The Restaurant Revitalization Fund (RRF) was created by the American Rescue Plan Act of 2021. $28.6 billion in funding was allocated for grants to eligible entities. RRF grants will be administered by the Small Business Administration (SBA).
The grant is based on the decline in gross receipts comparing 2019 and 2020 for businesses which were open in 2019, with a maximum grant of $5 million per physical location and $10 million per entity. There are alternative calculation methods for businesses which were not open for years 2019 and 2020. Be sure to read the discussion on eligible entities, below.
This article is general in nature and is not intended to give advice to you or your business. You should always consult your own financial and legal advisors. If I can be of further assistance, please contact me.
How to Apply:
SBA has announced that it will begin accepting applications on Monday, May 3, 2021, at 12:00 p.m. EDT. There are three ways to apply:
- SBA has opened its online portal to roll-out the RRF program. Advance registration is required before filing an application.
- Restaurants who currently use an SBA POS partner may apply through their POS partner. This currently includes Toast, Square, Aloha and Clover, but others may be added.
- By telephone at 844-279-8898
This article is a summary of the RRF. For complete information, see the SBA Program Guide. As of the date of this article, the most recent Program Guide was published April 28, 2021.
How to Calculate Grant
There are three calculation methods, based on when the business began operations. Remember, in each case a grant is limited to a maximum of $5 million per physical location and $10 million per entity.
Calculation 1:
Use Calculation 1 if the business began operations on or before January 1, 2019.
Subtract 2020 gross receipts from 2019 gross receipts. Then subtract any PPP loans received in either 2020 or 2021. For example, if a business had 2019 gross revenues of $2 million, and 2020 revenues of $1 million and had received a $250,000 PPP loan, they could apply for a RRF grant of ($2 million – $1 million – $250,000) = $750,000.
Calculation 2:
Use Calculation 2 if the business began operation after January 1, 2019. Restaurants who began operations partially through 2019 may elect to use either Calculation 2 or Calculation 3, however if they began operating after December 31, 2019 they must use Calculation 3. Calculation 3 may be advantageous if a business had low revenues in 2019, and significant expenses in 2020.
Annualize 2019 average monthly gross receipts, then subtract 2020 gross receipts and any PPP loans similar to Calculation 1. For example, assume a business opened on July 1, 2019 and had $1.2 million gross receipts in 2019, and $1 million in 2020 and had received a $250,000 PPP loan. They could apply for a RRF grant of $1,150,000.
Calculation 3:
Use Calculation 3 if the business began operation between January 1, 2020 and March 10, 2021. Applicants who have not yet opened but have incurred eligible expenses would also use Calculation 3.
For example, assume a restaurant began operations on March 1, 2021, and had gross receipts of $50,000 between opening and March 11, 2021. The restaurant incurred eligible expenses of $800,000 during the period February 15, 2020 and March 11, 2021 and received a first-draw PPP loan of $10,000. In this example, they would be eligible for a RRF grant of $740,000:
Eligible Entities
The overall rule is that RRF grants are available for places of business in which the public or patrons assemble for the primary purpose of being served food or drink. To satisfy this requirement, at least 33% of an entitie’s gross revenues must be from on-site sales to the public. I’ll refer to this requirement as the “on-site sales test”. To be eligible, the business must not be permanently closed, however it may be temporarily closed. A business could even qualify if it will be opening soon and had expenses incurred as of March 11, 2021.
The on-site sales test is performed using 2019 data, however for businesses who opened in 2020 or have not yet opened the applicant’s original business model should have contemplated at least 33% of gross receipts in on-site sales to the public.
The SBA Program Guide includes a list of eligible businesses. The following are presumed to meet the on-site sales test:
- Restaurants
- Food stands, food trucks, food carts
- Caterers
- Bars, saloons, lounges, taverns
- Licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products
- Other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink
- Snack and nonalcoholic beverage bars.
The following types of businesses will be required to submit documentation which their application to support meeting the on-site sales test:
- Bakeries
- Brewpubs, tasting rooms, taprooms
- Breweries and microbreweries
- Wineries and distilleries
- Inns
Other Definitions
Ineligible Entities:
- State or local government-operated business
- Non-profits
- Publicly-traded business
- As of March 13, 2020, owns or operates (together with any affiliated business) more than 20 locations
- Received or have a pending application for a grant under the Shuttered Venue Operators Grant program
- Permanently closed
On-site sales:
On-site sales include sales of food and/or beverages that were:
- consumed on the applicant’s premise
- were purchased at the applicant’s premise to-go
- were purchased online and picked up from the applicant’s premise or were delivered directly to a consumer for use.
On-site sales do not include wholesale sales.
Gross Receipts:
Gross receipts includes all revenue received or accrued, calculating using the entity’s accounting method (accrual or cash). It includes sales of products or services, interest, dividends, rents, royalties, fees or commissions. Gross receipts is reduced by returns and allowances.
Gross receipts does not include net capital gains and losses, PPP loans (first-draw or second-draw), SBA Section 1112 payments, EIDL Loans, EIDL Advances, Targeted EIDL Advances, Randolph-Sheppard Act Financial Relief and Restoration Payments, or state and local small business grants.
Eligible Expenses
Grant funds can be used for:
- Payroll costs
- mortgage payments (principal and interest)
- Rent payments
- Utilities
- Maintenance expenses
- Supplies
- Food and beverage expenses
- Covered supplier costs
- Operational expenses
- Paid sick leave
- Other essential expenses
Covered Period
The covered period is the period in which the grant must be used to pay for eligible expenses. The covered period for this grant program is February 15, 2020 through March 11, 2023. If funds aren’t used on eligible expenses before the end of the covered period, or if the business permanently ceases operations, the funds not used for eligible expenses are required to be returned.