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Law360 (March 11, 2021, 7:01 PM EST) -- U.S. lawmakers including Senate Majority Leader Chuck Schumer on Thursday celebrated President Joe Biden's quick approval of a $28.6 billion package of COVID-19 relief funds in the first federal grant program available to help struggling restaurants and bars since the pandemic began.
Biden on Thursday signed the Restaurant Revitalization Fund grant program, which will be run by the Small Business Administration, after it passed the U.S. House on a 220-211 vote Wednesday as part of the $1.9 trillion coronavirus relief bill known as the American Rescue Plan.
The $28.6 billion portion of the massive relief bill, which won passage Saturday in the Senate on a 50-49 vote, is modeled after the bipartisan Restaurants Act proposed in June 2020 by Rep. Earl Blumenauer, D-Ore., and Sen. Roger Wicker, R-Miss. Wicker, however, joined other Republicans in refusing to support the $1.9 trillion stimulus package.
"Senate Democrats will move the bill forward to the SBA soon. We have to get this done fast," Schumer, D-N.Y., said Wednesday at a news conference held by the grassroots Independent Restaurant Coalition, which launched its Restaurants Act efforts last year when the coronavirus pandemic struck. "We have to get the word out to restaurants that aren't IRC members. Help is on the way. If we have to renew the act, we'll get that done too."
Schumer, who said he's "brokenhearted" whenever he sees "closed permanently" on a restaurant window, added that the first amendment he ever put on the floor as majority leader was the Restaurants Act when it was reintroduced this year.
Blumenauer said early Wednesday he was "ecstatic" that Congress was moments away from approving the $28.6 billion package of relief funds and sending it to Biden, but he asserted that much restaurant rescue work lies ahead. At the top of the agenda is ensuring that the SBA properly implements quick grant distribution, he said.
"We're filled with hope as this proposal head to the president's desk, but a lot more work needs to be done to reach out to the hardest-hit restaurants and smallest businesses," he said.
The Oregon representative, who said he wrote the bill with assistance from the IRC, believes that the $28.6 billion in relief is just a start for helping restaurant owners who have been coping with worker layoffs and payment of adequate wages, gaps in the industry's supply chain, and federal immigration policy that has hurt the industry.
"The $28.6 billion is not going to be enough," he said. "Sen. Schumer says he is open to replenishing the fund, and we have to take him up on that."
An Improvement Over PPP Loans, Says Dem Lawmaker
The Independent Restaurant Coalition launched its Restaurants Act efforts last April when it began to lobby for $120 billion in grant relief after civic shutdown orders forced restaurants and bars nationwide to close, throwing millions of employees out of work.
The IRC reports that the industry is down more than $219 billion in revenue from a year ago and lost nearly 50%, or 5.9 million, of its jobs between February and April 2020, with at least 4.5 million of those jobs provided by independent restaurants. The industry now employs 11 million workers while about 2 million are still out of a job since the pandemic hit, according to the group.
Blumenauer said the grants are an improvement over last year's Paycheck Protection Program. Administered by the SBA, the forgivable PPP loan program introduced in March 2020 under the Trump administration's Coronavirus Aid, Relief and Economic Security, or CARES, Act did little to assist smaller restaurants and other hospitality establishments, according to the Democratic representative. When writing the 2021 Restaurants Act, he said, he "built it on the failure" of the PPP program.
"It is going to be a challenge to make sure that we don't have the larger restaurant operations, which are technically eligible, get most of the relief grants," he said, pointing to the financial troubles of about 400,000 independent establishments that remain open around the country after at least 110,000 restaurants and bars closed in the past year.
Food and beverage lawyers say they are now talking to clients about the grant program's particulars. The Restaurant Revitalization Fund offers grants of up to $10 million per entity or $5 million per physical location. Eligible businesses can use their grant money to cover payroll expenses, mortgage, rent, utilities, construction for outdoor seating, personal protective equipment, paid sick leave and supplier costs, according to the bill.
In addition, lawyers note that of the $28.6 billion in relief funds available, $5 billion will go to independent entities with gross receipts during 2019 of not more than $500,000. The remainder will go to entities, including franchises, with up to 20 locations, and publicly traded companies are excluded. During the grant program's first 21 days, the SBA will put veterans, businesses owned or controlled by women, and socially and economically disadvantaged businesses at the front of the line to receive awards.
$28.6B Will Go Fast In A 'Bittersweet' Restaurant Relief Deal
To be sure, the race is already on for restaurants to grab a share of the relief funding.
"We had a client with 21 locations calling us today who was apoplectic," Riley Lagesen, national restaurant industry practice group chair for Davis Wright Tremaine LLP, told Law360 on Tuesday. "We're advising our clients to pay very close attention to determine their eligibility, and if they're eligible, to apply as soon as possible."
Portland, Oregon-based Lagesen mirrored Blumenauer's concern that the available funds will get snapped up quickly and leave some deserving businesses in the lurch.
"The biggest concern is that this $28.6 billion is not enough money and it will go so fast that deserving businesses won't be able to access any of the funds," he said. "Hopefully, there will be a replenishing of the funds."
Lagesen said he's troubled by the Restaurant Revitalization Fund's lack of an underwriting process that might assess a business' ability to survive even after it receives a grant. He also noted that businesses that took out PPP loans will have those funds deducted from any grants they receive.
Still, he said, the program is "a significant milestone" for eateries and bars that haven't had easy access to bank loans or private capital during the pandemic.
"It's bittersweet. We have many clients who will benefit from this, but we also have clients who will get nothing and need the support," Lagesen said. "You have a lot of businesses that will be penalized for doing the right thing for their employees and customers. But on the other hand, it's a significant boost to some of these businesses. It's not the best available act, but the best act available. We've seen so many iterations and discussions of the House and Senate acts since May, it's very hard to find a perfect solution to this massive problem faced by the restaurant industry."
Lagesen, who said he advocated for the Restaurant Revitalization Fund, added that the National Restaurant Association joined the Independent Restaurant Coalition last year in supporting the $120 billion grant proposal.
"The key difference was that the IRC wanted to keep it to smaller businesses and exclude chains and franchisees, while the NRA wanted to provide broader coverage," Lagesen said. "But they've been collaborating over the past few months in a more unified approach, and they've been talking since May."
Carolyn D. Richmond, chair of Fox Rothschild LLP's hospitality practice group as well as the labor and employment counsel at the New York City Hospitality Alliance, said the restaurant and bar industry faced a lot of negatives even before the pandemic hit. Revenue was dropping considerably in many markets due to rent and labor costs, she said.
"It was all coming to a head before the tsunami of the last 365 days," Richmond said. "My clients get upset when I say this, but it's going to take a lot more than $28.6 billion from the federal government and a couple of years to get out of this."
Restaurants will need to cover the expenses of reopening and maintaining equipment after their venues have sat empty for a year, according to Richmond. And in years to come, she said, restaurants can expect to spend money on capital improvements such as updated air systems and new kitchen designs while dealing with more regulations.
"The bottom line is that this $28.6 billion is a massive step forward, but it is not a panacea for the industry. The money will primarily be used to pay off a lot of debt," Richmond said. "The industry has been pivoting for the last year to outdoor dining, lower capacity and ghost kitchens" — professional food businesses that cook restaurant-quality meals but are set up only for delivery. "All of this is going to stay, and operators will look for efficiencies with staffing as well."
--Editing by Bruce Goldman.
Clarification: An element of this story has been updated to clarify Lagesen's comments on support for the House and Senate versions of the grant program.
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