What Does the Restaurant Revitalization Grant Mean for Your Business?
On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law and created a $28.6 billion Restaurant Revitalization Fund to provide grants to eligible entities that suffered revenue losses due to the COVID-19 pandemic.
The Small Business Administration (SBA) has not yet released details on the process for submitting a grant application nor given an official launch date. However, the act does require that any application include a certification that the grant is necessary to support the applicant’s ongoing operations due to the uncertainty of the current economic conditions and that the applicant has not applied for or received a grant for shuttered venue operators.
For the first 21 days after the program begins, the SBA will prioritize issuing grants to businesses that are owned and controlled by women, business that are owned and controlled by veterans, and businesses that are socially and economically disadvantaged. Additionally, Congress set aside $5 billion of the funding for entities with gross receipts of $500,000 or less in 2019, with the remaining $23.6 billion to be distributed to eligible recipients at the SBA’s discretion.
Entities eligible for a restaurant revitalization grant include most places of business whose primary purpose is to provide food or drink to patrons, including locations in airport terminals or tribally owned businesses. Examples include:
- Foods stands
- Food trucks
- Food carts
- Tasting rooms
- Licensed facilities or premises of an alcoholic beverage producer where the public may taste, sample, or purchase products
Entities who are ineligible for the grant include any of the following:
- State or local government-operated businesses
- Restaurant groups that own or operate more than 20 locations as of March 13, 2020, either alone or with any affiliated businesses
- Entities that have received or have an application pending to receive a Shuttered Venue Operators Grant from the SBA
- Publicly traded companies
In general, an applicant may apply for a grant equal to the applicant’s pandemic-related revenue loss, which is usually the applicant’s 2020 gross receipts reduced by the applicant’s 2019 gross receipts. The pandemic-related revenue loss must also be reduced by the amount of funds received through first or second draw Paycheck Protection Program (PPP) loans.
If the applicant was not in operation for all of 2019, the applicant would annualize the 2019 gross receipts over 12 months in order to determine the 2019 gross receipts. For example, assume a qualified restaurant began operations in June 2019 and had $350,000 of gross receipts during 2019. The restaurant would apply their average gross receipts per month ($350,000 over seven months = $50,000 per month) over all of 2019 in order to determine their 2019 gross receipts for purposes of calculating the pandemic-related revenue loss ($50,000 x 12 months = $600,000). For applicants that opened after Jan. 1, 2020, the pandemic-related revenue loss will be the payroll expenses incurred by the entity less the gross receipts received. However, regardless of the amount of pandemic-related revenue loss suffered by an applicant, each restaurant revitalization grant will be capped at $10 million and limited to $5 million per physical business location.
Once a grant is received, a recipient may use the funds during the “covered period” to pay for a variety of expenses that the SBA deems to be essential to maintaining the recipient’s business. For purposes of this grant, the covered period begins Feb. 15, 2020, and ends Dec. 31, 2021, but can be extended up to March 11, 2023, at the SBA’s discretion. Examples of expenses that can be paid using the grant funds include payroll costs, mortgage payments (interest and principal), rent payments, maintenance expenses, supplies, food and beverage expenses incurred in the regular course of business, operational expenses, and paid sick leave.
The SBA is expected to release guidance on the application process in the coming weeks. We will continue to monitor the situation and provide updates as additional guidance is issued. If you believe you may be eligible for a restaurant revitalization grant, please contact your KSM advisor or complete this form.
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