[House Hearing, 117 Congress] [From the U.S. Government Publishing Office] A REVIEW OF THE SBA'S GRANT PROGRAMS ======================================================================= 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 ----------------------------------------------------------------------------------- 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.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]