Potential Replenishment of the Restaurant Revitalization Fund

The Restaurant Revitalization Fund (RRF) was adopted by Congress in April 2021 to provide financial relief for eligible restaurants and related food and beverage service businesses. Originally, $28.6 billion of tax-free federal grants were approved for restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, bakeries, brewpubs and others if their revenue in 2020 was less than their revenue in 2019. The Small Business Administration (SBA) began to accept applications in May 2021 and is now administering the RRF.

The RRF operated on a first-come, first-served basis and the $28.6 billion was depleted quickly. During the first 21 days of the program, priority was given to eligible small businesses owned and controlled by women, small businesses owned and controlled by veterans, and socially and economically disadvantaged small businesses.

Following the 21-day period, all eligible applicants could apply, including franchisees of franchise systems with more than 20 units if their franchisors were currently listed on the SBA Franchise Directory. However, approximately 147,000 applicants from the priority group applied for more than the initial $28.6 billion in the RRF.

According to the SBA, more than 362,000 applications seeking a total of $75 billion in funding were received in the three-week period after the RRF applications were accepted for filing. The average grant application was for just over $200,000.

The Restaurant Revitalization Fund Replenishment Act of 2021 (RRFRA) was proposed on June 10 by a bipartisan group of lawmakers in the House and Senate to provide an additional $60 billion for the RRF. According to the SBA, restaurant operators that did not get grants the first time around will automatically be eligible for the new funds if they have an application and the necessary documentation on file.

If the RRFRA becomes law, grants will be available if the applicants’ gross revenue in 2020 was less than gross revenue in 2019.

For businesses not in operation for all of 2019, the maximum grant will be the annualized average monthly gross revenue for 2019 less the annual gross revenue in 2020. Businesses not in operation for all of 2020 could potentially receive a grant equal to the amount of eligible expenses invested in the business to date.

Grants cannot exceed $10 million per entity or $5 million per location, and will be reduced by amounts previously received under the Paycheck Protection Program. Even with another $60 billion, it is likely that the funds will be depleted quickly. Consequently, eligible business owners should apply as soon as possible if the RRFRA becomes law.

Barry Kurtz is State Bar of California Certified Specialist in Franchise & Distribution Law.

This information provides an overview of a specific developing situation. It is not intended to be, and should not be construed as, legal advice for any particular fact or situation.