The Restaurant Revitalization Fund was supposed to help small businesses. How did a huge airport concessions conglomerate get a piece of the pie?

by Jessica Fu08.12.2021, 1:37pm

Travelers dining at Forno Magico restaurant in Newark International Airport, Newark, New Jersey, USA. (Newark, USA – May 11, 2017).
Relief was limited to companies that operate 20 or fewer locations. OTG Management—the company responsible for installing iPads at airports across the country—operates more than 350. It got a $10 million RRF grant anyway.
When lawmakers created the Restaurant Revitalization Fund (RRF) in March—a $28.6 billion pot of money meant to provide financial relief to the beleaguered hospitality industry—they made a point to limit the program to small businesses. Only companies that own or operate 20 or fewer locations were eligible to apply, even if some locations operated under different names or brands. However, it appears that one the country’s biggest airport concessions operators was able to get an RRF grant, in a potential violation of these rules.
Per data released by the Small Business Administration (SBA) last month, a company called OTG DCA Venture II LLC received $10 million from the relief program, making it one of just 66 restaurant companies that were able to obtain the maximum grant possible. (For comparison, about 100,000 restaurants received any amount of relief, and over 270,000 applicants got turned away empty-handed.)
We also found that another airport concessions company, called High Flying Foods, was able to receive almost $30 million in grants, nearly triple the program limit.
You might not be familiar with this company by name, but if you’ve ever transited through a major hub, chances are you’ve come across its restaurants. That’s because OTG DCA Venture II is a subsidiary of OTG Management, one of the biggest airport restaurant operators in North America, boasting more than 350 restaurant locations across the U.S. and Canada, according to the company’s own business and court filings. (OTG Management gained notoriety last week for charging $28 for beer at LGA; it also happens to be the company responsible for installing thousands of iPads at airports across the country.)
To be clear, this does not appear to be an instance of franchising, where an independent company licenses the brand of a well-known company, like McDonald’s or Taco Bell. In 2014, OTG Management registered OTG DCA Ventures II to conduct business in Virginia, where Reagan National Airport airport is located; additionally, an employee of OTG Management filed the layoff notice for OTG DCA Venture II employees during the onset of the pandemic last March. In a lawsuit filed against its insurance company over coverage for pandemic-related losses in January 2021, OTG DCA Venture II was disclosed as a subsidiary of the “ultimate parent company” OTG Management.
The Counter made multiple attempts to reach OTG Management and get clarity on the RRF grant—whether OTG DCA Ventures II, which self-reported as a subsidiary as recently as January 2021, may have been sold to a third party, potentially qualifying it for RRF relief. The company did not respond.
These examples also raise questions about what measures SBA took to verify the eligibility of grant recipients, especially those which received the biggest or multiple awards.
The award isn’t the only questionable payment in the SBA data. We also found that another airport concessions company, called High Flying Foods, was able to receive almost $30 million in grants, nearly triple the program limit. It collected awards through five separate subsidiary companies, each sharing the same business address and management. When asked about this, High Flying Foods president Kevin Westlye said in an email that the overpayment was due to a technical issue on SBA’s application form, and that the company had “returned the excess funds.” When asked to verify that the company had returned funds, or show exactly how much was returned, Westlye did not respond. (Update: After the publication of this article, Westlye emailed a comment to The Counter, but did not specify exactly how much the company returned to SBA.)
While the airport concessions companies listed in our story may be just two incidents of eyebrow-raising RRF grants, the cumulative value of the relief they received equals a whopping $40 million. For comparison, the average program recipient got slightly less than $300,000. These examples also raise questions about what measures SBA took to verify the eligibility of grant recipients, especially those which received the biggest or multiple awards.
SBA did not respond to a question about how it verified whether RRF applicants accurately disclosed the number of locations they had, or whether they had applied for multiple grants under separate subsidiaries.
For now, those 270,000 applicants who haven’t received RRF grants remain at the mercy of Congress to replenish the fund—a possibility that remains highly uncertain.
“Congress established need-based eligibility requirements,” an SBA spokesperson said in an email to The Counter. “The SBA is implementing this program as Congress intended and [has] even layered on additional set-asides for the smallest, hardest hit food and beverage businesses in America.” The set-asides refer to funding reserved for applicants with revenue that falls under certain thresholds.
SBA also did not respond to a question about how it intends to redistribute excess funds that have been returned to the program, if at all. One of the persistent concerns that restaurant owners have raised about the RRF program is that it didn’t provide enough aid to the industry as a whole. Its funding was depleted rapidly, most applicants got no aid at all, and the program’s rocky rollout led many businesses to complain that the distribution process was discriminatory.
For now, those 270,000 applicants who haven’t received RRF grants remain at the mercy of Congress to replenish the fund—a possibility that remains highly uncertain. Just last week, Senator Rand Paul, a Republican from Kentucky, blocked a bipartisan Senate move to approve an additional $48 billion in funding, arguing that the aid would only incentivize states to implement more pandemic restrictions in the future.
“You reward the Democrat governors who shut these restaurants down, guess what?” said Paul, referring to various social distancing restrictions meant to reduce the spread of Covid-19. “They’ll shut them down longer.”

Leave a comment

Your email address will not be published. Required fields are marked *