Hopes of a $40 billion aid package were dashed Thursday in the Senate.
In what the National Restaurant Association called “a devastating blow to the restaurant industry and small business operators,” the U.S. Senate on Thursday failed to advance the Small Business COVID Relief Act of 2022. The vote dashed hope of replenishing the Restaurant Revitalization Fund, which ran dry with 177,000 operators looking in from the outside. More than 278,000 restaurants applied for RRF grants, with 101,000 applications funded before the $28.6 billion program was depleted. The vote total on Thursday was 52 to 43.
“Throughout the pandemic, restaurants focused on serving their communities. When government-mandated closures shuttered dining rooms, restaurants found a way to shift operating models and keep employees on the payroll. When first responders needed a hot meal, restaurants stepped in to help in cities and towns across the country,” Michelle Korsmo, president and CEO of the Association, said in a statement. “When Congress offered these restaurants the RRF lifeline, restaurant owners and operators made business decisions based on those commitments. Restaurants that are still trying to make up for what was lost in the pandemic today are struggling with workforce shortages, record-high inflation, and supply chain constraints. Today’s vote will further exacerbate those challenges and result in more economic hardships for the families and communities across the country that rely on the restaurant and foodservice industry.”
The RRF was originally established by the American Rescue Plan. Senate Majority Leader Charles Schumer called it a “down payment” to restaurants at the time. The Association said, by leaving 177,000 in the dark, “the Federal government essentially picked winners and losers, among direct competitors, based on chance, not need.”
It was a program with bumps from the outset, although the Association said it succeeded in helping restaurants who did receive it. Operators used it primarily to pay off debt and meet payroll. According to Association research, more than 900,000 restaurant jobs were saved, and 96 percent of recipients reported funds helped their establishments stay open.
Yet the reverse story resonates, too. Per the Association, 62 percent of operators said their restaurant accumulated additional debt since the beginning of the pandemic; 57 percent claimed their restaurant fell behind on expenses.
Industry-wide, eating and drinking establishments shed $300 billion in sales the first year of the pandemic.
“Even though the restaurant industry appears to be recovering from a consumer spending perspective, for restaurants, most of which operate on 3–5 percent pre-tax profit margins, the challenges continue to mount,” the Association said. “Soaring food prices, supply chain constraints, and workforce shortages make it impossible for many restaurants to pay off debt that was accumulated during the pandemic.”
The $48 billion Small Business COVID Relief Act of 2022 (the program that failed to pass Thursday) was introduced by Sens. Ben Cardin (D-MD) and Roger Wicker (R-MS). It included $40 billion for RRF replenishment and $8 billion in support for other industries strapped by the pandemic. The House passed the Relief for Restaurants and other Hard Hit Small Businesses Act of 2022 (H.R. 3807) on April 7, which included $42 billion to replenish the RRF. “Both political parties agreed that the RRF should be replenished but couldn’t reach a consensus on how to pay for it,” the Association said. “Democrats generally wanted to treat replenishment as emergency spending, while Republicans generally wanted existing funds reallocated.”
The original RRF received requests for more than $75 billion in funding. On average, restaurants asked for grants of roughly $207,000.
According to data released by the SBA, there were 72,568 “priority” applicants, roughly 72 percent, who 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 plagued the RRF early. 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.”
Diana Staley, owner of Reverie Kitchen in Branford, Connecticut has been advocating for RRF replenishment legislation since it ran out, holding more than 40 meetings at the Senate.
“Seeking to blame Democrat governors for this situation is absolutely a false narrative, as restaurants in every state were unilaterally affected,” she says of pandemic restrictions over the past two-plus years. “Furthermore, Florida and Texas, the ‘most open states,’ rank as the third- and fourth-highest amount of grant applications in the program and account for 14 percent of the funding.”
Replenishment of the RRF would have taken place in the order applications were received.
“Today, a Senate filibuster dashed the promise made to more than 177,000 small business owners in communities across the country,” said Sean Kennedy, EVP of public affairs for the National Restaurant Association, in a statement. “These restaurant owners believed the creation of the Restaurant Revitalization Fund was a down payment, and that the Senate would complete the mission with this vote. A bipartisan majority voted to begin debate on this critical legislation, but it wasn’t the 60 votes needed. While there are valid questions about government spending and inflation, restaurants should not be caught in the crossfire. We applaud the leadership of Senate Majority Leader Chuck Schumer (D-NY), as well as Senators Ben Cardin (D-MD), Roger Wicker (R-MS) and Kyrsten Sinema (D-AZ) for their work in creating and pressing to replenish the RRF."
Erika Polmar, the executive director of the Independent Restaurant Coalition, echoed the point. “Local restaurants across the country expected help but the Senate couldn’t finish the job,” Polmar said. “Neighborhood restaurants nationwide have held out hope for this program, selling their homes, cashing out retirement funds, or taking personal loans in an effort to keep their employees working and their doors open. We estimate more than half of the 177,300 restaurants waiting for an RRF grant will close in the next few months as a result of Congressional inaction.”
Polmar promised the IRC would continue to fight for issues critical to independent restaurants as it remained engaged in Washington, D.C. and local communities. “And make no mistake, we will keep fighting for a sustainable future for independent restaurateurs, their employees, and the communities they support,” she said.
Data suggests at least 90,000 restaurants and bars have closed since the beginning of COVID. The IRC said 52 percent of the applying restaurants that did not receive RRF grant funding believe they are on the verge of closing for good.
A IRC survey of nearly 1,000 members of the independent restaurant and bar community in 48 states found more than half of businesses that did not get RRF grants said they could shutter within six months.
“These restaurants were left with no aid to struggle to compete with those restaurants next door who received RRF,” Staley says. “The potential impact of these restaurants closing will affect roughly 4,432,500 million employees.”
Earlier in the week, as the vote approached, industry platforms ChowNow, Toast, and more than 20 other businesses and trade associations penned an industry letter urging Congress to act quickly “so that the tens of thousands of independent restaurants that did not receive relief could keep their doors open.”
The message was as many as four in five local restaurants and bars were in danger of shuttering without further aid.
COVID hit independents like a sledge hammer from day one. Independent revenues dropped more than 70 percent in the final two weeks of March 2020. At least 4.5 million of the roughly six million jobs shed in the food and drink industry within opening weeks of COVID came from independents, according to the IRC.
In 2020, independent locations declined by 8 percent, according to The NPD Group. Or 28,399 closures.