New Federal Grant Program Throws Lifeline to Restaurant Industry
American Rescue Plan Act Also Expands Funds for Shuttered Venues
By James Bailey, CPA
The American Rescue Plan Act (ARPA) – the latest and largest COVID-19 relief package at $1.9 trillion – creates a $28.6 billion Restaurant Revitalization Fund (RRF) to distribute grants to eligible restaurants and food establishments. Of the total, $5 billion will be set aside for businesses with 2019 gross receipts of $500,000 or less.
The hospitality industry has been one of the hardest hit by the COVID-19 pandemic, and restaurants in many states are still under government orders to limit their business to takeout and/or outdoor dining, severely reducing their gross receipts.
Grants available under the Restaurant Revitalization program will be available by mid-May by applying through the U.S. Small Business Administration (SBA). Following is a summary of eligibility and application rules.
Businesses that are eligible for RRF grants include: restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taproom-licensed facilities or the premises of beverage alcohol producers where the public may taste, sample or purchase products, or other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink.
Applicants’ must have owned or operated fewer than 20 locations, together with any affiliates, as of March 13, 2020. Publicly traded companies are not eligible for the grants.
An eligible entity will be required to certify that the uncertainty of current economic conditions makes it necessary for the grant request to support the establishment’s ongoing operations, and that the applicant has not applied for or received a grant under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (generally for live venues and theaters).
Calculating the Grant
The RRF grants will be calculated based on the COVID-19-related revenue losses documented by the applicants, less any Paycheck Protection Program (PPP) loans obtained in either 2020 or 2021. Generally, pandemic-related revenue loss means 2019 gross receipts less 2020 gross receipts. The ARPA provides additional provisions for eligible entities that were not in operation for any or all of 2019.
Individual RRF grants cannot exceed more than $5 million, or in the case of an affiliated group, $10 million in the aggregate.
How May RRF Grants be Used?
The RRF grant must be used on eligible costs during the covered period, which is defined as beginning on February 15, 2020, and ending on December 31, 2021, or on a date established by the SBA that will not exceed two years after the signing of the ARPA.
Eligible expenses include:
- Payroll and benefit costs
- Payments of principal or interest on any mortgage obligation (except any prepayment of principal on a mortgage obligation)
- Rent payments, including rent under a lease agreement (except any prepayment of rent)
- Maintenance expenses, including 1) construction to accommodate outdoor seating, and 2) walls, floors, deck surfaces, furniture, fixtures and equipment
- Supplies, including protective equipment and cleaning materials
- Food and beverage expenses that are within the scope of the normal business practice of the eligible entity before the covered period
- Covered supplier costs, as defined in the Small Business Act, as redesignated, transferred and amended by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
- Operational expenses
- Paid sick leave
- Any other expenses that the SBA determines to be essential to maintaining the eligible entity
If a grant recipient is unable to use all the grant funds, or if the recipient’s establishment permanently ceases operations before the end of the covered period, the recipient must return to the U.S. Department of the Treasury any funds not used for allowable expenses.
The Fine Print
Restaurant Revitalization grants will not be taxed as income, and all normal federal tax deductions are protected.
As directed by ARPA, SBA will prioritize awarding grants to eligible entities owned or controlled by women, veterans, or socially and economically disadvantaged businesses during the initial 21-day application period.
While further information on how to apply for a RRF grant will be forthcoming, including required documentation, we recommend that businesses evaluate their eligibility and gather the financial information to support their calculations of pandemic-related revenue losses now to be ready to apply when the grants become available.
Funds for Shuttered Venues
The ARPA also expanded a program created at the end of 2020 that provides $15 billion in federal grants to venue operators, such as live venues and theaters, that have been shut down by COVID-19-related government orders.
The original legislation that created the Shuttered Venue Operators Grant program prohibited operators who received Paycheck Protection Program (PPP) loans after December 27, 2020 from applying. The ARPA amended that section so PPP recipients are now eligible to apply for the Shuttered Venue grants. However, grants to PPP recipients will be reduced by the amounts of any PPP loans received on or after December 27, 2020.
If you are interested in applying for a Restaurant Revitalization grant, please contact your Adams Brown advisor.