Article contributed by Stacy L. Gilbert, Citrin Cooperman
Throughout this past year, we have witnessed many food businesses, especially in the restaurant and hospitality industry, struggle to survive under the financial constraints and economic losses triggered by COVID-19. More than ever, restaurants had to carefully monitor cash flow and rely on close relationships with its customers to stay open.
At long last, the American Rescue Plan Act of 2021 (ARPA) was signed into law on March 11, 2021, and it includes the Restaurant Revitalization Fund (RRF), a new grant program established to support restaurants. With the RRF, restaurants that are eligible for its benefits can take advantage of the funds while creating a logical business plan moving forward.
Having been a partner at Citrin Cooperman for the past 10 plus years and being a trusted advisor to restaurant operators for close to 30 years, I have come to understand and truly appreciate the value of building strong long-term relationships and working with clients on strategies that allow them to accomplish their goals and prepare for future outcomes. This past year, my goal has been to share our knowledge and understanding of the regulations and resources available to restaurant owners; to help them make informed decisions about their business and advise them on the appropriate solution, suitable for them.
Foodservice businesses that are eligible for the RRF include restaurants, food stands, food trucks, food carts, bars, caterers, and lounges that are not owned by a local or state government.
These businesses can own up to 20 different locations including their affiliated businesses. This means the funds recognize independent businesses that are more vulnerable to economic hardships. The grants available would give up to $5 million per a restaurant’s physical location or $10 million for the entirety of a restaurant business, including its affiliates.
While it is predicted that there will be more funds added to the current $28.6 billion currently administered by the Small Business Administration (SBA), the initial funds will be prioritized for women-owned businesses, businesses run by veterans, as well as the socially and economically disadvantaged within the first 21 days of distribution. Additionally, $5 billion of the grant funds have been set aside for those businesses with $500,000 gross revenue or less in 2019.
As owners prepare to receive news about their fund eligibility and distribution, they should look over their financial statements and future projections. It is essential that businesses gather all evidence of their gross receipts and calculate the reduction of the gross revenue received in 2020, compared to 2019. Be mindful that gross receipts include all revenue and PPP funds. Lastly, restaurants should project their eligible expenses for the covered period – February 15, 2020 – December 31, 2021– and allocate the costs among any other funds they have received through the Paycheck Protection Program (PPP) or Employee Retention Tax Credit (ERTC).
The funds, similar to that of PPP, must be used for a particular purpose: to recover lost revenue as the result of the pandemic and ensure the restaurant survives through the pandemic’s financial burdens. Specifically, the funds can be used for utilities, maintenance, supplies, operating expenses, covered supplier costs, food and beverage inventory, and payroll. We encourage restaurants to protect and prioritize their employees and allocate as much funding as possible to payroll and related benefits.
The Restaurant Revitalization Fund can provide potential relief for owners who have spent money to try to open a restaurant and want to recover some costs towards a future opening, however, the RRF does not permit businesses to use the funds to open a second location. If restaurants do not use all the funding for the eligible expenses before the end of the covered period, funds must be returned to the government. It is critical that restaurants that have access to the RRF understand that these funds are for specific costs to keep the business operating.
The guidelines surrounding federal COVID-19 relief programs frequently change and are complex. Getting through this process requires a different skillset than may be available through the current relationships owners have with their accounting or financial services providers. With that in mind, we offer unique advisory services and dedicated professionals who stay current and knowledgeable about regulations. It isn’t only about having the cash, it is also about how you spend it and how long it will last, as well as being able to make quick decisions when necessary. Our advisory services are specifically geared to helping our restaurant clients thrive in any outcome.
We pride ourselves on our consistent communication with business owners to help them with both their challenges and goals. Over the past year, our priority has been to educate restaurants on available support systems and funds. Going forward, we will continue to strengthen those relationships by helping them achieve the best value and benefit from the resources they have available, while strategically advising them on how to monitor their cashflow to make future decisions.
As warmer weather is around the corner, and more people receive the vaccine, there is a new sense of hope for restaurant and food service businesses. The Restaurant Revitalization Fund is a great win for the industry, and we hope owners are quick to take advantage while the funding is available. We are here to help guide restaurants to prioritize their immediate needs while calculating future projections to help them prepare for future challenges and thrive in any outcome.
For more information on the Restaurant Revitalization Fund and its benefits, visit https://www.citrincooperman.com/industries/restaurants-and-hospitality
Stacy L. Gilbert is an audit and tax partner at Citrin Cooperman, with over 30 years of expertise providing tax, accounting, business, and forensic valuation services. She has a strong focus in the restaurant and hospitality industries, serving as co-leader of the firm’s Restaurant and Hospitality Practice and specializing in strategic business consulting services, including with respect to COVID-19 response regulations and the Payroll Protection Program (PPP). Stacy has specialized knowledge in restaurants and hospitality businesses, advising clients on a variety of tax matters; including, tax compliance and tax planning, income, payroll and sales tax, and foreign reporting; and, provides business advisory services with respect to structuring, internal control, and profitability enhancement.
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