In 2020, the restaurant industry saw a significant drop in diners due to mandated closures and social-distancing regulations.
In 2021, it seemed as if those numbers were on the rise; however, they were still well below the usual rate, with peak numbers 25 percent below average.
To support restaurants during such a challenging time, the latest pandemic stimulus package, the American Rescue Plan Act of 2021, includes $28.6 billion for restaurants in the form of the Restaurant Revitalization Fund (RRF).
How Do You Qualify?
If you lost revenue during 2020 compared to 2019, chances are you could be eligible for the RRF. The bill describes qualifying businesses as anywhere “where the public can taste, sample, or purchase products,” including food stands, taverns, brewpubs, restaurants, or other establishment types.
There are some exceptions, however. Bars and restaurants that are part of any publicly-traded company are not eligible. The same goes for establishments owned by the local or state government. Also, restaurant owners operating 20+ venues are ineligible, but different rules apply for franchise owners.
How Much Could You Receive?
This figure will more than likely be based on the amount you lost during the pandemic period. You can apply for a grant that totals your 2020 gross revenue minus your 2019 gross revenue. Restaurant operators who apply for the RRF must confirm that the funds are required and necessary to support the businesses continuation.
However, if you can prove that you had a loss in 2020, compared to 2019, your current trading status may not prevent you from receiving RRF financial support. If you received money from the Paycheck Protection Program (PPP), that money will be classed as income when applying for RRF. Money from an Economic Injury Disaster Loan (EIDL) is not classed as income for this purpose. Restaurants may receive any amount up to $5 million and restaurant groups can receive up to $10 million, depending on proven need.
For business taxes, RRF funds are also not considered as income and will not be taxed as such.
How Can You Use the Funds?
The general consensus is that the funds from the RRF must be used to support the continued running costs of your business. This may include:
- Rent payments
- Mortgage payments
- Construction costs to install outdoor seating
- Sick leave
A range of other items considered essential to the running of the business can be paid for using RRF grant funds. If you can prove the expense is necessary to keep your business running, you can use the funds for that expense. Currently, the period to use any funds provided expires on December 31, 2021; but, the SBA reserves the authority to extend that if necessary.
For help making sense of the RRF and getting your accounts into shape for the coming year, contact Insogna CPA to see how our personalized service can support you now and into the future.