Andrew Darneille had a sense of deja vu when he clicked on the link from his accountant. It led him to a page that said, in essence, that the Restaurant Revitalization Fund would not be the lifeline he had hoped for. Based on the fund’s grant calculations buried in the larger $1.9 trillion American Rescue Plan Act, his Smokecraft Modern Barbecue in Arlington, Va., would not get a cent in federal relief during a pandemic that has left many restaurateurs hanging by a thread.

It was the same song, different verse, for Darneille. He did not get any money from the latest round of the Paycheck Protection Program (PPP), either. The reason was basically the same: Smokecraft was too new. Because his barbecue restaurant opened in July 2020, it either did not qualify for a PPP loan or had to follow different grant calculations than those for older, more established restaurants.

Either way, Darneille is apparently empty-handed, at a time when he and his family have been pumping tens of thousands of dollars into Smokecraft to keep it afloat during a pandemic that has closed an estimated 110,000 restaurants across the nation.

“When I got that email … my heart sank. I just said, ‘You’re joking.’ ” said Darneille in an interview with The Washington Post. He called Stephanie O’Rourk, his CPA, and asked whether he was reading the document right: Smokecraft would not get any money from the revitalization fund, a targeted relief program that the restaurant industry had been lobbying Congress for over the past 12 months?

“She said, ‘Yeah, that’s correct,’ and I said, ‘What?!’ ”

The fund, according to its architects, was designed to help any independent operator who owned 20 or fewer restaurants, including those who had opened during the pandemic. Rep. Earl Blumenauer, D-Ore., who introduced the Restaurants Act that served as a blueprint for the fund, specifically included language to provide relief to new restaurants such as Smokecraft.


“The goal of this legislation was always to provide full relief to newly opened restaurants,” Blumenauer said in a statement to The Washington Post. “We’ve communicated this to the SBA [Small Business Administration] Administrator, who has discretion to run the restaurant revitalization program consistent with Congressional intent.”

Blumenauer has “every confidence” that Isabella Casillas Guzman, the new head of the SBA, will fix the problem with grant formulations for new restaurants.

Speed is of the essence. The $28.6 billion revitalization fund could go live as soon as early April, according to testimony during a Senate Small Business Committee hearing this month. The SBA will administer the fund, which will prioritize restaurants and bars owned by women, veterans and minorities during the first 21 days of the grant-making process. Senate Majority Leader Chuck Schumer, D-N.Y., told the “Eater’s Digest” podcast this month that Congress will renew the fund if it is depleted before the pandemic is over.

If the SBA does not fix the formula, it could mean no federal relief money for thousands of restaurants and bars. According to data collected by Yelp, several thousand restaurants and food establishments have opened every month since March 2020, when the novel coronavirus first led to government-ordered shutdowns, shorter operating hours and limited seating capacities.

O’Rourk, the Smokecraft’s accountant, handles many restaurant accounts as head of the National Hospitality Emerging Concepts and the Operational and Financial Consulting Divisions at CohnReznick in Atlanta. She said that if the SBA follows the current funding formula, new restaurants “are going to get little to absolutely nothing because your payroll costs should not exceed your revenue.”

Typically, payroll costs are about 30 percent to 35 percent of total expenses, though O’Rourk says restaurants have had to “be smarter and more efficient” during the pandemic, operating with fewer employees, which could drop payroll costs below 30 percent of overhead. That would all but guarantee that new restaurants would not qualify for a grant under the current formula.


Programs such as the revitalization fund, O’Rourk said, “are really looking to fund mainstream America, the small guys and gals, who do not have access to other sources of capital, and this grant is the only way they’re going to make it through the next six to nine to 12 months.”

Lawmakers, lobbyists and accountants acknowledge that Congress’s intent was different from what was actually written into American Rescue Plan Act, which President Joe Biden signed in March. Several say the problem is basically an error in drafting the legislative text for the act, which runs hundreds of pages.

“That’s the problem when you do legislation so quickly,” said O’Rourk. “Sometimes the words don’t represent the intent, and I’m assuming, in this case, that is what happened.”

After days of saying nothing about the apparent oversight, the SBA acknowledged it in a voice mail to The Post late on Friday. “I can confirm that the SBA is aware of the problem in the formula, and we will be addressing that error in the statute,” said Shannon Giles, a spokeswoman for the agency.

When told about the forthcoming changes in the funding formula, Darneille was grateful for a grant that potentially could cover losses totaling about $150,000. But he noted that his relief money would still pale in comparison to those of established independent restaurants, which could get millions of dollars in federal cash based on the differences between their 2019 and 2020 gross revenue (minus any PPP loans they received). Revitalization grants are capped at $10 million per restaurant group and $5 million per individual restaurant.

“I think the problem here is fundamentally that we haven’t been able to operate at more than, in our case, about 50 percent capacity,” Darneille said. “My revenue in 2020 was easily half of what we expected it to be, if not worse.”

O’Rourk said it would be difficult for new independent restaurants to determine their potential gross revenue without having an older operation to provide financial data. A new restaurant could determine its potential revenue based on check averages, the ideal number of table turns per evening and delivery projections. But that, she added, “is a harder exercise” for both restaurant and government agency.

Comments are not available on this story.