The American Rescue Plan Act of 2021 (the “Act’) created a $28.6 billion Restaurant Revitalization Fund (RRF) to be administered directly by the Small Business Administration (SBA).

Eligible restaurant businesses may receive a tax-free federal grant equal to the amount of its COVID 19 pandemic-related revenue loss. Eligible entities include: restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, licensed facilities or premises of beverage alcohol producers 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 drinks.

Owners of more than twenty restaurants, are not eligible for the RRF. Publicly traded companies are also not eligible for the RRF. However, franchises of publicly traded companies are eligible. Initially, the SBA is prioritizing grants to small businesses owned and controlled by women, veterans, and disadvantaged small business concerns.

The Act makes available nearly $23.6 billion for restaurant businesses of different sizes based on annual gross receipts. Approximately $5 billion will be available to businesses with gross receipts of $500,000 or less during 2019. Total RRF grant amounts for an eligible business and any affiliated businesses are capped at $10 million and limited to $5 million per physical business location and is based on pandemic-related revenue loss. Revenue loss is calculated by subtracting a restaurant’s 2020 gross receipts from its 2019 gross receipts. If the restaurant was not in operation for the entirety of 2019, the total revenue loss is the difference between 12 times the average monthly gross receipts for 2019 and the average monthly gross receipts in 2020 (or a formula from SBA). If the restaurant was not in operation until 2020, it can still receive a grant equal to the amount of “eligible expenses” subtracted from gross receipts received (or a formula from SBA). If the restaurant was not yet in operation as of the application date, but it has made “eligible expenses,” the grant would be made equal to those expenses (or a formula from SBA).

Pandemic-related revenue losses are reduced by any amounts received from the PPP. However, any funding received from Economic Injury Disaster Loans (EIDL) or the Employee Retention Tax Credit (ERTC) are not counted as 2020 revenue. The EIDL and/or ERTC funds cannot have been used to cover the same expenses as the RRF grant.

“Eligible Expenses” under the RRF include payroll, principal or interest on mortgage obligations, rent, utilities, maintenance including construction to accommodate outdoor seating, supplies such as protective equipment and cleaning materials, normal food and beverage inventory, certain covered supplier costs, operational expenses, paid sick leave, and any other expenses that the SBA determines to be essential to maintaining operations. To be “Eligible Expenses” they must have been incurred during the “Covered Period” (February 15, 2020 to December 31, 2021), or a date determined by the SBA. If the restaurant does not spend all of its RRF funds, or permanently closes before the end of the Covered Period, the restaurant must return the unused funds.
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Demand is likely to be high for the RFF grants. Therefore, restaurant owners should be as prepared to apply for RRF grants as soon as the SBA starts accepting applications. Restaurants should obtain their DUNS number at https://www.dnb.com/duns-number.html and their SAM number at https://www.sam.gov/SAM/. The numbers will be needed to register with the SBA to apply for the RRF grant. In addition, restaurants should compile their receipts and financial statements in order to disclose 2019 and 2020 revenues.

Not everyone who is eligible for an RRF grant will actually receive one. It is likely that RRF funds will run out very quickly.

Immediately contact your legal counsel to help you prepare to apply for these grants. They will not be around for long.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.