After a shutdown in the spring of 2020, the Golden West Café in Hampden muscled through the pandemic by adding outdoor seating, increasing wages and buying protective equipment for staff.
Those expenses and more will be covered by a $709,600 grant from the federal Restaurant Revitalization Fund. “It’s hopefully going to get us through the fall and winter,” said owner Sam Claassen.
In Mount Vernon, Patrick Hudson was anticipating a similar grant to pay off mounting debts to suppliers and utilities at The Local Oyster. Despite applying in time and being told he was eligible for $400,000 through the Small Business Administration grant program, his businesses received nothing.
The disparity between relief to Golden West and Local Oyster is painfully common in the Baltimore restaurant scene, where nearly two out of every three restaurants that applied for grants got nothing.
“If it wasn’t for that money, I don’t know what we’d be doing and I am heartbroken for all the restaurateurs looking for answers and funding,” Claassen said. “I certainly feel very fortunate.”
A review of financial data by Baltimore Fishbowl shows other stark and puzzling disparities. Restaurants of similar style and reputation saw vastly different outcomes: Maryland seafood legend Phillips received $5 million; Maryland seafood legend Faidley’s got zero.
Nearly six out of every 10 dollars went to four ZIP codes in Baltimore. Nearly $9 million of the $115.5 million distributed in the Baltimore area went to franchise operations such as Subway and Dunkin’ Donuts.
“I don’t have a problem with some of these big names or franchises getting money,” Hudson said. “It’s the scale that I have a problem with. It’s the shocking scale, inequitable scale. The fact that nobody at the SBA stood up and said this was wrong, that just blows my mind.”
The Restaurant Relief Fund was among several programs approved in Washington to help businesses during the pandemic, including the popular Paycheck Protection Program. Because of social distancing limits, decisions by local leaders to prohibit indoor eating, restaurants have been hit particularly hard.
Nationwide, the program received more than 278,000 eligible applications seeking $72.2 billion in aid. Officials say approximately 101,000 applications were funded, draining the entire $28.6 billion fund in a matter of weeks.
According to the federal data, 5,386 Maryland restaurants applied for some $1.3 billion. Only 2,024 applicants were paid, totaling just over a half-billion.
But the awards were all or nothing: restaurants got either everything they asked for, or zero — with no explanation of why.
Senator acknowledges concerns
“The Restaurant Revitalization Fund was a recognition that restaurants had been especially hard hit. That’s why I’m glad we included the fund as part of the American Rescue Plan,” said U.S. Sen Chris Van Hollen, a member of the Budget Committee that crafted the program. “But clearly the amount of funds there were insufficient to meet the need.”
He said he acknowledged concerns about how the funds were distributed, and is examining next steps.
Federal and regional officials from the Small Business Administration declined to participate in interviews for this story.
Damye Hahn manages the operations at the legendary Faidley’s Seafood in Lexington Market, and is part of the fourth generation of her family in the business. Faidley’s applied as soon as the grant portal opened, and because the restaurant is women- and veteran-owned, it was put in a priority group for processing.
But then plaintiffs mounted discrimination lawsuits saying the SBA should not prioritize certain groups. The agency dropped the effort, and halted payouts promised to nearly 3,000 restaurants affected by the lawsuits, including Faidley’s.
That meant Hahn, who originally was told funding was headed Faidley’s way, would end up with nothing.
“I paid 100 percent of my rent all the way through COVID. Every freaking penny. I was the only merchant in [Lexington Market] that did.” Hahn said. “I laid nobody off: they scrubbed walls, they refinished tables. We did everything we could to give them something to do. We took huge losses because we didn’t have anybody walking in the door, and we were hoping this relief would literally allow us to make up for the last year.”
The story is very different at another venerable eatery. Phillips Seafood Baltimore LLC received $5 million from the program. The crab and seafood chain brought in the most federal dollars in Baltimore, calling the payout “a huge lifeline.”
“Throughout the pandemic, Phillips has applied for all available assistance programs relating to the COVID crisis,” company spokesperson Michelle Torres said in a statement to Baltimore Fishbowl. “Since March of 2020, our locations in Baltimore and Ocean City have suffered huge revenue losses due to COVID-19 and the subsequent closures and restrictions throughout 2020 and into 2021. Due to the large size of our operations, and our location in tourist-centric areas, the impact to our business was catastrophic.”
Hahn, of Faidley’s, said the program has essentially picked winners and losers, with scant rationale, noting that she cannot compete with someone who “has that kind of money to reinvest in their businesses.”
“I don’t begrudge anyone that got anything in the grant program, but the reality was two thirds of us didn’t get the help,” she said. “When only one third do, and the numbers were very huge, I don’t think that is good for the overall restaurant business or the economy. They should have implemented it differently.”
Like Opening a Whole New Business
In addition to the Mount Vernon restaurant, Hudson runs a location in Arlington, Va., the True Chesapeake Oyster Co in Hampden and an oyster farm. Hudson described his frustration watching the process unfold.
“I applied as soon as the portal opened. I was there refreshing the screen and applied,” he said, noting that both of his Local Oyster restaurants were eligible for $400,000 apiece. “I applied, and I got the confirmation. I would check the website every day. It would say ‘processing,’ ‘processing,’ ‘processing.’ Then eventually I started hearing that the portal was going to close.”
Hudson said he was counting on the federal relief to pay bills and debt. He’s also behind on utilities and with his suppliers. He said the funds were crucial to get through the next six months and maybe break even.
The pandemic was a nuclear-scale shock to the Baltimore restaurant industry, in particular to those businesses starting out or growing.
Golden West Café employed more than 50 staffers in 2019, featuring monthly events for horror-film buffs, hosted “packed” drag bingo. It was pivotal in shaping the annual Maryland Vegan Restaurant Week.
But all that halted in March 2020, recalls Claassen, the owner. She closed the restaurant even ahead of Gov. Larry Hogan’s lockdown order, then eventually reopened for carry-out only before adding outdoor seating and finally reopening the inside to diners once all the staff was vaccinated.
Getting the restaurant reopened for indoor dining was akin to opening an entirely new business, she said. The restaurant increased its staff wages by $2 and provided hazard bonuses along the way. Claassen provides KN95 masks to all staff, and she pays employees for time off to get tested and quarantine if exposed to the coronavirus.
She is grateful for the help.
“Right now, in the midst of this Delta (variant) stuff, it’s going to get us hopefully through the fall and winter.” Claassen said. Grant money “is absolutely going to be spend on maintenance, payroll, rent. It’s going to be spent on utilities. It’s going to be spent on inventory.”
Recipients are not required to pay back the funding as long as the money is used no later than March 11, 2023 for “eligible uses.” Those uses include payroll expenses, mortgages or rent, utilities, the construction of outdoor seating, protective equipment and food costs, among others, according to the SBA.
Partial grants would have helped
But Hudson and Hahn questioned why selected awardees were fully funded rather than all eligible applicants received partial grants.
Hudson said if his Loyal Oyster received just a fraction of one of the multi-million dollar grants, it would mean a world of difference.
“I share their concerns about how the SBA distributed the funds,” Van Hollen said. “There are some restaurants that got a whole lot of money and others that got none at all. I think there could have been a better allocation method.”
In Baltimore, 58 percent of the $115.5 million awarded went to four Baltimore ZIP codes – 21202, 21230, 21201, and 21231 – encompassing areas downtown and the Inner Harbor, Fells Point and Federal Hill, according to federal data examined by Baltimore Fishbowl.
An additional $10 million in funds were distributed to recipients in the 21211 ZIP code, rounding out the top five in the city. The 21211 ZIP code includes the popular Hampden “Avenue” on which The Golden West Café is located.
Additionally, $8.9 million went to franchises such as Subway, Smoothie King and Dunkin Donuts. Subway franchises raked in a nearly $4 million in funds examined.
“Going forward we have two avenues before us,” Van Hollen said. “One is to work to replenish the fund and the other is the state of Maryland and local jurisdictions are able to use the funds they received for this purpose.”
Van Hollen and Sen. Ben Cardin, who chairs the Senate’s Committee on Small Businesses which has oversight over the SBA, both said they are working with lawmakers to add funds to the program.
At Faidley’s, Hahn said she would wait.
“I’m going to plug along day-by-day, the same way we do every day and hope that Congress does the right thing,” she said. “Honestly I’m hanging my hat on it hoping they do. I’m not quite sure what our next move is if they do nothing, but we’ll survive in some capacity.”