Operating a restaurant requires more than acquiring startup cash, finding a location, and writing a menu. It takes obtaining various licenses and permits to ensure compliance with local, state, and federal regulations. Getting the writs and proofs you need for each restaurant license takes time, so it's important to start the process as early as possible.
We explain what you can expect with each of the following business licenses and permits as you work towards opening your restaurant.
What Licenses and Permits Are Required to Start a Restaurant?
There are some licenses and permits that are necessary to open a restaurant. Failure to obtain them can result in penalties and fines, closure, legal consequences, or even prevent you from opening your location at all. Receiving legal counsel may help you map out the steps and ensure that nothing is missed according to the laws in your restaurant’s city and state. It’s easiest to work your way down from the top, starting with the required restaurant business licenses and ending with location-specific permits you may encounter.
1. Business License
A business license, also known as a business tax certificate, gives you the authority to operate in your jurisdiction. The exact form of this license is dependent on your restaurant’s location and address. If you plan on selling alcohol, you will need a federal business license as well as a state business license.
How to Get a Business License
To get a business license, you will want to work through your city and state government. The easiest way to start would be to search your state’s name plus the term “business license” in an online search engine. This will bring up your state’s government website where the application and procedures can be found. You may be required to register your business name and acquire an EIN before applying for a business license. Requirements will be listed on your state's website. For more information, you may use the US Small Business Administration’s website to look up your state and city-specific rules for receiving a business license.
How Much Does a Business License Cost?
A business license can cost anywhere from $25 to over $300 to register, most averaging around $50 to $75. The cost of a business license itself varies depending on your state, business type, exact location, and expected profit. You will need to renew this license annually or every few years depending on your location.
2. Employer Identification Number
An employer identification number (EIN) essentially tells the federal government that you are an employer and provides you with a tax ID. With this number, you can hire employees and have them on a legal payroll. Your state will give you an employer identification number that is separate from your federal number, which helps legitimize your business's standing.
How to Get an Employer Identification Number
To get an EIN, you will want to visit the IRS’s website and follow the application process listed there. This can take a while since the IRS only issues one employer identification number per responsible party per day to ensure fairness. Be sure to apply as early as possible. You can also fax, mail, or call the IRS to submit your application.
How Much Does an Employer Identification Number Cost?
An EIN is free but takes time to obtain.
3. Certificate of Occupancy
A certificate of occupancy indicates that the building where your restaurant is located has passed its final inspection. It deems the building is zoned for your type of business, up to code, and safe to operate in. This may include an electrical, plumbing, and fire inspection as part of the building inspection.
How to Get a Certificate of Occupancy
To receive a certificate of occupancy, your location will need to be inspected by your local building or zoning department. To arrange the appointment, search your state’s name plus the term “certificate of occupancy” in an online search engine to find the information on your state government’s website. This certificate may also include a city and fire permit issued by your local fire marshal.
How Much Does a Certificate of Occupancy Cost?
A certificate of occupancy will vary by location, with costs around $100 to $400.
4. Food Service License
A food service license, or food permit, shows that a restaurant meets all food preparation, storage, and safety regulations, and has been granted a license to sell food. It ensures that your location is in accordance and up-to-date with restaurant food safety laws.
How to Get a Food Service License
The city or county Health Department issues food service licenses and requires an inspection to take place. Depending on your county, you may need to complete a food safety training program or earn a food handler’s permit to get approved for a license. The Health Department will inspect your restaurant regularly to make sure that the expected standards are being maintained. To apply, start by reviewing the food vendor’s application requirements on your state government’s website. You may then apply directly online.
How Much Does a Food Service License Cost?
A food service license can cost around $50 to register. However, the cost of the license itself varies by type of food establishment, location, and the number of employees. The fees are determined at the time of the inspection and typically range from $100 to $1000. You will need to renew these licenses periodically as well.
5. Sign Permit
A sign permit allows you to display or change permanent signage outside your restaurant’s building. In many counties, signage size, brightness, and location are regulated and need to be approved beforehand. Receiving the permit shows that you have met the standards and codes required and can proceed with adding the sign.
How to Get a Sign Permit
To apply for a sign permit, you will need to visit your local county government’s website for the steps and application. This will involve working with a sign contractor and the Zoning Department. You must provide a scale drawing of the signage, and often you will need to submit variations for approval. If your sign includes lighting, you may also need to provide the wiring and circuit plans you intend on establishing. Requirements may vary depending on the size and type of sign.
How Much Does a Sign Permit Cost?
The cost of a sign permit will depend on the estimated cost of your sign, including the cost of labor, materials for your signage, and its size. You can expect a typical range of $50 to $350 for a sign permit, with most costing around $150.
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6. Building Health Permit
A building health permit shows that your restaurant building and practices comply with sanitation regulations. Typically, you will only need a building health permit if it's a new construction. However, your county may require it for older buildings as well to ensure a sanitary work and dining environment.
How to Get a Building Health Permit
A building health permit is issued by your local government. To confirm if you need one and apply, search your state’s name plus the term “building health permit” in an online search engine. To maintain this permit, your location will be subject to routine inspections.
How Much Does a Building Health Permit Cost?
You can expect a building health permit to cost somewhere between $50 and $1000. Some factors that can affect the cost are the building’s age and location.
7. Employee Health Permit
An employee health permit, also known as a food handler’s permit, indicates that a specific employee has passed a course educating them on proper health and safety practices in a commercial kitchen. The course teaches employees about proper food storage and food handling practices along with proper sanitation practices to avoid cross-contamination.
How to Get an Employee Health Permit
An employee health permit is provided after an employee completes a state-approved food handler’s course and passes the final test. Most locations require the ServSafe test offered by the National Restaurant Association. To find the course selected by your state, search your state’s name plus the term “employee health permit” or “food handler’s permit“ in an online search engine.
How Much Does an Employee Health Permit Cost?
An employee health permit can cost anywhere from $100 to $500 depending on the level and course material needed. The permits must be periodically renewed.
Other Restaurant Permits and Licenses to Consider
Aside from the required permits and licenses, there are others you may need to obtain depending on what additions you are looking to make to your restaurant. It is important to familiarize yourself with the following permits, in case you run into them down the line.
If you’re ever concerned that you may accidentally miss a permit, be sure to divulge your full business plan with your legal counsel so they may identify permits you still need to apply for. Below is a quick review of just some additional permits you may encounter.
Liquor License
The process for obtaining a liquor license can vary from state to state and city to city. You will want to check with your local government for the processes and regulations you must abide by in your jurisdiction. A liquor license tends to be one of the most regulated and strict licenses you may encounter.
In some locations, you may be required to get both a liquor license and a beer and wine license if you are looking to serve all three. Remember to apply early, since the application process can take as long as a year. The fees will vary depending on your location, and the bar license will need to be renewed each year.
Music License
Choosing the right music for your restaurant can be a challenge, but you've got time to figure it out. You need a music license to play music from any platform in your restaurant. So, while you're perfecting your playlist, apply for a music license to abide by copyright laws. You can work with several companies to use the music they have rights to, such as the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music Incorporated (BMI), or Global Music Rights (GMR). No matter where it's coming from, you need a license to play music in your restaurant. The pricing can vary but is usually between $250 and $2,000. A live entertainment license is a similar permit you may also be interested in researching.
Resale Permit
A resale permit, also known as a reseller permit or a resale license, prevents double taxation on a product by collecting tax when your customer buys the product, rather than when you purchase the product initially. A resale certificate is generally only needed if your restaurant is located in a state that issues sales tax, such as California, where a California resale certificate is needed. You can register online with your local government to receive a tax-exempt certificate. The fees vary depending on your security deposit amount but can be anywhere from $0 to $50.
Seller's Permit
A seller's permit, or a sales tax permit, indicates to the state that your business collects sales tax during customer purchases. In various states, you'll need both a seller's permit and a resale permit for proper taxation documentation.
Dumpster Placement Permit
If you are going to need dumpsters for your restaurant, you may also need a dumpster placement permit. This would allow you to place a dumpster outside your facility that can then be used for food waste and trash disposal. The costs for the permit can vary depending on the placement and size of the dumpster, along with the location of your establishment.
Pool Table Permit
One license that can easily be forgotten is a pool table permit. Some states regulate billiard tables and require business owners to register them before use. A pool table permit can limit the hours of operation of the billiard area and even the number of pool tables in an establishment. The fees can vary on your location and how many tables you want to add. The permits also need to be renewed annually.
Valet Parking Permit
The need for a valet parking permit can vary from state to state. If you plan to have valet parking for your restaurant, check with your local government to see if you need a permit. If so, you may need to present a detailed plan of your valet service, indicating the pick-up and drop-off points, the number of parking spaces, how payment will be collected, and letters of agreement from your designated drivers. The fees associated vary depending on your state.
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No matter what type of restaurant or food service operation you're starting, obtaining the correct permits and licenses is essential to your success. With penalties that can affect your bottom line or even close your doors, you will want to thoroughly research the restaurant licenses you need and start the application process early to allow them time to be issued.
