On May 10, the first payments from the Restaurant Revitalization Fund (RRF) went out to more than 16,000 restaurants and other food and beverage providers.
A week after opening the $28.6 billion RRF, the U.S. Small Business Administration (SBA) said that it had begun sending out more than $2 billion in a first round of funding to restaurants, bars and other eligible applicants, according to Journal of Accountancy.
When President Joseph R. Biden, Jr. signed the American Rescue Plan Act into law, creating the RRF, it occurred a year after the first restaurants were ordered to close during the COVID-19 pandemic.
The SBA reported in early May that more than 186,000 restaurants, bars and other food and beverage businesses applied for RRF assistance during the first two days after the program’s application window opened on May 3.
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The RRF created a new federal program for restaurant owners with 20 or fewer locations. Operators could apply for tax-free grants of up to $5 million per location, or up to $10 million for multi-location operations. The grant amount was determined by subtracting 2020 sales from 2019 revenues.
Funds from the grants can be spent on a wider range of expenses than previous relief programs, including mortgages or rent, utilities, supplies, food and beverage inventory, payroll and operational expenses. Five billion dollars of the fund was set aside for restaurants with gross receipts under $500,000 and, for the first three weeks of the application period, the SBA prioritized awarding grants for women-, veteran- or socially and economically disadvantaged-owned businesses.
However, businesses need to act quickly, as the application window for the Restaurant Revitalization Fund closes on Monday, May 24 at 8 p.m. EDT.
Blair Motl, owner of Payroll Vault in East Dundee, Ill. – a process payroll company that offers a variety of services and support to small and medium-sized business, such as restaurants – said the latest RRF bill is great because it’s turned its focus on restaurants and small businesses that were previously overshadowed by large corporations.
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“Restaurants can now benefit by getting a 3.5 month multiplier of payroll expenses rather than the 2.5 for everyone else,” said Motl. “The banks were also limited to giving out small loans for two weeks, so they had a chance of getting funded. Restaurants are now also able to include the cost of PPE [personal protective equipment] and perishable food costs to the nonpayroll portion of the loan. For our clients, we've sourced over $6 million in credits in just over eight weeks. The program is definitely working."
Guidance for Bars & Restaurants
Mark Moeller, owner and president of Westport, Conn.-based The Recipe of Success – a consultancy firm that works with new and struggling restaurants across the country – has been hands-on with his clients throughout the pandemic. Here’s a breakdown of Moeller’s key thoughts and advice on U.S. government aid and what it all means for restaurant operators:
Some Areas Will See More Benefit Than Others
“The Restaurant Revitalization Fund will impact restaurants differently state to state and location to location,” said Moeller. “Cities like New York City and Los Angeles, where there were extended lock downs, will see the greatest benefit since their revenue was down significantly in 2020 vs. 2019. Outlying areas that saw a shorter window of closure may see their benefit shrink especially after reducing the amount by the PPP loans.”
Evaluate Your Eligibility
“The Restaurant Revitalization Act grants do not have to be paid back and restaurants should be evaluating if they are eligible,” said Moeller. “These grants, used correctly, will help restaurants pay current expenses so their incoming revenue can go to past expenses. This may allow a struggling restaurateur to right the ship coming out of the pandemic. We work with operators to focus on their profit and loss statement and be critical on how they spend their revenue.
Government Aid Can Be Detrimental to a Restaurant If It’s Not Forgiven
"Loans like the PPP [or the RRF] can be helpful in the short term but detrimental in the long run if a restaurant owner cannot get them forgiven,” noted Moeller. “Like all loans, a cost benefit analysis should be done to understand the impact both short and long term. The problem is that the funds were necessary to attempt to stay in business and hope to come out on the other side of the pandemic.”
Overall, according to Moeller, a lot of good has been done within the bar and restaurant industry through these government aid programs. “The greatest issue is that no one was prepared for this to happen,” said Moeller. “Everyone was in reactionary mode and so the initial guidelines were the best they could be with minimum information. As time went along, and everyone from the government to the operators to the public learned to truly understand what the lasting impact of the pandemic would be, great steps were made to make the loans forgivable and opened up the categories within the eligible expenses to help better support restaurants.”
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