Biden Relief Plan Includes $25 Billion for Struggling Restaurants

Though countless small businesses have been hammered during the coronavirus pandemic, it's fair to say that restaurants have been notably hard-hit. As of late August 2020, nearly 20,000 restaurants had permanently closed their doors, according to Yelp. And in December 2020, the National Restaurant Association reported that 110,000 dining establishments closed last year, either temporarily or permanently.

It's therefore encouraging to hear that President Biden may be targeting restaurants in his latest relief package. However, will that aid be enough?

Relief could be on the way

In January, President Biden released the details of his $1.9 trillion coronavirus relief package. Notably, his plan calls for boosted and extended unemployment benefits and a round of $1,400 stimulus checks for the public. But the New York Post reports that Biden's relief plan will also include a $25 billion grant program for struggling restaurants. The details of the program haven't been firmed up as of this writing, but in theory, that aid would allow eligible dining establishments to file for grants worth up to $10 million each to compensate for lost revenue in 2020.

Targeted aid for the businesses that need it

In late December, lawmakers passed a relief package that included a follow-up round of Paycheck Protection Program (PPP) loans. Businesses that received an initial PPP loan can now apply for a second-draw loan if they meet certain criteria -- have 300 or fewer employees and have a revenue loss of 25% or more for at least one quarter of 2020.

PPP loans are completely forgivable provided that at least 60% of their proceeds are used to cover payroll costs. But that actually doesn't help restaurants all that much. For dining establishments, the bulk of their expenses routinely comes from rent, supplies, and overhead. Payroll is a comparatively small expense for food establishments as servers tend to rely more on tips than wages. As such, the PPP really doesn't offer the targeted relief restaurants need.

This new $25 billion in aid, however, could be a better fit. The New York Post reports that grants under this program would be available to restaurants that aren't part of a national chain with more than 20 locations. As such, that money is more likely to target mom-and-pop establishments. Furthermore, the beauty of grants is that like PPP loans that satisfy the 60% payroll requirement, they don't need to be repaid. That could help restaurants not only compensate for lost revenue last year but stay afloat until the pandemic draws to a close.

Of course, some may be less than thrilled with a $25 billion grant program for restaurants. The RESTAURANTS Act, a previously introduced measure that was never passed into law, asked for $120 billion in relief for food establishments. But a $25 billion grant program is still better than no targeted aid at all.

Can restaurants hang on?

These days, many restaurants are surviving by getting creative -- setting up igloos to allow patrons to dine outdoors, offering at-home meal kits and enhanced takeout and delivery options, and spacing indoor tables strategically to comply with capacity restrictions. But for some, those efforts may prove fruitless without adequate aid.

While coronavirus vaccines are becoming increasingly available to the public, restaurants will most likely need to continue operating within capacity limits until the pandemic is truly behind us. And given how they're struggling already, that's a tall order.