What the $900 Billion Stimulus Means for Restaurants: The Good, the Bad, and the Disappointing

In an eleventh hour deal at the end of the year, Republicans and Democrats agreed on another stimulus package totaling $900 billion in aid. The bill made its way through both the Senate and the House on Monday night and is now with President Trump, who has until December 28 to sign it.

This package was passed nearly nine months after the initial CARES act. It again sends cash payment directly to Americans, though this time it's $600 instead of $1,200. It adds an additional $300 to weekly unemployment checks and extends benefits for an additional 11 weeks. It includes $284 billion for more forgivable loans under the Paycheck Protection Program (PPP). And it earmarks targeted relief for certain industries like airlines and Amtrak. The bill does not include the targeted industry relief promised by the RESTAURANTS Act, a June proposal that would deliver $120 billion in grants to restaurants; it passed the House in October and is currently supported by 53 senators.

Read more: Restaurant Workers Should Be Next in Line for the Vaccine

Senate leadership announced they had finally reached a compromise on Sunday night after months of gridlock. Even the announcement took on a political tone. "At long last, we have the bipartisan breakthrough the country has needed," Senate Majority Leader Mitch McConnell said from the Senate floor.

The chamber's top-ranking Democrat, Senator Chuck Schumer, said, "Make no mistake about it, this agreement is far from perfect. But it will deliver emergency relief to a nation in the throes of a genuine emergency." Schumer also spoke about the need to pass restaurant-specific relief in the new year. And President-elect Joe Biden has referred to this relief package as "a down payment" on more aid to come. According to some experts, whether more relief comes could be determined by the results of Georgia's upcoming runoff elections that determine control of the Senate.

Still, it's a small acknowledgement that the current plan isn't enough, which has been a recurring theme for the beleaguered restaurant industry. With a second wave of infections sweeping the country, some states and local jurisdictions have rolled back indoor and outdoor dining, severely limiting how restaurants can operate, again. Many restaurants have gone into so-called hibernation, ceasing all operations until it's safe to fully reopen. Many others—110,000 at last count, according to the National Restaurant Association—have closed long-term or permanently. Recent data from the Bureau of Labor Statistics showed that restaurants lost 17,400 jobs in November, and are down over 2.1 million jobs since the start of the pandemic.

"Obviously something is better than nothing but we've lost a tremendous amount of restaurants this year. This could have prevented it had it come a couple months earlier," said Charles Bililies, founder and CEO of San Francisco's Souvla restaurants. He temporarily closed all of his restaurants in March out of concern for the safety of his team and because, he said at the time, the numbers weren't adding up to stay open.

While the first round of funds came relatively quickly after the start of the pandemic, PPP rollout wasn't particularly smooth. Now, legislators have included some changes to the process that they likely hope will deliver money into the hands of businesses that need it most. Businesses must show they've taken a significant loss to qualify: 25% or greater reduction in revenue, year over year, in any quarter of 2020. The new legislation also offers a carve-out for very small businesses and those in underprivileged communities, many of which were sidestepped by earlier aid packages. Large restaurant groups can still seek relief as long as they employ fewer than 300 employees per location thanks to a plan detail that left many small business owners frustrated in the last round. Publicly traded companies are specifically left out of this round, a welcome change after spring disbursements saw large restaurant companies like Shake Shack take money and eventually return it.

"The PPP does not cut it for a lot of businesses like ours," said Kyle Sollenberger, co-founder and CEO of Commons Company, based in Lancaster, PA. In February, his company employed 105 people across a variety of businesses: cafes, a coffee roastery, a catering company, and a wholesale kitchen and bakery. Thanks to the diverse elements of his business, he said, they've fared better than most during the pandemic. Still, he said, it's disconcerting to be taking on more and more debt. "The PPP money is long gone, those funds ran out fairly quickly," he said. "The biggest challenge is everyone is digging a deeper and deeper hole. It's going to be a long time for us all to dig out of this." Sollenberger is unsure if his business will qualify for more relief under the recent bill.

To help with the challenges hospitality businesses continue to face, the new legislation increased the amount they can borrow—3.5 times monthly payroll; businesses in other industries are limited to an amount equal to 2.5 times monthly payroll.

When Bililies received PPP funds for Souvla, terms of the program dictated he had to use the money within eight weeks in order for it to be forgiven—so he did. "The problem with doing that is that we were left at the end of eight weeks without money there," Bililies said. In order to keep staff employed past those eight weeks, he was forced to reopen the restaurants with limited service shortly after. Later, the time period to use the funds and still forgive the loans was extended to 24 weeks. In the latest round, businesses have between 8 and 24 weeks to use funds in order to qualify for forgiveness.

Meghan Blair-Valero is managing director of Fogged In Bookkeeping, a Massachusetts-based company with about 100 restaurant clients. "One of the best pieces of advice we can give people is that this is a moving target at the moment," she said. As in the spring, it will take time for everyone—tax professionals included—to read and understand the new legislation, which is nearly 5,600 pages long.

Blair-Valero has found at least one piece of great news for small businesses: expenses paid using forgivable PPP funds—payroll, rent, utilities—can now be deducted on a tax return, reducing a business's net taxable income. Additionally, businesses can apply for a second round of funds if they've utilized the first round, and don't have to have applied for forgiveness on the first round to apply for more aid.

By now, most small businesses are familiar with other PPP terms that haven't changed. Loans are administered via the Small Business Association, disbursed by banks, and are forgivable when the money is spent on certain expenses like payroll and rent. Non-forgivable loans are repayable with reasonably favorable terms, including low interest. Blair-Valero is hopeful that some of the initial rollout hiccups will improve this time.

"What will make it smoother is now there's infrastructure for doing this. When the first round of loans came out, the majority of banks were not prepared to administer this sort of program," she said. "I think in general it will be an easier process because we're prepared. We know what we're looking at."

In a statement, Tom Bené, president and CEO of the National Restaurant Association, said, "A second round of PPP, combined with unique enhancements for the restaurant sector, will provide critical access to capital. Restaurant operators and their employees are dedicated to serving their communities, and today's bipartisan agreement will give them the opportunity to do that through the holidays. However, the long-term economic challenges facing independent, franchise, and chain restaurants will not end with the new year, and we will continue to press federal and state leaders for the support that will put us on the road to recovery."

Meanwhile the Independent Restaurant Coalition (IRC), a group formed in March to represent the interests of independent restaurants in Washington, said in a statement that the bill falls woefully short of giving 11 million workers job security before the holidays. "When we've been asked by the government to change the way we do business, our elected officials need to help us stay in business. It's clear Congress wants to help us and we gave them a plan to do that. This legislation isn't it," it reads.

Still, restaurateurs, like Bililies, seem to be happy for the aid they're able to receive and pass on to employees, though it doesn't make the prospect of staring down a bleak winter any easier. "Unfortunately I think that the first quarter of 2021 is going to be the most challenging one that we've had to face," he said. "Most restaurants have their strongest quarter in Q4 and are set up to weather a weaker Q1, that's historically how it goes. So now you've got this fourth quarter that hasn't had any of that holiday spending, private dining bump. You don't have much gas left. Hopefully this PPP will put enough gas in the tank to get us through the first quarter."

Of course, there's one more huge difference from last time: viable vaccines. "At least now we have a light at the end of the tunnel," Bililies said, "even if it's way off in the distance."