[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
A REVIEW OF THE SBA'S GRANT PROGRAMS
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HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT, INVESTIGATIONS, AND REGULATIONS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MAY 27, 2021
__________
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-016
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
44-923 WASHINGTON : 2021
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Dean Phillips............................................... 1
Hon. Beth Van Duyne.............................................. 3
WITNESSES
Ms. Cheetie Kumar, Chef and Owner, Garland, Raleigh, NC,
testifying on behalf of The Independent Restaurant Coalition... 6
Ms. Esther Baruh, Director of Government Relations, National
Association of Theatre Owners, Washington, DC.................. 8
Mr. Chris Montana, Owner and Chief Executive Officer, Du Nord
Craft Spirits, Minneapolis, MN, testifying on behalf of the
American Craft Spirits Association............................. 9
Mr. Mark Maguire, Owner, Maguire's Kitchen & Catering, Dallas,
TX, testifying on behalf of the National Restaurant Association 11
APPENDIX
Prepared Statements:
Ms. Cheetie Kumar, Chef and Owner, Garland, Raleigh, NC,
testifying on behalf of The Independent Restaurant
Coalition.................................................. 25
Ms. Esther Baruh, Director of Government Relations, National
Association of Theatre Owners, Washington, DC.............. 29
Mr. Chris Montana, Owner and Chief Executive Officer, Du Nord
Craft Spirits, Minneapolis, MN, testifying on behalf of the
American Craft Spirits Association......................... 32
Mr. Mark Maguire, Owner, Maguire's Kitchen & Catering,
Dallas, TX, testifying on behalf of the National Restaurant
Association................................................ 36
Questions and Answers for the Record:
Questions from Hon. Scott Fitzgerald to Ms. Esther Baruh and
Answers from Esther Baruh.................................. 41
Additional Material for the Record:
Chocolate Touring, LLC....................................... 43
Fiddler on the Roof.......................................... 45
National Federation of the Blind............................. 47
A REVIEW OF THE SBA'S GRANT PROGRAMS
----------
THURSDAY, MAY 27, 2021
House of Representatives,
Committee on Small Business,
Subcommittee on Oversight,
Investigations, and Regulations,
Washington, DC.
The Subcommittee met, pursuant to call, at 1:01 p.m., via
Zoom, Hon. Dean Phillips [chairman of the Subcommittee]
presiding.
Present: Representatives Phillips, Craig, Chu, Davids, Van
Duyne, Hagedorn, Meuser, and Donalds.
Chairman PHILLIPS. I want to thank everybody, especially
our witnesses for joining us today for a remote hearing. I want
to make sure to note some important requirements first.
Standing House and Committee rules and practice will
continue to apply during our remote proceedings and all members
are reminded that they are expected to adhere to these standing
rules including decorum when they are participating in any
remote event. With that said, technology, of course, requires
us to make some modifications to ensure that members can fully
participate in these proceedings.
House regulations require that members to be visible
through a video connection throughout the proceedings, so
please keep your cameras on. And, if you are not speaking,
please keep your microphones off. If you have to participate in
another proceeding, please exit this hearing and log back on
later when you are available.
In the event a member encounters technical issues that
prevent you from being recognized for your questioning, I will
move to the next available member of the same party and I will
recognize that member at the next appropriate time slot
provided that they have returned to the proceeding. Should a
member's time be interrupted by technical issues, I will
recognize that member at the next appropriate spot for the
remainder of their time once those issues have been resolved.
In the event a witness loses connectivity during testimony or
questioning, I will preserve their time as staff address their
technical issues. I may need to recess proceedings to provide
for time for the witnesses to reconnect.
And finally, please remember once again to remain mute
until you are recognized to minimize background noise.
In accordance with the rules established under H.Res. 965,
staff have been advised to mute participants only in the event
that there is inadvertent background noise. Should a member
wish to be recognized, they must unmute themselves and seek
recognition at the appropriate time.
Now that we are done with the fun part of the hearing, I
will move on to my opening statement.
COVID-19 sparked a once in a lifetime, at least we hope,
crisis for America and our small businesses. As cases rose,
COVID forced small firms all across the country to shut their
doors to protect their customers and employees and to slow the
spread of the virus. By April 2020, the number of active small
business owners had dropped by 22 percent, almost a quarter of
our nation's small businesses, the most significant drop on
record in our nation's entire history. Since the dire situation
emerged, members of the Committee have worked tirelessly in a
bipartisan fashion to get small businesses the relief that they
need to stay afloat, to keep the lights on.
In March of 2020, Congress created the PPP program, the
Paycheck Protection Program and the COVID EIDL program,
Economic Injury Disaster Loan Program, to provide small
businesses with forgivable or low-interest loans to help them
make it through the pandemic. But for many small business
owners, too many small business owners, including many in the
district that I represent and have spoken with on many
occasions, taking on additional debt was not feasible during
these uncertain times. This was especially true of businesses
in the entertainment and hospital sectors that had their entire
business model disrupted by the pandemic.
Recognizing the need for alternative relief options,
Congress and this very Committee have worked to provide direct
economic relief to small firms that cannot afford to weigh down
their balance sheets with additional debt.
For today's hearing, I would like to focus on two major
program that Congress designed to reach the hardest hit small
businesses in some of the most impacted sectors of the economy.
The Shuttered Venue Operators Grant Program (SVOG) and the
Restaurant Revitalization Fund (RRF) are two programs that
launched in 2021 and will deliver up to $50 billion in relief
to small firms. This has been a monumental task by any measure
for the SBA, and I would like to impress upon all of us today
that Congress and the SBA have worked hard to ensure that
struggling small businesses do have access to this
unprecedented direct financial support. I hope that by taking a
closer look at these programs we can gain a better
understanding of the challenges that federal grant programs
face, as well as the important relief that the programs are
providing to struggling small business owners across the
country.
The SVOG provided the SBA with $15 billion in grants to
various entities across the hard-hit events industry that could
demonstrate revenue loss. The implementation of SVOG was no
small task for SBA, of course, and as we examine the program,
it is essential to consider the complexity in launching a brand
new federal grant program of that size and magnitude and that
expeditiously. Unlike other programs, SVOG required that the
SBA create an effective program for both for-profit and
nonprofit eligible entities that often have different revenue
generation and accounting systems.
So I do hope today's hearing allows us to explore benefits
that businesses are hoping to receive from the SVOG and find
ways to help the SBA administer the program effectively,
efficiently, and get relief to struggling entities
expeditiously. As COVID continues to wreak havoc on the dining
and hospitality sectors, earlier this year in particular,
Congress stepped in and delivered much-needed relief through
the Restaurant Revitalization fund. The RRF provided almost $30
billion, $28.6 billion, to the SBA for grants to qualifying
food and beverage establishments. The program also took steps
to ensure that funds reached the most vulnerable small
businesses in the country, including instituting a $5 billion
set-aside for small firms with less than $5,000 in gross
receipts and an initial 21-day prioritization period for women,
veteran, and underserved small businesses. These measures
proved to be an effective way at getting aid to small
businesses that have been neglected during previous relief
efforts and have borne the brunt of the pandemic. As of May
20th of this year, over half of all applicants of RRF were
women, veterans, and socially and economically disadvantaged
business owners.
On May 18th, SBA announced that RRF had distributed $6
billion to nearly 38,000 applicants. At the same time, they
reported that RRF received 303,000 applications with a total
demand of more than $69 billion. So without additional funding
for this program, eligible entities requesting billions of
dollars in need for relief are going to go unfulfilled. It is
those that we have in mind today.
Since the beginning of the pandemic, members of this
Committee have worked to improve relief programs to meet the
needs of small businesses and get relief to those who need it
the most. So I hope today's hearing allows us to explore these
programs' challenges and triumphs and steps that this Committee
can take to improve both.
With that, I will now yield to our Ranking Member for her
opening statement. So Ms. Van Duyne?
Ms. VAN DUYNE. Thank you very much, Chairman Phillips.
Good afternoon. Thank you all for taking the time to be
with us to discuss the SBA's grant programs, specifically the
Shuttered Venue Operators Grant and the Restaurant
Revitalization Fund Programs. I am looking forward to hearing
your thoughts as to how we can improve both of these programs.
In the early days of 2020, as the COVID-19 pandemic took
hold of the American economy, Congress and the Trump
administration worked collaboratively and expediently to
establish the Paycheck Protection Program (PPP) and fortify the
Economic Injury Disaster Loan Program (EIDL). Within weeks,
much needed funds were being delivered to our nation's smallest
employers to keep their employees on the payroll, pay their
mortgage, and keep their lights on. And through no fault of
their own, small businesses owners' livelihoods were destroyed
and the businesses they had invested their entire life towards
were forced to shut. The state and local public health mandates
necessitated the swift actions taken by Congress and the Trump
administration to keep our smallest employers alive.
At the end of 2020, Congress passed, and President Trump
signed the Consolidated Appropriations Act for Fiscal Year
2021. Included in this legislation was the SVOG program, which
was designed to provide grants to small businesses that rely on
mass gatherings and thus experienced severe hardships during
COVID-19. Unfortunately, the Biden administration waited until
early April to implement this program and even worse, when it
did launch, the SBA portal crashed, forcing the SVOG program to
cease operations the very same day it opened on April 8th. The
SBA has since reopened the program, but much needed funding has
yet to reach these hard-hit businesses.
Earlier this year, Congress passed the so-called American
Recovery Plan Act of 2021, and due to the amount of unnecessary
spending and bitter partisanship included in this legislation,
it was forced through Congress using the budget reconciliation
process which required a simple majority in both chambers and
very little collaboration.
There is one thing the plan got right. It created the RRF,
which is a lifeline to struggling restaurants across the
nation. Unfortunately, while the program had Republican
support, it was crafted with zero Republican input. And in
fact, during the Small Business Committee markup of the
reconciliation package, Republican Committee members offered
several amendments, including ones that would have doubled
funding for the RRF and made it more accessible to all small
restaurants, we were unable to garner a single Democratic vote.
Not a single one.
And why is this important? The RRF is now out of money and
only certain small businesses have been able to apply for it
successfully. We will hear from one of my constituents on the
panel who has done everything right from the beginning,
utilizing existing programs to keep his employees on the
payrolls, bills paid, and lights on. He submitted his
application to the RRF as soon as possible, working through the
process exactly as it was designed. It has been weeks and he
still has not heard back. And this is unacceptable.
As we move forward, we absolutely must find these
chokepoints that are leaving our small businesses twisting in
the wind. They deserve better. They deserve bipartisan
solutions that will work because they did during the early days
of the pandemic. And finally, we must ensure that we utilize
these dollars, taxpayer dollars, not free money, as efficiently
as possible.
Vigorous oversight of these programs by our Subcommittee is
critical as we move forward. I was incredibly proud to take a
step in that right direction this week by partnering with
Chairman Phillips and six other members of the Small Business
Committee to introduce the Restaurant Recovery Fairness Act,
which will provide the vital oversight we are talking about for
the Restaurant Revitalization Fund. I look forward to more
collaborative oversight actions by this Committee as we
continue to stamp out fraud and abuse and make sure our funds
are going where they are needed the most. I look forward to
more collaborative oversight as we stamp out fraud and abuse
and make sure that our resources are going to small employers
that need it the most. And again, thank you all for being with
us. I look forward to today's discussion and I yield back.
Chairman PHILLIPS. Thank you, Ms. Van Duyne.
And now I will just take a moment to explain how the
hearing will proceed.
Each witness is going to have 5 minutes to provide a
statement, and each Committee member will have 5 minutes for
questions. Please ensure that your microphone is on once again
when you begin speaking and that you return to mute when you
are finished.
With that, I would like to introduce our witnesses.
Starting with our first, Ms. Cheetie Kumar, the chef and owner
of Garland, a restaurant in Raleigh, North Carolina. Ms. Kumar
is a self-taught cook who studied recipes while perusing a
career as a musician. In addition to Garland, Ms. Kumar is also
the owner of the music venue, King's, and the cocktail lounge,
Neptune's Parlour. She has been nominated for the James Beard
Award, Best Chef of the Southeast from 2017 to 2020, and was a
finalist in 2020. So we welcome you, Ms. Kumar.
Our second witness is Ms. Esther Baruh, the director of
Government Relations for the National Association of Theater
Owners. In this capacity, she works with theater owners and
operators and directs federal and state policy strategy. Ms.
Baruh has been working closely with theater owners and public
health officials in addressing theater industry's response to
the pandemic. And we thank you for joining us, Ms. Baruh.
Our third witness, a man after my own heart who has got the
best background I think in Zoom history, and a Minnesota Gopher
banner behind him is Chris Montana, the owner and CEO of Du
Nord Craft Spirits, located in my district, Minneapolis,
Minnesota. Mr. Montana started the Du Nord as a family
business, bringing together his experience growing up in
Minneapolis with his wife Chanel's rural upbringing on a cold
spring Minnesota farm. Du Nord is committed to diversifying the
craft alcohol community and actively recruits underrepresented
people to join the Du Nord family. I appreciate you joining us,
Chris, and welcome you as well.
With that, I will turn it back over to our Ranking Member,
Ms. Van Duyne, to introduce our final witness.
Ms. VAN DUYNE. Thank you.
Our final witness is Mr. Mark Maguire, owner of three very
popular eateries, including one restaurant and two cafes in the
North Dallas area, two of which are in my district, Texas 24.
And I wish you had a more exciting background there, Mark, but
maybe next time. After starting and managing several successful
entertainment businesses across the country, Mr. Maguire was
hired by Walt Disney World Company to lead the team that
launched the Pleasure Island Entertainment Complex, which
included two restaurants. Several successful restaurant and
entertainment endeavors later, he was ready to strike out on
his own, and in 1999, he opened Maguire's Regional Cuisine in
Dallas. He has been a staple of the North Dallas community ever
since. Mr. Maguire has served on a number of nonprofit boards,
including the North Texas Food Bank and Hunger Busters. He has
been heavily involved in restaurant advocacy and has served as
a director and officer in the Texas Restaurant Association for
over 20 years, including Dallas president and Texas president.
Today, Mr. Maguire is testifying on behalf of the National
Restaurant Association. Mr. Maguire, we welcome your
participation at today's hearing.
Mr. MAGUIRE. Thank you.
Chairman PHILLIPS. All right. And with that we will begin
today's hearing by recognizing Ms. Kumar for 5 minutes for your
statement.
STATEMENTS OF CHEETIE KUMAR, CHEF AND OWNER, GARLAND; ESTHER
BARUH, DIRECTOR OF GOVERNMENT RELATIONS, NATIONAL ASSOCIATION
OF THEATRE OWNERS; CHRIS MONTANA, OWNER AND CHIEF EXECUTIVE
OFFICER, DU NORD CRAFT SPIRITS; MARK MAGUIRE, OWNER, MAGUIRE'S
KITCHEN & CATERING
STATEMENT OF CHEETIE KUMAR
Ms. KUMAR. Chairman Phillips, Ranking Member Van Duyne, and
members of the Subcommittee, thank you for inviting me to talk
about the successful launch of the Restaurant Revitalization
Fund and the need independent restaurants still have for help.
Let me start by thanking Chairman Phillips and Chair
Velazquez for all the support you have shown independent
restaurants throughout this pandemic.
I am the chef and co-owner of Garland in Raleigh, North
Carolina, and in the same building as our restaurant is our
music venue and basement cocktail bar.
I immigrated from India to the Bronx at the age of 8 and
eventually settled in the South, here in Raleigh, to play music
and open my restaurant. My story is not very different from so
many others in the restaurant industry. Women, minorities,
single parents, veterans, and so many others get their start in
restaurants, build their lives in restaurants and make a career
working in restaurants. Frankly, restaurants represent America
more than any other industry.
Last March, I joined the then newly formed Independent
Restaurant Coalition, which is a group of chefs and independent
restaurant owners who have built a nationwide, grassroots
movement to secure vital protections for the nation's half a
million independent restaurants and the more than 11 million
restaurant and bar workers impacted by the coronavirus
pandemic. Since then, we have advocated for a standalone
restaurant grant program to help recover some of the estimate
$280 billion in losses sustained by our industry because of the
pandemic.
We want to help save our employees and their families, to
help make our suppliers and landlords whole, and most of all to
save restaurants. I am proud that our small restaurant survived
this far in the pandemic. We have cut, crimped, pivoted,
closed, opened, closed again, opened again, pivoted again, done
takeout, served an outdoor sidewalk patio through the winter,
and a myriad of other things to get this far.
Both rounds of the Paycheck Protection Program funding
helped us to get through. We were closed for weeks last spring
and did not do hot takeout through the summer, but instead
pivoted to launch a prepared meal program so that we could make
sure my staff was able to work safely. Frankly, as terrified as
I was for my business, I value people and their health over
commerce. We have been able to stay open and provide more jobs
because of the help we received. Without that help, Garland,
Neptune's Parlour, and King's would be lost to the history of
Raleigh. But Congress and the administration threw us a
lifeline and I am here to ask that you do the same for every
independent restaurant in America to ensure we do not have an
extinction event.
We are not out of the woods yet. Fifteen months of losses
will not be recouped by a few weeks of full indoor dining
capacity. For restaurants like ours, this pandemic is not over
by a longshot. The RRF experience was really smooth for me. I
applied on the first day and got word about our acceptance a
couple of weeks later. I was lucky most of my financials were
straightforward and the guidance was spot on for me. I know
others have not been as lucky, but I am also happy to report
that the SBA has been working hard to treat everyone fairly and
equitably during this process.
The SBA closed the RRF application portal after 3 weeks of
overwhelming demand. As of this week, over 370,000 restaurants
and bars have applied, requesting over $79 billion in funds.
Two hundred eight thousand of those applicants were women,
veterans, and socially and economically disadvantaged
individuals.
I am proud to be one of the first recipients of the RRF
grant. I applied at 11:30 a.m. before the portal was even
supposed to be open. I just checked and got my application in,
but I had spent days before that preparing. A lot of people in
my position are having something like grantee guilt. We feel
really bad for having gotten a grant when so many others are
still facing a terrifying and uncertain future without this
grant.
A friend of mine told me not to feel guilty but to make my
business healthy and then work tirelessly to ask Congress for
more money for this program, so that is exactly what I intend
to do. I believe that for every restaurant in the country to be
made whole, the program could need as much as $140 billion
more. This is not reflective in the statistic because not every
restaurant knows about the program and not everyone applied
knowing that $28.6 billion would not be enough, so they simply
gave up on this lifeline.
Congressman Blumenauer, Congressman Fitzpatrick, Senator
Sinema, and Senator Wicker plan to introduce a bill soon to put
more money into the RRF. The restaurant community could not be
more thankful for these four heroes for standing up in our very
darkest days.
In closing, I want to emphasize one last, crucial point. I
sit here today, not on behalf of Garland, but to stand for the
11 million restaurant workers and 500,000 independent
restaurants to say both thank you and more help is needed.
Every single one of you has a struggling restaurant in their
districts and every single one of you will have some
restaurants that do not get an RRF grant for which they
applied. Please help all restaurants look like post-pandemic
success like Garland, knock on wood, and please add more money
to the RRF.
Thank you for the opportunity to appear before you today.
Chairman PHILLIPS. Thank you, Ms. Kumar.
And Ms. Baruh, now you are recognized for 5 minutes for
your opening statement.
STATEMENT OF ESTHER BARUH
Ms. BARUH. Thank you. My name is Esther Baruh, and I am
here on behalf of the National Association of Theater Owners
representing movie theaters operating 90 percent of the movie
screens across the United States.
Thank you Chairman Phillips, Ranking Member Van Duyne, and
members of the Subcommittee for the opportunity to testify
today regarding the Shuttered Venue Operators Grant program, or
SVOG. This program is a critical lifeline for movie theaters,
live music venues, and arts organizations that were completely
shuttered by the pandemic and are only now beginning to rebuild
toward recovery.
I would like to open by thanking the many members of
Congress, their staff, and the administration who were and are
instrumental in standing up this program. We were thrilled to
hear SBA Administrator Guzman say yesterday that SVOG have
begun to go out. Our organization has not received any reports
from our members about notification of grant awards but we hope
they will be imminent.
A word about why movie theaters are so important to our
culture and economy. Cinemas employ over 153,000 individuals
nationwide in support and boost millions of additional jobs in
surrounding retail and restaurants and the cinema supply chain.
Ninety-six percent of theater operators are small businesses.
Moviegoing is one of the most affordable out-of-home activities
and is especially popular among minority groups. Theaters were
devastated by the pandemic. Ninety-six percent of independent
theater operators lost over 70 percent of revenue last year and
those losses have continued into this year. Our industry lost
63 percent of jobs, although we are hopeful that these jobs
will rebound as we continue to reopen.
We deeply appreciate Congress's recognition of the
difficulties our industry experienced by including us in the
Save Our Stages Act, now known as the Shuttered Venue Operators
Grant Program. We have every confidence that the SVOG program
will help thousands of theater operators and other businesses
and organizations to keep their doors open.
Per the last updates from SBA, the number of grants and the
funding amount requested track almost exactly with what we
expected. In addition to being able to fund initial grants,
this also means that there will be sufficient funding for
supplemental grants as intended in the legislation, which we
were also glad to hear the administrator confirm in her
testimony yesterday.
However, the implementation process has not been without
some significant challenges. I refer the Subcommittee to my
full testimony for details on that.
Today, I want to focus on two key issues, the first being
the opportunity to appeal, and the second being the
supplemental grants process. With regard to the opportunity to
appeal, as the Chairman mentioned, the SVOG program is complex
and its application is also complex. It required reams of
paperwork to complete. The good news is that we believe that
because of this, the instances of fraud associated with this
program will be extremely low. The number of supporting
documents required for the application should make it virtually
impossible for a nonqualified entity to apply. This also means,
however, that there are many opportunities to make a mistake,
especially since the SBA's guidance changed considerably and
frequently as the program was set to open and changed again
even after thousands of applications were submitted. We are
still waiting on clarification of certain outstanding questions
that impact complete and correct applications. But
unfortunately, applicants have no opportunity to cure their
applications and very little information about what mistakes
they may have made.
We strong urge the SBA to allow appeals. If eligible
applicants are denied these grants, they will have no options
left, and their businesses will be forced to close permanently
or go bankrupt.
Second to ensuring that all eligible applicants are able to
access initial grants, we also urge the SBA to move
expeditiously on the supplemental grants process. These
additional grants were made available by Congress because
entities that experienced more than 70 percent of revenue loss
in the first quarter of this year require additional funding to
survive.
We do not have an update from the SBA yet on this process
but the good news is that the application for the initial grant
included all the information necessary to evaluate and process
supplemental grants. So, we hope that as soon as initial grants
begin to be disbursed, the SBA will work on supplemental
grants.
I am confident that the SVOG program will do a lot of good.
We urge the SBA to provide an opportunity to appeal and to get
the supplemental process going so it is not subject to too much
delay.
Thank you again for the opportunity to testify and I
welcome your questions.
Chairman PHILLIPS. Thank you, Ms. Baruch.
And next, Mr. Montana, the next 5 minutes are yours.
STATEMENT OF CHRIS MONTANA
Mr. MONTANA. Mr. Chair and distinguished members of the
Committee, unlike previous testifiers, it may be less obvious
why a distiller would be here speaking to you from my
distillery discussing these programs. And it is because many
distilleries, mine included, owe their continued existence to
the PPP, EIDL, and the RRF programs.
In early March of 2020, I had a conversation with my
cocktail room staff and they told me that they did not feel
safe operating the cocktail room during COVID. I shut the
cocktail room that night. More than 60 percent of Du Nord's
revenue came from the cocktail room and closing it likely meant
the end of the business. To compound matters, 2 days later the
second blow came as all bars and restaurants closed. Our
biggest customers are bars and restaurants, and their closure
meant a significant blow to our small wholesale business. We
are a breakeven company. To losing 60 to 80 percent of our
business was a death sentence. So we decided to go down
swinging. We had alcohol, and that is what was needed to make
hand sanitizer, so we, like hundreds of other small
distilleries in cities and communities across the country,
pivoted to making hand sanitizer. Our initial batch was donated
to police, letter carriers, Meals on Wheels, homeless shelters,
and congregate care facilities. Later, we would find a market
for the sanitizer and those sales helped us stay afloat and
enabled us to continue donating sanitizer to those who needed
it most.
I am proud to say that our sanitizer was distributed to
nearly every childcare center in the state of Minnesota at no
cost to them. And through our partnership with other Twin
Cities distilleries, we were able to donate tens of thousands
of gallons of sanitizer to those who needed it most.
While this story is, I believe, extraordinary, it could
have been told by many other distilleries across the country
because they, too, responded when their community needed them
and converted their stills and tanks to sanitizer production.
They, too, are of their community and respond when their
community needs them.
Of the hundreds of distilleries nationwide that pivoted to
sanitizer production, I do not know of a single one that did
not donate substantial amounts. And after the events of 2020, I
have never been prouder to call myself a distiller, and that is
why it is so humbling to be given the honor to represent them
here today.
It is an honor that I previously held as the president of
the American Craft Beers Association, and in that role I had an
opportunity to learn from hundreds of distilleries across the
country about the challenges they faced. Perhaps most
enlightening was learning that like me, most of them relied on
their cocktail rooms to survive.
The lifeblood of the American micro distillery has for many
years been the cocktail room. It is a place where people can
come and gather and buy our products that we make right there
on site, and it is often our only opportunity to make a sale
directly to our consumer. Unlike most businesses, we are not
typically allowed to sell directly to our consumer. We are
required by law to sell to a distribution company, that then
sells to a retail company, that then sells to a retail company,
that then sells to the consumer. In fact, only a fraction of
the price that you pay on the shelf makes it back to the
distiller.
So when these cocktails rooms had to close because they,
like other restaurant and bars represented a substantial and
unjustifiable risk of community spread of COVID-19, the
industry took a body blow that I was not sure it could recover
from.
As is often the story with major disasters, big business is
usually able to bounce back. They are well insured, well
capitalized, their pockets run deep. But we do not have those
deep pockets. So when a disaster strikes small businesses, we
do not usually come back, and we did lose distilleries, but not
as many as I would have thought in those moments in March. And
it is because those businesses, like my business, were able to
avail themselves of programs specifically designed to keep them
afloat.
We would not have made it to the point where we could make
hand sanitizer without the infusion of capital we received by
the Payroll Protection Program. When those sales dried up in
the absence of more than 70 percent of our business, the second
Payroll Protection Program, the EIDL loan and the Restaurant
Revitalization Fund kept us going. And now as things begin to
open up, the future is starting to look brighter. But at the
time when the outlook was bleakest, our government gave us a
hand much in the way that we gave our communities a hand when
we switched to sanitizer production.
If nothing else I say today sticks with this Committee, I
hope that it will be this one thing. On behalf of the micro
distilleries across the country, thank you for stepping up for
us. When we stepped up for our communities, we did not do it
because we wanted a handshake or a pat on the back or a cookie,
we did it because that is what you do. You use the resources
that you have to do what you can to help the people who need
helping. And I am proud to say that that is what my government
did, too. The fact that my business has survived to reach today
is traceable directly back to the PPP, EIDL, and Restaurant
Revitalization programs, and I know there are many other micro
distilleries across the nation who would say the same.
So thank you for your time and for the honor of addressing
this Committee.
Chairman PHILLIPS. Thank you, Mr. Montana. I think I speak
for everybody when I say we would trade a cookie for a martini.
With that, Mr. Maguire, the next 5 minutes are yours.
STATEMENT OF MARK MAGUIRE
Mr. MAGUIRE. Thank you, Chairman Phillips, and Ranking
Member Van Duyne, and the other members of the Subcommittee. My
name is Mark Maguire, and I am the founder, co-owner, and
managing partner of Maguire Restaurant Holdings and CORE F&B in
Dallas. We operate Maguire's Kitchen and Catering, a fine
dining restaurant that opened in North Dallas in 1999, as well
as two Gather Coffee Cafe locations, both of which are located
in Ranking Member Van Duyne's district. Thank you for allowing
me to testify today on behalf of my business, the National
Restaurant Association, and the Texas Restaurant Association.
I would also like to thank the other witnesses who are
testifying today as well. Your stories are compelling and the
heartache is familiar. Each of our businesses is unique and I
know we have all struggled mightily and are anxious to have the
opportunity to rebuild.
Like so many restaurants across the U.S., my businesses
were severely impacted by COVID-19. Even in Texas where now we
are allowed to operate at 100 percent and consumer demand is
getting stronger by the day, we are far from normal. Ms. Kumar
mentioned pivoting and other witnesses have mentioned pivoting.
I am past the pivoting now and I am into full pirouettes. We
are spinning like a top on a daily basis trying to deal with
these new obstacles that are coming our way. Labor shortages,
product costs, increases in available, supply chain chaos. My
example, since January of this year, in less than 5 months, we
have had 40 to 50 percent increases on our proteins, cooking
oils are up over 50 percent, paper goods and to-go supplies up
to 70 percent increases.
What does this do to us? Well, as mentioned, we are
spinning like a top trying to keep up with it. I will give you
an example. During the 5 years prior to the pandemic, my
restaurant in North Dallas had one menu price increase in those
5 years. Since March 20th of this year, we have had to increase
our menu prices twice in 5 months. And that is not because we
are finding a way to make a profit. We are just trying to find
a way to keep our heads above the water. We have not even come
close to scratching out a profitable month since before this
all began.
Sadly, I know I am not alone in this experience.
Collectively, as mentioned, the restaurant industry has lost
$290 billion in revenue during this pandemic. The relief
programs that Congress has provided have been a lifeline to my
business and to many others. In fact, one of my restaurants was
less than 30 days from total shutdown when we received our
second PPP. So thank you very much. And, the PPP worked exactly
as Congress and SBA had intended. It provided immediate relief
that allowed us to keep our people working and the lights on.
But the PPP was always intended to provide short-term
assistance. Nobody could possibly have seen how long this
pandemic effect would last and how deeply it would cut into the
American economy. But now my business and many other
restaurants need relief that fits a pandemic that has created
waves of challenges for 15 months and counting.
We all hope that the Restaurant Revitalization Fund can be
that solution. I believe it still can if it is funded to
provide the support for which it was created and intended for
everyone who is in need. Last night we learned that the SBA has
received applications for about $75 billion in grants from a
fund with $28.6 billion. That is easy math, $46 billion
deficit. Unfortunately, my businesses are likely to fall within
this deficit gap. Even though Maguire's has had an incredibly
difficult year, we did not qualify for the RRF because of our
PPP proceeds. My two cafes do qualify but they do not meet any
of the priority classifications. So without additional funding,
the RRF assistance is unlikely to come my way.
I know there is a bipartisan commitment to the RRF within
Congress, so I am hopeful the funding deficit and eligibility
concerns can be remedied. Our flagship Maguire's Kitchen has
seen numbers increase every week but we are still digging out
from a deep deficit. And with so much chaos in the supply chain
and instability in the labor market, we are counting on the RRF
to provide some runway to allow us to work through this new
minefield and get to a point where we can actually manage and
plan proactively to rehire and rebuild. If my RRF is funded,
for example, for my cafes, I will be able to reopen the one
cafe that has been closed since October and bring back as many
as 14 to 16 Texans into the workforce.
Finally, I will just add that restaurants are more than a
business. It is true we employ a lot of people and that is
important to our economy. But it is also true that we play an
important role in our communities. Just consider all of the
interactions you have had at restaurants and venues with
business associates, friends, and family over the years. Can
you imagine life without that?
A sincere thanks to this Committee, the SBA, and other
members of Congress who have worked to continue with bipartisan
focus to provide programs that have been immeasurably helpful
to my businesses, as well as many others across the country. I
appreciate your leadership and ongoing support.
Thank you so much for allowing me to testify. I am happy to
answer any questions.
Chairman PHILLIPS. Thank you, Mr. Maguire.
And to all of our witnesses, I just want to say, too, to
the two of you who are in the restaurant business, as the owner
of three coffee shops in Minneapolis who did not solicit or
accept PPP money, I can empathize, deeply empathize with the
struggles you are facing. I know them firsthand and rest
assured, my Committee joins me in trying to assist all of you.
I will start the questioning with myself for 5 minutes and
recognize myself.
And my first question is to you, Mr. Montana. The
Restaurant Revitalization Fund as we all know had an initial
21-day period, priority period, for grants to women-owned
businesses, veteran-owned businesses, and other socially and/or
economically disadvantaged small business concerns. Reports
from the SBA indicate that the program received almost 150,000
applications--147,000 from these priority groups requesting
more than $29 billion in relief funds. So given the unique
challenges facing such communities and business owners, please
share some perspectives with the Committee about why you
believe that priority period was an important part of this
grant program.
Mr. MONTANA. Thank you for the question. I would first go
back to our experience with the PPP and the experience that I
know is shared from a number of my colleagues. We were not able
to get the PPP the first time that we attempted, and we did not
exactly know why. We would later find out that you needed to
have some deeper rooted connections and longer running
established relationships with banks. And that is not the case
for a number of particularly minority-owned businesses, and
myself included. And so I think that instead of having history
repeat itself, it was important to make sure that this fund got
that piece right. And so I do think it made sense. I know that
it has helped us significantly. Again, I would not be standing
here, this place would not be open but for those funds. And I
think that the real challenge here is not so much to focus on
the fact that instead of being left out again, this population
did get a chance, a fair chance at those funds. I think instead
the focus should be on how can we make sure that everyone now
gets that same access. And so I would hope, the funds have
helped me in such a way, and I am fortunate I received them. I
would hope that everyone else gets the same opportunity. And so
I really do help that this Committee and this Congress finds a
way to fully fund the program.
Chairman PHILLIPS. Thank you, Mr. Montana.
Ms. Baruh, creating and standing up multi-billion dollar
programs such as this one is no small task. Our agencies were
ill-prepared, poorly staff, and resourced to do so, of course,
but the SBA has worked hard to build an online application
portal as you know and worked with the private sector to manage
the tools and technology to make the application process at
least reasonably successful. The SBA also created education and
outreach materials as we all know, worked with resource
partners and engaged with stakeholders to ensure that eligible
entities were aware of the program requirements and were
prepared to apply for the program.
So perhaps you could share with the Committee about how
your engagement with the SBA during the process has gone and
have they been forthcoming in your estimation with information,
updates, and support? We welcome your perspective.
Ms. BARUH. Congressman, thank you so much for the question,
and for acknowledging that, yes, SVOG has been a complex
program to stand up and we know that many people at the SBA
have been working hard.
You know, the SBA was very forthright with stakeholders
early on in the process that they wanted our feedback. And we
worked really hard to provide that feedback. As they issued
frequently asked questions every week, we responded with
updates, questions about the questions, feedback that we were
getting from our members in the field. So we tried to be a
resource to the SBA. As you had mentioned, there are a lot of
entities that qualify for this program and we are all a little
bit different and our requirements are all a little bit
different. So I know that we at NATO and the other stakeholder
groups all tried to be resources to SBA, provide them with as
much information as we could about the specific intricacies of
our industries and how the program should be stood up correctly
so that as many eligible entities as possible could access it.
The SBA has held a number of stakeholder meetings since
April 8th and onward, and we would just urge the SBA to keep
maintaining those open lines of communication, to maintain two-
way communication with the stakeholders. Let us continue to be
a resource to them. When we report questions from the field or
ambiguities or things that have come up, to continue to engage
with us directly so that we can make sure that our members have
correct and complete applications and get access to this
funding.
Chairman PHILLIPS. Thank you, Ms. Baruh.
It looks like my time is winding down so with that I will
yield to Ms. Van Duyne, who is now recognized for 5 minutes.
Ms. VAN DUYNE. Thank you very much, Chairman Phillips.
Mr. Maguire, in your written testimony, you talked about
the additional rate of inflation on your business. You talked
about the poultry increases by 40 percent, meat over 30 percent
increase, cooking oils at 50 percent increase. In addition to
these inflationary pressures, do you see anything coming out of
Washington that could further pump the brakes on your business,
say in the tax or regulatory realm?
Mr. MAGUIRE. Well, that is a pretty broad based question,
and the answer to it I will give you is broad based as well.
Now is not the time for anything coming out of Washington to
provide any kind of a negative impact on our P&Ls and taxes are
included. Any regulatory demands or actions that come from D.C.
right now that in any way put a financial or operational or
regulatory burden on our businesses, now is not the time for
that.
Ms. VAN DUYNE. Okay. Earlier this week, the Chairman of
this Subcommittee, Dean Phillips and I introduced the
bipartisan Restaurant Recovery Fairness Act to ensure that only
proper entities receive funding under the multi billion dollar
program. Safeguarding American taxpayer dollars will remain a
high priority for me. It was great to see in your testimony
that you mentioned program integrity. Would you agree that a
balanced approach on oversight that does not create burdens as
you were mentioning earlier, or rather safeguards that oversee
the program would be beneficial?
Mr. MAGUIRE. Absolutely. I think that integrity in the
program is obviously something that is extremely important, and
I would fully support that. My experience with the PPP and the
RRF has been pretty positive from the standpoint that I am
qualified to comment on how to establish integrity in
developing these programs. But certainly, the application
process and the documentation that has been required along with
the required documentation for forgiveness has been substantial
and very thorough. And I feel pretty good about the way these
programs have been set up and the integrity that has been
established to ensure that they are properly followed.
Ms. VAN DUYNE. I appreciate that.
In listening to your testimony and from talking to business
owners just across this district, it is clear that the enhanced
unemployment benefits have had very large negative impacts and
effect on small employers' ability to hire staff. In fact,
yesterday, I called one of our local barbeque places that I
have been to a number of times over several decades and they
actually had a voice greeting that said they were closed due to
a national labor shortage.
Can you speak to what you are seeing in the workforce? I
cannot go to any restaurant, honestly, that is open fully
because they do not have the staff. What are you seeing?
Mr. MAGUIRE. Well, we are no different. We are in the same
boat. We are lucky in Texas that we have been open 100 percent
and we have seen a strong return in consumer demand. And there
have been nights that our restaurants have had to go on waits.
And they have gone on waits with empty tables. And the reason
they have gone on waits with empty tables is not because of
social distancing requirements. It is because we do not have
the staff to service them. That is definitely a knife in the
back considering what we are trying to climb our way out of.
And the labor issue is real. It is real for many reasons. One
is the way the unemployment benefits have been structured, but
there are a lot of other factors that are involved that are
making it challenging to get employees back into our business.
We lost a lot of people out of our industry to other industries
during this crisis because we could not provide the jobs and
there were other industries that were thriving during the
pandemic that they moved into. And so now we have got to try to
find a way to get them back into our business and we are doing
that by creating opportunities for high wages and for flexible
schedules and for great work cultures. And that is on us to
provide to entice those people back to our industry.
Ms. VAN DUYNE. I appreciate that.
I have got time for just one more quick question.
What has your experience been with the RFF thus far? And
can you compare your experience with the Restaurant
Revitalization Fund to your experience with PPP?
Mr. MAGUIRE. Well, my experience has been vastly different.
The PPP, while it was new to everybody the first time,
certainly, by the second time everybody had a pretty good
understanding of the process and the documentation that was
involved. And the portals that I applied through were very
communicative in regards to letting me know where in the
process my application stood. The RRF was much more difficult.
I think the information that was put out as far as how to
complete the application, what documentation was necessary was
pretty confusing to me until the National Restaurant
Association produced a document that kind of walked us through
step by step. So we got through the application process but now
my application was submitted on May 4th and it has been sitting
in an under review status for the last 22 days, 23 days. And I
have not been able to get any kind of idea or communication
from anybody as to the status of that application, although I
do know that because I do not fit any of the priority
classifications, it is very unlikely that I will see any money
unless this thing is funded.
Ms. VAN DUYNE. Thank you.
Chairman PHILLIPS. Your time is expired. Thank you, Ranking
Member Van Duyne.
And now we will turn to the gentlelady from California, Ms.
Chu, for 5 minutes.
Ms. CHU. Thank you.
Ms. Baruh, movie theaters and live venues were among the
first businesses to close their doors at the start of the
pandemic and will be amongst the last to reopen. That is why I
am so concerned about the SVOG delays, especially as theaters
like the ArcLight in Pasadena, which is in my district, have
recently closed for good. I know that our top priority must be
getting funds out the door to struggling businesses. But we
also have to ensure that the program's rules are written in a
way that will allow eligible entities to get through the
application process smoothly.
So as a member of the Ways and Means Committee, I am also
concerned about the way the tax structure of these theaters
might impact their eligibility for relief programs.
Specifically, I understand that there is a Form 4506-T required
by SBA that poses serious challenges for theater owners with
multiple locations. So could you expand on these concerns and
talk about how we can ensure the application process works for
all eligible entities, including theaters?
Ms. BARUH. Thank you so much, Congresswoman. And yes, we
were devastated for the loss of the ArcLight Pacific Theaters
that closed because of the circumstances of the pandemic and
probably because some of the SVOG funding, it has not arrived
quickly enough.
With regard to the tax issues that you mentioned and the
4506-T form, yes, it is a very complex form. This form was
required by the SBA so that the IRS could pull applicant tax
returns so that they could be used to verify applicant identity
and revenue streams. The SBA actually revised the guidance to
the 4506-T after many thousands of people had submitted their
applications. And unfortunately, their guidance is still
incomplete. There are entities that are organized as
disregarded entities for the purpose of tax filing who cannot
fill out the 4506-T form per the guidelines of the SBA. And
what this means is if they cannot file the 4506-T, their
application is not complete. They will not be considered for
SVOG.
And so what we really need the SBA to do, and we have
flagged this with them, is to put out the full guidance about
all the various tax types that are eligible for this program,
that the SBA has made eligible for this program so that
everybody who is eligible can get their application in, have it
be complete, and get the funding flowing.
So I would be glad to work with you and your team on the
specific tweaks that we need to see in the guidance so that we
can get these correct 4506-Ts in as quickly as possible.
Ms. CHU. Yeah, we would certainly like to work with you on
that.
And also, Ms. Baruh, you mentioned in your testimony that
SVOG applicants will not have the opportunity to appeal if
their application is rejected by SBA even if it is for a reason
outside of their control like these form 4506-T issues that you
just talked about. So as Chair of the Subcommittee in the last
Congress, I was closely monitoring SBA's response to fraud
risks in pandemic programs and I do appreciate the level of
care that they took and that they are taking to reduce fraud.
But we also have to ensure that eligible small businesses are
still able to fully participate in the program, especially
industries that are as hard hit as yours.
So could you elaborate on why you support an appeals
process? Give us an example of why this is needed and discuss
how SBA can implement such a program without increasing fraud
risk in it.
Ms. BARUH. Sure. Thank you, Congresswoman. And I just want
to state, we also support the goal to reduce and prevent fraud.
It would be terrible, frankly, if this funding ended up in the
hands of the wrong entities.
We think it is really important to have an appeals process
for a couple of reasons. One is that there were technical
issues associated with the application. And I will give you a
couple examples of that. This sounds small, but if you uploaded
a document, you could not delete it. So the little trashcan
icon did not work. So if you uploaded a document by mistake,
you could not delete it and there were a limited number of
slots of documents that you could upload. So virtually,
everything as part of the application required documentation to
prove it. So again, if you could not delete a wrong document,
we do not know that a reviewer is going to understand that this
was just a mistake. So that is from the technical side.
From the policy side, even going into the application,
after the SBA redid all the guidance and reopened the portal,
there were still a bunch of issues that were very ambiguous.
Among them, how you should fill out the date your entity began
operations. If you opened after January 1, 2019, your grant
amount might calculate incorrectly if you did not have the
right date in that box. But the guidance on how to fill it out
was very ambiguous. And so I know that we have members who
probably had their applications miscalculate their grant amount
because of this ambiguity. So given that we had technical
issues and policy issues, all of this is explainable. Right? As
soon as two people can have a dialogue about it, you can
explain it and understand it and fix it. So we would just
really ask the SBA to provide that opportunity so that these
mistakes which were just errors that people made because of
ambiguities or technical problems could be rectified and they
can still get the grant and again, without in any way
infringing on any fraud issues.
Chairman PHILLIPS. The gentlelady's time is expired.
I just ask everybody, Committee members and witnesses to
try to keep track of the time if you might.
With that, I recognize the fellow gentleman from Minnesota,
Mr. Hagedorn for 5 minutes.
Mr. HAGEDORN. Chairman, thank you. I appreciate the
opportunity. Thanks for holding this hearing.
I am going to direct the first part of my remarks to Mr.
Maguire if I could. Yesterday, sir, we were able to discuss
these issues with the SBA Administrator Ms. Guzman, and I
talked with her about the Restaurant Revitalization Fund and
how the Democrats with President Biden and the members of
Congress decided to have a priority group that included every
single type of bar and restaurant owner except people who
happened to be White men. And I asked her also about how if she
could assure us that illegal aliens were not receiving funds
through the Restaurant Revitalization Fund before U.S.
citizens. In both cases, first of all, she could not really
explain how it was not discriminatory or racist to exclude
White men from the process, the initial process, which now
there is no funding left for anybody else who was not part of
the priority group, and secondarily, she could not really
assure us that illegal aliens were not receiving these monies
before U.S. citizens.
So I am not going to ask you to comment on any of that
because clearly you see where I am coming from. But I will ask
you, you are a business owner. You are a restaurant owner. You
understand all the competitive natures of your business. You
have seen what everyone in the industry has gone through the
last year. As a member of Congress, I think our goal is to make
sure everybody gets treated equally. That we get all
businesses, all restaurants and bars from one side of the
coronavirus to the other, and that I do not think we should be
picking winners and losers here. But as a person in the
business, it would be a big competitive advantage for your
neighbor who has a similar business to get money from the
government and you to be shut out simply because you did not
fit on their priority list; correct?
Mr. MAGUIRE. Well, I would agree with you from the
standpoint that I am disappointed that it does not look like I
am going to have an opportunity at this time to receive any
funding. However, my take on that is that it has very little to
do with how the program is structured and everything to do with
how the program is funded. There was not enough money to fund
all of the priority classifications alone, so we did not even
get through the priority classifications, whether I fit into
them or not. Had I been a White male veteran, I would have been
in that priority classification. Unfortunately, I did not have
an opportunity to serve my country. But to me the problem is
funding, and it has been funding since day one. It is something
that we have been trying to work through right from the
beginning on this. I think everybody knew that $28.6 billion,
while it is a gigantic number, was not going to even make a
dent in what was needed for this and we clearly saw within 21
days that it is probably going to end up being less than a
quarter of what was needed. So hopefully, we can find a way to
get back to the drawing board and find a way to get the funding
for everybody that needs it because whether you are in that
priority class or not, if you need it, you need it. I need it.
Mr. HAGEDORN. So to reclaim my time. So actually, the
priority list was almost completely funded by [inaudible]
dollars. Representative Van Duyne, our ranking Republican did
mention that Republicans offered an amendment to put another
$20 billion into the program that was rejected, unfortunately,
by the majority.
I also would like to associate my comments with
Representative Van Duyne, who was talking about unemployment
compensation and how it is especially hurting getting albor5
for this sector of the economy. I talk with business owners,
especially restaurant and bar owners across the district here
in Southern Minnesota all the time and this extra $300 a week
federal unemployment compensation is a deterrent for people to
return to work. Representatives Emmer, Stauber, Fischbach, and
myself of Minnesota wrote our governor a letter a couple of
weeks ago asking that he join about 20 to 25 governors across
the country in order to reject that extra money and have
incentives to get people back to work. Also in Minnesota, we
are encouraging our governor to reopen our state, give up his
emergency powers, and make sure that we can get all businesses
and schools fully operational with kids back in school because
that will free up people to get back to work and not be at home
all the time taking care of the kids. So it just seems to be
kind of commonsense in those areas.
But with that, I will yield back.
Chairman PHILLIPS. The gentleman yields back.
And now I recognize Ms. Davids from Kansas, the Chairwoman
of the Economic Growth, Tax and Capital Access Subcommittee of
the Small Business Committee. Ms. Davids, you are recognized
for 5 minutes.
Ms. DAVIDS. Thank you, Chairman Phillips. And thanks for
holding this hearing today to focus on some of the newest SBA
relief programs that we are seeing for our small businesses.
And it has been referenced a couple of times already.
Yesterday, we held a Full Committee hearing with Administrator
Guzman and I know I asked her about the need to provide
additional funds for the Restaurant Revitalization Fund.
Obviously, the RRF is oversubscribed at this point, and I have
appreciated some of the comments by Mr. Maguire about the need
to properly fund the program. And also, I know Ms. Kumar, in
your testimony mentioned the impact of the Restaurant Relief
Fund.
I am curious if one or both of you, I would love to hear
from both of you, about how the return to things like greater
indoor capacity, like really fully opening up, is impacting you
and what the RRF can do about that. But also, kind of
fundamentally looking forward, I know Mr. Maguire, you actually
talked a bit about none of us expected this to go on this long.
And now we are seeing, we need to be thinking about addressing
this, we are 16, 18 months, like this is going not impact us
for a while. Can you talk a little bit about just how you are
planning for that and what you think the RRF needs to look like
and how we need to adapt?
Mr. MAGUIRE. Well, I think the most challenging word in
that whole commentary was planning. And there really is just no
such thing as that. I have been in this business since I was 18
years old. I managed or owned or operated for 35 years. I have
managed P&Ls that whole time. I have never seen anything like
this in my entire career. The price increases that we have seen
in the last 45 days are unprecedented and there is no playbook
for how to deal with this. What I am looking for from the RRF
is to provide financial support that will allow a runway for us
to get to the point where we can start planning and being
strategic in what we do because right now there is really--I am
not exaggerating when I say I wake up and say, okay, what is
coming my way today? And what are my prices on this? And am I
going to have to change my menu? And will I be able to offer
everything? And am I going to have enough staff to meet the
demand of the consumer? And that is a daily issue. That is not
something that any of us have ever had to deal with.
Ms. KUMAR. Thank you for that.
I just want to state that yes, our restaurant is open for
indoor dining now. We are still practicing safety. But it is
not as simple as just unlocking our doors and going back to the
way things were. I do not think things are going to be the same
for a really long time. And the grant money, the period that it
covers, the expenses are covered from February of 2020 till
March of 2023. So while the grant awards might seem large and
the fund, it sounds like it is a lot of money, and it is, we
are required to plan, and planning again is the operative word.
We cannot go back to the same way of doing business. We have
thousands of dollars that we owe to our landlords, for example,
if we were lucky enough to reach a deferred agreement with
them. A lot of us still owe money to our suppliers. And a lot
of people took out EIDL loans that they are going to be making
payments for 30 years because of this pandemic that put us in a
situation that was like no fault of our own. And in the best of
times before the pandemic, our profit margins were 6 to 9
percent in a really good year. Like 9 percent we were jumping
up and down with joy. And now we are seeing again higher
supplier costs. Myself and our company, we are committed to
much higher wages for our employees and to make this a
sustainable career for people to come back to, to lure them
back to work. I know a lot of people really wanted to stay in
the industry but they just simply could not afford to do it.
And that is an expensive commitment that we are willing to make
but we do need the support in order to sustain this industry
and make it a viable place for people to be employed.
Ms. DAVIDS. Yeah, thank you for that.
And just really quickly, Ms. Baruh, we are going to follow
up with you about some of the commentary that you made earlier.
Obviously, it is a huge issue if disregarded entities are
having hurdles the way they are to get access to the programs.
Thank you so much.
Chairman, I yield back.
Chairman PHILLIPS. Thank you, Ms. Davids.
And next I recognize the gentleman from Pennsylvania, Dan
Meuser, the Ranking Member of the Economic Growth, Tax, and
Capital Access Subcommittee. I recognize you now, Dan, for 5
minutes.
Mr. MEUSER. Thank you, Chairman Phillips. I appreciate that
very much, and Ranking Member, Van Duyne, for holding this
hearing. And I certainly thank all the witnesses for being with
us today which is very likely a nice day in Texas and North
Carolina and the other places that you are. So I appreciate it.
And for your testimony that has a touch of optimism to it but a
lot of reality because that is what business is all about. A
lot of reality. There is no fooling yourself in business. If
you do, you go out of business.
So Mr. Maguire, being that you are in Texas and Ms. Kumar,
you are in North Carolina, our experience here in Pennsylvania
has been pretty rough for small businesses, for restaurants. We
were at 25 percent capacity from January 4th through April 4th,
25 percent indoor capacity. On April 4th, we went to 50 percent
capacity. And on May 31st, we will go to 75 percent capacity.
Or check that. Since April 5th, we have been in 75 percent
capacity. So as you can see, restaurants in particular were hit
hardest. Our small businesses were hit pretty hard, too. But of
course, PPP was very, very important, and my guess is, and from
your testimonies and statements that you all were able to gain
PPP. Now, I also know that restaurants have some part-time
employees so the PPP was not very significant even though in
PPP 2 we increased it to a 2.5 percent ratio. So I know that
was helpful. But that is why the RRF was so essential, and we
allocated $27.5 billion, I believe. And with prioritization.
That is all well and good if there would have been enough to go
around, if you will. And there definitely was not. In my
district, I have virtually every restaurant I hear from has not
received the RRF, and not to point fingers but Republicans did
ask for an amendment of an added $20 billion to the RRF fund
which did not get passed, did not get accepted. Now, of course,
we are trying to find additional funds for the RRF which are
very, very important. So that will continue.
Now, I would like to just ask, let me start with Cheetie
Kumar, if I can. Ms. Kumar, you would describe your experience,
but where are you now with, you said the PPP was very helpful.
The RRF was there for you. How are you with a percentage of
where you would like to be or where you were prior to the
pandemic?
Ms. KUMAR. Thank you for that. Our company suffered a 70
percent reduction in revenue from the start of the pandemic
until now. We have been operating with indoor dining and
maintain our patio and we are seeing definitely increased
revenue but it is going to take us many, many, many months to
get back to the original level of revenue that we had before.
And so 3 or 4 weeks of good restaurant business does not really
cover 15 months of extreme losses. And it is going to be
probably, I mean, I do not foresee seeing a profit this year,
this calendar year. My husband is my partner and we are still
drawing a really conservative salary. We did not pay ourselves
at all until PPP 2, and we are projecting making maybe $45,000
a year as a guaranteed salary, if we are lucky, if there are no
more dips in the roller-coaster. We do not have amnesia about
what has happened already in the last year so we are kind of
bracing ourselves and holding onto that money and being very
conservative minded about how we spend that money in the coming
months.
Mr. MEUSER. Okay. And as far as government assistance, that
is somewhat in the rearview mirror now; right? I mean, we are
in recovery mode. And so now at least you do not want
government giving you any additional headwinds such as the
unemployment compensation we know is going until September. Is
that a negative, is that a little bit of a headwind for you, or
what are your thoughts there?
Ms. KUMAR. Well, for me in North Carolina, the average
unemployment benefit, even with the federal assistance, is less
than $500 a week. And for our restaurant, that is not a
competitive deterrent for people to come back to work. We offer
a living wage and we are proud to do so. For us personally, we
are not a low wage, hourly, part-time kind of restaurant.
Mr. MEUSER. That is great. I appreciate that. That is good.
That is very good to hear. It truly is.
Mr. Maguire, your thoughts on the UC supplement.
Chairman PHILLIPS. Mr. Meuser, your time has expired. I am
sorry.
Mr. MEUSER. I am sorry, Mr. Chairman. I yield back. Thank
you.
Chairman PHILLIPS. Okay. Thank you. Thank you, Dan.
And now I recognize the gentleman from Florida, Mr.
Donalds, for 5 minutes.
Mr. DONALDS. Thank you, Mr. Chairman. Thank you to the
Ranking Member.
First of all, I just want to associate myself with the
comments of Mr. Meuser and the Ranking Member specifically when
it comes to the fact that we did try to put more money into the
Restaurant Fund. And we all know what happened on the
Committee, so we will just move on.
But real quick, Mr. Maguire, I know Representative Meuser
had a question for you so I actually would like to just allow
you to give you time to answer Representative Meuser's previous
question.
Mr. MAGUIRE. The question regarding the headwind caused or
potentially caused by the UI benefit?
Mr. DONALDS. Yes.
Mr. MAGUIRE. Well, as I mentioned before, it is certainly a
component of what is contributing to the labor shortage. There
is no doubt about that. I can give you very specific examples
within my staff that has chosen to continue working or not
working and collecting the UI benefit. However, there are some
considerations there that are beyond their control and what I
have told them is, look, when I need you back to work, you are
going to have to come back to work or I cannot guarantee that I
am going to give you a job. But the bottom line is right now UI
is a huge contributor to the labor shortage. People moving out
of our industry is a huge contributor to the labor shortage.
People not being able to get childcare coverage to work the
hours we want them to is a huge contributor. And these issues
are ongoing and we are going to collectively find a way to work
together to overcome them. But the UI benefits certainly need
to be addressed.
Mr. DONALDS. Thanks for that.
Real quick, I want to jump into a couple of things because
obviously we could talk about what the programs have been. I
understand that they have been helpful. The enterprises have
been able to take advantage of it. But we are also having to
consider new policies that are coming down.
So Mr. Montana, I want to ask you real briefly, considering
the administration's putting out the idea of raising corporate
income taxes and also their policy that they wanted to put
through of raising the minimum wage, the federal minimum wage
to $15 an hour, what would be the impacts of that on your
enterprise?
Mr. MONTANA. Representative Donalds, thanks for the
question.
So as to the minimum wage, there is no one who works for Du
Nord Craft Spirits that makes the minimum wage. They all make
more than the minimum wage and that is on purpose because we
want people to have a living wage and it is in large part
because of that that we do not have any kind of a labor
shortage. We have people who are trying to come back. I think
people should like their jobs and not just have to work their
jobs.
The other side of that, when you talk about the tax
implications, one thing to keep in mind when you think about
it, I am coming to you from a distillery. This is a unique
perspective. Many distilleries are in a growth phase, which is
a polite way of saying that most of us lose money. And so when
we are looking at income taxes, well, that is not really where
we pay our taxes. We pay our taxes in excise taxes. So we pay a
tax just to be able to sell. And so that is where the tax
burden typically is for us. But I am not particularly concerned
about the percentages moving up or down. Here or there. That is
not what holds my business back. What is holding my business
back is that I am required by law to use middlemen and I do not
have a route to my customer. And so if someone is looking to
help out my business, a craft distillery, make it so that I can
sell just like anybody else directly to my customer. And the
day that that happens, you are going to see distilleries take
it to the next level and really thrive in this country.
Mr. DONALDS. All right.
Mr. Maguire, real quick, I have got about a minute left,
you stated in your written testimony that you have only raised
prices once in 6 years. You have had to raise them twice in the
last year. You have 52 seconds. Why?
Mr. MAGUIRE. Why have I had to raise them twice?
Mr. DONALDS. Yes, sir. Why?
Mr. MAGUIRE. Because of the unprecedented increases in our
product costs in the last 45 days. We did not see 10 to 15
percent increases on any of our product cost during the
pandemic outside of the paper and to-go supplies and the PPE
equipment and supplies. Our commodity pricing has gone
absolutely berserk in the last 2-1/2 months and really in the
last----
Mr. DONALDS. Mr. Maguire, real quick. Real quick because I
have got now 24 seconds. What have your suppliers said in
relation to these price increase?
Mr. MAGUIRE. Most of the suppliers are saying it is
happening at the manufacturing level and the manufacturing
level is happening because of labor shortages.
Mr. DONALDS. I yield back. Thank you, Mr. Maguire.
Chairman PHILLIPS. Thank you, Mr. Donalds.
Are there any other members that wish to continue to a
second round of questioning? If so, just raise your hand either
virtually or physically.
Nobody? Okay.
I want to thank our witnesses. I learned a lot from each of
you. Mr. Montana, having come from the distilling business, I
surely understand what that three-tier system does and does not
do, and I understand efficiencies and inefficiencies. To all of
you in hospitality, rest assured a great deal of empathy from
all of us. So I want to thank you. You have all endured a lot
over the last year and the effort just to get to this day is
nothing short of incredible to me. Your testimonies illuminated
the benefits and drawbacks of the SBA programs as they
currently operate and illuminated some ways that we can improve
them. Hopefully, we will not have to do this again to this
magnitude, but should we, we will be better prepared and we
have opportunities to improve existing programs, perpetual
programs as well. As the voice of small businesses in
Washington, this Committee has to work to improve these
programs to meet the needs of entrepreneurs better, plain and
simple.
So I look forward to working with fellow members of the
Subcommittee on a bipartisan basis to help find ways to make
these programs operate more effectively and more efficiently.
I would ask for unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, that is so ordered.
If there is no further business to come before the
Committee, we are now officially adjourned. Thanks, everybody.
[Whereupon, at 2:16 p.m., the Subcommittee was adjourned.]
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