Restaurants Revitalization Fund to Provide $28.6 Billion in Relief for Restaurant Operators and Franchisees
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On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARP Act”), a $1.9 trillion COVID-19 relief bill which includes grant moneys for eligible restaurant operators as part of the Restaurants Revitalization Fund (“RRF”).
In addition to restaurant relief measures, the ARP Act contains other pandemic-related relief, including $1,400 stimulus payments for individuals making under $75,000. The ARP Act also allocates $350 billion to state and local governments, $130 billion toward the reopening of K-12 schools, and $75 billion for COVID-19 testing and vaccine distribution. In addition, the ARP Act adds another $7.25 billion in funding for the Paycheck Protection Program, which is set to expire at the end of March. The ARP Act is the second-largest stimulus bill in United States history.
RRF Eligibility for Restaurant Operators and Franchisees
The RRF will be administered by the U.S. Small Business Administration (SBA). Under the bill, an “eligible entity”—which definition includes restaurants, food trucks, bars, and brewpubs, among other establishments—may be eligible to receive a grant of up to $10 million. Applicants will qualify as an eligible entity, if, among certain other eligibility criteria: (1) they do not own or operate more than 20 units and (2) they are not publicly traded companies. For multi-brand operators, the 20-unit cap applies across brands.
The amount of the grant must not exceed the “pandemic-related” revenue loss of the applicant, which generally means the applicant’s 2019 gross receipts minus its 2020 gross receipts. Grants will be based on a modified formula for applicants that were not in operation for all of 2019 or who opened for business after January 1, 2020. Grant funds may be used to cover expenses the SBA deems essential, including, but not limited to, payroll costs, rent payments, utilities, F&B expenses within the normal scope of business practice, operational expenses, personal protective equipment (PPE), and cleaning materials.
During the initial 21-day period in which the SBA awards grants, the SBA must prioritize grants to eligible applicants that are small businesses owned and controlled by women, veterans, and the socially and economically disadvantaged. Also, $5 billion of the $28.6 billion will be reserved for applicants with less than $500,000 in gross receipts in 2019.
The SBA has yet to issue rules or any other guidance regarding the application procedure for RRF grants, except that applicants will have to make a good faith certification to the SBA that the uncertainty of current economic conditions makes the applicant’s grant request necessary to support its ongoing operations. Any funds left over after the first 60 days of grant eligibility will be opened to larger restaurant businesses.
RESTAURANTS Act of 2021
The RRF is based on the RESTAURANTS Act of 2021, a $120 billion relief bill for restaurant businesses that was first introduced in October 2020 with bi-partisan support and reintroduced in February 2021. Because the RRF mirrors key aspects of the RESTAURANTS Act of 2021, including the creation of the $28.6 billion dollar grant fund, the RESTAURANTS Act of 2021 will likely neither advance in either the House or Senate nor be reintroduced later this year as part of a smaller scale ongoing relief package for restaurant businesses.
Polsinelli’s Global Franchise and Supply Network Group can further advise restaurant operators and franchised businesses on the ARP Act and RRF and will continue to monitor the SBA’s publication of guidance regarding the application process for RRF grants and the expansion of the grant program to larger restaurant businesses.