National Restaurant Association called the move a "gut punch."

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

“Today’s news that Congress is walking away from the RRF is a gut punch to the 177,000 restaurants who now have some incredibly difficult decisions ahead of them,” Sean Kennedy, EVP, National Restaurant Association, said in a statement. “The pandemic is over for much of the economy, but small business restaurant owners have taken two steps back with every variant. We will continue to pursue an all-of-the-above agenda to rebuild and advance the nation’s second-largest private employer.”

A separate package had been negotiated by a bipartisan Senate group to backfill the depleted RRF with up to $48 billion. The money would have come in grants to restaurants that qualified last year but were left out (177,000 of them). It was rumored earlier in the week the package wasn’t going to make it into the omnibus. The package would also likely have included funds for other small businesses that did not qualify previously, like gyms. Sen. Roger Wicker, R-Miss, who championed the package, said late Monday he still held out hope to secure funds in the omnibus.

But restaurants won’t receive a federal lift, as the provision was left out of the final version of the appropriations package

Ben Cardin, chairman of Senate Small Business, said relief to restaurants was not included because some Republicans objected, according to a Tweet from CNN Chief Congressional Correspondent Manu Raju.

“We are beyond disappointed that this massive government funding proposal ignores the needs of 177,300 neighborhood restaurants and bars impacted by the pandemic,” Erika Polmar, executive director of the Independent Restaurant Coalition, said in a statement. “Thousands of neighborhood restaurants are going to close as a result of Congressional inaction on the Restaurant Revitalization Fund. I hear from business owners every day who are having to close their doors and since Congress and the White House couldn’t see their way to refill the RRF, hundreds more will face the same fate in the coming weeks. Communities aren’t just losing institutions they love. They are losing the jobs they need, as are the farmers, bakers, brewers, distillers and other suppliers restaurants support. This is a catastrophic day for independent restaurants.”

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

Added Polmar: “The Independent Restaurant Coalition is exploring every possible way to give restaurants and bars impacted by the pandemic the resources they need to keep their doors open and keep their teams working. Restaurants and bars feel abandoned by many elected officials, which is why the Independent Restaurant Coalition will continue to fight for this community in Washington and across the country.”

The Association has pushed for Congress to replenish the RRF ever since it went dry in January. Roughly two in three restaurants who applied were left out. Or 177,000 businesses with eligible pandemic losses of over $43 billion even after deducting Paycheck Protection Program loan amounts.

The RFF, which was the first industry-dedicated program since COVID, stirred no shortage of controversies. The $28.6 billion program received north of 370,000 applications, or about 55 percent of the total number of eating and drinking establishments open in February 2020.

This group sought more than $75 billion as funding evaporated in three weeks. On average, restaurants requested grants of roughly $207,000—proof the industry was facing “tremendous financial need,” the Association said at the time.

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

There were 72,568 “priority” applicants, roughly 72 percent, that received relief totaling $17,965,827,472.09. In all, less than a third of the largest grants went to prioritization groups and less than 10 percent went to non-priority businesses.

The SBA said 10,155 franchise locations received $2,649,675,046.00; six Hilton Hotel subsidiary locations collected $21,178,445.07; five Wyndham Hotel subsidiary locations took home $2,937,875.87; 85,406 businesses from urban areas received relief; and 15,598 businesses from rural areas received relief.

Nearly 70 entities received the RRF’s top draw—$10 million, including 15 wedding venues and caterers, eight airport and sports venue concessions companies, franchises from the quick-service industry’s largest brands, including Panera Bread and McDonald’s. Multiple events spaces and airport concession companies, as well as franchisees of Dunkin’, Buffalo Wild Wings, Chuck E. Cheese, Five Guys, and Jimmy John’s, collected grants within the $5 million to $10 million range.

Issues with the RRF began in earnest when nearly 3,000 restaurants and bars owned by women, socially or economically disadvantaged individuals, and veterans, had grant awards rescinded following lawsuits in Texas and Tennessee that ordered the SBA to cease 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 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 pointed out previously, about half of all restaurants in the country are owned or co-owned by women. And yet women-owned businesses received 12–18 percent fewer loans than the estimated makeup of women-owned businesses nationwide. Meanwhile, while more than 60 percent of all chefs are people of color, an AP analysis of PPP loans by zip code found that “thousands of minority-owned small businesses” were among the last to receive loans during the first two rounds of funding.”

To Kennedy’s current point, the Association’s January survey found many operators still have a steep hill to climb—88 percent of restaurants said they experienced a decline in customer demand for indoor on-premises dining in recent weeks, as a result of the increase in coronavirus cases across the U.S. due to the omicron variant. In turn, 51 percent had to reduce hours of operator and 34 percent had to close on days they normally would not have. Twenty-six percent also noted they reduced seating capacity.

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

Additionally, 62 percent said their restaurant accumulated additional debt since the beginning of the COVID- outbreak in March 2020.

A majority of restaurants reported not achieving a complete sales recovery to pre-pandemic levels; 63 percent said their sales volume in 2021 was lower than it was in 2019. Only 25 percent reported a same-store sales increase between 2019 and 2021.

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

Ninety-four percent who applied for an RRF grant but did not receive funding said a future grant would enable them to retain or hire back employees that 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 down 824,000 from pre-COVID levels.

Last week, the IRC said more than 11,000 restaurant owners, suppliers, diners, and workers sent a letter to the Biden administration, urging action on the Restaurant Revitalization Fund. In the letter, business owners wrote “[T]his program’s limited funding failed to support roughly two-thirds of the eligible businesses that applied. Nearly 200,000 small businesses have been overlooked and now four out of five of these restaurants and bars are in danger of closing permanently, threatening all of the livelihoods we support.”

“Pandemic restrictions might be lifting, but our businesses will struggle to hire if we don’t have the financial flexibility to pay down our enormous debts. There are more than 6,000 Ohio restaurants and bars just like mine that are depending on Senators Brown and Portman to keep our doors open. If they don’t act soon, the impact will be catastrophic,” added Lindsay Mescher, chef/owner of Greenhouse Cafe in Lebanon, Ohio.

Unemployment rate for leisure and hospitality was 6.6 percent—2.5 percent higher than the economy-wide rate. Since February 2020, employment in the sector was down by 1.5 million, or 9 percent.

Over the past year, leisure and hospitality wages have increased by roughly $59.01 on a weekly basis as well, a 13.4 percent increase during that period.

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

Some points:

  • 49 percent of businesses that did not receive RRF grants were forced to lay off workers because of the omicron surge compared to 33 percent of businesses that received RRF grants.
  • 42 percent of businesses that did not receive RRF grants said they were in danger of filing for or have filed for bankruptcy, compared to just 20 percent that received RRF grants.
  • 28 percent of businesses that did not receive RRF grants have received or are anticipating receiving an eviction notice compared to just 10 percent that received RRF grants.
  • Restaurant and bar owners who did not receive an RRF grant said they were taking on more personal debt—41 percent of people that did not receive RRF reported taking out new personal loans to support their businesses since February of 2020. This was only true for 19 percent of businesses that received an RRF grant.
Feature, Finance