Federal restaurant aid runs dry, leaving many owners hungry for more
New York City restaurant owner Philippe Massoud desperately needs a cash infusion from the federal grant program set up to save businesses like his. But he's not counting on one.
"It's completely vital because right now on the books, with all the money that's owed and that's not forgivable, we'll all be walking around with a chain and ball for God knows for how long," Massoud said of his restaurant's financial predicament after more than a year of operating under pandemic restrictions.
His pessimism regarding federal assistance stems from the fact that hundreds of thousands of restaurant owners are competing for aid from the $28.6 billion Restaurant Revitalization Fund, which closed to new applicants Monday.
The U.S. Small Business Administration made clear it would prioritize applications from women, minority and veteran-owned businesses for three weeks beginning May 3, after which eligibility was slated to open more broadly. But by May 18, the SBA reported it had already received about 303,000 applications for a total of more than $69 billion in relief funds.
The Lebanon-born Massoud said he applied for a grant "as soon as" applications opened May 3.
"We applied as early as we could, and of course it has run out of money," Massoud said of the rescue program. "We are not prioritized in the context of being a minority, even though as an Arab-American I am [a minority]. But we were advised to apply just in case there was anything left over, and obviously there is nothing left over."
He suspects many thousands of restaurant owners across the U.S. will face a similar predicament — a lack of aid from the grant program created to help them — as the battered restaurant industry starts to regain its footing from the COVID-19 recession, more than year since the pandemic began.
Calls for a second helping
Business owners and their advocates are already calling for the fund to be replenished.
"The vast majority of independent restaurants and bars are still struggling to make ends meet through no fault of their own and [we] will advocate to keep the Restaurant Revitalization Fund fully funded until everyone who needs relief can get it," said Erika Polmar, executive director of the Independent Restaurant Coalition, a group of independent chefs and restaurateurs that lobbied for a $120 billion relief fund. "Restaurants were a thriving part of our economy for many years and, with the right tools, can help families and communities recover quickly."
Whether Congress would dish up more billions remains to be seen. Meanwhile, some Republican lawmakers say the existing $29 billion pot discriminates against non-priority business owners — anyone who isn't a woman, veteran, or socially or economically disadvantaged individual.
A group of Republican lawmakers last week sent a letter to SBA Administrator Isabella Guzman stating the portal closing on May 24 effectively shuts out non-priority restaurant owners from receiving funds. They called the move "unacceptable" and asked that the administration provide detailed data on the grants by May 28 — including the immigration status of recipients.
"Fairness needs to be the guiding principle for all government programs. I refuse to stand by and allow the SBA to be in the businesses of choosing winners and losers for resources that should be available to small businesses of ALL backgrounds," stated Representative Blaine Luetkemeyer of Missouri, ranking member of the House Small Business Committee.
A federal judge disagreed with that argument on May 24 when he ruled against a conservative legal group that had sought an immediate halt to the priority status for restaurants and bars owned by women and certain minorities.
"Congress has gathered myriad evidence suggesting that small businesses owned by minorities ... have suffered more severely than other kinds of businesses during the COVID-19 pandemic," U.S. District Judge Travis McDonough in Knoxville, Tennessee, ruled in denying a temporary restraining order sought by the Wisconsin Institute for Law & Liberty. "[The government's] early attempts at general economic stimulus ... disproportionately failed to help those businesses directly because of historical discrimination patterns."
The Wisconsin-based legal group is appealing the decision.
"We won't get any funds"
Colorado restaurateur Bobby Stuckey, who runs Pizzeria Locale and Tavernetta, two of Denver's most popular restaurants, among others, told CBS MoneyWatch he is "pretty much aware we won't get any funds" out of the program.
"We applied on day one, nervously, the moment the portal opened, and we were very excited. But we are very realistic that we might not get funds because the rumor is that all of the funds are gone for that first tranche," said Stuckey. He would consider any kind of financial award a "wonderful miracle."
He doesn't begrudge business owners whose applications were placed ahead of his — especially since many of the smallest businesses were shut out from the initial rounds of the Paycheck Protection Program that delivered hundreds of billions in forgivable low-interest loans to all kinds of companies with fewer than 500 workers. Instead, Stuckey believes the federal government should allocate more money toward the restaurant fund, given that many different types of wating establishments suffered over the course of the pandemic.
"If you have a restaurant that didn't have good patio or outside dining, or if you did fine dining which doesn't translate to 'to-go' as much, you could be a powerful, successful restaurant with a 20-year history but your need could still be very desperate right now," Stuckey said.
Even Alex Pincus, whose hospitality group, Crew, specializing in outdoor dining, has thrived during the pandemic, said he has "zero cushion" financially as he brings his restaurants back up to speed.
While Pincus is eligible for a $2.5 million RRF grant to cover losses incurred across four restaurants, three of them located in New York City, he is concerned funds will all be spoken for before his application is even considered.
"It's definitely vital toward our sustainability as a company. I can't definitively say we'll 100% go out of business without it, but it's going to make things a lot more comfortable and viable," Pincus said.
Ed McFarland, owner of Ed's Lobster Bar, with restaurant locations in lower Manhattan and Sag Harbor, New York, also needs a grant, but knows it's far from guaranteed, equating receiving funds to "winning a smaller lottery ticket."
"It changed our lives"
Not even Dana Rodriguez, a Mexican immigrant who owns two small restaurants in Denver, was sure she'd see relief from the fund established to help business owners just like herself — until late last week.
"When the RRF came up, we were so excited, but I didn't have my heart set on it," Rodriguez said. "I thought maybe if you do the math, there are so many restaurants that there won't be enough money."
Closed for six months during the pandemic, she reopened her two establishments, SuperMegaBien and Work & Class, in early May, and worked to rebuild them as her grant application moved through the SBA approval process.
Rodriguez said her operating costs rose dramatically during the pandemic. In particular, her payroll nearly doubled, rising from $450,000 a year across both restaurants to $800,000 as she hired and trained a mostly new crew of hosts, servers and chefs.
Her skeptical perspective changed last Friday when she received a notice from her bank alerting her to a deposit into her account. She looked up the amount: It was a six-figure sum.
"That morning, it changed our lives. It changed everything. And that's a feeling I hope everyone gets to feel, because we all went through a really hard time, and to see that number in your account when you wake up to give you the confidence you can keep doing what you love and do business," Rodriguez said. "It literally saved our business."
