Restaurants Revitalization Fund to Provide $28.6 Billion in Relief for Restaurant Operators
Last week, Congress passed the American Rescue Plan Act of 2021 (“ARP Act”), a $1.9 trillion COVID-19 relief bill which includes grant moneys for eligible restaurant operators as part of the Restaurants Revitalization Fund (“RRF”). President Biden signed the bill the following day.
The U.S. House of Representatives voted to pass the ARP Act on February 27, 2021. The Senate made some changes to the House version of the bill, including approving an additional $3.6 billion in funding for restaurant relief and removing a proposed $15 minimum wage raise following the Senate’s determination that the provision violates budget reconciliation process rules. On March 6, 2021, the U.S. Senate passed the ARP Act, and the bill went back to the House for approval of the Senate’s version. On March 10, 2021, the House passed the bill, and President Biden signed the bill into law on March 11, 2021, before certain COVID-19 unemployment aid programs expired.
In addition to restaurant relief measures, the ARP Act contains other pandemic-related relief, including $1,400 stimulus payments for individuals making under $75,000, tax-free student loan forgiveness and expanded federal unemployment insurance. The ARP Act also allocates $350 billion to state and local governments, $130 billion toward the reopening of K-12 schools and $75 billion for COVID-19 testing and vaccine distribution. In addition, the ARP Act adds another $7.25 billion in funding for the Paycheck Protection Program, which is set to expire at the end of this month. Once enacted, the ARP Act will be the second-largest stimulus bill in United States history.
RRF Eligibility for Restaurant Operators and Franchisees
The RRF will be administered by the U.S. Small Business Administration (SBA). Under the bill, if an applicant (including a franchisee) is an “eligible entity”—which definition includes restaurants, food trucks, bars and brewpubs, among other establishments—the applicant will be eligible to receive a grant of up to $10 million. Applicants will qualify as an eligible entity, if, among certain other eligibility criteria: (1) they do not own or operate more than 20 units and (2) they are not publicly traded companies. For multi-brand operators, the 20-unit cap applies across brands.
The amount of the grant must not exceed the “pandemic-related” revenue loss of the applicant, which generally means the applicant’s 2019 gross receipts minus its 2020 gross receipts. Grants will be based on a modified formula for applicants that were not in operation for all of 2019 or who opened for business after January 1, 2020. Grant funds may be used to cover payroll costs, rent payments, utilities, maintenance expenses, supplies, F&B expenses within the normal scope of business practice, covered supplier costs, operational expenses, paid sick leave, outdoor seating construction, personal protective equipment (PPE), cleaning materials and other expenses the SBA deems essential.
During the initial 21-day period in which the SBA awards grants, the SBA must prioritize grants to eligible applicants that are small businesses owned and controlled by women, veterans and the socially and economically disadvantaged. Also, $5 billion of the $28.6 billion will be reserved for applicants with less than $500,000 in gross receipts in 2019.
The SBA has yet to issue rules or any other guidance regarding the application procedure for RRF grants, except that applicants will have to make a good faith certification to the SBA that the uncertainty of current economic conditions makes the applicant’s grant request necessary to support its ongoing operations. Any funds left over after the first 60 days of grant eligibility will be opened to larger restaurant businesses, but the details regarding the procedure for opening up the eligibility requirements have not yet been published.
RESTAURANTS Act of 2021
The RRF is based on the RESTAURANTS Act of 2021, a $120 billion relief bill for restaurant businesses that was first introduced in October 2020 with bi-partisan support and reintroduced last month. Because the RRF mirrors key aspects of the RESTAURANTS Act of 2021, including the creation of the $28.6 billion dollar grant fund, the RESTAURANTS Act of 2021 will likely neither advance in either the House or Senate nor be reintroduced later this year as part of a smaller scale ongoing relief package for restaurant businesses.