A bill that would refill the Restaurant Revitalization Fund with $40 billion failed to pass the Senate Thursday, dealing what could be a death blow for some struggling restaurants that didn't receive grants from the program. 

The vote on Small  Business  COVID Relief Act of 2022 (S. 4008) secured a bipartisan majority in favor of passing the bill at 52 votes versus 43 against, but the legislation needed 60 votes to pass.

"While there are valid questions about government spending and inflation, restaurants should not be caught in the crossfire," Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, said in a statement. 

The House passed the Relief for Restaurants and other Hard Hit Small Businesses Act of 2022 (H.R. 3807) on April 7, which would refill RRF with $42 billion. Ultimately, the political parties couldn't agree on how to pay for an RRF refill — Democrats wanted an RRF replenishment to act as emergency spending, while Republicans "generally wanted existing funds reallocated," according to the NRA.

Rep. Dean Phillips (D-Minn.) warned the Senate had "not been amenable" to this legislation last month on a call with the Independent Restaurant Coalition, but the coalition committed to remaining "belligerently optimistic." 

"I think about the thousands and thousands of restaurant owners around this country, both Democratic and Republican. Because this isn't just a blue thing — this is a blue and a red thing," said Greg Leon, chef and owner of Spanish and Portuguese restaurant Amilinda in Milwaukee. "And I can't understand why our elected officials would not want to do something to help their constituents. It just boggles my mind."

The fund has been closed since May 2021, when it ran out of its allotted $28.6 billion just three weeks after opening. This rapid depletion excluded nearly 200,000 restaurant applicants from grants. More than half of the independent restaurants and bars represented in that pool predict they will close within six months without RRF grants, an April survey by the IRC found. Only about 100,000 restaurants received the grant's funding. 

Erika Polmar, executive director of the IRC, worries the fund's incomplete fulfillment did a pandemic-bruised restaurant industry more harm than good.

"It created a more challenging competitive marketplace between those that received and those that didn't," Polmar said. "Now you have this level of competition where the restaurant across the street who received the Restaurant Revitalization Fund [grant] can pay higher wages than the individual who did not receive the RRF. So it's sort of added insult to injury."

Leon agreed. He was one of the nearly 3,000 restaurant owners who had their grants rescinded after a lawsuit was brought against the Small Business Administration arguing RRF's priority period for minorities and socially and economically disadvantaged operators was unconstitutional. 

"Now, not only are we competing with restaurants who have a leg up on us. We're competing with restaurants who got the RRF. And we're competing with restaurants who can afford to pay $25 to $30 an hour and that's how they can get staff. That's who we're competing with," Leon said. "And it's difficult to know how we can tell somebody to work for me, but all I can pay you right now is $15 bucks. And they're like, 'Well, why would I want to come with work for you when the restaurant down the street can pay me $20?'"

Legislators and operators hoped that a refill of the fund, which the House approved in early April, would even the playing field for restaurants across the country and be a lifeline for restaurants grappling with growing debt, wage inflation and a persistent labor shortage. That debt burden has snowballed as restaurants took on Paycheck Protection Program and Economic Injury Disaster Loans as a band-aid in place of RRF grants, Polmar said. 

"Now we see things like unforgivable PPP expenses, add into that debt from EIDL loans because the government said 'You didn't get RRF, but we still have EIDL,'" Polmar said "It's a low interest rate loan, but it's a loan, and those payments are coming due. It's just like compounding grief. One layer of it on top of another."

DoorDash, ChowNow, Toast, The James Beard Foundation and 26 other associations, brewers, suppliers and other businesses wrote a letter to Congress on Tuesday urging legislators to vote yes on refilling RRF.

"These businesses — many of which have received no government relief to date — simply do not have weeks to wait as the pandemic continues to impact our economy. ... Refilling the RRF is a smart and necessary investment that we urge you to prioritize," the letter, which was shared with Restaurant Dive via email, states. 

Conflict in Ukraine and skyrocketing inflation may be partially to blame for the vote's results. In a separate letter, Sen. Ben Cardin (D-Md.) and Sen. Roger Wicker (R-Miss.) sent a bipartisan letter of support for the bill to Congress on Monday. 

"Soon we will vote to extend $40 billion to help the people of Ukraine stand against Russian aggression. This funding is absolutely necessary," the letter, which was also shared with Restaurant Dive via email, states. "However, we must remember that small businesses in the United States also need our help. The legislation we have proposed would help our small businesses keep their doors open."  

The National Restaurant Association also pushed legislators to refill the fund in a letter on Wednesday.

"The RRF was born out of an emergency and helped restaurants endure the disaster brought on by government ordered shutdowns and capacity restrictions. Replenishing the RRF should still be considered an emergency, no different than a hurricane, tornado, or wildfires," the association wrote.

"The hell that this industry has gone through, and in particular restaurant owners as they tried to keep their people employed, has definitely taken a toll," Polmar said. "It's been two years of not knowing how you're going to survive and how you're going to keep your people employed. And if you're even doing the right things, it's been awful."

That toll has been dangerous for the mental health of many independent operators, Polmar said. Last month, the IRC formed a partnership with Better Help, an online mental health services platform, to provide free counseling to IRC members. The IRC couldn't disclose how many members had used the service due to confidentiality, but Polmar said the program has been well received. 

"I personally have become a much more proficient crisis counselor than I ever imagined," she said. "There have been days where I've been on the phone with somebody and texting the Samaritans to get guidance on how to actually get someone to their home when I don't know where they live because they are on the verge of self harm."

Going forward, the industry's forecast is bleak — especially for thin-margined independent operators. Restaurants that didn't receive RRF grants are more likely to default on loans, file for bankruptcy and be evicted than competitors that did receive the grants

Without RRF grants, 48% of independent bars and restaurants risk defaulting on their loans compared to 22% of businesses that received RRF grants, according to IRC data. 

“Local restaurants across the country expected help but the Senate couldn’t finish the job. Neighborhood restaurants nationwide have held out hope for this program, selling their homes, cashing out retirement funds, or taking personal loans in an effort to keep their employees working and their doors open," Polmar said in a statement. "We estimate more than half of the 177,300 restaurants waiting for an RRF grant will close in the next few months as a result of Congressional inaction.”