What is covered in the Restaurants Act?

And how does this $25B bill differ from Sen. Blumenauer's $125B proposal?

Tucked in past the halfway mark of the American Rescue Plan Act of 2021 is the restaurant relief portion of the bill that the hospitality industry has been looking to as a beacon of hope. The immediate difference between what is proposed in Sec. 6003 of this bill vs. Sen. Blumenauer’s originally proposed Restaurants Act is a stark $95B.

Where Sen. Blumenauer’s restaurant relief legislation earmarked $120B for the food establishments, this current iteration is only slated to deliver $25B in aid. Let that sit for a moment: that’s 21% of the initial amount. Seeing such a large difference between proposals is mind boggling, especially given that Sen. Menendez said a few days ago, in reference to the U.S. Citizenship Act of 2021’s goal to provide a pathway for undocumented persons, “We must not start with concessions out of the gate.” Well, isn’t that what we’re doing here?

Eligibility

The duration of the covered period for the new bill extends past Sen. Blumenauer’s original proposed date of June 30, 2021. What is important here is that the lawmakers provide a caveat that the Administrator (of the Small Business Administration) may push the end date to no late than two years of this section’s enactment. Unfortunately, the covered period only begins on February 15, 2020, which fails to account for the xenophobic ramp-up toward and subsequent declining revenues of Chinatowns in the U.S. What I would have wanted to see here is acknowledgement of the effect COVID-19 has had on these communities and to push back the coverage date for such businesses.

Criteria-wise, this update expands on Sen. Blumenauer’s definition of eligible entities to provide a blanket catchall of “or other similar place of businesses in which the public or patrons assemble for the primary purpose of being served food or drink”. Part of what we see with bills is that they are consistently being worked on, and with this iteration, the additional language provides just-in-case coverage for businesses that might not fall in the simplified categorization of: restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, or licensed facility where the public may taste, sample, or purchase products. Food businesses in airport terminals are also noted as eligible to receive funds from this bill.

As for those who are not eligible, the list is short:

How will the $25B be distributed?

To be established by the Treasury of the United States, the $25B fund will be known as the Restaurant Revitalization Fund. While Sen. Blumenauer’s $125B fund was set to expire on June 30, 2021 with leftover monies sent back to the Treasury, this $25B will not expire—it will be available until fully expended. Of the changes to the original bill, this adjustment is not only the most important, but also acknowledges that these grants are truly necessary and not optional.

The $25B will be allocated in two ways: $5B will be set aside for businesses that did not gross more than $500,000 in 2019 and $20B for all other eligible entities. Furthermore, no entity shall receive more than $10MM+, and each physical location of an eligible entity will be capped at $5MM.

Another important change from Sen. Blumenauer’s original text is the elimination of the section titled “Conversion to Loan”. Should any business have received funds from the Administrator and have not used it in full by the originally stated end date for the covered period (June 30, 2021), the amounts received will immediately convert to a loan with an interest rate of 1% and a maturity date of 10 years. To include such a caveat in a relief bill is baffling. Restaurants should be trusted that they will make the right decisions on how to use their grants, and not be forced into a position where they have to spend it all within a certain timeframe or risk it turning into snake oil.

Both versions of the bill (14 days in the original and 21 days in the current bill) propose an initial period whereby certain groups are prioritized for grants. Sen. Blumenauer’s text outlines priorities for “marginalized and underrepresented communities, with a focus on women and minority-owned, and women- and minority-operated eligible entities; and … entities with annual revenues of less than $1,500,000.” The current text relies on definitions set forth by the Small Business Act to provide the parameters for its priorities: businesses owned and operated by women, veterans or socially and economically disadvantaged individuals (i.e. Native American tribes and Native Hawaiian organizations).

Again, here is an opportunity for lawmakers to finally step in and help the U.S. Chinatown restaurant businesses that were hit harder and earlier than any other group. Mom-and-pop Chinatown businesses have been fighting an uphill battle on their own since last January. They shouldn’t have had to endure all the xenophobic attacks. They shouldn’t have had to endure an 80% downturn in business. They shouldn’t have had to rely solely on community organizers for aid. The government should have stepped in, and they didn’t—but they change that. I would want to see the House carve out a provision that finds a way to include these affected small businesses in the prioritized list and get them the much needed aid sooner than later.

Using the grants

So, what can this money be used for? The grants are definitely cover a wide range of possible expenses, thereby providing actual relief (which is a stark contrast to PPP).

Here are the possible expenses, summarized:

  • Payroll costs

  • Principal or interest on mortgage obligations

  • Rent payments

  • Utilities

  • Maintenance expenses

  • Supplies (incl. PPE and cleaning materials)

  • Food and beverage expenses within scope of normal business practice prior to covered period

  • Operational expenses (this item was not in Sen. Blumenauer’s original text)

  • Paid sick leave

  • Any other expenses that the Administrator decides to be essential (also, not an item in Sen. Blumenauer’s original text; however, this addition provides room for the Administrator to adapt as needed)

Another difference between the bills

Sen. Blumenauer’s September proposal included a breakdown of how the Administrator would be able to execute the program. $300MM of the total $25B would be allocated toward staffing to ensure that the grants would be administered in a timely manner. And another $60MM would be allocated toward outreach to marginalized and underrepresented communities and creating a resource centre for these communities.

The updated bill takes away both these items, which I find to warrant further discussion.

With regards to the budget for hiring staff to administer the program, I am concerned that without additional funds and staff, the high volume of applications will be taxing on the current Small Business Administration, resulting in backlogs—which is something that small businesses cannot afford right now.

Part of the responsibility of lawmakers is to find ways to make information and resources available. Without a dedicated line item for outreach, I fear that these priorities will be pushed to the wayside, and those that are already having a challenging time navigating these laws and applications will continue to be faced with obstacles.

While there are marked improvements in terms of scope and clarification with the revised Restaurants Act, more—not less—should be done for food businesses. The total available funds shouldn’t dwindle by 80% in such an early proposal stage and the hardest hit businesses should not be left behind, faced with Sisyphean tasks.

Further reading: