New Rescue Bill Could Spark 'Eye-Popping' Sales Gains

Help is on the way for the down-and-out restaurant business, and industry observers are optimistic about new relief efforts headed their way. 

The new stimulus payments, about $1,400 for many consumers, total about $400 billion. And they are likely to “drive very robust industry comps exiting the first quarter and entering the second,” writes David E. Tarantino, who follows the industry for Baird. “We expect the upcoming direct payments to consumers to drive a strong double-digit lift in restaurant industry sales on a temporary basis.”

He thinks the gains could be “eye-popping.” Based on the proportion of the past two stimulus checks that found their way into restaurants, “we would not be surprised to see the upcoming checks drive a temporary sales lift of 20%-plus for multiple weeks.”

But just as important, restaurants -- including the little guys that lost out on earlier efforts -- are getting a $28.6 billion shot in the arm, called the Restaurant Revitalization Fund. The fund, tucked inside the $1.9 trillion American Rescue Plan Act just signed into law, is expected to help more restaurants as they try to last out the final months of indoor dining restrictions and COVID-wary consumers.

Larger chains, particularly in the QSR category, have fared relatively well through the pandemic. “This fund is a win for the smallest and hardest-hit restaurants that have sacrificed and innovated to continue to serve their communities,” says Tom Bené, president and CEO of the National Restaurant Association, in its statement. 

The legislation provides special provisions for small players. Restaurant owners with 20 or fewer locations can apply for tax-free grants of up to $5 million per location. Or they can ask for up to $10 million to aid several locations. The new effort also widens the scope of how the funds can be used, including for mortgages, rent, utilities, supplies, food and beverage inventory.

The calculation for the grants is based on a simple equation, subtracting revenues from 2020 from sales of those businesses in 2019.

And $5 billion has been set aside just for the smallest, open to restaurants with gross receipts of less than $500,000. In the early weeks of the program, the Small Business Administration is charged with prioritizing grants for restaurants owned by women or veterans, along with those owned by the socially and economically disadvantaged.

Previous relief efforts, including the Paycheck Protection Program, have given more than $70 billion to restaurants.

The National Restaurant Association reports that 110,000 have closed in the last year. And industry sales have fallen by some $255 billion.

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