You’ve got a location, a concept, and the perfect name for your new restaurant. Now you just need to get your paperwork in order. But it turns out that there’s a lot of paperwork! There are regulations to follow, restaurant licensing requirements to meet, and inspections to prepare for.
- But which rules apply to your business?
- What restaurant licenses and permits do you need to get your new operation off the ground?
- And where should you start?
There are quite a few formalities you’ll need to handle before you can open your doors and start serving food. You’ll need to register your business, get your tax documents in order, and make sure you’re following all the local zoning laws. Then you have to think about food safety, health codes, labor laws, and much more.
It’s a lot to think about. That’s why we put together a downloadable checklist to guide you on the primary certifications, permits, and licenses needed to open a restaurant. But first, let’s take a deeper look at the core things you must do to be in compliance with the rules and regulations for running a restaurant in the U.S. as well as in your specific state and city.
[If you’re launching a restaurant in Canada, start with these helpful resources instead.]
An Important Disclaimer First
While we are experts on restaurant operations and restaurant tech, we are not legal professionals. The contents of this article are meant entirely for informational purposes. Be sure to work closely with actual legal counsel every step of the way toward launching your restaurant so that you remain compliant with the rules and regulations in your local jurisdiction.
Restaurant Business Insurance
Let’s start with restaurant insurance, because everybody needs it. Not only that, but in a lot of cities and towns, you are required to have liability coverage in place before you can even apply for a business license. In addition, every state has specific rules about what type of insurance you’ll need.
Depending on the nature of your business, you may also have to meet specific coverage requirements that are set by your:
- Landlord
- Lenders
- Local licensing boards
An article from Farmer’s Insurance says that at a bare minimum, most restaurants will likely be required to carry the following coverage items in their policy:
- Property insurance
- Fire coverage
- Personal property coverage
- Business expense coverage
- Workers' compensation insurance
- Specialty insurance coverage
Additional coverage could be required depending on the nature of your business. You could need additional insurance coverage for things like:
- Liquor service
- Valet parking
- Food delivery
Get quotes from a few different insurance providers and find out exactly what kind of coverage you need based on your state, locality, and business model.
Restaurant Licenses and Permits Required To Open Your Business
You’ll need certain licenses and permits in order to be legally entitled to conduct business in the U.S., as well as in your state and locality. Be sure to consult with your legal counsel as you take these steps.
Here’s a quick breakdown of what you can expect from the process. (We’ll discuss liquor licensing in a separate section below.)
As noted above, acquiring a license to operate a restaurant in your city or town may require proof of liability insurance, and most particularly, of worker’s compensation insurance. Before you proceed to this step, you may be required to have an insurance policy in place, as noted above.
Federal Requirements
Employer Identification Number (EIN)
You’ll need an employer identification number (EIN) from the IRS in order to file your federal business income tax return. You can get this number directly from the IRS.
State Requirements
Legal Entity Formation
Before you can register or acquire state tax permits, you’ll need to legally form your business entity. In most cases, you’ll be registering your business as a limited liability corporation (LLC) with your department of revenue or the secretary of state’s office for your state. The Small Business Association (SBA) provides a directory where you can find the business registrar in your state.
Business Registration
Before you can obtain any local licenses, you’ll need to register your business with your state. You can do this by completing the tax and employer applications for your state. You will typically do this through your state’s department of revenue or through a related agency. You can use the same SBA directory noted above to find the right agency in your state.
Sales Tax Permits
In order for your business to collect sales tax on items sold, you will need to apply for a sales tax permit with your state. You can do this through either the department of revenue or the department of taxation in your state.
- If you do business in one of the following states (which don’t have a statewide sales tax), you may be exempt from this permit requirement.
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
If you operate in one of these states, however, you will want to pay close attention to local tax laws. Some counties and municipalities in the states listed above impose their own local sales tax.
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Sales Tax Resale Certificate
As a restaurant, your role is to collect sales tax when selling the final product to your customer. Because you are effectively acting as a middleman in the supply chain, a sales tax resale certificate allows you to purchase ingredients and supplies without paying sales tax on them. This exemption prevents double taxation, ensuring that sales tax is applied only once, when the final product reaches the end consumer, rather than at both the wholesale and retail stages.
Without an exemption, you and your customer would both be paying sales tax on the same item. Your restaurant would have to apply for a tax credit in order to be refunded this overpayment. But with the exemption, your customers pay 100% of the sales tax collected by your state.
Local Requirements
Once you are fully registered at the federal and state level, you’ll be qualified to apply for the local licenses you’ll need to operate.
General Business Operating Licenses
Many cities or counties will require you to carry a general business license. Depending on where you operate, you will need to apply for this license through your local township, city, or county government seat.
Zoning Permits
This is something you’ll want to take into consideration before you lock into a location. It’s important to know that the area you wish to operate in is properly zoned for commercial use and specifically for a restaurant business. Consult your local planning board or zoning department to be sure any location and building you choose is zoned for a commercial restaurant business.
Some localities may allow you to apply for a permit to transform a non-commercial building into a commercial building. However, in most localities, this building must still be in a zone that allows for commercial use of buildings.
Signage Permits
Most localities also have rules about the size, placement, and lighting you use to display your exterior signage. As long as you’re already in touch with your local planning or zoning department, make sure you have the right permitting for your signage, and be sure that you’re following all the rules.
Building Permits
Once you’ve secured the proper zoning and signage permits, you’ll also need the proper permits to do any construction on the building, including renovations, plumbing, and electrical wiring. These permits will also be issued by your municipality, usually through an office with a name like construction office, code enforcement department, or department of buildings.
It’s also worth noting that this office is typically responsible for approving your restaurant floor plan, so be sure to keep the lines of communication open as you refine your layout and building plans.
Fire Safety Permits
A fire safety permit indicates that your restaurant is in compliance with the local fire code. Fire safety inspection is required before you can receive this permit.
In many jurisdictions, fire inspection is already part of the building permitting process. That’s because a lot of municipalities will automatically trigger fire inspections as soon as you apply for building permits through your local construction office or code enforcement department. If this has not occurred, it will be up to you to contact your local fire marshal or fire prevention bureau.
In fact, this is really something you’ll want to do at an early stage in the process. You’ll want to consult your local fire marshal as you build or do renovations to make sure you’re following all the rules and adding all the required safety equipment. You don’t want to get halfway through your construction and find out that you need to do costly repairs.
Fire Safety Equipment Inspections
You will be required to install certain fire safety equipment. In most localities, you are also required to hire an approved fire safety vendor for installation as well as for routine system inspections. The frequency of these inspections may vary depending on the rules in your city, town, or county.
The system requirements are also different for every municipality and may also vary depending on your zoning area, but some of the common systems that you’ll need to have in place include:
- Specialized kitchen fire suppression systems
- Portable fire extinguishers
- Sufficient emergency exits, exit signage, and emergency lighting
- Smoke and heat detectors
Because these systems are usually installed by a third party, these will also need to be verified by a local fire inspector after installation.
Your municipality may not require any specific permitting for this type of safety equipment, but verification will be necessary before you can proceed to the next step, which is acquiring your certificate of occupancy.
Certificate of Occupancy (CO)
Once you’ve obtained all of the permits required, completed the physical work on your space, and passed all inspections, you’ll need a certificate of occupancy (CO). This certificate indicates that your building complies with all local building codes, zoning laws, and safety regulations.
In short, this certificate says that your building is safe to occupy and operate as a restaurant. In order to get this certificate, you’ll need to schedule and pass a number of industry-specific inspections and approvals — including building, fire, plumbing, and electrical inspections.
Once again, you’ll need to contact your municipality to find the right office for submitting your CO application, and again, it will usually have a name like construction office, code enforcement department, or department of buildings.
Food Health and Safety Certifications
The Food and Drug Administration (FDA) provides standards and guidelines for food health and safety, but the actual rules for your local area are determined by your state, county or city health department. That means permit and certification requirements can vary from one locality to another. If you’re not sure how to proceed, consult your legal counsel.
But you can anticipate that the following will be required:
- Food service establishment permit
- Food handler permits, training, and certification
- Certification of health department inspection and compliance with local sanitation standards and health codes
But again, the rules vary from one location to another. Get a deeper look at how you can ensure proper food safety training and health code compliance at your restaurant here.
Environmental Requirements
It’s also likely that there are a number of other local environmental regulations that you’ll need to comply with including proper waste management, wastewater disposal, and grease trap management. The agency that handles inspections and certification for compliance with these regulations can vary from one municipality to another.
Depending on the rules in your local municipality, you may need to contact the department of public works, department of environmental services, or the county or city health department.
Managing Your Business Vehicles
If you have vehicles designated for use in your business — whether for transport, delivery, or food service — there are some specialized rules you’ll need to follow and permits you’ll need to pull. As with the permits and licenses cited in the section above, the rules for operating vehicles as part of your business are different in every municipality.
But here are a few restaurant licenses and permits you will likely need in order to operate your vehicles for business use.
- Specialized commercial vehicle Insurance that covers vehicle-specific liabilities including theft, accidents, and (especially for food trucks) the use of specialized equipment onboard
And if you are using this vehicle for food service, you’ll also need to account for these additional requirements:
- Mobile business permits including street vending and parking permits, along with restrictions about where and when you can operate your vehicle
- Health and safety compliance based on local health department inspections, similar to those conducted in brick-and-mortar restaurants
- Fire safety inspections for food trucks with cooking equipment onboard, conducted by a local fire marshal, much like fire inspections in a physical restaurant
[Get a more detailed look at everything you need to know to start and run a food truck business.]
Employment and Labor Laws
Most of the licenses and permits above concern your restaurant’s physical space. Once that’s out of the way, it’s time to make sure all of your employment paperwork is in order. Compliance with employment and labor laws means that you need to be aligned with rules at the federal, state, and local levels. Speak with your legal counsel to make sure you understand which rules apply to you and that you have systems in place to comply with these rules.
Here are a few of the key documents and certifications you’ll likely need to account for:
Before Hiring Staff
- OSHA safety compliance: Your restaurant is required to follow rules and regulations set by OSHA (the Occupational Safety and Health Administration) for workplace safety in both your kitchen and dining room. There is no specific certification for compliance. Instead, your restaurant is required to know these standards, establish safe standardized procedures, train staff for compliance, and conduct independent audits.
At Hiring Time
- Form I-9: This form is used for employment eligibility verification. This is a mandatory federal document that must be completed for every new person you hire. The purpose of the I-9 form is to verify the identity of your employees and their legal right to work in the United States.
This is an important step for protecting both your business and your employees from fines and immigration enforcement actions. You can find the latest version of the I-9 form at the U.S. Citizenship and Immigration Services website.
- Anti-discrimination laws: Every state has a different set of statutes and protections against discrimination. These protections may prevent employers from excluding candidates for race, religion, creed, nationality, gender orientation, or sexual orientation — but the specific groups protected and the strength of the rules protecting them vary widely from state to state.
Check out Justia’s directory for more information about the anti-discrimination rules for hiring in your state. Make sure your employment procedures are in compliance.
Ongoing Compliance
The Fair Labor Standards Act (FLSA) is a set of federal rules that sets the baseline for certain compensation requirements, including:
- Minimum wage
- Overtime
- Tip pooling
Your restaurant is required, at a bare minimum, to meet these baseline requirements. However, if you operate in a state with a set of minimum standards that is greater than this baseline, you are required to follow the state-level requirements. You can find your state’s minimum standards using the U.S. Department of Labor directory of state labor laws.
Compliance with all federal, state, and local employment and labor laws can be a moving target. Fortunately, a lot of the top tech-based hiring and scheduling solutions are designed to keep you in compliance with little to no administrative hassle.
Liquor Licensing
We reserved a separate section for liquor licensing because of its complexity, and because you may need approval at the federal, state, and local levels in order to sell liquor in your restaurant. (Also remember that you’ll need liquor liability insurance.) Beyond that, here’s a quick look at the steps you’ll probably need to take.
- Apply for a liquor license with your city or county Alcoholic Beverage Control (ABC) Board.
- Get approval from your state Alcoholic Beverage Control (ABC) Board.
- File your Alcohol Dealer Registration (Form TTB F 5630.5d) with the federal government.
- If you plan to manufacture, import, or wholesale alcoholic beverages as part of your restaurant operation, you will also need a federal TTB Basic Permit.
Depending on the rules in your locality, there may also be specific licenses for selling only beer and wine as opposed to stocking a full bar of liquor.
There may also be zoning requirements and local quotas for where and how many liquor licenses a city may issue. If this quota has already been met in your locality, you may be able to purchase a liquor license from an existing owner. You’ll need to learn more about that process from your local ABC Board.
Getting Your Startup Paperwork in Order
We recognize that there are a lot of restaurant licensing requirements to take into account here. For most of these requirements, you will want to work closely alongside your legal counsel to make sure you’re doing everything right.
As you do work through these steps, you may want to refer to our handy downloadable checklist, where you can easily track all of the licenses needed to open a restaurant.
