How to Open a Restaurant in California

So you’ve always dreamed of opening a restaurant in California. You’ve picked the perfect name, found the ideal location, met with local chefs and crafted your menu. But, before the first customer can be served and the accolades start pouring in, you must ensure that you comply with California’s restaurant laws.

Some of the important initial considerations include:

Forming a business entity to operate your restaurant

Limited liability business entities such as LLCs and corporations are most commonly used. LLCs are particularly popular because of their ease of operation and simplified record-keeping requirements. Owning a restaurant as a sole proprietor or a general partnership is uncommon because of the high potential liability inherent in the restaurant industry.

Securing a Lease

Unless you can afford to buy real estate outright, you will have to negotiate a lease. Location is one of the most critical aspects of your new venture – many restaurants fail solely due to a bad location. Many restaurant owners request prorated rent in a commercial lease agreement, allowing for a scenario in which rent payments are lowest in the early years of the lease, providing some financial flexibility for a growing business that might be strapped for liquidity early in its life.        

Licenses and Permits

Due to safety concerns, establishing and operating a restaurant in California requires a number of licenses and permits. You will need a business license to open your restaurant and, if you anticipate a lot of business, you may need a crowd control permit from your local fire department. Each of your employees who handle food will need a California Food Handler Card from a state-certified organization obtained through online training and assessment for each person. If you are operating in Riverside, San Bernardino, or San Diego, they run their own food handling licensing systems, so check with your local authorities to ensure you are in full compliance. And of course, if you plan on serving alcohol, you will need a liquor license from the California Department of Alcoholic Beverage Control. An experienced lawyer can ensure that you are well within your legal operating bounds for all of these license requirements.

The California Retail Food Code

Designed to protect both the public and your employees, the CRFC imposes a number of health and safety regulations. Regular inspections, some of which are unannounced, ensure that you are up to code with your local health department. If you should fail these inspections, your establishment will be shut down until it can operate within the CRFC code guidelines.

Liability and Insurance

The high potential liability in the restaurant industry mandates that you must purchase appropriate insurance policies. At the very least, you will need standard insurance policies covering fire, theft, property damage and personal injury.  All of these policies need to be written in a manner that takes into account the specific risks of operating in the restaurant industry.

Labor Law Compliance

Hiring a wait staff, chefs, busboys, hostesses – you are no doubt going to have to deal with both Federal and State labor laws. Labor laws are particularly important in the restaurant industry because of high employee turnover, wage disputes, tips and overtime issues -- even the hiring process itself is regulated. There are some questions you simply cannot ask a prospective employee in an application or a job interview which is why it is important to have solid legal footing before even opening for business and issuing your first paychecks.

California Lawyers & Attorneys By City


How Priori Can Help

A Priori restaurant lawyer can help you select and establish your business entity, secure necessary licenses and permits, and advise you on how to comply with health, safety, and labor regulations. It also is important to have a lawyer review, or even help draft, your restaurant’s real estate lease and insurance policies.

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