FAQs: Applying for the Restaurant Revitalization Fund Grant

At a Glance:

• On April 17, the U.S. Small Business Administration (SBA) released its landing page about the Restaurant Revitalization Fund (RRF) grants, serving as a comprehensive guide to the program.
• The SBA has also released a sample RRF grant application.
• The application portal could be open as soon as May 1, 2021.
• On April 21, Aprio’s Restaurant, Hospitality and Franchise team will be hosting a webinar discussing this latest release and the RRF program. Click here to register.

The full story:

On April 17, the U.S. Small Business Administration (SBA) released its much-awaited landing page related to the Restaurant Revitalization Fund (RRF) grants. The RRF, which will be administered by the SBA, provides for $28.6 billion in grants for eligible entities. These grants are nontaxable and the associated expenses are nondeductible.

Let’s take a closer look at the key criteria of the RRF.

Who is eligible?

Eligible businesses include:

• A restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom-licensed facility or premise of a beverage alcohol producer where the public may taste, sample or purchase products, or a similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.
• Businesses that fall within the above categories and owned or operated less than 20 locations, together with their affiliates, as of March 13, 2020.

Bakeries, brewpubs, tasting rooms, taprooms, breweries, microbreweries, wineries and distilleries must provide documentation with their application that their on-site sales to the public comprised at least 33% of gross receipts in 2019. For businesses that opened in 2020 or that have not yet opened, the applicant’s original business model should have contemplated at least 33% of gross receipts in on-site sales to the public.

Businesses that classify as “inns” must provide documentation with their application that on-site sales of food and beverages to the public comprised at least 33% of gross receipts in 2019. For businesses that opened in 2020 or that have not yet opened, the applicant’s original business model should have contemplated at least 33% of gross receipts in on-site food and beverage sales to the public.

Who is not eligible?

Businesses that are not eligible for the grant include those who:

1. Owned or operated 20 or more locations, together with their affiliates, as of March 13,2020;

2. Have received or have a pending application to receive a Shuttered Venues Operators Grant (SVOG);

3. Are in bankruptcy liquidation; or

4. Have permanently closed.

How do I calculate the RRF grant amount?

When determining the grant amount for an eligible business, we must first define the date on which the business or location began making sales. This date will define when your business began operations and how you calculate the grant amount.

If the business operated for all of 2019, then your grant will be equal to 2019 gross receipts minus 2020 gross receipts minus Paycheck Protection Program (PPP) loans.

If the business did not operate for the full year of 2019, you can choose one of two different ways to calculate your grant: the average gross receipts method or the eligible expenses method. Here are the calculations for each method:

• Average Gross Receipts Method: Average 2019 monthly gross receipts x 12 – 2020 gross receipts – PPP loan amounts = grant amount
• Eligible Expense Method: Amount spent on eligible expenses between 2/15/20 and 3/11/21 – 2020 gross receipts – PPP loan amounts = grant amount

The eligible expenses method is the only calculation option available to you if your business began on or after January 1, 2020, and before March 10, 2021, or was not operating yet but incurred eligible expenses.

Please note that individual RRF grants cannot exceed more than $5 million, or in the case of an affiliated group, $10 million in the aggregate.

What are the permissible uses of grant funds?

The RRF grant must be used on eligible costs during the covered period, defined as the period beginning on February 15, 2020, and ending on March 11, 2023.

Eligible expenses include:

• Payroll and benefit costs
• Payments of principle or interest on any mortgage obligation (which shall not include any prepayment of principal on a mortgage obligation)
• Rent payments, including rent under a lease agreement (which shall not include any prepayment of rent)
• Utilities
• Maintenance expenses, including construction to accommodate outdoor seating and walls, floors, deck surfaces, furniture, fixtures and equipment
• Supplies, including protective equipment and cleaning materials
• Food and beverage expenses that are within the scope of the normal business practice of eligible entity before the covered period
• Covered supplier costs, as defined in section 7A(a) of the Small Business Act (as redesignated, transferred and amended by section 304(b) of the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Public Law 116-260))
• Operational expenses
• Paid sick leave
• Any other expenses that the SBA determines to be essential to maintaining the eligible entity

If a business receives a RRF grant and is unable to use all of the grant funds or permanently ceases operations before the end of the covered period, the eligible entity shall return to the U.S. Department of the Treasury any funds that it did not use for the allowable expenses described above.

How do I determine gross receipts?

Generally, gross receipts are all revenue in whatever form received or accrued (in accordance with the business’s accounting method, i.e., accrual or cash) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees or commissions, reduced by returns and allowances but excluding net capital gains and losses. These terms carry the definitions used and reported on IRS tax return forms.

What’s not included?

• PPP loans
• Economic Injury Disaster Loans (EIDLs) or advances
• Any state or local small business grants
• Sales and use taxes collected
• Fees collected from related parties and/or affiliates

How do I apply?

The application process for the RRF will be administered by the SBA. We expect that the SBA will provide a portal that houses the application, some required forms and document-upload capabilities on its website.

When should you apply?

• The SBA previously stated that the application portal would open 14 days after it posted supplemental information, which would be May 1.
• The American American Rescue Plan Act (ARPA) stated that the application will become available no later than 60 days after the signing of the bill, which is May 9.

Where is the application?

• The application will be available at restaurants.sba.gov (the site is not yet available).
• The SBA is also working with certain software-as-a-service (SaaS) platforms, point of sale (POS) vendors and restaurant ecosystem partners to embed the application in their systems.

What documentation is required?

The documentation required for the RRF application process is focused on attesting to the applicant’s gross receipts. The SBA has provided a comprehensive list of what will be accepted during this application process. Note that not all of these documents are required by every applicant:

• IRS Form 4506-T, completed and signed by the applicant. Completion of t his form digitally on the SBA platform will satisfy this requirement.
• Any of the following documents demonstrating gross receipts and, if applicable, eligible expenses:
  • Business tax returns (IRS Form 1120 or IRS Form 1120-S)
  • IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F
  • For a partnership: the partnership’s IRS Form 1065 (including K-1s)
  • Bank statements
  • Externally or internally prepared financial statements, such as income statements or profit and loss statements
  • POS report(s), including IRS Form 1099-K

For applicants that are a brewpub, tasting room, taproom, brewery, winery, distillery or bakery:

• Documents showing that on-site sales to the public comprise at least 33.00% of gross receipts for 2019, which may include Tax and Trade Bureau (TTB) Forms 5130.9, or TTB. For businesses that opened in 2020, the applicant’s original business model should have contemplated at least 33.00% of gross receipts in on-site sales to the public.

For applicants that are an inn:

• Documents showing that on-site sales of food and beverages to the public comprise at least 33.00% of gross receipts for 2019. For businesses that opened in 2020, the applicant’s original business model should have contemplated at least 33.00% of gross receipts in on-site sales to the public.

How will the RRF grants be distributed?

We expect that all applicants will be able to apply for the RRF grants on the first day that the application portal is available. However, during the first 21 days, the SBA will fund applications on which the applicant has self-certified that it meets the eligibility requirements for a small business that is at least 51%-owned by one or more individuals who are:

• Women:
• Veterans; or
• Socially and economically disadvantaged:
  • Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.
  • Economically disadvantaged individuals are those whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.

What’s next?

The application portal could open as soon as May 1. Applicants should prepare themselves by understanding their eligibility, gathering the required documents and reviewing the sample application.

Let Aprio help

Aprio is continuously monitoring new guidance from the SBA, as well as the Treasury, Congress and the IRS, to ensure we have the latest information when advising our clients and helping them claim much-need COVID-19 relief funds

To discuss your eligibility for funding or how you can prepare for the application process, contact Aprio’s Restaurant, Franchise & Hospitality team for a consultation.

Disclaimer for services provided relative to SBA programs and the CARES Act

Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.

The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.

Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.

You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.

In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.

Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA programs.