The American Rescue Plan Act: What Restaurants Need to Act on NOW

Mar 11, 2021 Published Article

The American Rescue Plan Act (“Act”) was passed by the Senate over the weekend and passed by the House today.  President Biden is set to sign the Act into law on Friday, March 12th.  The Act has $1.9 Trillion in relief funds with $28.6 Billion set aside for the restaurant industry in the Restaurant Revitalization Fund (“Fund”).  The Fund has apportioned funds into two funding groups; $5 Billion for restaurants with annual gross revenue under $500,000 and $23.6 Billion for restaurants over $500,000 in annual gross revenue.

Differences from the Paycheck Protection Program (“PPP”)

This is a grant program with no loan documents or forgiveness applications.  Instead, each restaurant entity can apply for and receive up to $10M in grant funds through the Act.  The amount a restaurant receives is based on the sum of the restaurant’s gross revenue in 2019 minus the gross revenue in 2020 minus PPP and EIDL money received.  For example, Restaurant A made $7M gross revenue in 2019, made $3M gross revenue in 2020 and received $1M in PPP and EIDL combined.  ($7M - $3M -$1M =$3M) The restaurant will receive $3M in grant funds directly from the SBA (as long as funds are available).

The permitted use of funds is much broader than the permitted use under the PPP.  In order to receive forgiveness from the PPP loan, the funds had to be used for retaining employees or similar expenses and capped a certain dollar amount per employee.  The Act does not have those same limitations.  The acceptable use of funds include:  Payroll costs, Rent, Utilities, Maintenance (including construction for outdoor seating and related re-design), Supplies, Food and Beverage Expenses, and Operational Expenses.

This Act is only for restaurants, which means a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink

The restaurant entity must not be a publicly traded entity and it must not have more than 20 locations, including through its affiliates.

The Act has identified three qualifying groups that will have priority for the initial 21 days of funding.  The three qualifying groups as defined by the Small Business Administration are; 1) women owned small biz, 2) veteran owned small biz, and 3) socially/economically disadvantaged small biz.

Restaurant owners should consult with their accountants to prepare their 2020 financial reports and compare those numbers with the 2019 financial reports to determine the amount the restaurant may qualify.  Unlike the PPP program these funds are not loans, but are instead grants distributed by the SBA.  The applicants should apply directly through the SBA.

If you would like to discuss how the Act may impact your business please do not hesitate to contact Newmeyer Dillion’s COVID-19 Multidisciplinary Taskforce today.