The $28.6 Billion Restaurant Revitalization Fund (“RRF”), part of the Biden Administration’s $1.9 trillion American Rescue Plan Act, will provide direct grants to restaurants and other qualifying food businesses, offering much needed, urgent relief. The funds will be given in the form of a grant, not a loan – which means, provided the funds are used properly in accordance with the Small Business Administration’s (“SBA”) guidelines, it will not have to be repaid.
Already, more than 110,000 restaurants —about one in six across the U.S. — have closed permanently, resulting in the loss of 2.4 million jobs. Small restaurants lost over $135 billion in sales last year, while the broader industry lost $240 billion, according to the National Restaurant Association.
The RRF defines restaurants liberally, deeming many types of businesses that serve food or drink as its primary purpose eligible for grants. Restaurants and bars are eligible, as are food stands, food trucks, food carts, catering businesses, saloons, inns, taverns, breweries, and licensed beverage alcohol producers “where the public may taste, sample or purchase products,” according to the legislation.
During the first 21 days of the program, the SBA will prioritize the review of applications from women, veteran, and socially disadvantaged-owned establishments. However, all eligible businesses can (and should) apply during the initial 21-day window. Applications of those not in the priority groups just will not be reviewed until after the initial 21-day window closes. As part of the program, $5 billion in funding is reserved for the smallest independent restaurants, those that before COVID-19 earned $500,000 or less in a year. Chain restaurants with more than 20 locations are excluded altogether, as are publicly traded companies. In general, the SBA will award grants based on the order in which applications are received.
Eligible restaurants can expect grants that match their pandemic-related revenue loss. For a restaurant that opened prior to 2019, the grant is calculated by taking its revenue in 2019 and subtracting its 2020 revenue and any PPP loan monies received. To illustrate, a restaurant that earned $1 million in 2019 and $500,000 in 2020, and that also received a $300,000 PPP loan, would be eligible for a $200,000 RRF grant. Different formulas are used for restaurants that opened in 2019 or later or have yet to open. Additional information on how to calculate the amount of the grant for such restaurants can be found here. Eligible entities are entitled to grants of up to $5 million per location, with a cap of $10 million in the aggregate per applicant.
Qualified applicants can use the grant funds to cover a wide array of expenses, including payroll and other operational expenses incurred in the ordinary course of business, such as outdoor dining construction expenses and other expenditures like personal protection equipment and extra sanitizing supplies. Funds may also cover personal owner loans to the company, provided same are documented and were incurred in the ordinary course of business. Funds may not be used to pre-pay operational or other qualified expenses.
The RRF funds must be used by March 11, 2023. Any remaining funds as of that date must be
returned. The restaurant must also return any unused funds if it closes.
As of April 30, 2021, Restaurants and other qualified applicants can go here to create their account to apply for the RRF. The SBA will begin accepting and reviewing applications on May 3, 2021 at 12:00 PM EDT at the same link. Additional information on the RRF, including the documentation necessary to submit with the RRF application, can be found here on the SBA’s website
Please contact an attorney in MSF’s Hotel & Hospitality Group if you need assistance with respect to this information.
Christy L. Reuter
Partner | Chair, Hotel & Hospitality
(646) 755-3174 | email@example.com
Gregg M. Kligman
Counsel | Employment
(646) 273-8209 | firstname.lastname@example.org