More Money for the Depleted Restaurant Revitalization Fund?
During the first 21 days of the Restaurant Revitalization Fund (RRF) approved by Congress in April 2021 and administered by the Small Business Administration (SBA), priority was given to eligible small businesses with limited financial resources – including food and beverage service businesses owned and controlled by women, veterans and certain racial and cultural groups.
Those priority groups applied for more than the initial allotted amount of $28.6 billion in the fund; and were awarded grants of approximately $18 billion. The SBA awarded the remainder to eligible applicants not within the priority group.
Several lawsuits were filed in federal courts against the SBA in May 2021, based on claims of race and sex discrimination by RRF applicants not within the priority group.
As a result, the U. S. District Court for the Northern District of Texas and the U. S. Court of Appeals for the Sixth Circuit ordered the SBA to cease RRF disbursements based on race or sex. Thereafter, the SBA notified more than 3,000 priority group applicants who had previously been approved for grants that their awards had been rescinded.
According to a directive issued by the SBA, applicants who had their approvals rescinded would only receive payment once the SBA “completes processing all previously filed non-priority applications, and only then if the RRF is not first exhausted.”
Meanwhile, on-going legislative action has been taken to replenish the depleted RRF. On June 11, 2021, the Restaurant Revitalization Fund Replenishment Act of 2021 (Replenishment Act) was introduced in Congress to provide the RRF with an additional $60 billion.
Co-sponsored by 208 Democrats and Republicans, the Replenishment Act is still pending. On July 20, 2021, the ENTRÉE Act was introduced to provide $60 billion to the RRF from unspent Economic Injury Disaster Loans and state and local funds, and to eliminate the priority given to small businesses controlled by women, veterans and racial and cultural groups. The ENTRÉE Act was co-sponsored by 57 Republicans and is believed to be unlikely to pass.
In addition, a bipartisan group of Senators unsuccessfully sought unanimous consent on the floor of the Senate to approve $48 billion in additional funding to the RRF in early August.
Notwithstanding these efforts, it’s almost September and there is still no RRF for restaurants and food and beverage businesses. And, to make a bad situation worse, on August 10, the Senate passed the $1.2 trillion infrastructure bill which may end the Employee Retention Credit (ERC) on September 30, three months earlier than expected. According to the National Restaurant Association, the ERC has been a key tool in the restaurant industry’s recovery.
Barry Kurtz is the Chair of our Franchise & Distribution Practice Group.
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.