Robinson Brog Leinwand Greene Genovese & Gluck, P.C. - New York City Business Litigation Attorneys

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Help Is On The Way For America’s Struggling Restaurants

by Scott Ahroni

This month President Biden signed into law the American Rescue Plan Act of 2021 (ARPA). This new law has appropriated $28.6 billion to help struggling restaurants through grants from the newly created Restaurant Revitalization Fund (RRF) being handled by the Small Business Administration (SBA). For the first three weeks of the program the SBA will focus on giving grants to veteran-owned, women-owned or socially and economically disadvantaged small businesses. The bulk of the $23.6 billion will be granted in an “equitable manner” by the SBA to all sizes of businesses, with five billion dollars allotted to restaurants with gross receipts of $500,000 or less.

The initial period of time covered by the program is from February 15, 2020, through Dec. 21, 2021 (the “covered period”), with the understanding that the U.S. Small Business Administration (SBA) may extend this initial covered period through March 11, 2023 if needed. All grant recipients must spend their funds during the covered period with any remaining funds not used during the that time being returned at the end of the program.

The defined entities who are eligible for the grants are all encompassing defining qualified recipients 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.” This breakdown requires applicants to show that their customers patronize their business for “the primary purpose of being served food or drink.” Applicants will be required to verify that “the uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations of the eligible entity.”

Included in the eligible grant recipients list are businesses located in an airport terminal or a tribally owned business. However, several types of businesses are excluded, such as state or local government-operated businesses, publicly traded companies, applicants for Shuttered Venue Operator (SVO) grants, and those businesses that own or operate more than 20 locations.

The grants that will be available for the eligible businesses are going to be equal to their pandemic-related revenue loss. Grants will be capped at $5 million per physical location, and $10 million for affiliated businesses. For any company that opened prior to 2019 will be determined by subtracting their 2020 gross receipts from their 2019 gross receipts. For companies that opened in 2019 will be eligible for their 2020 gross receipts minus 12 times their average 2019 monthly gross receipts. And those businesses that opened in 2020, they are eligible for eligible expenses incurred in 2020 minus any gross receipts received in 2020. The SBA has determined that all eligible expenses will include payroll costs (under $100,000 per year employees), rent payments, utilities, maintenance expenses, supplies, food and beverage expenses, covered supplier costs, operational expenses, paid sick leave, payments of principal or interest on any mortgage obligation not including prepayments, and more. Payroll costs for the program will not include qualified wages under the Employee Retention Tax Credit or COBRA premiums and the PPP loan amounts will be deducted from the grant award amount.

To help prepare for the launch of the program, businesses should ensure that they have obtained a Date Universal Numbering System (DUNS) number and are registered with the System for Award Management (SAM). In the meantime, the SBA is expected to issue additional guidance and an application that will specify the process to access RRF grants in the coming weeks.

For more information on the program or to find out if your business qualifies, contact us here.

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