The Restaurant Revitalization Fund Should Have Stronger Oversight if More Funds are Approved

The American Rescue Plan included a program meant to keep small businesses owned by disadvantaged groups in the restaurant industry open during the height of the pandemic. The $28.8 billion grant program—known as the Restaurant Revitalization Fund—gave money to over 100,000 businesses, with some grants going as high as $10 million.

Overall, the program did do its job. Less than 10% of the money went to non-prioritized groups and $25 billion went to non-franchise restaurants. But there were some instances in which money went to questionable recipients. These included some franchisees of large restaurant corporations, which were eligible.

Take the case of a company called Jax LLC, a franchisee of Golden Corral which received a $10 million grant. It was among 126 Golden Corral franchisees which received a total of $277 million in RRF funds. As shown in Violation Tracker, Jax paid $85,000 in 2018 to settle an Equal Employment Opportunity Commission case involving sexual harassment and disability discrimination.

Another example is OHM Concessions Group, a franchisee of Dunkin’ Donuts, whose franchisees received a total of $63 million from RRF. In 2015 OHM paid $151,000 to settle an EEOC case involving disability discrimination.

There are also examples among the RRF recipients of independent small businesses with a history of corporate misconduct. Among them is NHPI, LLC, and known as The Inn at New Hyde Park in York, received a $5 million grant. Its rap sheet includes wage and hour violations leading to $116,000 in penalties.  

Recently, Good Jobs First Executive Director Greg LeRoy testified before the Senate Budget Committee on the topic of whether taxpayer dollars should go to companies that violate labor laws. The issue related to federal contracts, and whether companies like Amazon that spend millions union busting should get billions in subsidies to arguably further bad behavior.

The same question may be asked of recipients in a program such as RRF. Should a restaurant get $10 million grant , even if it has a history of mistreating workers? And if the answer is yes – we don’t want workers to get inadvertently hurt in the process – those companies should be required to face extra scrutiny in the form of extra reporting or proof that the money is being used for its state purpose. And if the company again is found guilty of stealing wages from workers, discrimination or other workplace issue, there should be mechanisms to get the money back.

The public’s money shouldn’t be given out for free. Putting more guardrails on future programs could ensure we don’t get outcomes like we saw with the Paycheck Protection Program (PPP), the most well-known of the CARES Act direct assistance programs.

Meant to support small businesses and keep workers on the job, academic research and economic analysis found that the PPP saved jobs, but at a high per-job cost, and ended up going to businesses that did not need the money in the first place. Worse, 90% of those loans have been forgiven before any proper accounting was done.

There remains a need for better oversight with pandemic relief spending – and that can be done now. The federal government is considering additional funds for the program and may include a provision that bars businesses guilty of wage violations from applying. Guardrails like this one should be applied to all pandemic spending programs to ensure that this money is being spend on its intended purposes and to companies treating their workers with dignity.