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The restaurants and other food businesses approved for Restaurant Revitalization Fund grants were made public this week, igniting the kind of debate that happens whenever the government picks winners and losers. The woefully underfunded program sought to cover pandemic-related losses in a hard-hit industry. City Paper is just beginning to comb through the data, but with questions and confusion swirling, we sought to provide some answers straight away.
What is the Restaurant Revitalization Fund?
A $28.6 billion federal relief fund for restaurants and other businesses like caterers and food trucks that was a part of the $1.9 trillion American Rescue Plan and is run by the Small Business Administration. The application period ran from May 3 to July 14. Demand far outpaced supply—the SBA approved less than one third of applicants for grants. More than 370,000 businesses applied for about $75 billion. Only 105,000 companies were approved. Earlier this week the Washington Business Journal shared a searchable database that displays which restaurants were approved for grants and the amount of the grants. You can search specifically for D.C., where the SBA approved about 730 grants.
Who scored big in D.C.?
RRF grants max out at $10 million for entities like restaurant groups and $5 million for standalone businesses. The grants are sizable because the intent is for restaurants to recoup their pandemic-related losses.
CDG Hospitality LLC, the restaurant group behind Chef Geoff’s, Cafe Deluxe, and a few other local restaurants, was approved for $8.2 million. Its namesake, restaurateur Geoff Tracy, appreciates the support he’s received from both the Paycheck Protection Program and the RRF. “Most independent restaurants, like us, are paying down debts incurred over COVID, trying to hire up, using it for wages [and] benefits, and trying to stay afloat after a devastating year for the industry,” he says.
Compass Coffee, which has a dozen coffee shops spread throughout the D.C. area came in second at just over $6.8 million. Michael Haft co-founded Compass with Harrison Suarez; both are former Marines and Haft’s father and grandfather started multiple businesses in the D.C. area, including Dart Drug and Crown Books. Haft told the Washington Business Journal that while they haven’t received the funds yet, they plan to spend “at least 75 percent of it on payroll and other costs to keep employees working.” (They laid off 80 percent of their employees at the start of the pandemic, but converted some of them into construction workers of sorts.)
Then came The Park at 14th, one of D.C.’s largest nightclubs owned by Marc and Anne Barnes. It reopened in June as more of a restaurant and received $5 million from the RRF. “Nightlife has become too much,” Marc told WUSA9 last month. Anne did not respond to City Paper’s requests for comment.
Next was Del Mar, Fabio Trabocchi’s Spanish restaurant at The Wharf that recently made headlines after a staff walk out. The SBA approved a $5 million grant for the restaurateur, who also owns Fiola restaurants in D.C., Italy, and Miami. On the other side of The Wharf development, Officina from Nicholas Stefanelli, rounded out the top five, receiving $4.5 million.
Why are some people upset?
When Congress rolled out the grant program, it told the SBA to prioritize some business owners over others. Namely, they thought it prudent to give early access to businesses owned by women, veterans, and “socially and economically disadvantaged individuals” such as people “who have been subjected to racial or ethnic prejudice or cultural bias.”
At least 51 percent of the company had to be owned by someone who falls under one or more of these categories to be eligible to get a three-week head start (May 3 to May 24). Others could apply simultaneously but they’d have to wait longer to receive approvals and funds.
That didn’t sit well with everyone especially because it was clear from the jump there wasn’t nearly enough money to fund all restaurants that applied. Some groups filed lawsuits challenging the constitutionality of a plan they felt was discriminatory. The Wisconsin Institute for Law and Liberty filed one saying, “White male applicants were at significant risk.” So did America First Legal, a Stephen Miller-led right-wing group that believes “all citizens deserve a government that puts their needs and their country first.”
The lawsuits alleging discrimination were successful. Federal court rulings quashed prioritization. The SBA froze pending payments to nearly 3,000 applicants. Most received letters informing them their grant approvals had been rescinded.
Take Sandra Basanti, who owns Pie Shop on H Street NE. On May 29, the SBA informed her that she had been approved for a grant and that the funds would hit her account in a week or less. After the judges handed down their decisions, Basanti received a second correspondence she calls “the death email.” It read, “We regret to inform you that, due to recent court rulings, the SBA will not be able to disburse your RRF Fund award.” The SBA said that while their website would display her grant as “fully canceled,” Pie Shop’s application would be eligible to be filled again if Congress approved more funding.
The SBA said in court documents that impacted applicants would only receive money once the agency “completed processing all previously filed non-priority applications, and only then if the RRF is not first exhausted.” According to the SBA’s website, applications were then processed in a somewhat opaque “order in which they were approved.”
Despite this devastating setback for many business owners, the majority of places that were approved for grants in D.C. were owned by women, veterans, and/or socially and economically disadvantaged individuals. The SBA published information obtained via FOIA that has more granular data about grantees. Of the roughly 730 approved applicants, 68 percent of them said they fall into one or more of those three categories. They include small businesses like Tsehay Ethiopian Restaurant and Bar, Karibbean Kitchen, Brooklyn On U, and Last Call.
Still others are frustrated that large, well-heeled restaurants were approved for such large sums of money, especially if they laid off their staff and closed their doors for the duration of the pandemic while smaller restaurants stayed open and fought to keep a few employees on the clock.
Nationally, some heavy hitters in hospitality were approved for grants like David Chang’s Momofuku Restaurant Group ($6.8 million) and fine dining bastions like Alinea in Chicago ($2.2 million) and Atelier Crenn in San Francisco ($2 million). According to Nation’s Restaurant News, less than one-third of the largest grants went to prioritized groups.
How were grant award amounts calculated?
There were three possible calculations, depending on factors like when a business opened or if they received Paycheck Protection Program loans:
Calculation 1: for applicants in operation prior to or on January 1, 2019: 2019 gross receipts minus 2020 gross receipts minus PPP loan amounts
Calculation 2: for applicants that began operations partially through 2019: Average 2019 monthly gross receipts x 12 minus 2020 gross receipts minus PPP loan amounts
Calculation 3: for applicants that began operations on or between January 1, 2020 and March 10, 2021 and applicants not yet opened but have incurred eligible expenses: Amount spent on eligible expenses between February 15, 2020 and March 11, 2021 minus 2020 gross receipts minus 2021 gross receipts (through March 11, 2021) minus PPP loan amounts.
City Paper asked the SBA whether the way award amounts are calculated tips the scales in favor of restaurants that temporarily closed throughout the pandemic but did not receive a response by press time. The agency also didn’t respond to a question about when they expect all funds to be disbursed.
What can the grants be used for?
RRF grant money can be put towards payroll costs, sick leave, mortgage and rent payments, principal and interest on debt, utility payments, maintenance expenses, construction of outdoor seating areas, supplies, food and beverage costs, and other operating expenses. The idea is for businesses to use the money to make up for the losses they incurred. They cannot use the grant money to expand. Business owners have until March 11, 2023 to spend the money. Some critics of the fund say there aren’t enough strings attached to the grants nor is there enough of a guarantee that the money will trickle down to workers.
An SBA spokesperson says after the total award funds have been exhausted, restaurants must “certify that the funds were used for eligible purposes for the required period.” They could also randomly select applications for an audit. Before the funds are exhausted, beginning in December 2021, applicants will have to submit self-reported, unaudited data detailing the use of distributed funds each year through the program’s end in 2023.
How are local businesses actually using them?
Ivy and Coney co-founder Josh Saltzman explains that his Shaw bar has already started using its $274,355 grant for payroll. “As we continue to ramp up and everything, it allowed us to bring back our full staff immediately and be like, ‘OK we’re fine now,'” Saltzman says with an exhale. “We gave raises to the kitchen staff so that we could pay them more equitably. Frankly, it allowed us to also pay ourselves again.” According to Saltzman, all three bar owners depended on their significant others’ steady jobs during the pandemic.
The grant also freed Ivy and Coney up to give bonuses to employees who stuck with the bar throughout the various phases of the pandemic. “They struggled the most,” Saltzman says. “It was nice to be able to do that.” The rest of the money will be used for repairs.
Caterers struggled in the pandemic because the pandemic necessitated canceling every event from weddings to catered lunches in downtown office buildings. Ben Lin of B. Lin Catering received PPP loans that were essential. They meant his company would most likely see the other side of the pandemic. “I know we’d stay alive but it would still take a few years for us to recover because we have some outstanding debts to pay, our rent, and equipment in need of repairs that we neglected,” he says.
Then came the RRF. The SBA awarded B. Lin Catering $1,977,280. “Prior to the pandemic we had built out our new catering kitchen and took out a sizable loan,” Lin says. “That was in August 2018. We really only were in operation in our new facility, which we invested a ton of money in, for a year and four months. We were in a lot of trouble.”
The facility should have allowed them to do three times the amount of business as before. But, instead they found themselves in a deep hole, down 90 percent. Lin tried selling platters for home gatherings, but pivots didn’t always come easy to caterers. Even though some weddings are back on the calendar, Lin says business is still down 60 percent. The RRF grant will help with hiring and retaining employees and covering increased food costs that are also a result of the pandemic.
Not everyone has tapped into their funds, like Bettina Stern who co-founded Chaia. The vegetarian taco business boasts two brick-and-mortar locations and a catering department. The SBA approved a $626,904 grant. Chaia hasn’t touched it yet because they’re still spending both PPP loans they received. She was quick to apply and quick to benefit.
“I’m a voracious reader of the news and pay a lot of attention to what’s happening,” she says. The moment she heard about the RRF, she flagged it for her co-founder and director of operations. They hit send on their application as soon as they could. “We were at the front of the line. Within days we got the announcement we were getting it and within days of that, we had money in the bank.”
She recognizes that not all of her industry colleagues are similarly situated. “Not everyone has the luxury of time as they’re trying to run their business and get their payroll out,” Stern says. “It’s not fair for those who didn’t have the luxury of that extra time to make that happen.”
Why are there some closed restaurants on the list?
City Paper noticed a few restaurants that were approved for grants that have been reported as permanently closed, such as Nazca Mochica and Maddy’s Taproom. Eater NY reported that temporarily closed establishments are eligible for aid, but permanently closed places are not. City Paper reached out to both establishments and learned that both are planning comebacks.
What are the chances that the federal government replenishes the fund so more restaurants and food businesses can be approved for grants?
Again, the RRF’s biggest shortcoming was that it was underfunded. Some legislators across the country are pushing for Congress to replenish the fund so more food businesses can benefit. The National Restaurant Association and the Independent Restaurant Coalition are heading up the lobbying efforts. There are two approaches. Lawmakers can try attaching it to bipartisan legislation that’s likely to pass in the coming months or push forward with standalone legislation like the proposed Restaurant Revitalization Fund Replenishment Act of 2021. It calls for $60 billion more. There are petitions going around and pushes punctuating social media.