The American Rescue Plan Act of 2021 (ARPA), signed into law by President Biden on March 11, 2021, appropriated $28.6 billion for the creation of a Restaurant Revitalization Fund (RRF) to issue grants to struggling restaurants. The Small Business Administration (SBA) will administer the RRF. During the first 21-day period of the program, the SBA will prioritize awarding grants to women-owned, veteran-owned, or socially and economically disadvantaged small business concerns. Five billion dollars is reserved for restaurants with gross receipts of $500,000 or less. The remaining $23.6 billion is to be granted in an “equitable manner” by SBA to eligible entities of different sizes. This language will give SBA some discretion in the allocation in grant awards, and will allow for regional markets to be considered when determining a gross receipt size standard for eligible entities after the 21-day period.
Eligibility
The eligibility criteria breaks from the PPP definitions of food services and instead defines an eligibility entity as “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.” Therefore, applicants must be able to demonstrate that customers frequent their business for “the primary purpose of being served food or drink.” Businesses located in an airport terminal or a tribally owned business concern are included as eligible entities. Eligible entities will be required to certify that “the uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations of the eligible entity.”
Excluded Entities
However, certain businesses are excluded, including state or local government-operated businesses, applicants for Shuttered Venue Operator (SVO) grants, and publicly traded companies. Businesses that own or operate (together with any affiliated business) more than 20 locations are also excluded. The ARPA defines “affiliated business for this program” as “a business in which an eligible entity has an equity or right to profit distributions of not less than 50 percent, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of March 13, 2020.” This definition is more concrete than the definitions contained in typical SBA affiliation rules.
Amount of Grant
The amount of grants available to eligible entities during the covered period will be equal to the pandemic-related revenue loss of the eligible entity. For eligible entities that opened prior to 2019, pandemic-related revenue losses are 2020 gross receipts subtracted from 2019 gross receipts. For eligible entities that opened in 2019, pandemic-related revenue losses are 2020 gross receipts subtracted from 12 times average 2019 monthly gross receipts. For eligible entities that opened in 2020, pandemic-related revenue losses are eligible expenses incurred in 2020 (see below for eligible expenses) minus any gross receipts received in 2020. PPP loan amounts will be deducted from the grant award amount. Grants are capped at $5 million per physical location, and $10 million for affiliated businesses.
Eligible Uses
The ARPA defines eligible uses of the grants to include:
- payroll costs (not including employee compensation exceeding $100,000 per year);
- payments of principal or interest on any mortgage obligation (but not prepayments), rent payments, including rent under a lease agreement (but not prepayments);
- utilities;
- maintenance expenses (including construction for outdoor seating, walls, floors, deck surfaces, furniture, fixtures, and equipment);
- supplies (including protective equipment and cleaning materials);
- food and beverage expenses;
- covered supplier costs;
- operational expenses;
- paid sick leave; and
- any other expenses as determined by SBA.
Payroll costs for the grant program do not include qualified wages under the Employee Retention Tax Credit or COBRA premiums.
Duration of the Program
The covered period is Feb. 15, 2020, through Dec. 21, 2021, but the administrator may extend the covered period through March 11, 2023. Eligible entities must spend grant funds for eligible uses during the covered period. Any grant funds that are not used for eligible uses during the covered period must be returned.
Preparing for SBA Deployment of RRF
In the coming weeks, the SBA is expected to issue additional guidance and an application that will specify the process to access RRF grants. In advance of additional SBA guidance and release of a RRF application, businesses should ensure that they have obtained a Date Universal Numbering System (DUNS) number and are registered with the System for Award Management (SAM).
Update: The Small Business Administration clarified on March 30 that RRF applicants will not need to register for a DUNS number or on SAM.gov, a shift that acknowledges the high demand for the program.
This document is intended to provide you with general information regarding the federal Restaurant Revitalization Fund. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions.