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Are Additional Grants Enough for Restaurant Relief?

Our dean of Restaurant & Hospitality Management weighs in on the latest stimulus.

PPP1 has come and gone. PPP2 is a distant memory for most. The American Rescue Plan (ARP) Act of 2021 includes the Restaurant Revitalization Fund (RRF), hard-fought-for grants for the hospitality industry. Tribeca's Kitchen Director of Operations Rick Camac shares his take on this round of restaurant relief.

While the number is impressive ($28.6 billion), we’ve got quite a deep hole to climb out of as an industry. Is this the government’s way of making it up to us? Is it too late?

The details of each round of small business paycheck protection have been covered extensively in the media, but I will summarize the latest round of grants. PPP1 was misunderstood, came way too late, and was too stringent in its application (rent and payroll) and its deadline for usage.

For PPP2, the government loosened up the usage, gave more time and got it out to everyone quicker. Unfortunately, this pandemic is stubborn and has stuck around way longer than anyone ever expected. In NYC, restaurants were closed for six or so months (many of us longer as some restaurants saw no reason to open with limited capacity, for good reason). Restaurants reopened at 25%, then at 35% and finally at 50% capacity. Making a profit at even 50% capacity is virtually impossible without huge landlord abatements (not deferrals, as that’s just “kicking the can down the road,” as they say).

We are now more than a year after the initial shutdown and many restaurants are already out of business (about 5,000 or so I’ve heard). Many have been deferring rent for so long they could easily be in six figures of debt.

RRF is the biggest grant program to date and may be the last. The highlights:

  • The first $5 billion are earmarked for small businesses with sales under $500k.
  • The next is for minority and woman-owned businesses, over the first three weeks.
  • Then comes most everyone else who is not public or doesn't have entities of 20 or more.
  • The goal is for funds to be delivered by the end April.

The funding is calculated by subtracting a restaurant’s 2020 gross receipts from 2019, then subtracting PPP1 and PPP2. The net results can be staggering. As an example, let’s say you were only open for three months in 2020 and did $500k in business. In 2019, you did $2.5 million. The result is $2 million. Then subtract about $200k for PPP1 and $300k for PPP2, and you get a check for $1.5 million.

Some may say that calculating from topline when some make single digits is too much. If in 2019, you made 10% to the bottom line, that’s $250k. Now you’re receiving a check for $1.5 million, which is six times your bottom line. Is that fair? I think so. Here’s why:

  • As mentioned, many of us are coming out of a huge hole. Some may not come out of it. Restaurants may owe $500k or more in rent alone.
  • Restaurants can use the funds for myriad uses for the rest of 2021, not lining the pockets of owners or investors.
  • Business will be slow to come back for health concerns and the lingering pandemic that we are not out of yet.
  • As mentioned, restaurants are not profitable at 50% capacity, so we need to pass that threshold just to begin to have hope of turning a profit.

Our industry could be halfway through 2022 before we see a light at the end of the tunnel. So, I hope restaurants use the funds wisely. We need and deserve it. Every day counts as expenses mount. Let’s get out there and get back to business!

Study business skills with Rick in ICE's Restaurant & Culinary Management program.

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