March 12, 2021

Order Up! Congress Serves Up $28.6 billion Restaurant Revitalization Fund

Grants will cover income lost due to pandemic

Restaurants suffering revenue shortfalls as a result of the COVID pandemic will soon have access to nearly $29 billion in grants provided under the Restaurant Revitalization Fund, thanks to provisions tucked within the American Rescue Plan Act of 2021 (the “Act”). The Act was passed by Congress Thursday morning and signed into law by President Biden Thursday afternoon with SBA rule making expected within a few weeks.

The Act – and the Restaurant Revitalization Fund in particular – will make grants available to qualifying restaurants who met pandemic-related revenue loss standards.  Unlike the PPP program – which included loans that can be forgiven if certain tests were met – the Restaurant Revitalization Fund grants are not debt, are not subject to income tax, and are not (right now) subject to future testing.

Restaurants should act quickly, though, as the grants will be doled out on first-come-first-served basis (subject to a priority for veteran and women owned businesses).

Key Facts

Allocation of Funds:

  • $5 billion earmarked for entities with 2019 gross receipts not more than $500,000.00
  • $23.6 million to all other qualifying entities.

Eligibility: There are four tests that must all be met, including:

  1. Business Type:
    • Restaurant,
    • Food Truck,
    • Food Stand,
    • Caterer,
    • Brewery/Distillery Tasting Room,
    • Any place where people assemble to eat and/or drink
  2. Size: No more than 20 locations, including any "Affiliated Business"
    • "Affiliated Business" means any business in which an eligible business owns equity or a right to profit in excess of 50%, or over which the eligible business has authority or control. This analysis will consider entities with such affiliates as of March 13, 2020.
  3. Govt Prohibited: The applicant cannot be owned, operated, or controlled by state or local government.
  4. Publicly Traded Disqualified: Publicly-traded companies cannot qualify.

Calculating Amount. Grants will be equal to the pre-pandemic revenue loss calculated by subtracting 2020 gross receipts from 2019 gross receipts.

  • Partial-2019 operations will be calculated using 12 times the average monthly gross receipts for the portion of 2019, relative to the average gross receipts from 2020. 
  • Businesses Opening in 2020 can receive a grant equal to the amount of "eligible expenses" subtracted from its gross receipts received in 2020.
  • Businesses not yet in operation as of the application date can receive a grant equal to "eligible expenses" incurred.
  • NOTE: PPP Funds received by a restaurant will reduce, dollar-for-dollar, the amount a restaurant qualifies for under the grant.
  • ALSO: The SBA has added that it is likely to refine these calculations, but it is clear the intent is to provide funding to new businesses as well.

Cap of Grant. Equal to pandemic-related revenue loss with caps (based on 2020 shortfalls in gross receipts as compared to 2019 gross receipts) of:

  • $10 million per entity (including affiliates)
  • $5 million per location

Award Priority

  1. First 21 days are limited to small business (per SBA guidelines) which are:
    • owned or controlled by women or veterans
    • socially and economically disadvantaged business concerns
  2. $5 billion earmarked for entities with 2019 gross receipts of up to $500,000, and all other funds available in order of application. Yes – first come, first served.

Use of Grant Funds. Funds can be used for the following expenditures incurred between Feb. 15, 2020 and Dec. 31, 2021:

  • Payroll
  • Mortgage principal and interest (excluding prepayment)
  • Rent (excluding prepayment)
  • Food and Beverage Expenses
  • Operational Expenses
  • Staff Supplies, including PPE
  • Outdoor Seating
  • Utilities
  • Maintenance Expenses
  • Covered supplier costs
  • Paid sick leave
  • Other "essential" expenses

When Will Funds Be Available. The SBA will promulgate rules in the near future, which Preti Flaherty will be tracking. Restaurants are encouraged to reach out to their lenders preemptively in anticipation of submitting applications as soon as possible, as the program is truly first-come, first served.

For more questions on COVID-19 related hospitality questions, Attorney Jason Howe can be reached via e-mail at [email protected].