Congress walks away from Restaurant Revitalization Fund

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The replenishment of the Restaurant Revitalization Fund will not be part of a massive spending package unveiled in the coming days as the Senate prepares to move the text of the omnibus funding bill.

“Today’s news that Congress is moving away from the RRF is a blow to the 177,000 restaurants who now have incredibly difficult decisions to make,” said Sean Kennedy, executive vice president of the National Restaurant Association, in a statement. “The pandemic is over for much of the economy, but small restaurant business owners have taken two steps back with every variation. We will continue to pursue a comprehensive program to rebuild and advance the country’s second largest private employer. »

A separate package had been negotiated by a bipartisan Senate group to top the depleted RRF with up to $48 billion. The money would have come in the form of grants to restaurants that qualified last year but were left out (177,000 of them). It was said earlier in the week that the package was not going to end up on the omnibus. The package also likely would have included funds for other small businesses that weren’t previously eligible, such as gyms. Sen. Roger Wicker, R-Miss, who has championed the package, said late Monday that he still held out hope of securing funds in the omnibus.

But restaurants will not receive a federal lift.

The Association said the RRF’s 177,000 funding applications “remain in limbo at the SBA.” In the company’s most recent survey, it noted that initial RRF funding saved more than 900,000 jobs and helped 96% of grant recipients stay in business. “Replenishing the RRF to fund the remaining claims could have saved an additional 1.6 jobs and helped thousands of small commercial restaurants keep their doors open,” an Association spokesperson said in an email.

The Association has been pushing Congress to reconstitute the RRF since it dried up in January. About two out of three restaurants that applied were left out. Or 177,000 businesses with eligible pandemic-related losses of more than $43 billion, even after Paycheck Protection Program loan amounts are deducted.

The RFF, which was the industry’s first dedicated program since COVID, was not without controversy. The $28.6 billion program received north of 370,000 applications, or about 55% of the total number of food and beverage establishments open in February 2020.

This group has requested more than $75 billion as funding evaporated in three weeks. On average, restaurants applied for grants of about $207,000, evidence that the industry faced “tremendous financial needs,” the Association said at the time.

Overall, 101,004 claimants received relief totaling $28,574,979,471.70

There were 72,568 “priority” applicants, or approximately 72%, who received assistance totaling $17,965,827,472.09. In total, less than a third of the largest grants went to prioritization groups and less than 10% to non-priority companies.

The SBA said 10,155 franchises received $2,649,675,046.00; six Hilton Hotel affiliates raised $21,178,445.07; five Wyndham Hotel locations won $2,937,875.87; 85,406 businesses in urban areas were supported; and 15,598 businesses in rural areas received support.

Nearly 70 entities received the RRF raffle – $10 million, including 15 wedding venues and caterers, eight airport and sports venue concession companies, franchises of the industry’s biggest brands fast food, including Panera Bread and McDonald’s. Several event spaces and airport concession companies, as well as franchisees from Dunkin’, Buffalo Wild Wings, Chuck E. Cheese, Five Guys and Jimmy John’s, have raised grants of between $5 million and $10 million.

The problems with the RRF began in earnest when nearly 3,000 restaurants and bars owned by women, socially or economically disadvantaged people and veterans had their grants rescinded following lawsuits in Texas and Tennessee. who ordered the SBA to stop honoring the 21-day priority period for marginalized groups.

A federal court ruling accused the SBA’s 21-day prioritization program of discriminatory practices. Two restaurants in Tennessee and Texas filed lawsuits, and two of the three judges accused the SBA of “racial gerrymandering” and called its decision-making effort to award grants “unconstitutional.”

More than 122,000 applications came from this “priority” pool. As the Independent Restaurant Coalition previously pointed out, about half of all restaurants in the country are owned or co-owned by women. And yet, women-owned businesses received 12-18% fewer loans than the estimated composition of women-owned businesses nationally. Meanwhile, with more than 60% of all chiefs being people of color, an AP analysis of PPP loans by zip code found ‘thousands of minority-owned small businesses’ were among the last to receive loans in the first two funding cycles. ”

At Kennedy’s current point, the Association’s January survey found that many operators still have a steep hill to climb – 88% of restaurants said they had experienced a decline in customer demand for in-room dining. interior on-site in recent weeks, due to the increase in coronavirus cases across the United States due to the omicron variant. In turn, 51% had to reduce operator hours and 34% had to shut down days they normally wouldn’t have. Twenty-six percent also said they had reduced the number of seats.

As a result, 76% of operators said their restaurant’s business conditions were worse than they were three months ago.

Additionally, 62% said their restaurant had accrued additional debt since the COVID outbreak began in March 2020.

A majority of restaurants said they had not reached a full recovery in sales to pre-pandemic levels; 63% said their sales volume in 2021 was lower than in 2019. Only 25% said same store sales increased between 2019 and 2021.

With the RRF in particular, 46% of people who applied but did not receive funding said it was unlikely they would be able to stay in business beyond the pandemic, if they did not receive a grant. .

Ninety-four percent of people who applied for an RRF grant but did not receive funding said a future grant would allow them to retain or rehire employees who would otherwise have been temporarily or permanently laid off.

The latest employment data from the Bureau of Labor Statistics shows the restaurant and bar sector is down 824,000 from pre-COVID levels.

Last week, the IRC said more than 11,000 restaurateurs, suppliers, diners and workers sent a letter to the Biden administration, calling for action on the Restaurant Revitalization Fund. In the letter, the business owners wrote “[T]its limited program funding failed to support approximately two-thirds of eligible companies that applied. Nearly 200,000 small businesses have been neglected and now four in five of those restaurants and bars are at risk of closing permanently, threatening all the livelihoods we support. »

“Pandemic restrictions could be lifted, but our businesses will struggle to hire if we don’t have the financial flexibility to pay off our huge debts. There are over 6,000 Ohio restaurants and bars like mine that depend on Senators Brown and Portman to keep our doors open. If they don’t act quickly, the impact will be catastrophic,” added Lindsay Mescher, chef/owner of Greenhouse Cafe in Lebanon, Ohio.

The unemployment rate in the leisure and hospitality industry was 6.6%, 2.5% higher than the economy-wide rate. Since February 2020, employment in the sector has decreased by 1.5 million, or 9%.

Over the past year, recreation and hospitality salaries have also increased by approximately $59.01 on a weekly basis, an increase of 13.4% over this period.

The IRC also collected survey data from nearly 1,200 members of the independent restaurant and bar community.

Some points:

  • 49% of companies that did not receive RRF grants were forced to lay off workers due to the omicron surge, compared to 33% of companies that received RRF grants.
  • 42% of businesses that did not receive RRF grants said they were at risk of filing or have filed for bankruptcy, compared to only 20% that received RRF grants.
  • 28% of businesses that have not received RRF grants have received or expect to receive an eviction notice, compared to only 10% that have received RRF grants.
  • Restaurant and bar owners who did not receive an RRF grant said they were taking on more debt – 41% of those who did not receive an RRF said they took out new personal loans to support their businesses since February 2020. This was only true for 19% of companies that received a grant from the FRR.
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