We are all learning to live with the COVID pandemic cloud looming over our heads and many businesses have been forced to close their doors. Assuredly, the restaurant and bar industry has been one of the industries that has been hit the hardest by the pandemic. Restaurants and bars have and continue to struggle amid the pandemic due to COVID as well as due to state and local government restrictions; fewer patrons, curfews, forced closures, seating, and capacity requirements are just some of the hurdles restaurants and bars have had to overcome and continue to overcome since March of last year.
Previously, COVID relief plans provided relief in the form of loan forgiveness and loans to small businesses through the Small Business Administration (the “SBA”), however, none were specifically geared toward the restaurant and bar industry. Now, as of Thursday, March 11th, restaurants and bars are finally anticipated to receive some much-needed relief through the 2021 COVID relief bill, the American Rescue Plan Act of 2021 (the “Plan”). The Plan provides $28.6 billion in the form of tax-free grants to the struggling restaurant and bar industry and confers the power to distribute the funds through the SBA.
Restaurants, caterers, wine tasting facilities, bars and similar business establishments where the public or patrons assemble for the primary purpose of being served food or drink (the “Establishment” or the “Establishments” if more than one), may be eligible to receive grants through the Plan, as determined by the SBA, if:
- as of March 20, 2020 the Establishment has less than 20 locations (inclusive of affiliate Establishments);
- the Establishment has not applied for nor received a “Shuttered Venue Operators” grant (generally for performing arts, live venues, theaters, etc.); and
- the Establishment is not publicly traded (the “Eligible Establishment” or the “Eligible Establishments” if more than one).
If the otherwise Eligible Establishment received a grant or loan under the Paycheck Protection Program or through the Economic Injury Disaster Loan program, then the maximum value of the Plan amount would be reduced by the amount of previous grants and loans already received.
The Plan directs the SBA to prioritize the grants, for the first three weeks, to women, veterans and socially or economically disadvantaged Establishment owners. Eligible Establishments may receive up to $10,000,000 (up to $5,000,000 for each physical location). The amount received will based on the pandemic-related loss and shall be calculated by subtracting the 2020 revenues from the 2019 revenues. If the Eligible Establishment was not in operation for the entirety of 2019, at all or not yet in operation as of the application date, then grant money will be provided based on other formulations and “eligible expenses” expended by the Establishment. Eligible expenses are those incurred from February 15, 2020 to December 31, 2021(the foregoing formula and eligible expenses period may be adjusted by the SBA once the SBA publishes its guidance). Such expenses must be essential to maintaining operations, which includes, but is not limited to, payroll, principal or interest on mortgage payments, rent, utilities, maintenance including construction to accommodate outdoor seating, supplies such as protective equipment and cleaning materials, food and beverage inventory, operational expenses and paid sick leave. Additionally, Eligible Establishments may only spend their grant funds for such expenses. If all grant funds are not spent by the Establishment, or if the Establishment permanently closes, before December 31, 2021, the Establishment must return any unused funds to the Treasury.
While, the SBA has not yet promulgated the applicability requirements, it has announced that further guidance will be provided within weeks and we will provide an update upon such further guidance.
If you are interested in learning more about the American Rescue Plan Act of 2021, whether your establishment is eligible or how this Plan affects your restaurant or bar, please do not hesitate to contact us at Klein Greco & Associates LLP.
Written By: Anna Avruchevsky, Esq. and Richard Klein, Esq.
About the Authors:
Anna Avruchevsky, Esq. is a partner at Klein Greco & Associates LLP. She is a trusted advisor to entities, individuals and cooperative and condominium boards. She can be reached at email@example.com.
Richard Klein, Esq. is a managing partner at Klein Greco & Associates LLP. Mr. Klein has first-hand knowledge in the restaurant industry having previously owned and operated a restaurant and is now an active restaurant investor. He is a dependable advisor to restauranteurs, cooperative and condominium boards and individuals. He can be contacted at firstname.lastname@example.org.