March 10, 2021

Restaurant Revitalization Grants Included in New Aid Package

The American Rescue Plan Act of 2021 ("ARPA") provides direct economic support to restaurants and bars in the United States through the establishment of the Restaurant Revitalization Fund.[1]  Administered by the Small Business Administration ("SBA"), the purpose of this fund is to provide tax-free, economic grants to eligible restaurant businesses.[2] 

Under the ARPA, an "eligible entity" 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.[3] 

However, restaurant entities who (together with any affiliates) operate more than twenty (20) locations (regardless of whether those locations do business under the same name), who have previously received (or applied for) grants under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, or are publicly-traded companies do not qualify for restaurant revitalization grants under the ARPA.[4]  For purposes of the ARPA, the term "affiliated business" means a business in which an eligible entity has an equity or right to profit distributions of not less than 50 percent, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of March 13, 2020.[5]

The total amount of each grant[6] is calculated based on the eligible entity's "pandemic-related revenue loss," which is generally calculated as the difference between gross receipts earned in 2020 compared to 2019.[7]  Grants will be prioritized  for entities that are owned and controlled by women, veterans, and socially and economically disadvantaged individuals.[8] Similar to the Paycheck Protection Program (PPP), eligible entities must certify in good faith that economic uncertainty makes the grant application necessary to support ongoing operations.[9]  Also similar to the PPP, grant funds may only be spent on certain items, such as payroll costs, mortgage obligations, rent, utilities, facility maintenance, and supplies.[10]

This Insight is intended only to provide an overview of the matters addressed herein and does not constitute legal advice.  If you have any questions regarding a specific issue, please seek appropriate legal counsel.

[1] H.R. 139, Tit. V, Sec. 5003

[2] ARPA § 9673(1).

[3] ARPA § 5003(a)(4). This includes entities located in airport terminals or that are Tribally-owned concerns.

[4] ARPA § 5003(a)(4)(C).

[5] ARPA § 5003(a)(2).

[6] ARPA § 5003(c)(4).

[7] ARPA § 5003(7).  For eligible entities not in operation for the entirety of 2019, opened beginning January 1, 2020, or yet-to-open, the revenue loss will be calculated on a monthly average basis, or some other formula to be determined by the SBA. 

[8] As those terms are defined in the Small Business Act,.

[9] ARPA § 5003(c)(2)(A).

[10] ARPA § 5003(c)(5).