The Restaurant Revitalization Fund (RRF) was established to provide funding for eligible restaurants, bars, and other qualifying businesses adversely affected by COVID-19 according to Section 5003 of the American Rescue Plan Act of 2021 (the Act). The grant program, administered by the Small Business Administration (SBA), is intended to cover the total pandemic-related revenue losses of eligible entities when coupled with other grants and loans such entities may have received. Although the program just opened on May 3, 2021, in just two weeks the SBA received over 266,000 applications from eligible small businesses totaling $68 billion in requests, nearly double the $28.6 billion currently authorized under the program. This legal update summarizes the requirements and additional information related to the grant application process.
ELIGIBILITY
In authorizing the SBA to initiate this program, Congress mandated that priority be given to small businesses owned by women, veterans, and socially disadvantaged community members. An “eligible entity” under the program includes a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility, or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.
To qualify as a place of business in which the public or patrons assemble for the primary purpose of being served food or drink, an eligible entity must have earned at least 33% of 2019 gross receipts in on-site sales to the public. For entities that opened after 2019 or have not yet opened, “[t]he original business model... should have contemplated at least 33% of gross receipts in on-site sales to the public.” Additional documentation on this qualification is required for bakeries, brewpubs, tasting rooms, taprooms, breweries, microbreweries, wineries, distilleries, and inns (for inns, food and beverage sales only). Other eligible entities, such as restaurants and bars, are presumed to meet the requirement, and all applicants must make attestation as to the eligibility in their applications.
Eligible entities may be located inside an airport terminal or another business operating independently (i.e. having own tax identification number), or be a tribally-owned concern.
The following entities are not included:
- State or local government-operated business entities
- Entities that own or operate more than 20 locations as of March 13, 2020 (locations that are owned by any affiliated business or are under different names also count)
- Entities that have pending applications for or have received the Shuttered Venue Operators Grant
- Publicly traded companies
Additionally, each grant applicant must make a good faith certification that “the uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations of the eligible entity.”
GRANT APPLICATION
Eligible entities may apply via 1) SBA’s online application portal, 2) SBA-recognized Point of Sale (POS) vendors including Square, Toast, Clover, NCR Corporation (Aloha), and Oracle, or 3) phone at (844) 279-8898. RRF application sample provides guidance for application preparations. Applicants can complete the form online. (See RRF application portal screenshots for a preview.) SBA will continue accepting applications subject to availability of funds.
GRANT DISTRIBUTION
Of the $28.6 billion currently appropriated, $5 billion is reserved by the Act for eligible entities with 2019 gross receipts of not more than $500,000 for the first 60 days. The SBA had additionally set aside $4 billion for eligible entities with 2019 gross receipts from $500,001 to $1.5 million, and $500 million for eligible entities with 2019 gross receipts of not more than $50,000.
Generally, grants will be awarded on a first-come, first-served basis. However, eligible entities in the following categories, as defined in the Small Business Act, will be prioritized during the initial 21-day period: “small business concerns owned and controlled by women”, “small business concerns owned and controlled by veterans”, or “socially and economically disadvantaged small business concerns.”
AMOUNT OF GRANT
An eligible entity may receive up to $5 million per physical location and $10 million in total. The minimum funding amount is $1,000, and any applications requesting less than the minimum amount will not be accepted or approved.
The actual amount of each grant will be equal to the pandemic-related revenue loss of the eligible entity. Pandemic-related revenue loss generally means the value produced by subtracting an eligible entity’s 2020 gross receipts from the eligible entity’s 2019 gross receipts, if the value is greater than zero. If an eligible entity was not in operation (i.e. had not started making sales) for the entirety of 2019, average monthly gross receipts or other formula determined by SBA will be used. If an eligible entity opened between January 1, 2020, and March 10, 2021, payroll costs minus any gross receipts or other formula determined by SBA will be used. If an eligible entity has not yet opened as of the date of the application for RRF but has incurred payroll costs as of March 11, 2021, the amount of those expenses or an amount based on a formula determined by SBA will be used. The amount of loss will be reduced by any amounts of SBA loans received in 2020 or 2021 pursuant to 15 U.S.C. 636(a) (i.e. Paycheck Protection Program loans).
A detailed description of the calculation formula is included in RRF Program Guide.
If a grant is made based on estimated gross receipts in an amount greater than the entity’s actual gross receipts in 2020, the difference must be returned to the U.S. Department of the Treasury.
USE OF FUNDS
Funds must be used no later than March 11, 2023. If there are any unused funds by the date or the eligible entity permanently ceases operations on or before the date, the remaining funds must be returned to the U.S. Department of the Treasury.
An eligible entity may only use the grant funds for limited categories of expenses incurred as a direct result of, or during, the COVID-19 pandemic. Categories for allowed usage include the followings:
- Payroll costs (including paid sick leave)
- Mortgage payments
- Rent
- Obligations that are not prepayments
- Utilities
- Maintenance expenses
- Supplies (including protective equipment and cleaning materials)
- Food and beverage expenses within the scope of the normal business practice before February 15, 2020
- Expenditures made to a supplier of goods that are:
- for the supply of goods essential to the operations of the eligible entity at the time of expenditure
- pursuant to a contract, order, or purchase order (i) in effect at any time before the receipt of RRF grants or (ii) with respect to perishable goods, in effect before or at any time between February 15, 2020, and March 11, 2023 (or the date of the entity’s permeant closure)
- Operational expenses
- Any other expenses that SBA determines to be essential to maintaining the eligible entity (i.e. construction of outdoor seating)
Past-due expenses may be covered only if they were incurred between February 15, 2020, and March 11, 2023 (or the date of the entity’s permeant closure).
PROCESSING TIME AND FUNDING OF GRANTS
During the first two weeks that the grant program was open, the SBA has swiftly processed and approved nearly $3 billion in grants to over 21,000 restaurants. Funding takes place through direct deposits within a few days of approval.
ADDITIONAL GRANTS FUNDING ANTICIPATED
It is unknown at this time whether additional funding will become available to cover all of the applications. Additionally, the SBA is continuing to initiate other grant programs for Supplemental Targeted Advances and Congress is considering a similar program to address the hotel industry as well.
RESOURCES
SBA’s RRF Email Alerts Sign-up
RRF Program Guide
RRF Knowledge Base
If you have any questions about this legal update, please do not hesitate to reach out to the authors or any of your contacts at Morris, Manning & Martin, LLP.
