Subsidies not enough for some restaurants

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BALTIMORE – In 2021, the owners of the Wharf Rat in Fells Point were lucky to receive a grant of approximately $300,000 from the Restaurant Revitalization Fund, a federally funded program designed to help businesses during the coronavirus pandemic .

The money paid for employee salaries, outdoor seating and HVAC upgrades, but it disappeared as quickly as it came, according to owner Jennifer Oliver Martin.

Within months, the Wharf Rat closed, making it one of more than a dozen Baltimore-area restaurants that closed after receiving federal funding to keep them open.

“The Wharf Rat has been unable to maintain the level of customer service on which it has built its reputation,” Martin said in an email. “It is with great sadness that the Oliver family has decided to close the Wharf Rat after 35 years of service to the community.”

At the start of the pandemic, restaurant advocates successfully lobbied Congress to create the Restaurant Revitalization Fund (RRF), which would allocate billions of dollars in grants to businesses across the country struggling to survive the crisis. of coronaviruses, which closed dining rooms and reduced customer traffic for months.

Demand exceeded effort: in Maryland, less than 4 in 10 applicants were approved. Some $562 million has been distributed to 2,024 eligible businesses across the state. And that helped many of them survive. According to the National Restaurant Association, the funds saved 900,000 restaurant jobs across the country, and 96% of recipients said the funds helped their establishments stay open.

But a year after the majority of that money was handed out, questions have been raised about the effectiveness and oversight of the $28.6 billion program, which is part of the US bailout and is run by the US Small Business Administration. Some restaurants have closed despite receiving the grants, a fact that frustrates business owners who lost money.

A Sun analysis of US Small Business Administration data on restaurants in the Baltimore area shows more than a dozen restaurants have closed since receiving subsidies last year, some of which have received more than one million dollars. Some owners say their businesses are temporarily closed, but offer no timetable for reopening. At least one restaurant announced it was closing its dining room before receiving a $260,000 grant.

Although there is no obligation to repay the funds as long as the money is spent by March 2023 on eligible operating expenses – including payroll, utilities, rent or mortgage and supplies – restaurants are supposed to return unused money if they close. Christopher Hatch, an SBA spokesman, said he could neither confirm nor deny the returns.

“There is no public list of returnees,” Hatch said.

Hatch declined to comment on individual restaurants. Another SBA spokesperson made this statement: “Funding provided by the American Rescue Plan’s Restaurant Revitalization Fund, along with other SBA assistance programs, has helped more than 100,000 restaurant owners and other food and beverage businesses to get back on their feet and survive the pandemic. ”

A recent report from the US Government Accountability Office revealed issues with the SBA’s oversight of the program. Nationally, nearly a third of grant recipients had required annual accounting reports that were six months late in being submitted to the SBA, according to the GAO. And the SBA hasn’t tracked which businesses have closed.

“The SBA should be more on top of companies that don’t do the required reporting,” said Lisa Moore, GAO’s deputy director for capital markets and community investment. “It’s a big red flag. If someone is not reporting, you should immediately take steps to proactively review this.

She added that the SBA reporting portal does not currently allow businesses to tell whether they are open or closed.

In response to a Freedom of Information Act request last year, the SBA released the names of all grant recipients, including more than 2,000 with addresses in Maryland.

Some grants have been awarded to restaurants that say they have temporarily suspended operations. In May 2021, a business with an address at 1400 Warner St. received nearly $1 million under the program, according to SBA records. Earlier this year, the building at this address was demolished. The pub at that address, Game, is set to move to new space, co-owner Jimmy Trujillo said through his lawyer, although he declined to say when or where that would happen.

It is unclear whether any area grant recipients that are temporarily closed are using RRF funds to renovate. SBA’s Hatch said he was unsure whether RRF money could be used to fund a restaurant redevelopment or relocation.

SBA data shows Woodberry Kitchen, considered one of Baltimore’s top dining destinations before the pandemic, received $1.8 million under the program. This money, according to an email from owner Spike Gjerde, “has allowed us to pay rent, keep our core staff employed for the past two years, and continue to buy as much food as possible from our local farmers – who were also struggling – as we tried different pivots.The restaurant has also expanded its outdoor seating options which has been vital during the pandemic.

Woodberry Kitchen has largely limited its operations to special events during the pandemic and has been completely closed for months, according to its social media accounts. Some of its contents were auctioned off earlier this year.

Gjerde said the restaurant is undergoing renovations that will allow it to reopen “with a new model designed to be more resilient to future disruptions.” Events will resume this fall, he said in a post on the restaurant’s social media account Aug. 9.

Phillips Seafood closed its Ocean City crab house six months after receiving more than $3 million under the program. A spokeswoman for Phillips did not respond to emails and calls from The Sun about the shutdown. Phillips’ Inner Harbor location, which received $5 million, remains open.

IBT LLC, which shares an address with Ida B’s Table near Baltimore City Hall, got about $260,000 from the program in May 2021, about a month after the restaurant announced its closure on social media. An Instagram post dated April 5, 2021 read, “Effective today, Ida B’s Table has made the difficult decision to close our doors.

In an email, restaurant partner Joe Spinelli clarified that the restaurant “remains open, but limited to take-out, off-site catering, banquets and small events.” In a follow-up message, he added: “All reports have been filed as required.” The company phone number has been disconnected.

“It’s all such a mess”

The closure of restaurants that received the subsidies sought has generated bitterness among business owners who have lost the RRF program while remaining open while dealing with increased expenses and the uncertainty of the pandemic.

Damye Hahn, whose business, Faidley Seafood, did not receive a grant from the RRF, said the scheme has given some restaurants a boost at the expense of others.

“Those who have had it are really going to weather this storm — the high inflation storm, in addition to the covid storm — much better than those of us who haven’t,” Hahn said.

Gjerde of Woodberry Kitchen shares these views. But in an email, he added: ‘It is also clear that winning an RRF grant cannot guarantee a restaurant’s survival, given the enormity of the challenges and disruptions.’

Since 2021, Hahn and other business owners have expressed frustration with how Restaurant Revitalization Fund money has been distributed.

“It’s all such a mess,” said Hahn, who wants to see the fund replenished, though that’s unlikely to happen.

Hahn was initially told that Faidley Seafood had been approved for an RRF grant, which was later denied after three lawsuits in June 2021 challenged the SBA’s congressionally mandated policy of prioritizing companies owned by women and other groups.

Erika Polmar, executive director of the Independent Restaurant Coalition, which formed during the pandemic and advocated the creation of the RRF, said most cases of restaurant owners closing even after receiving federal grants reflect the high cost of running a business.

“Restaurants operate on really, really thin profit margins,” she said. “No one had a lot of money in the bank for this [pandemic].” The closures are a testament to how difficult it is to be a small business owner in our current economic climate. Every pivot you saw cost money.


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