Employee Retention Credit for Fast Food Restaurants

January 4, 2023
Written by Peter Anderson

ERTC for Fast Food Restaurants

If you own or operate a fast food restaurant, You're more than likely eligible for the employee retention tax credit (ERTC or ERC) from the government, even if you got the PPP loan.

The COVID-19 tax relief measure is meant to ease the burden for small businesses, and is only eligible for companies that have between 5 and 500 employees. Fill out the form below to quickly find out if you're eligible for an ERC loan that does not need to be paid back.

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Tax Relief for Restaurant Franchises

If your business is a fast food restaurant, there is a good chance that you are eligible for the Employee Retention Credit. The credit, which is a tax credit of sorts, will provide instant cash relief to your business. 

Specifically, it will allow your business to claim a generous cash reward on the wages that you have paid to your employees over the past year.

The Employee Retention Credit is a federal program designed to give small businesses a boost. Its most obvious benefit is that you won't have to pay extra taxes on wages that you have covered.

While the credit is not refundable, it can be claimed for up to one quarter of the year. The IRS has outlined several ways to calculate the credit.

To get started, you'll need to decide how many full-time employees you have. Full-time employees are defined as those who work at least 130 hours per month. Your company may qualify for a grant of up to $26,000 for each employee.

You'll also need to demonstrate that your business was affected by the pandemic. For example, you'll need to show that your restaurant suffered a significant drop in gross receipts.

Finally, the most prestigious ERC award goes to the aforementioned PPP. Whether you have a small business or a large corporation, the PPP will help you recover some of your losses from the recent wildfires in California. Depending on your needs, the program can provide you with a hefty cash reward.

Although the IRS has not yet announced the exact amount of the cash grant, estimates range from $20 billion to $100 billion. Those impacted by the California fires will have until December 15, 2020 to file their taxes or make payments.

COVID-19 relief measure

A recent survey of restaurant owners found that more than half of them do not expect to make it in the dark. In fact, more than 100,000 restaurants have gone out of business in the past year. For starters, restaurants are struggling to pay for the basics like paper goods and ingredients. The foodservice industry is among the industries hardest hit by the recession. Restaurants are also grappling with the specter of a foodborne illness. Many brands are having a tough time getting through the winter months.

This isn't the first time the restaurant industry has been in the spotlight. A few years ago, Congress passed a restaurant relief measure in the form of a stimulus package. But the stimulus package proved illusive, as many restaurants were unable to reopen during the initial forgiveness period. As a result, the industry is looking for a silver bullet. Luckily for them, a new slew of bills aimed at helping out the stricken industry has been introduced.

The $2 trillion aid bill is the most comprehensive package of its kind ever to hit Capitol Hill. It contains a number of noteworthy provisions, many of which are designed to boost the economy in the short term. Among them is the COVID-19 relief measure. Other notable parts of the plan include a flurry of tax cuts and the largest stimulus package since the Great Recession. Interestingly, Republicans are not exactly thrilled with the prospect of further deficit spending.

The bill also includes a $25 billion eviction moratorium and $15 billion for live venues. There are also a few stipulations to be fended off in the name of fiscal sanity.

Eligibility requirements

The Employee Retention Credit (ERC) is a tax credit that was created to help businesses retain employees. It can be useful for restaurants and hotels. However, before claiming the ERC, businesses should determine if they meet the eligibility requirements.

For the 2020 ERC, a restaurant was eligible if it had 100 or fewer full-time employees. They could receive $5,000 for each employee. In addition, a hotel would qualify if it had 100 or fewer full-time staff.

In 2021, the minimum number of full-time employees was raised to 500. This increased the wages that a mid-sized company can pay. If the amount of qualified wages paid to a full-time employee stayed the same in 2021, they are eligible to receive $7,000 in credits.

Employee retention credit is a refundable payroll tax credit that can reduce a business's federal quarterly payroll tax bill. A business can use the credit to offset qualified wages and health care expenses.

Businesses can claim the ERC even if a governmental shutdown is taking place. A restaurant that has normal operations, but has reduced gross receipts by more than 50%, is able to claim the credit. Hotels that have operated normally but have had a decrease in revenue are also able to apply for the credit.

The Employee Retention Tax Credit was designed to provide financial relief to restaurants and other businesses that have experienced a significant drop in gross receipts. It can help restaurateurs keep their staff employed by freeing up funds for other purposes.

As of August 2021, the IRS clarified the rules on qualifying for the ERC. Part-time employees are not counted towards the 100/500 employee threshold. Also, tipped wages are now considered part of the qualified wages and are subject to FICA taxes.


One of the more exciting challenges that restaurants face is keeping their staff happy and healthy. This is a challenge that can be solved by implementing the most sensible restaurant policies in the form of policies for staff, patrons, and food. The best way to accomplish this feat is to implement a restaurant insurance plan that covers the entire menu and the ancillary foodservice staff. A robust restaurant insurance plan can provide you with the peace of mind that you deserve and will reward you with a healthier bottom line. The perks of a solid restaurant insurance plan include the following: a no frills policy, the reassurance that you are covered for accidents and illnesses, no deductible, no maximum limits on hours of operation, and free access to a network of top quality professionals tasked with ensuring your peace of mind and keeping your restaurant on the road to success.

Impact on fast food restaurants

If your business is affected by the COVID-19 pandemic, you may be eligible to take advantage of the Employee Retention Credit. This credit provides relief for restaurant employers and can help keep your employees on the payroll during shutdowns. It is one of the most substantial tax credits available to the hospitality industry.

Restaurants can qualify for the credit if they can show that they have suffered a significant decline in gross receipts. The decline is calculated by reducing the percentage of total gross receipts by 20 percent. For example, if your restaurant's total gross receipts are $1 million in 2019, you will qualify for the credit if your gross receipts are less than $800,000 in 2020.

You can claim the credit retroactively, but you will have to file an amended payroll tax return to do so. Your restaurant can claim the credit for wages paid to eligible full-time employees during the three years prior to the date you filed your employment tax returns.

To qualify for the credit, you must count all your employees as "full-time". Generally, you will need to hire a minimum of 30 hours of full-time work per week.

You must also be sure to count your corporate office employees, too. You can only claim the credit for qualified wages you pay to full-time employees between March 13, 2020 and September 30, 2021. These wages can include health care costs, insurance premiums, and tips.

In addition to the employee retention credit, the government has introduced other programs that can be of benefit to restaurants. There is the Paycheck Protection Program, which is a federal loan program that can help your business keep employees on the payroll.