The global pandemic has affected just about every facet of our lives--from how we live, how we work, and how and we run our businesses. Many small businesses and industries have been severely crippled by COVID-19, particularly the restaurant industry. Due to the health and safety measures in place, restaurants have lost huge amounts of revenue - not only are people getting sick with COVID-19, they are preferring to eat at home to avoid exposure to the virus. This has inevitably been a problem for restaurant owners in terms of a declining number of clients and available staff.
The Impact of the Pandemic on the Restaurant Industry
According to a survey by the National Restaurant Association in November 2020, full-service restaurants, (which include independent, chain and franchises) experienced a 36% drop in sales revenue compared to the same time last year.
In addition, over 110,000 restaurants have closed--the majority being well-established businesses serving their communities for an average of 16 years and employing an average of 32 people.The majority of closed restaurant owners said they would either leave the restaurant business completely or not reopen a restaurant at least within the next few years.
The National Association of Restaurants has been active in pressing Congress for more relief packages to salvage the nation’s most loved small businesses. In response to the great need, the Small Business Association (SBA) has been tasked to administer the Restaurant Revitalization Plan (RRF).
SBA administrator Isabelle Guzman asserts that the RRF will prioritize funding to the “hardest-hit small businesses...to make sure that these businesses can meet payroll, purchase supplies, and get what they need in place to transition to today’s COVID-restricted marketplace.”
In response to the urgent need for relief, the SBA announced this week that it will be accepting applications for the Restaurant Revitalization Fund (RRF), starting on Monday, May 3rd, 2021 at 12pm EST. Registration starts on April 30th 2021.
Here’s a brief overview of the RRF and what you need to know to successfully complete your application.
What is The Restaurant Revitalization Fund (RRF)?
The Restaurant Revitalization Fund is a program that is part of the American Rescue Plan Act, which will provide $28.6 billion in grants to restaurant businesses and bars that experienced revenue losses due to the pandemic. The goal is to help restaurants sustain themselves during this challenging economic recovery period.
Eligible businesses can receive up to 10 million in funding and 5 million per location. It’s important to note that the amount of funding is related to the amount of revenue loss experienced during the pandemic. The grants are non-refundable, however, funds must be spent by March 23, 2023. If not, unused funds must be returned.
Besides full-service restaurants, food and beverages businesses are eligible:
- Food trucks, food stands, food carts
- Snack and non-alcoholic bars
- Bars, saloons, lounges, taverns
- Wineries, distilleries
- Breweries, microbreweries
There are exceptions for businesses involved in making food and alcohol, such as bakeries and breweries. The SBA outlines that such entities must prove that onsite sales to the public were at least 33% of gross receipts in 2019.
Businesses eligible must be one of the following organizations: C-corporation, S-corporation, partnerships, limited liability companies, sole proprietors, self-employed individuals, independent contractors, tribal businesses, LL-taxed as S-corporations, or sole proprietors.
- Businesses also called entities that own or operate in 20 locations (including with affiliated businesses)
- Permanently closed businesses
- State or local government-owned or operated businesses
- Publicly traded corporation or owned by a publicly-traded corporation
- Businesses that filed for bankruptcy or are liquidating under Chapter 7, 11, 12 or 13
- Businesses without a valid tax number
- Business with a Shuttered Venues Operation Grant (SVOG) or a pending SVOG application
How Do I Apply?
In order to apply, you will need to fill out the SBA Form 3172, IRS Form 4506-T, and other receipt documentation, see the list here. Take that note if your business needs to show the 33% of onsite sales, you will need to provide additional paperwork (such as Form 5130.9 from the Tax and Trade Bureau).
There is a 21-day priority period for priority groups, such as women, veterans, and economically and socially individuals.
If you do not fall into this category, use this time to get all the necessary information together in order to prompt complete the form.
Where Do I Apply?
Applications must be completed in English and Spanish. However, there is documentation available in over 30 languages to help you fill out your application.
It takes approximately 14 days for the SBA to review applications.
What Funding is Available?
The availability of funding depends on the applicant's gross receipts for 2019 (before the pandemic):
- Not more than $500,000: $5 billion available
- Between $500,001 and $1, 500, 000: $4 billion available
- Not more than $50, 000: $500 million available
Since funding availability is based on loss of revenue due to COVID-19, you’ll be calculating your payment amount based on how long your business was open. For instance, if you were open before January 2019, you will subtract your 2019 gross receipts from 2020 gross receipts (minus PPP loan amounts). If you opened your business after January 2019 or during 2020, your calculations will be a little different, see here.
It’s important to note that gross receipts do not include: Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL), Advances on EIDL, State and local grants, SBA Section 1112 payments.
How Can I Spend My Funds?
The RRF funds can be spent on a variety of business expenses, including payroll, rent/mortgage, utilities, operating expenses, maintenance, supplies, food and beverage-related expenses. Funds cannot be used on repayment of debt or interest or business expansion.
Will There Be Enough Funding TO Go Around?
While the restaurant industry is gradually picking up, mostly attributed to increased vaccination, stimulus packages, and warmer weather, enabling more outdoor dining, bars, and restaurants will continue to require support.
Many restaurant owners fear the funds allocated will not be enough, however SBA associate administrator Julie Verratti and others seem confident that funds will be replenished similarly to the PPP.
Whom Do I Contact for Assistance or for Additional Information?
Sekure Can Help
Contact Sekure to find out how we can help your restaurant weather the ups and downs of the recovery economy.