US restaurant industry fears rescue package falling short

Published on
July 27, 2021
A Phillips' Restaurant in Balitmore, Maryland.

Through the past year-and-a-half, the U.S. government issued hundreds of billions of dollars in rescue funding for companies facing difficulties due to the COVID-19 pandemic. But its efforts have come under criticism from those who feel their businesses were unfairly excluded from the rescue programs and from entities that received less funding than their competitors.

In the latest round of the Restaurant Revitalization Fund passed by U.S. Congress and administered by the Small Business Administration, many large U.S. restaurant groups received grants of more than USD 1 million (EUR 845,000). New York City’s Momofuku Restaurant Group received USD 6.8 million (EUR 5.7 million) and Peter Luger Steakhouse took in USD 5 million (EUR 4.2 million). An analysis by The Counter, an independent and nonprofit news outlet, found 5 percent of RRF awardees received 40 percent of the program’s funding total.

In the seafood industry, the discrepancy between the money received by Phillips’ Seafood’s Restaurants and a small seafood market and eatery in Baltimore, Maryland, has caught public attention. Phillips’ restaurant in Baltimore received USD 5 million (EUR 4.2 million) and its Ocean City, Maryland, restaurant garnered nearly USD 3.2 million (EUR 2.7 million). But Faidley Seafood, a small woman- and veteran-owned business in Lexington Market with a history dating back to 1886, received no funding, The Baltimore Sun reported.

In the process of distributing grants, the SBA picked “winners and losers,” Faidley Seafood Co-Owner Damye Hahn told the newspaper. Hahn said she doesn’t begrudge Phillips’ restaurants receiving the award, but said she believes her business should receive funding as well.

In fact, Faidley Seafood qualified for several hundred thousand dollars of emergency funding, but the SBA could not award the funds due to a legal challenge to its policy of prioritizing women, veterans, and other disadvantaged individuals for grants. As a result, the SBA halted payments to Faidley Seafood and between 3,000 and 6,000 other restaurant groups. After the lawsuits succeeded, the companies affected were placed in the general pool for RRF funding, but at that point, the RRC funding was depleted.

Nearly 200,000 restaurants that applied for funding did not receive anything, according to the Independent Restaurant Coalition (IRC), which said restaurants and bars lost over USD 280 billion (EUR 237 billion) during the pandemic yet only received USD 28.6 billion (EUR 24 billion) in targeted relief.

“The priority period worked, but the fund was simply never large enough to accommodate everyone who needs help,” IRC Executive Director Erika Polmar told SeafoodSource, adding that 94.8 percent of grants awarded were under USD 1 million.

Larger awards, such as the funds received by Phillips Foods “don't indicate mishandling of funds,” Polmar said. Restaurant chains with fewer than 20 locations are eligible to apply for the RRF, she noted. But hotels, entertainment complexes, and other businesses not directly tied into the restaurant industry received funding unfairly, Polmar said, pointing to recreation facilities, management companies, and hotel chains that received grants from the SBA, even though Congress “clearly spelled out that only eating and drinking places should qualify for relief.”

“The RRF was designed to help businesses whose primary purpose is serving food and drink,” Polmar said.

Phillips Seafood did not return emails requesting comment.

The IRC is urging Congress to replenish the RRF, and the Restaurant Revitalization Fund Replenishment Act was recently introduced in both chambers of Congress, The bill provides an additional USD 60 billion (EUR 51 billion) in funds for food and drink businesses.

Restaurants are still contending with pandemic-related headwinds such as soaring food costs, IRC said

"At least 177,000 restaurants and bars desperately need Congress to quickly replenish the Restaurant Revitalization Fund, so they can stay open,” Polmar said.

Photo courtesy of Jeramey Lende/Shutterstock

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