Restaurant365 is closely monitoring news from the federal government on the Restaurant Revitalization Fund. When the legislation was passed on March 11, the Small Business Administration (SBA) set an April target to begin taking applications, but as of April 12, 2021, the SBA has not released a date for accepting grant applications, nor released specific details about the grant application process. As soon as there is any news from the SBA, this blog post will be updated.
Updated April 12, 2021
The long-awaited restaurant relief has arrived as President Biden signs the $1.9 trillion American Rescue Plan, creating the $28.6 billion Restaurant Revitalization Fund (RRF). The RRF is earmarked for the restaurant industry in the form of tax-free grants of up to $5 million for individual restaurants and $10 million for restaurant groups with 20 or fewer locations. After the American Rescue Plan was voted on initially by the House on March 1, the Senate increased the amount of money for the Restaurant Revitalization Fund from the initially proposed $25 billion to $28.6 billion.
The Restaurant Revitalization Fund is modeled after the $120 billion RESTAURANTS Act, which was introduced in Congress in June 2020 and passed by the House but was not voted on by the Senate. The financial relief, which is aimed at saving restaurants, bars, and jobs, was a key objective of lobbying by the National Restaurant Association (NRA) and the Independent Restaurant Coalition.
The Small Business Administration (SBA) will administer the Restaurant Revitalization Fund and is likely to begin processing restaurant grant applications “within weeks, not months,” according to Rep. Earl Blumenauer (D- Or.). He said that $28.6 billion “won’t be enough” to help small businesses recover and the fund may need a second round, similarly to the Paycheck Protection Program (PPP). Still, independent restaurants are hoping that the grants will be a light at the end of the long and dark pandemic tunnel.
The eligibility amount will be determined by subtracting an applicant’s 2020 sales from its 2019 revenues, with the goal of compensating the business for what was lost during shut down and while diners were advised to stay home.
The SBA has not yet announced an exact date to begin accepting grant applications, nor has it provided the details of the grant application process, however, the SBA is targeting early April to launch a phased rollout of the fund. This blog post will be continually updated to reflect the most recent and accurate information from the SBA.
The grants may be used alongside any government disaster loans and Employee Tax Retention Tax Credits (ERTC) that a restaurant business has received since the beginning of the COVID-19 pandemic. However, a relief grant and an ERTC cannot be used for the same expenses. Also, if a restaurant received a PPP loan, the amount of the PPP loan will be subtracted from the eligible grant total received from the Restaurant Revitalization Fund. Any unused grant money must be returned to the federal government.
Highlights of the Restaurant Revitalization Fund
Individual restaurants and other food and drinking establishments, including caterers, brewpubs, taprooms, and tasting rooms, may apply for the grants. Key features of the fund include:
- Individual restaurants may apply for grants of up to $5 million.
- Restaurant groups with 20 or fewer locations may qualify for grants of up to $10 million.
- Franchisees of larger chains that do not own more than 20 locations are eligible to apply for grants of up to $10 million.
- Publicly traded restaurant groups are not eligible for the grants.
- Payroll (excluding employee compensation exceeding $100,000 per year)
- Employee benefits and paid sick leave
- Mortgage, rent, and utilities
- Outdoor seating construction; supplies, PPE, and cleaning materials
- Food, operational expenses, and debt obligation to suppliers
How is the Amount of the Grant Determined?
- The grant will equal 2019 revenues minus 2020 revenues for restaurants established prior to 2019.
- For restaurants that opened in 2019, the grant will equal the average of 2019 monthly revenues times 12, minus 2020 revenues.
- Restaurants that opened in 2020 will be eligible to receive funding equal to eligible expenses.
Covered Period and Set Asides
- Grants can be spent on eligible expenses from 2/15/20 through 12/31/21. The SBA Administrator may extend the period through two years from enactment if conditions warrant.
- $5 billion of the $28.6 billion total is reserved for restaurants with less than $500,000 in gross receipts in 2019 for the first 60 days of the program.
- During the initial 21-day period, the administrator will prioritize awarding grants to eligible entities that are owned or controlled by women, veterans or are socially and economically disadvantaged businesses.
Restaurants Applying for the Grants Must Certify That:
- Current economic conditions make the grant request necessary;
- Funds will be used appropriately;
- And they will only apply for and receive one grant.
Aside from the grant program, restaurants may also benefit from the American Rescue Plan’s allocation of another $1,400 in direct payments to most U.S. households. When relief money was paid directly to consumers in two earlier relief packages, restaurants experienced an uptick in sales.
While the SBA has not yet announced when it will begin accepting grant applications, it did confirm that applicants will not need to register for a DUNS number or register with the System for Award Management (SAM), two extra steps that would have delayed the grant application process by more than two weeks. The SBA made this decision after urging from the NRA and others to streamline and simplify the application process.
This blog post has been prepared for informational purposes only, and is not intended to provide, and should not be relied on, for advice on applying for a grant. You should consult your own tax advisor or CPA if you have specific questions about how the Restaurant Revitalization Fund may affect your restaurant business.
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