Article written by:
Dustin Minton, CPA, MBA
Director, Restaurant Services
In case you missed it, the National Restaurant Association (“NRA”) submitted its Blueprint for Recovery plan to Congressional leaders earlier this week with the hope of obtaining additional relief for restaurants, as well as changes to the existing relief programs in place, mainly the Payment Protection Program and Economic Injury Disaster Loan program. Please note this is a proposal of terms; nothing has been passed into law regarding these proposals. Companies should continue to plan based on current relief programs in place.
The existing relief programs were a nice start for the restaurant industry but the terms of the programs did not match up to the realities of the restaurant industry. Depending on what segment you operate, you are experiencing very different realities. The pizza segment, represented by delivery/carryout models like Domino’s, has done very well; whereas, casual and upscale casual segments have seen their businesses decimated in the blink of an eye having no control over the situation. In between, quick service and fast-casual restaurants have been able to maintain operations while still experiencing reduced revenues of 15 to 30%, on average.
Below is a summary of the NRA’s Blueprint for Recovery which will better align the challenges of being forced to shut down dine-in operations, having reduced traffic as a result of stay-at-home orders, and attracting employees to come off of unemployment, where most are making more money on unemployment rather than coming back to work. Let’s not forget that for some, there is no work to come back to and there is the uncertainty of when restaurants will be able to fully reopen. What will the restaurant appeal look like to customers who may be fearful of large gatherings? What constraints will be placed on restaurants in regards to capacity and safety measures? So many questions and uncertainty face an industry made up of passionate owners and employees. The NRA’s blueprint is the first step on the road to restoring overall store operations and profitability which in turn restores customer enjoyment.
The proposals below help bridge the gap between the two realities.
New Grant Program
The “NRA” has proposed that Congress pass a $240 billion grant program to help restaurants recover from the COVID-19 pandemic. As proposed, the program would provide grants to:
- Support ongoing operating expenses and debt obligations from government-mandated closures;
- Rehire and retrain restaurant workforces, and;
- Provide a lifeline to reopen and readjust to a new era of increased distancing and heightened health and safety standards.
Restaurants would apply through a new portal at the Internal Revenue Service for quarterly grants of not more than the prior year-on-years quarterly gross revenue. The grants could be used for:
- Payroll expenses;
- Operating expenses (e.g., rent, utilities, ongoing debt obligations, business insurance premiums, vendor payments, etc.), and;
- Re-opening expenses (e.g., stock, inventory, sanitation equipment, health and safety compliance, etc.).
The proposal does apply some restrictions on use related to owner, operator, board member and officer compensation and physical improvements to facilities.
Changes to the Payroll Protection Program (“PPP”)
In addition to proposing this new legislation, the NRA is also proposing changes to PPP loans, including:
- Providing flexibility for restaurants to determine the beginning of their eight week forgiveness period based on the removal of “stay-at-home” orders;
- Allowing defined “operating” expenses to be more than 25% of the forgivable amount, and;
- Restoring the ten year repayment period specified in the CARES Act and shortened by the Small Business Administration to two years.
Finally, the NRA is also advocating for:
- A tax credit or grant program for costs incurred to create the “healthy restaurants” needed to bolster public confidence in the industry and enhance the wellbeing of employees and customers;
- Providing federal relief for employer’s share of unemployment insurance;
- Expanding the restaurant meals program to allow all SNAP participants to access restaurant meals, and;
- $50 billion of additional funding for Economic Injury Disaster Loans (EIDLs).
The NRA, along with our state restaurant associations (kudos to the Ohio Restaurant Association), have done a fantastic job of advocating for the restaurant industry and there is more work to be done to make sure our restaurant industry comes out of this alive and having the ability to continue on for many years without being burdened with undesired debt. Restaurants are a huge part of our culture of celebration, networking and bringing people together which I know we all miss. So, let your Congressional Representatives and Senators know you support these proposed programs and changes to ensure we have our favorite restaurants for many years to come. An easy way to do this is by texting the word “Recovery” to 52886. If you have suggestions, please reach out to the NRA or your state restaurant association.
For more information, or to discuss this in more detail, please contact a member of GBQ’s Restaurant Services team.