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‘An extinction level event.’ Federal bailout funds split struggling restaurant industry

The $29b Restaurant Relief Fund bailed out thousands of restaurants, but many who were left out say they now face a bleak future

Steve “Nookie” Postal, owner of Commonwealth in Kendall Square, worked in the kitchen during the lunch hour on Friday. Postal’s restaurant was not included in the federal bailout money this spring and he now worries about the restaurant’s future.
Steve “Nookie” Postal, owner of Commonwealth in Kendall Square, worked in the kitchen during the lunch hour on Friday. Postal’s restaurant was not included in the federal bailout money this spring and he now worries about the restaurant’s future.Erin Clark/Globe Staff

For 16 months, while scrambling to stay afloat, the restaurant industry has begged the federal government for money to help recover from the pandemic. But the $28.6 billion Restaurant Relief Fund didn’t play out as they’d intended. The funds became mired in legal challenges, and then ran out far too quickly, leaving more than 200,000 applicants — nearly two in every three restaurants that applied — in the lurch.

Now, food service workers say, it’s splitting the industry in two: the haves, and the have-nots.

“Imagine you live on a street and all the houses burn down, and the government says, ‘You’re going to be okay and we’re going to help you rebuild,’ ” said chef Steve “Nookie” Postal of Commonwealth in Cambridge, which didn’t receive any funds. “And then the government turns around and says, ‘We’re just going to give it to 30 percent of the houses on your block.’ They can rebuild their house. You’re [out of luck].”

Those flush with cash, Postal said, are able to pay workers more than their competitors, giving them an edge in a tight labor market. They can pay down debts, afford the surging prices for the cost of goods, and make repairs to their equipment.

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Commonwealth employee Galeano Diana took lunch plates from customers George Henman and Martha Gallagher on July 30.
Commonwealth employee Galeano Diana took lunch plates from customers George Henman and Martha Gallagher on July 30.Erin Clark/Globe Staff

Then there’s everyone else.

Aaron Cohen, owner of Gracie’s Ice Cream in Union Square and Earnest Drinks in Kendall Square, worries about that too. Restaurants that received the funds “can go and pay whatever they want for staff or chicken or whatever else they want,” he said, while those who didn’t remain strapped.

“It’s going to become a competitiveness issue,” he said.

Already, some restaurants are citing the failure to secure RRF payouts as their downfall. Last week, as he announced his five brewpubs would stay closed for good, BeerWorks owner Joe Slesar told the Boston Business Journal that not getting RRF was “the final straw” in his attempt to survive the pandemic. He applied the first day the grants opened but his application was never fulfilled.

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“There will be other places still to fold,” Slesar said.

Chris Coombs, who owns the Boston Urban Hospitality group, is worried he could be one of them. He fought hard with the Independent Restaurant Coalition to secure the RRF grants, but failed to score any for his four restaurants: Deuxave, dbar, and his two Boston Chops steakhouses. Now he’s contemplating whether he’ll be able to keep the doors open at his restaurant in Downtown Crossing.

“For many restaurants, this is life or death,” Coombs said. “For me personally this is the difference between whether Boston Chops will or will not reopen.”

Postal predicts something even more dire: “We’re talking an extinction level event,” he said, prompting many restaurant owners who’d been holding out hope to throw in the towel.

And because the grants are public record, everyone in Boston’s close-knit restaurant world knows who got what. Last month, the Small Business Administration released a full database of recipients. In Massachusetts, they ranged from a handful of large restaurant and catering groups that received $10 million apiece to food stand operators who got less than $2,000.

When the list of recipients was released, it ricocheted through industry circles like a high school slam book. People pored over the list to see who received how much. It made for some testy conversations. Some owners described scanning social media posts and seeing industry colleagues taking vacations after knowing they’d received funds, and feeling green with envy.

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And it outraged many who were left out, particularly when they learned that some restaurants that temporarily stopped operations during the pandemic were awarded massive grants. Other funding mechanisms created by the government, like the Paycheck Protection Program, hinged on restaurants staying open, and had strict regulations attached about maintaining staffing levels, or they would default into loans if they weren’t followed. But the RRF dollars are grants — no strings attached — and, to those left out, that makes it feel like an even greater windfall for the chosen few.

“We did everything we were supposed to do, figured out how to keep our staff employed, pivoted to 100 percent takeout and put our entire menu online,” said Brian Treitman, the owner of B.T.’s Smokehouse in Sturbridge and B.T.’s Fried Chicken & BBQ in Worcester, which received no relief funds. He said that many restaurants who chose to close entirely had help paying their loans and mortgages through other federal programs and because they didn’t have to pay salaries or buy food, didn’t get as deep in debt as those who tried to stay open to support their staff.

“Yes they might have lost personal income, but if they qualified for a million-plus dollars worth of RRF they’re now going to be open and making money like they were before,” Treitman said. “That money is just going to sit in their bank account and be backup; meanwhile there’s all these other restaurants where just a little bit would help.”

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Now, restaurants — both the haves and the have nots — are attempting to band together again to re-fill the fund’s coffers.

In June, a bipartisan group of lawmakers in Congress introduced the Restaurant Revitalization Fund Replenishment Act of 2021, which would add $60 billion to the fund. And last month, a Republican lawmaker introduced the ENTRÉE Act (Entrepreneurs Need Timely Replenishment for Eating Establishments). That plan would also add an additional $60 billion for the industry, but those billions would be drawn from unspent dollars allocated for the Economic Injury Disaster Loans and state and local funds from President Biden’s American Rescue Plan.

They would also be distributed on a first-come, first-served basis, skirting the legal issues that arose after white business owners affiliated with right-wing groups challenged the race and gender priority system created to help make the distribution of funds more equitable, causing 3,000 minority and female business owners who were approved for loans to have them revoked.

A program that its supporters meant to be inclusive ended up being far more divisive than intended. And really, equity is what everyone is hoping for, said Jen Ziskin, co-owner of J&J Restaurant Group and the local chapter leader of Let’s Talk Womxn, a network of female restaurateurs.

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Ziskin feels the RRF challenges from every angle: One of her restaurants, Heritage of Sherborn, saw such gangbuster sales last year because of its outdoor patio that it didn’t even qualify for the grants. Her new restaurant, Punch Bowl, didn’t get approved and is still in limbo. But La Morra, in Brookline, saw sales dip 70 percent. The $400,000 in RRF funds she received there will be a tremendous help, Ziskin said, particularly as she contemplates the spike in COVID-19 cases due to the Delta variant and what it might portend for indoor dining in the months ahead.

Now, she just wants that same aid to be distributed to everyone else.

“This fund is a lifesaver,” she said. “There needs to be a way that it can be equitable and distributed to all that need it.”


Janelle Nanos can be reached at janelle.nanos@globe.com. Follow her on Twitter @janellenanos.