Restaurant owner presents plan to “fix RRF subsidies”

By John Pepper, CEO of Boloco

Shortly after the start of the pandemic, the federal government provided temporary help to small businesses in the form of Paycheck Protection Program loans – so-called P3 money. PPP dollars have saved countless small businesses from immediate and permanent demise both in April 2020 (round 1) and later in January 2021 (round 2). Usually, these PPP loans were canceled, so they were mostly grants.

In the spring of 2021, Congress created another restaurant grant program totaling nearly $ 30 billion – it was called the Restaurant Revitalization Fund – or RRF. And it turned out to be the big one.

The application process was extremely cumbersome. Across the country, individuals and small teams of people flocked to be ready to click “submit” at exactly the right time. I was fortunate to have Patty on the Streetlight Ventures team – our operating partners – for the retail work. All I had to do was be ready at 11:50 a.m. sharp on May 3, 2021 to make the final entries and click submit as close to noon ET as possible – the time when the SBA application process was officially completed. spear.

Try to imagine thousands of restaurateurs across the country looking at their computer screens at the same time as the hands of the clock pointed straight up on this Monday morning in May. Well, most of us in the industry don’t have to imagine – we remember it well. We were all there. The first-come, first-served approval structure forced this insane dynamic. It all reminded me of the beginning of the orange growing scene in Trading Places.

By 12:10, we had successfully submitted the applications for both Boloco entities. One entity owns and operates our unique Boloco unit in Hanover, New Hampshire and the other entity owns and operates the remaining five Boloco units in Boston. These are legally two separate companies, so they each applied separately.

Here is the problem. The way the formulas worked, restaurants in the United States requested more than $ 75 billion in grants, nearly three times the authorized $ 28.6 billion Congress had made available. It was pretty obvious that most operators – and perhaps more importantly their employees – were going to be left behind.

A few weeks after the deadline, the SBA sent the following message:

“The Restaurant Revitalization Fund has received over 147,000 applications … requesting a total of $ 29 billion in relief funds. To date, a total of $ 2.7 billion in relief funds have been distributed. to 21,000 restaurants since the Restaurant Revitalization Fund opened on May 3, 2021.

For anyone who had paid attention, that meant it was already over. The funds were exhausted.

For me, personally, I was not very upset by all of this. I was honestly surprised that the RRF never saw the light of day, just as I was surprised by the creation of the two PPP programs. I thought the pandemic was going to put a definite end to our 24-year-old business, as it would be for so many others. We had even prepared our last day of activity for all Boston restaurants on August 28, 2020. A few days before, with advice from lawyers, concessions from owners and rumors of a second round of PPP coming in late 2020. , which finally arrived in January 2021, we decided to keep hobbling forward. So far, anyway, we’ve lived to tell the story.

So when the RRF was completely exhausted, I wasn’t surprised. After all, the formulas were guaranteed to come to an end. The process required applicants to submit revenue figures etc. and it generated a dollar amount which you then requested.

Look at this… for our two entities, we had to ask:

Boloco Hanover (1 unit) – $ 275,000
Boloco Boston (5 units) – $ 5.4 million

These aren’t just big dollars for a company our size, they are huge. Some of Hanover’s best years saw profits of $ 275,000 in an entire year, and the Boston units never raised nearly $ 5 million in profits per year. The formulas were hopelessly wrong. And yet, this is how everyone in the industry has submitted.

So you can imagine my surprise when the status of our Boloco Hanover app changed to “Under review” on May 24, 2021.

A few days later, the total dollar amount of our one NH unit magically fell into that entity’s bank account. A year of benefits – which typically takes 365 days of blood, sweat, and tears in a non-pandemic setting – appeared in seconds.

The days passed. Based on what had just happened at NH, we were optimistic that MA would follow suit soon. We waited. Nothing. And unfortunately, our Boston restaurants were in dire need of funds than the Hanover entity. But Hanover got the money, and Boston didn’t. We never heard anything. You don’t get a rejection letter or anything like that. Just silence.

It reminded me of the spring of freshman in college when I was rushing a fraternity, and we all sat in our dorms all day waiting for the upper class students who had decided our fate the day before to strike. at the door. My roommate and I had dispatched one of the same fraternities. When the first blow came, it was for me. They bit into me … rejected. I was disgusted. But no more than a few minutes later another bang came and the same guys came over laughing at how it was a hoax and I got accepted. I was delighted. Later the same guys knocked again for my roommate. They screwed it up too. They never came back. Never said a word. When I left to join the acceptance “festivities” later that night, I remember seeing my roommate sitting on his bed waiting for that door to knock. The blow never came. The cruel games we played with people in college were bad enough, but in the case of RRF, we were playing with people’s lives.

A few days after the official closure of the RRF, organizations began to push for more. The Independent Restaurant Coalition wrote on June 10, 2021:

“The Restaurant Revitalization Fund (FRR) was a good start, but far from sufficient to provide the necessary assistance to the thousands of applicants who are desperately trying to survive. To give you an idea of ​​the current situation, on May 24, over 362,000 applicants requested funding of approximately $ 75 billion. Unfortunately, the fund only had $ 28.6 billion to distribute.

Chris Coombs of Boston Urban Hospitality wrote a compelling article last month about the inadvertent creation of haves and have-nots due to the flawed approval process for RRF grants.

He wrote:

“Congress must act urgently to replenish the program in order to bring relief to those of us who still suffer. Application for the restaurant down the street is in limbo.

The competitive advantage this has created cannot be overstated. Not only were some restaurants left behind, but they were actually harmed by the program due to the difficulty of competing under these circumstances. It is no longer a level playing field. Restaurants that have received RRF funds can afford to pay higher wages and charge less for food and drink. Congress has created winners and losers; Replenishing the RRF will help everyone to be fair. “

Chris is right. First, he’s right to be happy that others have received funding, especially traditionally disadvantaged homeowners, who are typically left behind in processes like this. Second, he’s correct in calling out that the winners win big (like our restaurant in Hanover, NH which received the RRF) and the losers lose everything (like our restaurants in Boston that received nothing).

A better way
If the SBA had chosen to accept and assess all applications and perhaps distribute the $ 29 billion among all applicants instead of distributing it on a first come, first served basis, it would still have been a significant amount of money to help all the restaurants and help them endure this ongoing crisis. If Boloco Hanover had received a third of what he actually asked for, for example, and the same had been true for all other grant recipients, those currently left out could all have participated. Would that have been enough? For the five Boloco units in Boston most definitely – at least until 2022, as it is right now.

Now the only hope is to replenish the RRF and try to get it right a second time. The problem is, many of us agree that too much taxpayer money has already been distributed, even though we have not received it. Critics of these programs say restaurants should just disappear if they can’t do so without government funding – and I don’t disagree in many cases. If our time in Boston is up at Boloco, I’m ready to call him. Personally, I don’t feel cheated. I’m not sorry about it. But then again, Boloco is no longer the source of most of my income. For other owners of this industry, their restaurants are. And for this reason, the process must be fair.

Finally, and this needs to be emphasized, there has been a lot of debate and litigation, as the first three weeks of approvals were initially meant to be reserved for “socially and economically disadvantaged women, veterans and business owners.”

Part of this was to offset the benefits people like me had gotten by applying to P3, where approvals had a lot to do with your long-term banking relationships. And while it’s true that most of us who applied as homeowners aren’t at a disadvantage, most of our employees are. This subsidy program should not be for homeowners only; it should be the millions of workers who rely on these owners – whoever they are – to provide them with well-paying jobs and help them lead better lives. The ramifications of this dynamic don’t stop at the owner level … and it’s tragic. Equal treatment among the ranks of hard-working hourly workers could have been considered more carefully.

The only way to make it fair at this point is to replenish the funds. Some are asking for as much as $ 60 billion in additional funding to make sure everyone gets the funding they’ve asked for. But honestly – if our amount of $ 5 million plus is representative of others, and I know it is – then we should drastically reduce that number and approve restaurants for less. Every dollar helps in this business during the good times, so anything we do will make a huge difference, whether it’s 25% or even 50% less than originally planned.

As Chris Coombs says, “Let’s get the whole restaurant industry back on its feet. “??