What do I need to know before opening a restaurant or catering business?
Opening a restaurant or catering business is no easy task. There is lots of paperwork and obstacles usually pop up. If a business owner prepares, however, the process may go more smoothly. An entrepreneur may want to consider the following while planning to open a restaurant or catering operation.
Business Plan
A Business Plan may help keep you on track, as well as determine the company's structure and mission. It can also set out the target market, restaurant concept, location, branding, restaurant design, menu, market analysis, marketing plan, financials, management, and more.
Dedication and time
A restaurant or catering business owner may need to commit an enormous amount of time and resources to get up and running. Many restaurants fail within the first year. Business owners often need to work long hours, make sacrifices for staff, and give up personal time to get the business off the ground.
Financing
Financing a restaurant or catering business can be tricky. Small business owners often invest a significant amount of their own personal funds to get started. With a strong business plan and organized finances, a business may consider outside financial resources, like loans or investors, to help with startup costs.
Location
Believe it or not, location plays a big factor as to whether a business succeeds or fails. The location of the restaurant or catering business may impact a business's rent, foot traffic, supply chain accessibility, food-type saturation, parking and accessibility, and even publicity. A convenient location also makes it easy for customers to come back.
Restaurant concept
A concept may help a catering business or restaurant attain its vision. A concept is a theme or idea that threads through some or all facets of the business. This can include the business name, menu, service style, decor and ambiance, and any other identifying traits. Common examples include farm-to-table, vegan, gluten-free, and Americana.
How do you develop a restaurant concept?
A restaurant concept is more than just choosing the type of cuisine. A potential restaurateur can identify the target clientele, the theme, the price points, menu design, brand, equipment, layout and size, location, and more. The concept may help dictate one's competitors, market demographics, finance strategy, and business plan.
To figure out your concept, you may want to research the latest culinary trends, available suppliers, market demands, and various prior successful businesses. Coming up with your own concept requires research and finding your inspiration.
What are the legal requirements to start a restaurant or catering business?
When starting a new restaurant or catering business, a potential owner should look into what licenses and permits will be required in their state, city, or county. Depending on the location of your business and the type of restaurant or catering company, the types of licenses required may vary.
Generally, the types of required licenses may include:
- Business name registration.
- Business license.
- Employer Identification Number (EIN).
- Certificate of occupancy.
- Food service license.
- Food truck permit.
- Sign permit.
- Music or live entertainment licenses.
- Resale permit, seller's permit, liquor license (if serving alcohol).
- Health and safety inspection permits.
Without the proper licenses and permits, a restaurant or catering company may run afoul of authorities. This can lead to fines and being shut down. A business owner may want or need insurance, including liability, property, and workers compensation, especially since many of these types of insurance are required in many areas.
It takes a lot of paperwork to open a restaurant or catering company. The business typically needs proof of insurance coverage, licenses and permits, employee files, training and policy documents, emergency plans and contact information, inventory records, tax documents, business registration, and more.
Is it legal to start a catering business from home?
For the most part, the answer is yes, but state and local laws will have different requirements that must be met. You may still need licenses, permits, and more, to do so.
Some places do not allow home-based catering for commercial food production. The law may allow home-based businesses to prepare and sell food under so-called cottage laws. Every state has slightly different cottage laws, so a potential home-based catering business may want to ask a lawyer about local requirements.
Cottage laws may determine:
- How you sell the food.
- Kitchen safety standards.
- What you can and cannot sell.
- Sales volume.
- Revenue limits.
- The appropriate business and food handling licenses.
- Compliance with food labeling laws.
Sales of certain kinds of food may be prohibited. In some areas, a home-based food business cannot sell their products to restaurants and grocery stores.
Inspecting food and retail entities is the responsibility of state and local health departments. If a customer complains, then the local health department may come to your home to schedule a kitchen inspection. Renting space from a commercial kitchen may be an option for some businesses. Also, a home-based business may be subject to Food and Drug Administration regulations as well as similar state and local government rules.
According to the FDA, a private residence is not a facility and is not required to be registered with the FDA. But the private residence must meet customary expectations for a private residence that may include some characteristics of a commercial facility. If your kitchen passes a certain threshold of being more commercial than residential, however, your kitchen may need to register as a commercial facility with the FDA.
If you have legal questions about starting a restaurant or catering business, reach out to a Rocket Lawyer On Call® attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
