Was the Restaurant Revitalization Fund a Success?

Barry Kurtz | Shareholder

July 8, 2021

The Restaurant Revitalization Fund (RRF) was adopted by Congress in April 2021 to provide financial relief for eligible restaurants and related food and beverage service businesses. Over $28 billion in tax-free federal grants were approved for restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, bakeries, brewpubs and others on a first come, first served, basis if their revenue in 2020 was less than their revenue in 2019. The SBA is the administrator of the RRF.

During the first 21 days of the program, priority was given to eligible small businesses owned and controlled by women, small businesses owned and controlled by veterans, and socially and economically disadvantaged small businesses, which were defined as businesses owned by certain racial and cultural groups with limited financial resources. Following the 21-day period, all eligible applicants could apply. However, approximately 147,000 applicants from the priority group applied for more than the initial $28.6 billion in the RRF.

As a result, the Restaurant Revitalization Fund Replenishment Act of 2021 was proposed on June 10 by a bipartisan group of lawmakers in the House and Senate to provide an additional $60 billion for the RRF but it has not yet become law.

However, on May 11, a lawsuit was filed in federal court against the SBA by an applicant that the SBA rejected as not being a business within the priority group, alleging that the program violated applicable law because it discriminated against businesses not within the priority group. The lawsuit claimed that the program violated the applicant’s equal protection rights because the priority carveout was based on race and sex and sought a temporary restraining order and preliminary injunction to prevent the government from relying on race or sex in the disbursement of the grants. The district court refused to issue a restraining order or preliminary injunction against the SBA.

The district court’s decisions were then appealed to the U. S. Court of Appeals for the Sixth Circuit. That appellate Court decided the  SBA did not prove that favoring  one race  over  another  was necessary to achieve a compelling state interest and issued a preliminary injunction ordering RRF disbursements to cease until the lawsuit was resolved on its merits and all appeals were exhausted.

To further compound matters, on June 30, the SBA announced the closing of the RRF application platform on July 14. The platform remains open until then, to allow previous applicants to check their status, address payment corrections or ask questions.

Was the RRF a success?

It appears so, although it did not satisfy thousands of the demands for the grants.

According to the SBA, the RRF program received more than 278,000 submitted eligible applications representing over $72.2 billion in requested funds – and approximately 101,000 applicants were approved for restaurants, bars and other eligible food service businesses. Applicants within the priority group received approximately $18 billion in grants; including $7.5 billion for women-owned businesses, $1 billion for veteran-owned businesses, $6.7 billion for social and economically disadvantaged-owned businesses and $2.8 billion for businesses owned by representatives of underserved populations. The remainder of the $28.6 billion was awarded to eligible applicants not within the priority group. The average size of grant awards to all applicants was $283,000.

Barry Kurtz is State Bar of California Certified Specialist in Franchise & Distribution Law.

This information provides an overview of a specific developing situation. It is not intended to be, and should not be construed as, legal advice for any particular fact or situation.




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