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Independent Restaurants are the focus of new House Bill proposing $120 Billion in Grants 

June 29, 2020

Throughout the nation, small restaurant owners and their employees, when compared to the owners and employees of businesses in other industries, have been particularly devastated by the COVID-19 pandemic, the resulting government-mandated shutdowns, and the re-opening guidelines that limit restaurant patron capacity. Amid the stay-at-home orders, most restaurants have either shifted to offering take-out food only or closed entirely; driving the industry’s revenue to record lows and unemployment to record highs.           

According to the Independent Restaurant Coalition, the Independent Restaurant Industry (restaurants not associated with a corporate chain) is made up of an estimated 500,000 restaurants and 11 million employees. However, the Industry faced an instant and dramatic falling out due directly to the COVID-19 pandemic, as the unemployment rate for those in the Industry increased five-fold from March to April, to a staggering peak of 37%, according to the Bureau of Labor Statistics. This shock to the Industry left many owners wondering if they will ever re-open their restaurant again. According to a recent survey, only 1 in 5 restaurants have confidence they can reopen their businesses when they are legally authorized to do so.

For these troubled restaurant owners, help may be on the way. With the goal of sending direct relief to small restaurant owners, a bipartisan group of U.S. Senators and Representatives introduced the Real Economic Support That Acknowledges Unique Restaurant Assistance Needed to Survive (“RESTAURANTS”) Act of 2020. The legislation, specifically designed for independently owned restaurants, would establish a $120 billion revitalization fund to help restaurants deal with the challenges facing the industry due to COVID-19, and to support the re-employment of restaurant workers. Relief from the fund will help restaurant owners cover payroll, benefits, mortgage, rent, protective equipment, food, and/or other costs.

The proposed bill provides grants, rather than loans (in contradiction to such programs as the Paycheck Protection Program) to privately-held restaurants that generate less than $1.5 million in revenue, under normal circumstances. The inclusion of this provision by the drafters was likely in full consideration of the public outrage from large, publicly-traded restaurant chains receiving PPP loans upwards of $20 million, while many small businesses were shut out of the first round of PPP funding entirely.

For restaurant owners, grants from the RESTAURANTS Act may be in addition to or in lieu of a PPP loan. While these owners have been eligible for PPP loans, many in the industry have voiced their displeasure with the PPP’s ability to meet the unique challenges faced by restaurant owners. Particularly, given that many restaurants were either closed or operating on “skeleton staffs” when the PPP loans application first opened, restaurant owners have been hesitant to take on new debt without knowing when their restaurant will re-open, or when their restaurant will operate at a capacity that warrants rehiring furloughed employees. As a result of the PPP’s shortcomings, only 8% of PPP loans have gone to businesses in the food services and accommodation industry, according to the SBA, despite the unemployment numbers for that industry being significantly higher than other industries.

The RESTAURANTS Act was introduced to the House of Representatives on June 15, 2020 and is currently being considered in House Committees. This article will be updated as the bill advances through Congress.

If you are a restaurant owner and would like to discuss available economic relief programs, complying with reopening guidelines, or any other matter related to COVID-19’s impact on your business, please contact HoganWillig Attorneys at Law at (716) 636-7600.

DISCLAIMER: This article has been published as a service to the general public, and, as such, is intended for general purposes only. The information contained within this article should not be considered and/or construed as legal advice. Each reader is advised to consult legal counsel to determine how the contents of this article may apply to their particular facts and circumstances.

For changing and up-to-date legal information, visit our COVID-19 Resource Center.

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