'Everything is at stake': Restaurants on the brink seek additional COVID relief

WASHINGTON (Sinclair Broadcast Group) — Restaurants are experiencing a rebound. Customers are returning, kitchens are bustling, dining rooms are full. Yet, many operators are barely hanging on after enduring the COVID-19 pandemic and industry leaders are looking to Congress for another round of relief.

"Looks can be deceiving," said Erika Polmar, executive director of the Independent Restaurant Coalition. "Restaurants are busy and many are quite full...There's no way a few months of great business will make up for the tremendous losses this industry has suffered."

Restaurants were the first and hardest hit by COVID-19 restrictions and among the last to get relief. In March, Congress authorized the $28.6 billion Restaurant Revitalization Fund to provide targeted support for independent food and drink establishments. It passed as part of the $1.9 trillion American Rescue Plan.

Funding for the restaurant grant program dried up July 2 after providing over 101,000 grants. The Small Business Administration took its RRF portal offline Wednesday, closing the door to any further relief.

The program saw a massive demand. From its May 3 launch, the SBA received 362,000 eligible applications requesting more than $75 billion in grants. The total number of applicants accounted for more than half of all eating and drinking establishments that were open in February 2020, according to the National Restaurant Association.

At least 177,000 applicants who qualified for the funds were left out of the program because it ran out of money.

Tyler Akin was one of the restauranteurs who did not receive a grant. He's the chef-owner of Stock in Philadelphia and chef-partner atLe Cavalier in the Hotel Du Pont in Wilmington, Delaware. On May 3, he was ready with his application and uploaded it within minutes of the SBA site going live.

When the SBA shut down the program this month, Akin found himself back in the same situation he was in for the last 15 months of the pandemic, only now he was running out of options.

"I'm in a situation now where my personal savings are exhausted, my credit cards are maxed out and I'm just hoping we can get this lifeline sooner than later," he said.

There has been an uptick in business in recent months, but not nearly enough to cover current costs and debts from the last year.

Others have described similarly desperate situations. In an interview with Sinclair Broadcast Group, a restaurant owner in New Jersey described pouring $10,000 of his money into his business each month just to keep the doors open and his staff paid.

A bipartisan group of senators and representatives introduced legislation in June to replenish the Restaurant Revitalization Fund with an additional $60 billion, enough to cover all the outstanding applicants, plus several thousand more institutions still in need of relief.

The House bill currently has 190 co-sponsors. Rep. Earl Blumenauer, D-Ore., the lead sponsor of the legislation, said he is working on attaching it to any vehicle moving through Congress. "This was always going to be a heavy lift, but the more that members of Congress talk to their local restaurants, the more they will understand the intense need for this relief replenishment," Blumenauer's office said.

Senate Democrats unveiled a $3.5 trillion budget plan Tuesday that they are aiming to pass by the fall. The restaurant grant program could potentially become part of that larger spending bill. Neither Senate sponsor of the legislation responded to a request for comment.

For Akin, like many other restaurant owners, replenishing the fund would mean survival. "It would mean my restaurants would continue to exist, which is very much in question," he said. "Everything is at stake for me at this point."

Without additional relief, Polmar warned the independent restaurant community would face "an extinction event."

According to some estimates, the U.S. restaurant industry lost $290 billion in the first 13 months of the pandemic. The industry saw some of the worst job losses as 90,000 establishments shut their doors permanently.

The picture has improved somewhat, with restaurant sales in May rebounding within 3% of pre-pandemic levels. Nearly half of restaurant operators were optimistic that they would see even higher sales through the late spring.

Some operators were lucky enough to get relief through the $800 billion Paycheck Protection Program, though many were large chain restaurants. Smaller operators struggled to retain staff to qualify for loan forgiveness. Other establishments couldn't cover their specific expenses because of PPP loan restrictions.

The RRF was designed to address the unique financial problems affecting the restaurant industry. Recipients were allowed to use the grants to cover payroll, mortgage and rent payments, food and beverage inventory, utilities, construction of outdoor seating areas, protective equipment ad cleaning supplies and other operational expenses.

Restaurant operators could qualify for up to $10 million in funding per business and $5 million per physical location. The average RRF grant size was $283,000. More than half of the grants were less than $150,000.

The fund set aside $5 billion in targeted relief for small, independent establishments. It also gave priority review status for applications submitted by businesses owned and operated by women, veterans or socially and economically disadvantaged individuals. The latter include people subjected to racial or ethnic prejudice or cultural bias.

Data show that these groups were most severely impacted by pandemic-related shutdowns. They also had a more difficult time securing traditional loans or grants through federal relief programs. The prioritization of these groups was challenged in court.

Members of prioritized groups received $18 billion of the $28.6 billion fund.Women-owned businesses received $7.5 billion, veteran-owned got $1 billion, businesses owned by social and economically disadvantaged got$6.7 billion, and $2.8 billion went to businesses owned by representatives of underserved populations.

Industry advocates acknowledge that the revitalization fund was a success for those that received it.Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, noted the grants made the future "clear and stable" for over 101,000 recipients. For those that were left behind, it has heightened their sense of fear, anger and uncertainty.

"Many are in the ironic position of seeing indoor dining resume but are taking in less revenue amidst rising food prices and inadequate staffing to fully open," Kennedy explained. "These operators have made all of the cuts and changes they can to stay open for the last year and are once again worried they won’t make it another month."

At least 39% of restaurant owners said they couldn’t cover their June rent, according to a recent survey by Alignable.

Food costs have increased substantially for restaurant owners. Grain prices have nearly doubled since last year, according to the Department of Labor. Beef and veal prices are up over 40%. Chicken and pork are up over 28% and cooking oils have risen 35%. Energy prices have also risen dramatically over the last year, leading to higher costs for food transportation and utilities.

Labor costs have also increased for establishments that raised wages and benefits to attract talent. Restaurant employment remains 10% lower than the start of the pandemic.