Capital

How the American Rescue Plan Supports Restaurants

The passage of President Joe Biden’s American Rescue Plan on March 11 offers restaurants a glimmer of hope after an abysmal year. The $1.9 trillion legislative package not only provides stimulus payments to most Americans but also provides much-needed financial relief for small businesses and support for the food supply chain.

According to the National Restaurant Association’s 2020 State of the Industry Report, total sales were $240 million below analyst projections and over eight million employees had been furloughed. As a result, over 110,000 businesses closed, some for good.

Meanwhile, the US food supply chain suffered casualties as well. As local restrictions forced people to cook at home, restaurants began purchasing less food and grocery stores became backlogged. Global consulting firm McKinsey estimates that overall sales dropped by as much as 27 percent during the first three months of the pandemic.

Not surprisingly, farmers struggled to find sufficient labor as the pandemic disrupted the inflow of migrant workers, many of whom are arriving through visa programs. Similarly, local travel restrictions disrupted the movement of nonlocal workforces between cities and counties. This ultimately had an impact on farming production and put many harvests at risk during the peak season, McKinsey’s research found.

Without intervention, it is likely that the US food system would have suffered greater losses. Here are some of the ways the American Rescue Plan helps get the food supply chain back on track and supports local restaurants in the process.

Food Supply Chain

Agriculture was hit particularly hard by COVID-19. A study by Texas A&M University’s AgriLife program estimates that the pandemic could have a $2.5 trillion impact on the agriculture industry by February 2022.

In response, many farmers turned to retail farming—selling direct to customers—rather than relying on wholesale distribution. Large distributors like Mission Produce saw their revenue decline from this move while smaller, organic food distributors such as United Natural Foods saw their revenue increase.

To help food manufacturers and distributors recover, the American Rescue Plan appropriates $4 billion to the US Department of Agriculture (USDA) to purchase food, distribute agricultural commodities (including fresh produce, dairy, seafood, eggs, and meat) to individuals and businesses, and provide grant funding to food distributors and manufacturers.

This relief measure includes providing the USDA with enough funds as may be necessary to provide stimulus payments to socially disadvantaged ranchers and farmers. These payments can be as high as 120 percent of a farmer’s total indebtedness to the Farm Service Agency, which administers federal farm loans.

Some of the assistance offered to these farmers include outreach, mediation, financial training, capacity building training, cooperative development training and support, and other technical assistance” to improve crop yields or replenish farmland, according to the bill’s text.

$300 million of the funding must be dedicated to increasing COVID-19 testing among animals that are susceptible to the virus.

Support for Restaurants

To support restaurants, the legislation appropriates $28.6 billion to the newly-created Restaurant Revitalization Fund. These funds are immediately available for disbursement by the Treasury Department.

The bill also defines restaurants very broadly to include “food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, licensed tasting rooms, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.”

Priority funding is available for businesses owned by women, veterans, and economically disadvantaged businesses. Any business that applies for funding must prove they incurred “pandemic-related losses,” meaning they can demonstrate a year-over-year dip in revenue.

While the relief is a welcome sight for restaurants of all sizes, it pales in comparison to the amounts industry experts requested from Congress nearly a full year ago.

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