Relief for the restaurant industry has taken many forms over the past 18 months. this year. Most restaurant owners are familiar with the Payroll Protection Plan, EIDL (Economic Injury Disaster Loans) and the RRF (Restaurant Relief Fund).

There is another type of benefit however that has not been as well publicized. We asked expert Bruce MacDonald from Denver Colorado to weigh in on benefits still available to restaurant owners. His tip; make sure you check out the Employee Retention Credits available to the industry.

Bruce says there are many restaurants that are dropping the ball and not exercising their rights to a refund from the IRS due to the 2020 Stimulus Act’s “Employee Retention Credit (ERC)”. We broke down his comments into questions and answers for restaurant owners that read our blog and social media.

First, who is eligible for the ERC (Employee Retention Credit?

Almost every restaurant in the nation qualifies to get a significant refund specifically because the State Government in their location restricted the amount of patrons allowed in their space (the refund is up to $5,000 per employee in 2020, up to $7,000 per employee in 2021 in each quarter!)

Is the ERC a loan?

No. This is not a loan, it is not through the SBA, it is a refund generated from a form you file with the IRS that is not tied to how much you paid in payroll taxes or income taxes.

Do you have to demonstrate a decline in revenue, similar to that required by PPP or the RRF to qualify?

The ERC is a little complicated, but it is NOT necessary to have had a specific % decline in revenue in 2020 or 2021 compared to 2019.   That is one option to qualify for the ERC refund, but even if you did not suffer such a decline, you can still qualify for the refund due to the restricted commerce clause in the law. Because restaurants have been affected by the six foot space requirements inside their walls, they are allowed to qualify for the refund.

How do you qualify?

The ERC refund is tied to the number of employees earning wages in the second, third and fourth quarters of 2020 and potentially the entire year of 2021, depending on your specific state restrictions.

Can you receive multiple forms of benefits, i.e. The PPP and EIDL and the RRF?

The ERC does not prohibit a business from receiving the PPP and the ERC, or the PPP, the Restaurant Revitalization Fund Grant and the ERC. There are restrictions on the calculations based upon the PPP Funds received, but most restaurants should qualify for significant refunds that in many cases are larger than the PPP Funds they received in the first round of funding in 2020.  

Is the amount received taxable income?

The refund is taxable, but can still be a huge assistance to a restaurant’s operations this upcoming year.

Why isn’t there more awareness of this program?

Restauranteurs are almost all aware of the PPP Forgiveable Loan benefits as well as the new Restaurant Revitalization Fund because there was a lot of press and information shared through sites like yours. In addition, when the ERC was first introduced in March, 2020, there was a provision that did not allow for businesses to receive both the PPP and the ERC- that provision was eliminated with the Dec 27^th, 2020 Stimulus Act. However, the ERC can be just as valuable to the survival of restaurants that suffered the effects of the COVID Virus.

Who should restaurant owners contact for more information:

For more information on this important program, restaurant owners can contact their CPA. If he or she is not knowledgeable, contact Bruce MacDonald, CPA. His firm is: BRUCE MACDONALD & CO. located at 728 Jersey Street in Denver Colorado. He can be reached by phone at 214-356-8380.

Restaurant owners seeking relief programs and ideas on ways to creatively work through the financial concerns created by reduced occupancy, changes in menu, changes to staffing and other items facing the industry today should bookmark the We Sell Restaurants blog. You can also reach out by email or phone one of our knowledgeable Certified Restaurant Brokers.

Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE is the co-founder of We Sell Restaurants and industry expert in restaurant sales and valuation. Named by Nation’s Restaurant News as one of the “Most Influential Suppliers and Vendors” to the restaurant industry, her articles and expertise appear nationwide in QSR Magazine, Franchising World, Forbes, Yahoo Finance, and BizBuySell. She is the co-author of Appetite for Acquisition, an award-winning book on buying restaurants.