Everything Restaurants Need to Know About the Restaurant Revitalization Fund

Major help for the hospitality industry is finally within sight, even though that assistance will be too late for too many. Over a year after the pandemic began decimating restaurants across the country — shuttering thousands of venues, putting millions out of work — and killing more than 567,000 people, the U.S. government will finally start disbursing targeted aid to one of the hardest-hit sectors of the U.S. economy. The $28.6 billion Restaurant Revitalization Fund, authorized by the March stimulus bill, will start taking applications for grants designed to equal a venue’s pandemic losses on May 3. What follows is an overview of the fund, including how it will help save certain establishments, like fast-food chains, how it will neglect other venues, such as recently closed restaurants, and how to apply.

To be clear: If you run a bar, restaurant, bakery, food truck, or catering outfit in need of help, you should start gathering documentation now and apply the day the program opens. The money will go fast, and while Senate Majority Leader Chuck Schumer told Eater’s Digest that funds will be replenished when they run out, few things are a guarantee in today’s political environment. You can access the formal rules for the program in English or in Spanish, which were released over the weekend. Here is a sample application.

Restaurants can apply via this link when the program opens.

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TL;DR: Establishments can begin registering for the Restaurant Revitalization Fund on April 30 so they can submit their applications at noon on Monday, May 3. Individual venues can apply for grants of up to $5 million directly on the SBA website or through point-of-sale (POS) systems like Square. Restaurant groups can seek up to $10 million as long as they have fewer than 20 locations and are not a publicly traded company. The SBA will accept applications from all venues when the program opens, but during the first 21 days, it will only process and fund requests from small businesses run by women, veterans, or people from economically and socially disadvantaged groups

The SBA will specifically set aside $5 billion for food businesses earning not more than $500,000 per year; $4 billion to mid-sized venues taking in $501,000 to $1.5 million annually; and $500 million to establishments making under $50,000.

Unlike the Paycheck Protection Program, which made restaurants spend the bulk of funds on worker payrolls — a questionable requirement when government shutdowns negated the need for workers — these revitalization grants carry fewer restrictions. The PPP, for example, denied funding to venues that opened after the pandemic began. The restaurant fund, by contrast, doesn’t make those exclusions; it covers nearly everyone, including venues that haven’t even opened yet. Funds can be used until March 2023, an extension from the program’s original end date in late December. Smaller venues will be glad to know that the paperwork burden is reasonably light; most establishments should be able to apply without the help of an accountant.

The RRF, as it’s abbreviated, has some downsides, however: Even with the allocated amounts, the funds will be depleted quickly, potentially disadvantaging smaller vendors who don’t know when they should apply because they haven’t been targeted by outreach efforts. Remember, the first $349 billion of last year’s PPP disappeared in under two weeks; the RRF has less than 10 percent of the paycheck program’s funding and focuses on a much harder-hit industry. Also, franchisees are eligible, meaning that a struggling independent restaurant could end up competing for funds with a local operator of, say, 13 McDonald’s. It’s also not clear whether undocumented owners will be able to apply. And perhaps most importantly: Permanently closed venues are ineligible. That means a bar or restaurant that shuttered recently — perhaps a bakery that packed it in as late as February after deciding that waiting for federal aid would be too great of a financial risk — won’t qualify for help. Indeed, this is a “revitalization fund,” not a restaurant-resurrection effort, but the closure provision will likely benefit more privileged venues that can afford to hold on until funds are disbursed, a process that could theoretically stretch into the early summer.

That aside, here’s everything you need to know about the restaurant fund.

What types of establishments are eligible?

• Restaurants
• Bakeries
• Food trucks, food stands, food carts, snack bars
• Caterers
• Saloons, inns, taverns, bars, brewpubs, taprooms, wine tasting spots, distilleries

For bakeries, inns, brewpubs, distilleries, and wineries, those venues must have onsite sales to the public that total at least 33 percent of gross receipts, according to the SBA. Establishments must also certify that “current economic uncertainty makes this funding request necessary to support the ongoing or anticipated operations.”

What types of venues aren’t eligible?

• Permanently closed establishments
• Publicly traded companies (but franchisees are eligible)
• An entity that owns and operates — together with affiliated businesses — more than 20 locations, whether under the same or multiple names. This should technically exclude some of the country’s largest independent restaurant groups.
• Venues that have a received a shuttered venue operators grant or that have an application pending
• Venues that have filed for Chapter 7 bankruptcy or that are liquidating under Chapter 11. Venues that have filed for Chapter 11, 12, or 13 bankruptcy but don’t have approved reorganization plans are also ineligible.
• Hotel restaurants without their own employee identification number, per an SBA spokesperson

Restaurants that are on temporary hiatus — those shutting down during slow seasons or venues that have taken a pause during government-mandated closures — are still eligible for funding.

What can restaurants spend the funds on?

Payroll (including health care), rent and utilities, mortgage obligations (including principal and interest), outdoor dining builds and other construction costs, supplier costs, operational expenses, paid sick leave, and any other expenses that the SBA administrator “determines to be essential to maintaining the eligible entity,” according to the March stimulus bill. Restaurants will also be able to use funds to pay off business-related credit card expenses, third-party delivery commissions, unforgiven portions of PPP loans, propane for food trucks, and insurance for food truck vehicles, the SBA said during various town halls this week.

The inclusion of mortgage principal is key, as the PPP only allowed for payment of mortgage interest. That means bars and restaurants finally have a way to pay down significant long-term debts, which they might have incurred well before the pandemic through kitchen renovations or initial build-outs. Small operators who maxed out their credit cards will be able to take care of that debt as well. Supplier payments are another important inclusion, as restaurant closures and operating restrictions have wreaked havoc on vendors and other parts of the larger food supply chain.

Can restaurants use funds to pay property taxes, particularly in cases where taxes are bundled with rent checks to a landlord?

Yes, according to an SBA spokesperson.

Is there anything that restaurants specifically can’t spend funds on?

One can’t use funds on business expansion, according to comments made by the SBA during a food truck-related town hall last week. For example, it would be acceptable to renovate a damaged food truck, but an operator would not be able to purchase an additional food truck for their fleet. Just the same, a restaurateur can expand their outdoor dining area, but that individual would not be able to use the grant funds to help with construction of a new restaurant at a different location. Venues also can’t prepay principal or interest on debt.

What is the time frame for the use of funds?

A grant recipient can use funds for expenses incurred from February 15, 2020 until March 11, 2023. Any unused funds by the end of the covered period must be returned, which seems unlikely at first glance, but keep in mind that the covered period automatically ends if a business closes permanently. More specifically, if you shutter your restaurant, you can no longer use any remaining grant money.

What is the time frame for applying?

Establishments can register to create an account for the program starting on Friday, April 30. The SBA will begin to accept applications from all venues at noon, Eastern Time, on Monday, May 3. During the first 21 days, however, the fund will prioritize small food and drink businesses — likely with annual receipts of $8 million or less — owned by women, veterans, or people from economically and socially disadvantaged groups. The SBA will then consider applications from all businesses “in the order in which they were received,” a phrase that could theoretically favor larger restaurants and those with the means to gather the necessary documentation to apply more quickly.

Are there any other funding set-asides for extra-small or mid-sized restaurants?

Yes, $5 billion will be set aside for restaurants whose 2019 gross annual receipts were less than $500,000. In addition, after the first 21 days, funds from the remaining $23.6 billion are supposed to be disbursed “in an equitable manner to eligible entities of different sizes based on annual gross receipts.” On that note, the SBA will carve out $500 million for the smallest venues, with gross yearly receipts totaling less than $50,000; the agency will also allocate $4 billion to mid-sized venues taking in $500,000 to $1.5 million on an annual basis.

The March stimulus bill states that the SBA may “take such steps as necessary” to ensure that eligible businesses run by women, veterans, and socially disadvantaged groups continue to have access to funding after the three-week period ends. That stimulus bill also gives discretion to the SBA to distribute funds based on demand and local regional costs, which could end up favoring larger, more expensive markets like New York and Los Angeles. Finally, about 60 days after funding begins, the SBA can distribute funding without respect to gross receipts, a provision that could end up favoring larger businesses that didn’t have access to funding carve-outs.

What qualifies as a socially, economically disadvantaged group?

A variety of groups, including those who identify as Black, Latinx, Indigenous American, Asian (including people from South Asia), Native Hawaiian or Alaskan, or Pacific Islander, will qualify. These individuals must make up 51 percent of ownership, though that benchmark can be met using a combination of owners of different demographic groups. This requirement will be met through self-certification, meaning that additional documentation is not currently necessary. Members of the LGBTQ community and Americans with disabilities can qualify for this period of funding if they also pass an economic disadvantage test, a spokesperson for the SBA said during a town hall.

How precisely will restaurants calculate their loan amounts?

Grants are designed to equal a venue’s “pandemic-related revenue loss,” though precisely how that’s calculated will depend on how long an establishment has been in operation. Venues that were open throughout the year before the pandemic will subtract their smaller 2020 gross receipts from their larger 2019 receipts to come up with the funding amount they’re entitled to. Venues that were only open for part of 2019 will subtract 2020 gross receipts from a pre-pandemic average of monthly receipts.

Venues that didn’t open until 2020 — or that haven’t yet opened even by the current date but have incurred eligible expenses — are also eligible. That’s in stark contrast to the PPP, which excluded venues that weren’t operational by February 15, 2020. These newer establishments will arrive at their potential funding number by subtracting eligible expenses (like rent, outdoor buildouts, payroll) from all gross receipts. In all three cases, any PPP loans received will be subtracted from the total potential grant amount. If any of this seems confusing, rest assured the tentative paperwork for the application provides a worksheet that spells everything out clearly. The SBA will also have a program that embeds the application in POS partner systems like Square, Clover, Toast, and Aloha.

What types of documents will bars and restaurants need to apply?

The draft SBA application asks for specific documentation of gross receipts and any eligible expenses. Establishments can use any of the following sources: business tax returns (IRS Forms 1120 or 1120-S); IRS Forms 1040 schedule C; IRS Forms 1040 schedule F; partnership’s IRS Form 1065 (including K-1s); bank statements; externally or internally prepared financial statements such as income statements or profit and loss statements; point of sale reports, including IRS Form 1099-K. Businesses will also need to fill out IRS Form 4506-T (a request for a tax return transcript), though venues should actually be able to fulfill that requirement during the SBA online application process. For bakeries, distilleries, and other venues that need to prove 33 percent of gross receipts are for onsite food and beverage sales to the public, this documentation will need to show precisely that.

Keep in mind: The fact that one could theoretically just send in bank statements as proof of gross receipts suggests that the SBA is trying to cast a wide net for applications through a low paperwork burden.

Will non-citizen restaurant owners be allowed to apply for grants?

If they have a green card, yes, according to an SBA spokesperson. After that, things get trickier. At the direction of President Joe Biden, the SBA expanded the PPP to “non-citizen small business owners who are lawful U.S. residents,” including both resident and non-resident foreign nationals. Those individuals were able to apply using individual taxpayer numbers (or ITINs) instead of Social Security numbers. That example is relevant because the restaurant fund will also accept applications from non-citizens with ITINs, as long they have filed taxes for the last three years. Whether undocumented residents will specifically be able to apply is a more complicated question, but Prix Fixe Accounting’s Chris Macksey told Eater the U.S. government might be willing to condone (if not explicitly authorize) applications from undocumented folks given how much in taxes those businesses contribute to state economies.

How long will it take for the money to run out and will it be replenished?

“I do think this money will be expended quickly,” SBA associate administrator Julie Verratti said in a town hall in April, a statement that rings all the more true in light of the fact that the original ask was for a much larger, $120 billion fund. Verratti, however, added that she “can’t imagine” the fund won’t be replenished, given the multiple refreshes of the PPP. Senate Majority Leader Chuck Schumer told Eater’s Digest in March that he believes the restaurant program will receive additional funding if depleted.

Can franchisees like Burger King or McDonald’s apply for restaurant grants?

Even though publicly traded companies can’t apply for grants themselves, franchisees can. The key factor, however, is that the publicly traded franchisor can’t claim the smaller franchisee or group of franchisees as so-called affiliated businesses. That is to say, the larger establishment can’t have the authority to control the direction of the smaller business, and it can’t claim a right to profit distributions of more than 50 percent, according to the National Restaurant Association’s guidance. This provision could theoretically let fast food chains controlled by smaller franchise owners mop up a lot of the SBA money very quickly, to the detriment of independent venues.

What about restaurants that aren’t digitally connected? Will they be able to apply?

Yes, there will be a telephone application option as well. Applicants will call (844) 279-8898, complete an application with a support agent, then mail in documents sent to them. Review of the application will take approximately 14 days, per the SBA.

What type of receipts will you need to keep after receiving a grant?

Always keeping one’s receipts is a good idea (photograph them with your phone, at least!), but more specifically to the rules of the RRF, you should absolutely keep them because a small portion of grant recipients will be selected for an audit. Venues not selected for an audit will still need to attest online by the year’s end that any expenses were used for eligible purposes.

This article has been updated throughout to reflect new information about the Restaurant Revitalization Fund.