at 200 S. Meridian St. above The Old Spaghetti Factory restaurant in downtown Indianapolis. The escape-room experience involves groups of customers working together to find clues and solve puzzles to exit themed rooms in an assigned amount of time.

The Fishers location, at 8890 E 116th St, opened in 2016. A third Indiana site opened in November at 16848 Southpark Drive in Westfield.

The SVOG bill, known as Save Our Stages in an earlier incarnation, was signed into law on Dec. 27, 2020, and included more than $16 billion in relief funding to be overseen by the SBA’s Office of Disaster Assistance.

Eligible entities for grants were listed as live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theater operators  and talent representatives.

Applicants were allowed to request grants equal to 45% of their gross earned revenue, with single grants capped at a maximum of $10 million.

Through Jan. 18, 170 grants had been awarded in Indiana. The top three SVOG recipients were North Park Cinemas in Evansville ($10 million); the Indianapolis Zoological Society, or Indianapolis Zoo ($9.1 million); and the Children’s Museum of Indianapolis ($8.9 million).

As Escape Room CEO Harbron indicated, not all escape room attractions in the United States were shut out of SVOG funding. Three examples of successful escape-room applicants: Escape Artistry, Chicago; Escape the Estate, Syracuse, N.Y.; and Escape Space Games, Portland, Oregon.

Andrew Preble, president of Ergo, a not-for-profit support organization for escape rooms, said more than 10 escape-room companies received SVOG funding.

“There’s not really any rhyme or reason for which companies received money and which companies didn’t,” said Preble, who owns a New Orleans escape room that was denied funding. 

Although Preble said escape rooms aren’t uniform in terms of theatrical flair or immersive experiences, he blames the SBA for being inconsistent.

“It’s hard to say if it’s unlawful or not, but we definitely don’t think (the SBA) acted in good faith with the different types of applicants,” Preble said. “Probably the biggest problem was that they didn’t have a process in place when they were reviewing applications to make sure they were consistent across the board.”

The SVOG legislation requires applicants to have a defined performance and audience space, audio mixing equipment, a public address system and a lighting rig. Staffing at eligible entertainment venues includes one or more individuals who work in at least two of the following roles: sound engineer, talent buyer, promoter, stage manager, security personnel and box office manager.

“The way the legislation was written, we supported it from the beginning without really any changes to it,” Preble said. “We didn’t think escape rooms were going to have that much of an issue applying for the grant. But that was very naive.”

The Escape Room USA’s litigation names the U.S. Small Business Administration and its top official, Isabella Casillas Guzman, as defendants.

When reached by the IBJ, SBA representatives said the organization does not comment on individual applications for SVOG or other programs, or on pending litigation. 

The SBA did share a general comment on the SVOG program: “The SBA’s SVOG Team has been creative and dedicated in providing our country’s small businesses, cultural institutions, venues, theaters and other entertainment operators every opportunity to receive funding. Some examples of our commitment are that the SBA invited over 5,000 applicants to appeal SVOG decline decisions. Approximately 3,000 businesses accepted this invitation.”

Top 10 Shuttered Venue Operators Grant awards in Indiana

• $10 million, North Park Cinemas, Evansville.
• $9.1 million, Indianapolis Zoological Society (Indianapolis Zoo).
• $8.9 million, Children’s Museum of Indianapolis.
• $8 million, Indianapolis Symphony Society (Indianapolis Symphony Orchestra).
• $7.1 million, Drum Corps International, known for marching band competitions, Indianapolis.
• $6.9 million, Bullseye Event Group, known for Indianapolis Colts VIP Tailgate events and sports travel packages, Indianapolis.
• $6.1 million, Music For All, Inc., known for Bands of America marching band competitions, Indianapolis.
• $5 million, Beef & Boards Dinner Theatre, Indianapolis.
• $2.9 million, Fort Wayne Zoological Society (Fort Wayne Children’s Zoo).
• $2.9 million, Derby Dinner Playhouse, Clarksville.