The American Rescue Plan Act of 2021 Includes Help for Restaurants

The American Rescue Plan Act provides a variety of much-needed funding for vaccine distribution, school re-openings, small businesses, unemployment support, health benefits, homeowner assistance and more.

Particularly helpful to the food service industry is a $29 billion Restaurant Revitalization Fund (RRF) meant to address the COVID-19 pandemic’s devastating effect on restaurants and other members of the industry. RRF grants will be available to a broad scope of eligible food service establishments including restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, licensed facilities or premises of a beverage alcohol producer where the public may taste, sample or purchase products, or other similar place of business, including restaurants and bars in airports.

The SBA will make direct grants to businesses of RRF funds. The RRF will provide grants for eligible businesses up to $10 million per business with a limit of $5 million per physical location.

The RRF is meant to cover a restaurant’s total revenue losses and will only be available to restaurants that can demonstrate such loss. Total revenue losses are reduced by funds received from first and second draw loans through the Paycheck Protection Program (PPP). The following formulas will be used to calculate the grant amount for which a business is eligible:

• Established restaurants: (2019 revenue) − (2020 revenue + PPP loans).
• Restaurants opened in 2019: (12 × 2019 revenue ÷ months open in 2019) − (2020 revenue + PPP loans).
• Restaurants opened in 2020: Can receive funding equal to eligible expenses incurred

The SBA will prioritize applications from businesses owned and operated by women, veterans, and socially and economically disadvantaged small businesses for the first 21 days of the application window. Additionally, $5 billion will be reserved for businesses that had less than $500,000 in revenue in 2019.

Of note are those businesses prohibited from applying for RRF grants. Food service businesses with more than 20 locations (together with any affiliated business and regardless of whether those locations do business under the same or multiple names) are not eligible. Also excluded are publicly traded companies. Businesses with private equity investment will also be subject to limits, including caps on the amounts for which they are eligible. Businesses with pending applications under the Save our Stages program are also ineligible.

RRF grants must be used only to pay for payroll, mortgage, rent, utilities, maintenance, certain building improvements (outdoor seating, walls, floors, decks, furniture and equipment), supplies, food and beverage costs, operational expenses and paid sick leave. The funds can be used to cover expenses from February 15, 2020 through December 31, 2021 (subject to extension if pandemic restrictions are extended) but amounts not used will need to be returned. These grants are not taxable and associated tax deductions are allowed.

The application window for RRF grants is expected to open in the next few weeks.

The COVID-19 Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the COVID19 situation develops.

Author Patrick Murphy is a partner in the Corporate & Securities Department at Klehr Harrison.