As part of the American Rescue Plan Act of 2021 (the Act), signed into law by President Biden on March 11, 2021, Congress created a program called the “Restaurant Revitalization Fund.” The program’s details can be found in §5003 of the Act. The purpose of the grants from the fund is to provide economic support for certain restaurants affected by the COVID-19 pandemic.

Under the program, $28.6 billion is set aside to provide grants to “eligible entities” to replace any “pandemic-related revenue loss.” These defined terms are discussed below. Of this $28 billion, $5 billion is set aside for entities who had gross receipts of $500,000 or less during the 2019 calendar year. The remaining $23.6 billion is to be awarded “in an equitable manner” as determined by the Administrator of the Small Business Administration (SBA). The $5 billion set aside is for a 60-day period of time after the signing of the Act, which would currently be May 10, 2021; however, a later date may be determined by the Administrator of the SBA (60-day period), any unused portion of the $5 billion set aside for smaller entities with gross receipts of no more than $500,000 in 2019 will become available for everyone. We anticipate the SBA will begin the 60-day period clock related to the $5 billion set aside upon its release of guidance.

Grants under the program will be limited to $10 million per entity and any affiliates, with a cap of $5 million per physical location of the eligible entity. Similar to the Paycheck Protection Program (PPP), the applicant must make a certification that “the uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations” of the business. Grant funds can be spent on the same types of allowable expenses as set forth in the PPP legislation, which include the expansion of allowable expenses under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act; however, there is not a payroll/non-payroll related spending percentage associated with this grant, at this time. The grant amount provided will be reduced by any PPP funds the entity has received or will receive. In the event you have already received a PPP loan, and are considering the choice between applying for a Restaurant Revitalization Fund Grant or Shuttered Venue Operators Grant (SVOG), you should consider that the SVOG limits the reduction of the grant only to PPP funds received on or after Dec. 27, 2020, unlike the Restaurant Revitalization Fund Grant. Another item to note is that any Restaurant Revitalization Grant funds used for payroll cannot be considered qualified wages for calculating the Employee Retention Credit. Additionally, if an entity has applied for an SVOG, it is ineligible to receive a grant under this program, and vice versa.

There are three key definitions for the program: (1) pandemic-related revenue loss, (2) eligible entity, and (3) affiliated business.

Pandemic-Related Revenue Loss: A “pandemic-related revenue loss” is calculated differently depending on how long the applicant has been in business. If in operation for the entirety of 2019, the pandemic-related revenue loss is the difference between the 2019 gross receipts and the 2020 gross receipts. If not in operation for all of 2019, you must take the average of the gross receipts for months in operation in 2019 and multiply by 12, and then subtract the average monthly gross receipts in 2020 multiplied by 12. If not in business until after Jan. 1, 2020 (but before March 11, 2021), the pandemic-related revenue loss is the amount of eligible expenses incurred minus any gross receipts earned during the time period after opening. The Act also permits the SBA to come up with alternative calculations for entities not in business for all or any of 2019.

Eligible Entity: An “eligible entity” is any “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.” However, the term “eligible entity” excludes any state or local government operated businesses, publicly traded companies, businesses which applied for or received an SVOG, and any business that as of March 13, 2020, “owns or operates (together with any affiliated business) more than 20 locations, regardless of whether those locations do business under the same or multiple names.”

Affiliated Business: Since the 20 location limitation applies to entities and their affiliates combined, the definition of “affiliated business” is key. “Affiliated business” is defined 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 is a very narrow definition, as it does not carry the normal SBA affiliation rules into consideration. This will be the biggest area to watch once the SBA begins rulemaking.

It is currently unknown when the grant application will be available, but once it is, the first 21 days will be reserved for applicants who are women-owned small businesses, veteran-owned small businesses, or socially and economically disadvantaged small businesses (also known as 8(a) small businesses), as these terms are defined in the Small Business Act and the SBA’s accompanying regulations. However, unlike the current contracting regulations requiring an SBA certification to claim some of these statuses, they may be self-certified for the purpose of obtaining a grant.

If you have questions or are considering seeking a Restaurant Revitalization Fund Grant, contact any member of Taft’s SBA Task Force.

Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.