The COVD-19 pandemic was devastating for businesses across the world, but few would disagree that the restaurant industry was one of the industries hurt the most. With social distancing requirements forcing restaurants to end in-person dining, many eateries simply couldn’t continue to even pay their rent as lockdowns stretched on and on.
The Payment Protection Program provided a lifeline to some restaurants, serving, as of July, some “49,000 loans of $150,000 or more made to restaurant companies” according to Restaurant Business Online. But for many, it wasn’t enough. “As of Dec. 1, 2020, more than 110,000 eating and drinking places were closed for business temporarily, or for good,” reported the National Restaurant Association in January of this year.
That said, some restaurants continued to hold on and now, thanks to the American Rescue Plan, which President Biden signed in March, restaurants should receive some relief. What kind of help can restaurants expect, and how can they tap into these government resources? In this guide, we’ll look at what the American Rescue Plan’s Restaurant Revitalization Plan promises for the food and beverage industry.
What is the Restaurant Revitalization Plan?
The Restaurant Revitalization Plan is a $29 billion program, according to Restaurant Business Online, designed to provide grants to qualifying restaurant applicants. So who does that include? The list is longer than you might think. Thanks to a streamlined guide provided by the National Restaurant Association, prospective applicants can see if they fit the bill. Those owners include, but are not limited to:
- Food carts
And the list goes on. Welcome news for many F&B owners who either missed out on PPP opportunities or felt overlooked.
That said, there are some disqualifying factors anyone looking to apply should be aware of. Publicly traded corporations or those that are majority-owned and controlled by a publicly traded corporation are not allowed to apply. The same goes for if “the entity owns or operates (together with any affiliated business) more than 20 locations”. If a restaurant has already shuttered, then they also cannot take part in the Restaurant Revitalization Plan funds. And bankruptcy also precludes someone from applying. For the full list of details, see here.
The good news is, acceptance is not based on the start date of a business. Restaurant Revitalization Fund Grants (RRFG) are available to restaurants even if they were not open prior to January 1, 2020.
How much are the grants?
Arguably the most important question to most restaurant owners is how much money can they get from the RRFG? It varies, of course, but the Small Business Administration reports that a minimum grant of $1000 is available up to a maximum of “$5M per location and $10M total for the eligible entity.”
Can those who have already received PPP receive RRFG?
This is an important question as many restaurants took advantage of PPP if not once, then twice. The good news is that places that received a first or second round of PPP can apply for RRFG. However, grants will be reduced by the total number of PPP funds.
How can a restaurant apply for RRFG?
Ensuring a restaurant turns in all the appropriate paperwork can make or break receipt of a grant, so it’s important that applicants include absolutely everything. The National Restaurant Association’s FAQ site lays out all the necessary documents including:
- Business tax returns (IRS Form 1120 or IRS 1120-S)
- IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F
- For a partnership: 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 report(s), including IRS Form 1099-K
Do some restaurant owners have an advantage in receiving grants?
Short answer: Yes. The Small Business Administration has announced that “woman-owned small business, veteran-owned small business, or socially and economically disadvantaged small business will be given priority for an award if their application is filed with SBA within the first 21 days the application is open for submissions.”
How will I receive my grant?
SBA says that approved applicants will receive their grant via direct deposit.
How can I use my grant?
A crucial question, every restaurant needs to understand what they can and can’t use their RRFG funding for. While SBA has the discretion to adjust what it determines to be essential, at present, recipients can use their money toward:
- Maintenance (for example, construction to make room for outdoor seating)
- Food and beverage expenses
- Operational expenses
- Paid sick leave
How will accepting RRFG affect my taxes?
This is a nuanced, individual question that will differ from business to business. While SBA says grants will not be included as federal taxable gross income by the IRS, state taxes are different, however. “A state may be able to increase an eligible entity’s state tax liability associated with its acceptance of a federal RRFG,” reports the National Restaurant Association.
How can a restaurant take advantage of RRFG while still meeting state and federal tax requirements?
The best thing a restaurant can do is speak to a professional accountant to help guide them through this process. By working with someone well versed in the nuances of the SBA programs, the American Rescue Plan, and the Restaurant Revitalization Fund, in particular, they can ensure their business correctly applies and receives the most money available while ensuring they comply with the tax code.