A Primer on The Restaurant Revitalization Fund
Posted on April 28, 2021
ARPA and RRF Overview
The March 11, 2021 American Rescue Plan Act of 2021 (ARPA) established the Restaurant Revitalization Fund (RRF). This article will be an overview of the RRF, including specific definitions of terms included in the conclusion.
The RRF provides support to businesses where the public (or patrons) assemble for the primary purpose of being served food or drink. The program seeks to give eligible entities a tax-free federal grant equal to the amount of its pandemic-related revenue loss, subtracted by the total amount a qualifying business received in all PPP loans. The Small Business Administration (SBA) will administer and disperse the funds and is set to start accepting applications on May 3rd, 2021. Interested business may apply through the SBA’s portal, through a recognized restaurant partner, or by telephone. The SBA developed partnerships with multiple recognized technology companies that provide software, hardware & payments services to the restaurant industry to help ensure wide and equitable distribution of relief.
The list of eligible entities encompasses a wide variety of businesses from restaurants, caterers, and inns to breweries and distilleries. Although for some entities, including breweries and distilleries, to be eligible the entity must have earned at least 33% of gross receipts in 2019 from onsite sales of food and beverage to the public.
The maximum grant amount is $5 million per location and $10 million for the eligible entity. If the grant would be less than $1,000 than the entity would not be eligible for the program. For the funds to be tax-free they need to be spent on eligible uses. The eligible expenses are similar to the PPP program eligible expense. Eligible expenses include payroll, food and beverage expenses (that are of normal business practice before the coverage period), rent, utilities, and maintenance expenses such as construction to accommodate outdoor seating. Eligible expenses can be incurred starting on February 15th, 2020.
If an entity cannot use all grant funds or permanently ceases operations on or before the March 11, 2023 the entity must return the unused funds to the government.
An application along with IRS form 4506-T and gross receipts documentation will most likely be needed to apply for the grant. For an initial 21-day period, the SBA will prioritize awarding grants for small business concerns owned and controlled by women, veterans, or socially and economically disadvantaged small business concerns.
- Restaurant, Food Stand, Food Truck, Food Cart
- Snack and Nonalcoholic Beverage Bar
- Bar, Lounge, Saloon, Tavern
- A licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase product
- Other similar place of business in which the public or patrons assemble for the primary purpose of being served food or alcohol
Entities that might have limited eligibility:
- An Inn
- Brewery, Brewpub, Microbrewery, Taproom, Tasting room
Eligibility may be limited to entities that have onsite sales of food and beverage to the public of at least 33% of gross receipts. When applying, entities may need to share evidence of onsite sales and/or may need to share filed Tax and Trade Bureau reports for the gross receipts reporting period.
- As of March 13, 2020, the entity owns or operates (together with any affiliated business) more than 20 locations, regardless of whether those locations do business under the same or multiple names.
- The entity has received a Shuttered Venues Operations Grant (SVOG) or has a pending SVOG application.
- The entity is a publicly traded corporation or is majority owned and controlled by a publicly traded corporation.
- The entity does not have a place of business located in the U.S., does not operate primarily within the U.S., and does not make a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.
- The entity is a state- or local government-owned or operated business.
- The entity is permanently closed.
- The entity filed for bankruptcy under Chapter 7 or is liquidating under Chapter 11.
- The entity has filed for bankruptcy under Chapter 11, 12, or 13 but does not have an approved plan for reorganization.
Eligible Uses of Funds
You may use funds for the following expenses during your covered period:
- Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums;
- Payments on any business mortgage obligation (both principal and interest; note: this does not include any prepayment of principal on a mortgage obligation);
- Business rent payments, including rent under a lease agreement (note: this does not include any prepayment of rent);
- Business debt service (both principal and interest; note: this does not include any prepayment of principal or interest);
- Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021.
- Business maintenance expenses including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment;
- Construction of outdoor seating;
- Business supplies, including protective equipment and cleaning materials;
- Business food and beverage expenses, including raw materials for beer, wine, or spirits;
- Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that:
- Are essential to the operations of the entity at the time at which the expenditure is made; and
- Is made pursuant to a contract, order, or purchase order in effect at any time before the receipt of Restaurant Revitalization funds; or
- With respect to perishable goods, a contract, order, or purchase order in effect before or at any time during the covered period;
- Business operating expenses, which is defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.
Note: Past-due expenses are eligible if they were incurred beginning on February 15, 2020 and ending on March 11, 2023
About Keiter Advisors
Keiter Advisors is a full-service transaction advisory group serving companies in middle market M&A transactions and financing. KA is recognized as the national leader in assisting owners to:
- Buy or sell businesses in a variety of industries, including business services, foodservice distribution, healthcare, industrials, meat processing and produce companies, technology/media/telecom, and veterinary practices,
- Plan and execute transition strategies, including family buy out initiatives and third-party sale
- Examine the profitability of their business and develop viable improvement programs
- Renegotiate existing financing arrangements and secure new lenders