The American Rescue Plan: Restaurants Finally Get Their Relief Fund
An important provision of the newly enacted COVID-19 relief legislation known as the American Rescue Plan is new assistance for restaurants and bars that suffered significant economic loss during the pandemic. A $28.6 billion fund was established to allow “eligible entities” to apply for grants up to $5 million per location ($10 million maximum) to compensate for “pandemic-related revenue loss.” Finally, restaurant small business owners, who have been asked to consider the public good over their own bottom line, have a fund program that will bolster that bottom line.
On January 20, 2021, the White House announced its American Rescue Plan, a $1.9 trillion- investment intended to build upon many of the measures in the CARES Act[1] from March 2020 and the Consolidated Appropriations Act[2] from December 2020. The plan became H.R. 1319 and was introduced on February 24, 2021. It passed the House on February 27, 2021, was amended and passed by the Senate on March 6, 2021, and obtained final approval from the House on March 10, 2021. On March 11, 2021, President Biden signed H.R.1319 – The American Rescue Plan of 2021 into law.[3]
The additional $7 billion for the Paycheck Protection Program (PPP) and the $15 billion for new advancements in the Economic Injury Disaster Loan (EIDL) program build upon programs that already demonstrated their value. The Shuttered Venue Operator (SVO) Grant program[4] appears as if it will be an excellent program for specific businesses, but the program established on December 27, 2020, still is not ready to accept applications from businesses that have been zero-revenue businesses for months. Nevertheless, the SVO fund received an additional $1.2 billion. Much has already been written on the above programs. This article will focus on the new relief for restaurants, bars and related companies known as the Restaurant Revitalization Fund.
The Restaurant Revitalization Fund
The Real Economic Support That Acknowledges Unique Restaurant Assistance Needed to Survive Act of 2020, also known as the RESTAURANTS Act of 2020, was a part of the Consolidated Appropriations Act until approximately 10 days before the law was finalized. The proposed $120 billion fund was cut from the final bill without any explanation.
Fortunately for restaurants, the industry group behind the RESTAURANTS Act did not give up. Section 5003 of H.R. 1319 creates a $28.6 billion fund through which grants can be awarded to eligible entities. This is known as the Restaurant Revitalization Fund. An eligible entity is defined as:
a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.
This rather broad definition has some exclusions. Publicly traded companies and state-owned business are expressly excluded. Any eligible entity that owned or operated more than 20 locations as of March 13, 2020, is also excluded. Finally, any entity that has a pending application for or has received a SVO grant is excluded. There is no express exclusion for a franchise owner, and Rep. Earl Blumenauer confirmed in a press conference on March 10, 2021, that franchisees of larger chains that do not own more than 20 locations are eligible.[5]
This fund does not offer low-interest loans or even forgivable loans. Instead, an eligible entity can apply for and receive a grant, which does not need to be repaid. The next logical question is: How large is the grant? An eligible entity can apply for a grant from the Restaurant Revitalization Fund for an amount equal to its “pandemic-related revenue loss,” not to exceed $10 million total and no more than $5 million per physical location. Surprisingly, the definition of “pandemic-related revenue loss” is intuitive:
The gross receipts, as established using such verification documentation as the Administrator may require, of the eligible entity during 2020 subtracted from the gross receipt of the eligible entity in 2019.
There are additional formulas to calculate pandemic-related revenue loss, but those formulas are meant to help entities that opened for business at some point during 2019, or even entities that had no revenue in 2019. The only modification to the rather simple mathematical formula is the pandemic-related revenue losses must be reduced by any amounts received from a covered loan under the PPP. There is no reduction for any amounts received under the EIDL, which makes logical sense. Any entity that received the EIDL has the responsibility to repay it over 30 years.
Finally, any eligible entity must pay attention to the limits on the potential uses of the funds. Without going through each specific limitation, a good general rule is the money must be used for the business. A recipient of the Restaurant Revitalization Fund grant cannot pocket the money as profit. However, spending this grant money on the business is likely to lead to large profits in 2021. Any restaurant small business owner wanting additional information on the limitations on the use of funds can contact Paul Petruska, Gabrielle Intagliata, or their regular Greensfelder contact.
[1] Public Law 116-136, also known as the Coronavirus Aid, Relief and Economic Security Act.
[2] Public Law 116-260.
[3] https://www.congress.gov/bill/117th-congress/house-bill/1319
[4] Section 324 of the Economic Aid to Hard-Hit Small Business, Nonprofits, and Venues Act, which is a part of Public Law 116-260.
[5] https://www.nrn.com/news/eligible-franchisees-will-be-able-apply-restaurant-revitalization-fund-grants-congressman-says