Bipartisan Support for Restaurant Owners, but Confusion Remains

More than 100,000 restaurants benefited from $28.6 billion in funding from the Restaurant Revitalization Fund, including more than 600 from Kansas and 500 from Arkansas. These numbers pale in comparison to how many restaurants applied for funding but did not receive it. Within 10 days of the RRF application window opening, the Small Business Administration (SBA) had received more than double the amount in requests than the total allotment.

Then, in early July, the SBA officially closed the RRF portal, but not after significant controversy surrounding prioritized applications. Now, there are two new potential pieces of legislation to provide additional funding for struggling restaurants. It is unclear how these two bills could work together, or if they even would.

Restaurant Revitalization Fund Replenishment Act

First introduced in June 2021, the RRF Replenishment Act is a bipartisan effort to increase RRF funding by $60 billion. There isn’t much in the actual legislation, simply a request to increase money, though the SBA has said before it would continue to process pending applications in the order they were received if the agency received more funding for the program.

Entrepreneurs Need Timely Replenishment for Eating Establishments (ENTREE) Act

The ENTREE Act goes a step further and proposes a plan to pay for $60 billion in replenished RRF funds. The amount is considered already accounted for as it represents the other 64 percent of restaurant applicants who were denied funding in the first round. Unused Economic Injury Disaster Loans (EIDLs) and state and local funds from the American Rescue Plan would pay for the ENTREE Act.

Funding would be available on a first-come, first-serve basis to avoid the headaches and lawsuits that arose from the first round, when the first three weeks were originally set aside for women- and minority-owned establishments.

Funding at the Local Level

Aside from potential Congressional relief, some state restaurant associations are helping local operators secure state and local grants. The American Rescue Plan Act (ARPA) distributed billions to state and local governments to help local taxpayers and nonprofits offset the financial burden from COVID-19; ARPA directives expressly mention heavily impacted industries like tourism, travel, and hospitality. State restaurant associations have been able to lobby for their member establishments to try to direct funding toward the industry.

The National Restaurant Association’s State and Local Blueprint has been helpful in this regard.

There are also strategies to maximize tax incentives, like the Employee Retention Tax Credit, Work Opportunity Tax Credit, and FICA Tip Credit.

Restaurant Industry Snapshot

In the past 18 months, the restaurant industry has seen more than 90,000 businesses permanently close and endured about 25 percent of all job losses nationwide. Many states still have COVID restrictions in place for dining out, further complicating an uneven recovery.

Supply chain disruptions, hiring difficulties, and rising food costs are making that recovery even harder for many restaurants. Food prices are up almost ten percent from a year ago, with the highest increases for fats and oils, chicken, pork, and seafood, eggs, and flour. In response, operators have been increasing menu prices and adjusting portions.

It’s not all bad news, though. Restaurant sales nationwide jumped in June, up more than two percent from the month before. That’s the “fifth solid increase in the last six months,” according to the National Restaurant Association.

There were around 200,000 pending applications in the first round of RRF funding when the portal closed, so demand is most certainly still there. It’s unclear when or if Congress would take up either or both the RRF Replenishment Act and the ENTREE Act, though with industry lobbying efforts and broad support, it seems likely that restaurants will have another shot at more funding.

If and when that happens, operators need to act quickly. It will be important to submit a complete, accurate application as soon as funding opens back up to ensure the best chance of receiving it. For questions on what information to prepare, contact your Adams Brown advisor.