What the CARES Act Means for Restaurants

cares act

The outbreak of COVID-19, and the effects of the public and government response, is impacting all businesses, but it’s severely affecting the hard-working owners, operators, farmers, delivery drivers, staff, and just about everyone in the food business. Closures of non-essential businesses and shelter-in-place measures have forced restaurants to either close or shift completely to takeout or delivery. This has created substantial losses for restaurants, with some regions seeing a 75% decrease in sales over a very short period of time.

The U.S. government has enacted a new law designed to provide financial relief to individuals and businesses during the COVID-19 crisis. Here’s what restaurant owners and operators need to know about the CARES Act.

Resource: Planning restaurant finances during COVID-19 is complicated. Along with this page, we’ve created a free Guide to Restaurant Finances During COVID-19. This guide helps you calculate Paycheck Protection Loans, your P&L statement, a budget template, and more.

Download COVID-19 Finance Resources
part one

Part one

The Cares Act


This is for informational purposes only and is not legal advice. If you have specific legal or tax questions, you should consult your attorney or tax advisor, as appropriate. Information regarding the Employee Retention Credit, Deferment of Payment of Employer Payroll Taxes, and eligibility and participation in Expanded Unemployment Insurance programs are subject to eligibility. Toast is not affiliated with the United States Small Business Administration (“SBA”), and does not act as a lender or referral agent for SBA lenders. SBA loan programs are subject to eligibility. Please consult with a licensed representative, counselor for the SBA or a licensed SBA lender for additional information.

Last updated on 4/3/2020

What is the cares act?

In an effort to address the economic impact caused by the COVID-19 health crisis, the U.S. federal government passed a stimulus bill on March 27, 2020, called the “Coronavirus Aid, Relief, and Economic Security Act” (“CARES Act”).

The CARES Act is aimed at providing financial relief to both individuals and businesses that have experienced economic hardship created by this crisis. This stimulus package can provide restaurants with funding to help with the substantial losses caused by COVID-19 social distancing and required shelter-in-place measures.

CARES Act Summary

The CARES Act will provide two trillion dollars in relief through multiple initiatives: a lending program for small businesses, unemployment support for gig economy workers, aid for the healthcare system, tax relief for businesses and individuals, and a fund dedicated to industries that have been severely impacted.

The CARES Act includes the following:

  • The Paycheck Protection Program, which will provide small businesses — including small restaurant businesses — with $349 billion in 100% federally guaranteed loans called Paycheck Protection Loans (“PPLs”). For the purposes of PPLs, small businesses are defined as businesses that employ not more than 500 employees (subject to some exceptions for non-restaurants). We’ve provided more content on PPLs below because this section of the CARES Act is targeted at relief that will be particularly helpful for restaurants.

  • Tax relief for businesses and individuals, including the delay of employer Social Security payroll taxes and increased interest deductions.

  • Unemployment compensation for gig economy workers who would not otherwise be covered by state unemployment compensation rules or if a gig economy worker has maxed out their state unemployment compensation.

  • Aid to the healthcare industry, including changes made to Health Savings Accounts.

  • A fund that allows air carriers and businesses important to national security to get cash through loans the U.S. Treasury can make (called the Exchange Stabilization Fund).

part two

Part two

Paycheck Protection Program

As of April 16th, the Paycheck Protection Program has run out of money and banks are no longer processing new applications. The SBA is also no longer accepting new applications for Economic Injury Disaster Loans. We are continuously evaluating related developments and will provide updates as circumstances change.

The Paycheck Protection Program is one of the core pieces of the CARES Act that will provide small businesses with $349B in 100% federally guaranteed loans called Paycheck Protection Loans (“PPLs”). The goal of the program is to prevent small business workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. A PPL may provide much-needed relief to help cover payroll, interest payments on a mortgage, rent, or utilities. PPL amounts used for the aforementioned expenses may be eligible to be forgiven (more details below).

The estimated maximum amount a small business can borrow through a PPL will be based off of monthly payroll costs, and all are subject to a $10M cap:

For non-seasonal businesses operating between February 15, 2019 and June 30, 2019: Average monthly payroll costs incurred during the one year period before the loan is made, multiplied by 2.5, plus the outstanding balance of any EIDL that you would like to refinance with the PPL and that you received between January 31, 2020 and April 3, 2020.

For seasonal businesses operating between February 15, 2019 and June 30, 2019: At your option, either the average monthly payroll costs for the 12-week period beginning on February 15, 2019 or between March 1, 2019 and June 30, 2019, multiplied by 2.5, plus the outstanding balance of any EIDL that you would like to refinance with the PPL and that you received between January 31, 2020 and April 3, 2020.

For businesses not operational in 2019 (upon request): Average monthly payroll costs incurred during January and February 2020, multiplied by 2.5, plus the outstanding balance of any EIDL that you would like to refinance with the PPL and that you received between January 31, 2020 and April 3, 2020.

Payroll costs are defined in the list below and are prorated for February 15, 2020 to June 30, 2020, meaning payroll costs incurred before or after these dates will not be counted.

  • Salary, wage, commission or similar compensation

  • Cash tip or equivalent

  • Payments for vacation, sick, family, or medical leave

  • Allowance for dismissal or separation

  • Payment for group health care benefits (including insurance premiums)

  • Retirement benefits

  • State and local taxes assessed on employee compensation

  • Compensation to sole props or independent contractors (including commission-based compensation) up to $100K

There are a few things that are excluded from payroll costs, including individual employee compensation in excess of $100K (pro-rated for February 15, 2020 to June 30, 2020), certain federal taxes, compensation to employees whose principal place of residence is outside the U.S., and sick or family leave wages if credit is allowed under the FFA.

Any business that wants to apply for a PPL needs to meet the following eligibility criteria:

  • You must be a small business that employs not more than 500 employees (subject to a few exceptions that don’t apply to restaurants). To note, a restaurant or foodservice business that has more than 500 employees may be eligible to receive a loan at a location that employs 500 or less employees if the business operates under a North American Industry Classification System code beginning with 72

  • If you are a franchisee, you must be listed here: SBA Franchise Directory

  • Sole proprietorships (and independent contractors and eligible self-employed individuals) will need to provide documentation to substantiate eligibility (payroll processor record, payroll tax filings, or 1099-MISCs, or income and expenses from the sole proprietorship)

  • The business must have been operational on February 15, 2020, and had employees to whom it paid salaries and payroll taxes, or paid independent contractors

A PPL loan can be used for:

  • Payroll costs (as defined above)

  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums

  • Payments of interest on any mortgage obligation

  • Rent payments

  • Utility payments

  • Interest on any other debt obligations that were incurred before February 15, 2020

  • Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020

A PPL is eligible to be forgiven if used for payroll costs (as defined above), interest on a mortgage (but not principal), rent, and payment on utilities (more on this below). Notably, the Treasury recently announced that potentially 75% of the forgiven amount will need to be for payroll costs.

The Treasury also announced that PPLs will have a maturity of 2 years, an interest rate of 1.00%, and loan payments will deferred for six months. The CARES Act stated that PPLs would have a maximum maturity of 10 years from the date as of which a small business applies for forgiveness and a maximum interest rate of 4%.

PPLs require no collateral or personal guarantees, don’t include any recourse against any individual member, shareholder, or partner for nonpayment, and don’t require that the borrower have no other available credit. They also have no guaranty or other fees (payable by business or lender), unlike other SBA 7(a) loan programs.

When you apply for a PPL, you will need to self-certify that:

  • The business was in operation on February 15, 2020 and had employees that were paid salaries and payroll taxes (or paid independent contractors, as reported on a form 1099-MISC)

  • You need the loan to support your ongoing operations due to the uncertainty of current economic conditions

  • Funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. If the funds are knowingly used for unauthorized purposes, the government can hold you legally liable.

  • Documentation verifying the number of full-time equivalent employees on payroll as well as the dollar amount of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight week period following the loan being provided

  • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Not more than 25% of forgiven amount may be for non-payroll costs

  • Information provided in the application and the information provided in all supporting documents and forms is true and accurate in all material aspects

  • You acknowledge that the lender will confirm the eligible loan amount using tax documents that you have submitted and you confirm that the tax documents you submit are identical to those submitted to the IRS

  • During the period beginning on February 15, 2020 and ending on December 31, 2020, you have not received PPLs or other certain SBA loans for the same purpose and are duplicative of amounts applied for or received under a covered loan

To learn more about what the Treasury has recently released with regards to the Paycheck Protection Program, see here: https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf

part three

Part three

Changes to EIDLS and Financing

In addition to the Paycheck Protection Program providing funding through PPLs to small businesses, the CARES Act has made changes to the Economic Injury Disaster Loan (EIDL) eligibility requirements that could be beneficial for restaurants, especially since applying for a PPL is not yet possible. You can learn more about how to apply for an EIDL here.

The CARES Act has waived certain standard EIDL requirements to benefit businesses experiencing substantial economic hardship due to COVID-19. Unlike typical EIDLs, a COVID-19 impacted small business is not required to be unable to obtain credit elsewhere, to provide collateral or a personal guaranty, except for loans in excess of $200K (which will require a personal guaranty by an owner), or to be in operation for one year prior to the disaster provided the business was in operation by January 31, 2020. Also, the business is not required to provide tax returns to demonstrate an ability to repay.

Generally, the following eligibility criteria for businesses applying for EIDL still apply:

  • The business must be physically located within a state declared a disaster area by the SBA (businesses in all 50 states are eligible to apply)

  • The business must have suffered, or is likely to suffer, substantial economic injury as a result of the disaster

  • The business must have good credit and an ability to repay

  • Small businesses with not more than 500 employees (although this requirement has been relaxed from traditional sizing requirements)

changes to eidls

The CARES Act makes it possible for small businesses that apply for an EIDL between January 31, 2020 and December 31, 2020 to request a grant of up to $10K. The small business will receive the grant within three days of applying for an EIDL, assuming the small business meets the eligibility requirements for an EIDL. The business will not need to repay the grant, even if the EIDL application is later denied. Please note that as of April 16th, the SBA is no longer accepting new applications for EIDLs. We are continuously evaluating related developments and will provide updates as circumstances change.

The grant funding can be used for any purpose that any COVID-19 related substantial economic hardship that an EIDL could be used for, including:

  • Providing paid sick leave to employees unable to work due to COVID-19

  • Maintaining payroll to retain employees during business disruptions or substantial slowdowns

  • Meeting increased costs to obtain materials unavailable from the the original source due to interrupted supply chains

  • Making rent or mortgage payments

  • Repaying obligations that cannot be met due to revenue losses

Small businesses can apply for an EIDL in addition to a PPL, provided the loans are not used for the same purpose. A small business that received an EIDL between January 31, 2020 and April 3, 2020 can refinance their EIDL into a PPL. Refinancing from an EIDL to a PPL could be beneficial because PPL amounts used for specific purposes during the eight weeks after the loan is made can be forgiven. For example, if a business receives a $100,000 EIDL in February to use for payroll costs through the summer, the business could refinance the balance of the EIDL into a PPL and be eligible to have the portion of the loan spent on payroll costs for the next eight weeks forgiven. Just keep in mind, if you have received an advance grant in connection with your EIDL (as described above, up to $10,000) and used it for payroll costs, that amount will be reduced from the amount available to be forgiven.

There are a few things to consider when deciding whether to refinance an EIDL into a PPL:

  • EIDLs allow you to defer principal and interest payments for one years, whereas you can only defer PPLs for six months.

  • EIDLs have a maximum term of 30 years (based on the financial condition of the borrower), while PPLs have a maturity of two years.

  • If a business receives the EIDL grant (up to $10K) and later refinances the outstanding balance of the EIDL into a PPL (available for those who received an EIDL between January 31, 2020 and April 3, 2020), the amount of the grant that is spent on payroll costs will be subtracted from the amount forgive.

Learn more about an EIDL here or apply now through the SBA here.

part four

Part four

Paycheck Protection Loan Forgiveness

Loan amounts used for the specific purposes below during the first eight weeks after the PPL is made may be forgiven (meaning you do not need to pay them back):

  • Payroll costs (as defined above)

  • Interest on a mortgage (but not principal payments or prepayments)

  • Rent

  • Payments on utilities (electricity, gas, water, telephone, transportation, or internet)

Notably, it was recently announced that at least 75% of the forgiven amount must have been used for payroll.

If you use your entire loan for costs that are eligible for forgiveness within the first 8-weeks, it will be forgiven (provided it isn’t reduced for any of the reduction reasons below).

The amount eligible for forgiveness will be reduced if:

  • The business has fewer employees compared to the prior year (described below); or

  • Wages for employees are reduced by more than 25% vs. most recent full quarter

The amount forgiven will not be reduced if a small business re-hires workers previously laid off or eliminates the reduction in wages by June 30, 2020.

If a small business has fewer employees compared to the prior year, the amount eligible to be forgiven will be reduced by the following.

  • Average monthly payroll costs X average number of full-time equivalent employees (FTEs) per month for the eight week period from the time the loan is recieved ÷

    • Option 1: Average number of FTEs per month from February 15, 2019 to June 30, 2019

    • Option 2: Average number of FTEs per month from January 1, 2020 to February 29, 2020

    • For seasonal employers: Average number of FTEs per month from February 15, 2019 to June 30, 2019

If, between February 15, 2020 and June 30, 2020, a small business reduces any employee’s salary or wages by more than 25% of what they received during the prior full quarter that they were employed, the amount eligible to be forgiven will be reduced by the dollar amount of the wage cut that is in excess of 25%.

Looking to apply for a PPL or EIDL? As of April 16th, the Paycheck Protection Program has run out of money and banks are no longer processing new applications. The SBA is also no longer accepting new applications for Economic Injury Disaster Loans. We are continuously evaluating related developments and will provide updates as circumstances change.

We’re updating this page with new information as it comes. Subscribe below to get notified.

part five

Part five

What The eMPLOYEE rETENTION cREDIT Means for Restaurants

The Employee Retention Credit is available to eligible employers in an effort to encourage businesses to keep employees on their payroll throughout the COVID-19 crisis. The credit allows businesses to take a reimbursed tax credit of up to 50% of the first $10,000 in qualified wages for each employee, for each calendar quarter.

What types of businesses does this credit apply to?

One of the most beneficial elements of this tax benefit is that it applies to almost all types of businesses, regardless of size, including tax-exempt organizations. The only individuals who are not able to take advantage of this credit are state and local governmental entities, and any businesses who receives a SBA loan.

Who is eligible to receive this credit?

To be eligible, an employer must have been in business during 2020 and have had partial or full suspension of their business activity due to shut-down orders by their applicable jurisdiction; or in a 2019/2020 calendar quarter comparison, starting with the first quarter of 2020, have experienced less than a 50% reduction in gross receipts as compared to gross receipts from the first quarter of 2019, until the end of any applicable subsequent calendar quarter comparisons where an employer’s gross receipts are greater than 80% in comparison to the same calendar quarter in the prior year.

What types of taxes does this credit apply to?

This credit applies to Social Security payroll and Railroad Retirement Tax Act taxes.

changes to eidls

What types of wages can be included in determining qualified wages?

Qualified wages and compensation consist of the salary, hourly wage, tips, and etc., that an employer generally pays to their employees for work performed. The wages must be paid after March 12, 2020, and before January 1, 2021. In addition, under this benefit, the value of health plan benefits can also be included in determining the amount of wages.

How much of a credit can an employer take per employee?

Employers are able to take a credit each quarter of up to 50% of the first $10,000 of qualified wages for each employee. This $10,000 limit applies to wages that an employee earns over the course of all calendar quarters.

How many employees can an employer receive this credit for?

For employers who had 100 or fewer full-time employees in 2019:

If a business had 100 or fewer full-time employees in 2019, the employer can obtain credit for their employees regardless of whether an employee worked during the crisis. This means that an employer will still receive the credit, regardless of interruptions to the business.

For employers who had more than 100 full-time employees in 2019:

If a business had more than 100 full-time employees in 2019, the credit is applicable only to employees who were not providing services for the employer during the calendar quarter due to COVID-19 prohibitions.

How do I receive my credit?

Employers can immediately obtain the reimbursement by reducing the amount of employee-withheld payroll taxes that they are required to deposit, by the amount of the credit they are eligible for.Employers can also submit a Form 7200 to apply for an advance of the credit.

part six

Part six

Deferral of Social Security Payroll Tax Payments

Employers are able to defer the payment of their share of the Social Security Payroll taxes until the end of 2022 in an effort to reduce the financial burden employers are currently facing during the COVID-19 crisis.

What wages can this tax deferral apply to?

This provision applies only to wages paid on March 27, 2020, and before January 1, 2021. The tax must also only be attributable to wages that were paid in 2020.

How much of the tax payment can be deferred?

Employers are permitted to defer payment of half of their share of Social Security payroll taxes to December 31, 2021, and pay the other half by December 31, 2022.

part seven

Part seven

Expanded Unemployment Insurance Assistance

Along with the passage of business tax credits and deferral of social security payments, Title II of the CARES Act made significant contributions and additions to unemployment insurance benefits programs and eligibility.

Pandemic Unemployment Assistance Program

The Pandemic Unemployment Assistance Program (PUA) is a temporary benefit program geared towards providing unemployment insurance benefits to individuals who do not qualify for other unemployment insurance benefits, but who have found themselves unable to work due to the COVID-19 crisis.

When does the PUA Program go into effect?

Benefits under the program are available from January 27, 2020, until December 31, 2020, or until the inability to work due to the COVID-19 crisis ends,if earlier.

Who can obtain benefits under the PUA Program?

To apply for the program, applicants must self-certify that they are unemployed, unable, or unavailable to work due to COVID-19 related reasons. These reasons can include: self-quarantining to protect from exposure, displaying symptoms indicating an individual has the virus, exposure to COVID-19 positive individual(s), leaving work to provide full-time care for children who are unable to attend schools or to family or household members who have contracted the virus, and/or have received a positive diagnosis of COVID-19, and etc.

What new categories of individuals are eligible for UI benefits under this program?

Under the new program, self-employed individuals and independent contractors are now eligible to participate in these programs. Individuals who may not otherwise be eligible for benefits due to an insufficient work history may also qualify for benefits under this program.

Are any individuals ineligible for participation in the program?

Those who are able to participate in telework or who are receiving paid sick leave or other paid leave benefits are not eligible to participate in this program.

Federal Pandemic Unemployment Compensation

In addition to providing eligibility to obtain unemployment insurance benefits to new subsets of workers, individuals who are receiving unemployment insurance benefits in a traditional UI program or pursuant to the new PUA program may also be able to obtain an additional emergency increase of $600 per week, for up to four months.

Pandemic Emergency Compensation Program

Pursuant to the majority of state unemployment insurance laws, recipients of UI benefits can generally seek assistance for up to 26 weeks. The Pandemic Emergency Compensation Program expands that timeline for assistance by providing an additional 13 weeks of unemployment insurance benefits to eligible individuals.

Who is eligible to obtain the additional 13 weeks of unemployment insurance benefits?

In order to obtain the additional time, individuals must not be able to obtain other forms of UI compensation by an applicable state, federal, or Canadian program, and the individual must also be actively seeking employment.

Can recipients seek the additional 13 weeks of UI benefits if they are receiving the additional $600 weekly benefit?

Yes. While recipients must generally be able to work and actively seek employment opportunities in order to qualify for unemployment insurance benefits, the CARES Act permits individuals receiving the $600 stipend to also seek this benefit concurrently, subject to state law.

Expanded unemployemnt

Waiver of One-Week Waiting Period

A number of states typically require a one-week waiting period before unemployment insurance benefits are paid to recipients. Pursuant to Title II, the federal government will agree to provide funds to states that would mitigate the cost of that one-week waiting period, on the condition that states agree to waive the waiting period.

Temporary Compensation Program Funding

Finally, the Act provides that the federal government will reimburse certain start-up costs for the creation of short-term compensation programs, subject to state law. The focus of these short-term programs should be to provide prorated unemployment insurance benefits to employees so that businesses are incentivized to reduce employee hours rather than lay off staff.

part eight

Part eight

Resources to manage your restaurant's finances

Whether they're planning to remain open for takeout and delivery, many restaurants are managing their current business financials and planning for the future during the COVID-19 health crisis.

As you’re calculating expenses, think through where you might be able to cut back. Can you ask your landlord for rent forgiveness this month? See below for tips on this. Can you ask your bank and financial partners if they're able to provide additional support.

To analyze your restaurant’s finances, download this free Excel sheet or use this free Google sheet with tabs for:

  • Paycheck Protection Loan Calculator: Calculate the estimated maximum PPL available based on payroll expenses.

  • Profit and Loss Statement Template: Generate P&L statements for a consistent time frame, either weekly, monthly, or quarterly, to track income earned and expenses paid.

  • Restaurant Budget Template: Lay out all of your operating costs to create a restaurant budget for your specific situation. Some costs may be negotiable, such as rent with your landlord.

  • Restaurant Balance Sheet Template: List out your assets, liabilities, and equity at a given point in time, and forecast short- and long-term cash flow.

  • Overhead Rate Calculator: Calculate the cost of running your business on a per-hour basis, based on indirect business costs.

  • Labor, COGS, and Prime Cost Calculator: Analyze prime cost, the sum of labor cost and cost of goods sold, compared to your gross sales in a given time period.

Download for Free

Don’t have Excel? Use this Google Sheet instead. Don’t forget to click File > Make a Copy for your own editable templates.

part nine

Part nine


Social distancing and government restrictions have forced restaurants to either close or shift completely to takeout or delivery. This has created substantial losses for restaurants all over the country.

Due to the declining sales, many restaurants will have trouble making rent. In several cities, rather than offering relief with a rent moratorium, businesses are encouraged to contact their landlord directly.

Asking for rent relief addressed to building owners may provide restaurant owners with the ability to continue to pay staff who rely on a paycheck for essentials and at the same time continue to support the community.

Rent relief is a lifeline for struggling businesses. Restaurants should review their lease contract to see if there are any provisions related to epidemics or pandemics. Often, the landlord-tenant partnership is amenable to flexibility in times of crisis if there aren’t any provisions.

There are several options for rent relief that you can propose to your landlord. Some examples include:

  • A temporary break on the rent bill (for example, a percentage off)

  • Delayed payment (rent that eventually gets paid on the back end of a lease)

  • Flexible payment option (for example, breaks up the lump sum owed or is paid as a percentage of sales as business picks up)

We’ve drafted an email template you can use to send your landlord a request for rent relief if you have experienced hardship due to the impact of COVID-19.

Email your landlord requesting rent relief.

pitch your landlord