Relief for Restaurant, Other Small Business Franchisees

Barry Kurtz | Shareholder

April 13, 2022

On April 7, 2022, the House of Representatives passed bill H.R. 3807, the Relief for Restaurant Franchisees and other Hard Hit Small Businesses Act of 2022, which, if passed by the U. S. Senate, will add $42 billion to the depleted 2021 Restaurant Revitalization Fund (RRF).

The RRF was originally adopted by Congress in April 2021 to provide $28.6 billion of tax-free federal grants for restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, bakeries, brewpubs and others in response to COVID-19, if their revenue in 2020 was less than their revenue in 2019.

The Small Business Administration (SBA) was appointed to administer the RRF. The initial RRF ran out of funds within three weeks after applications were accepted for filing. More than 362,000 applications requesting a total of $75 billion in funding were reported to have been filed. Businesses that applied but were unable to receive a grant from the first RRF will be eligible for a grant from the replenished RRF if they have an application and the necessary documentation on file.

Eligible applicants will be businesses that employ no more than 200 employees and experienced a “pandemic-relate revenue loss” of 40 percent or greater.

Of those applicants, first priority will be given to eligible applicants that experienced a pandemic-related revenue loss of at least 80 percent. Second priority will be given to eligible applicants that experienced a pandemic-related revenue loss of at least 60 percent. A “pandemic-related revenue loss” is defined in the Act as the average annual gross receipts of the business during 2020 and 2021 subtracted from its 2019  gross receipts, if that amount is greater than zero.

The SBA cannot disburse funds unless the applicant submits a statement to the SBA indicating the applicant is still operating its business, or intends to reopen the business within six months after the date the statement is submitted and indicating the place of business for which the applicant is seeking the grant.

If the SBA determines that the replenished RRF is insufficient to make grants to each eligible applicant that has not received an award, the SBA will be authorized to make grants with the available funds to each eligible applicant:

  • So that the amount of the grant that each eligible applicant would have otherwise received is reduced by an equal percentage;
  • By establishing a maximum amount for a grant to ensure that smaller eligible entities still receive grants; or
  • By providing full awards in the amounts below a certain threshold (as the SBA may establish) and reducing grants above that threshold by an equal percentage.

The bill must be approved by the U.S. Senate before it will become law. It’s anybody’s guess as to whether and when that will happen.

Barry Kurtz is the Chair of our Franchise & Distribution Practice Group, and a Certified Specialist in Franchise & Distribution Law by the State Bar of California Board of Legal Specialization.

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