Yesterday afternoon—nearly one year after the first bars and restaurants were ordered to close their doors to indoor and outdoor dining due to the COVID-19 pandemic—President Biden signed into law the American Rescue Plan Act of 2021, which provides $1.9 trillion in much-needed relief to millions of individuals, families, businesses, and other employers all across America. The new legislation offers the biggest piece of the pie to the restaurant industry in the form of $28.6 billion in tax-free federal grants soon to be available under a Restaurant Revitalization Fund (RRF) administered by the Small Business Administration (SBA).
Restaurants, food stands, food trucks, food carts, caterers, bars, tasting rooms, and other facilities licensed to sample, taste, or sell food or drink to the public are eligible for grants under the RRF, provided they own or operate fewer than 20 establishments including affiliated businesses, demonstrate that they suffered a loss of revenue over the past year, and do not have a pending application for shuttered venue operators.
Grants available under the RRF are calculated by subtracting 2020 gross receipts from 2019 gross receipts and are capped at $5 million per physical location and $10 million in total. For establishments that were not in operation for all of 2019, not in operation until 2020, or not in operation as of the application date, grants are also available under different formulations.
The amount of grant money available under the RRF will be reduced by any amount received by the establishment from Paycheck Protection Program (PPP) loans in 2020 and 2021.
For restaurants with gross receipts under $500,000, $5 billion in grant money has been set aside under the RRF, and the SBA will prioritize awarding grants for establishments owned by women, veterans, and businesses owned by socially and economically disadvantaged applicants during the first 21 days of the application period.
Funds must be spent on the following expenses incurred from February 15, 2020, to December 31, 2021 (or a date determined by the SBA):
- Payroll
- Mortgage principal and interest
- Rent
- Utilities
- Maintenance, including construction to accommodate outdoor seating
- Supplies including PPE and cleaning materials
- Ordinary food and beverage inventory
- Certain covered supplier costs
- Operational expenses
- Paid sick leave
- Other expenses the SBA determines are essential to maintaining operations
Grant applications are not yet available, but it is anticipated that the application process will begin within the next few weeks.
The National Restaurant Association, which has played a major role in lobbying Congress for relief since the outset of the pandemic, issued a statement through its president, Tom Bene, praising the new legislation, noting that “creation of the Restaurant Revitalization Fund will be a catalyst to reviving restaurants and saving jobs across the country. . . . Our focus from the beginning of this crisis has been on ensuring that our favorite local restaurants could access the assistance they would need to survive. This fund is a win for the smallest and hardest-hit restaurants that have sacrificed and innovated to continue to serve their communities.”
For hundreds of thousands of food and drink purveyors across the country, passage of the American Rescue Plan Act of 2021 and establishment of the RRF is long-awaited and welcome relief aimed at aiding our nation’s recovery from the devastating effects of the COVID-19 pandemic and will allow us to again enjoy time with friends, family, colleagues, and new acquaintances, create new memories, and savor all of the delights offered by our favorite bars and restaurants.
If you have any questions regarding the content of this alert, please contact Scott Rogoff, Hotels, Hospitality & Food Service Team leader, at srogoff@barclaydamon.com, or another member of the firm’s Hotels, Hospitality & Food Service Team.
We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. Please contact Yvonne Hennessey, COVID-19 Response Team leader, at yhennessey@barclaydamon.com or any member of the COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com.