Restaurant licenses and permits: they’re one of the least fun but most important parts of opening a new restaurant. Foodservice licenses, building health permits, and all the other necessary restaurant licenses and permits can add up to a confusing maze of paperwork and red tape. These requirements to open a restaurant can also end up being one of the biggest restaurant startup costs.
It may be a confusing process, but this guide is here to walk you through all the requirements to open a restaurant, the costs involved for each restaurant license and permit, and where and how to obtain them. Keep in mind that the process of obtaining this long list of restaurant licenses and permits can take nine months or more, so be sure to get started right away and budget your time and money wisely.
1. Business License
A business license is the first and most important of the requirements to open a restaurant. Any new business must first obtain a business license from the state in which they operate in order to be considered a legitimate, legal entity.
Some states, like New York, don’t have a state-wide license requirement but instead licensing requirements vary city by city; be sure to research the specific requirements for a business license in your location, as they will vary.
The US Small Business Association is a good starting point to find out more about the specific requirements in your area and how to go about obtaining this restaurant license.
Depending on your location, a business license will cost you anywhere from $75 to $7,000. This cost will vary based on the type of business, expected total revenue, and other factors.
Google your location and ‘business license’ to find more specific price expectations and guidelines and be sure to keep up with any annual renewal requirements or fees.
2. Employer Identification Number
While not technically a restaurant license or restaurant permit, every new business will also need to obtain an Employer Identification Number or EIN. This number will identify your business to the IRS when you and your employees file taxes. You can obtain this number from the IRS website directly.
Obtaining an EIN is free, which is great news for those trying to open a restaurant with no money! Keep in mind that this is one of the requirements to open a restaurant that should be initiated as early as possible, as the IRS only issues one EIN per business per day and it can take over a month to receive yours.
Apply for one as soon as you decide to open your business and get started on the other requirements to open a restaurant and apply for all the other restaurant licenses and permits you’ll need as you wait.
3. Food Service License
First on the list of requirements to open a restaurant specifically is a food service license. Food service licenses can be obtained in-person or online from your state’s health department.
Before you receive your food service license, you will need to undergo a building inspection where a health department employee will ensure all food storage, food preparation, and food safety standards are being upheld.
Typical food service license costs range anywhere from $100 to $1,000 depending on location, size, and number of employees. The price of the food service license is more than just a one-time cost; you will have to renew this restaurant permit as necessary and undergo annual inspections to maintain your food service license.
Ensure your restaurant is continually able to accommodate current food safety regulations and stay up to date with any changes to the regulations. Factor these implicit food license costs into the overall health department permit costs and be sure to stay prepared for the regular and random inspections.
4. Certificate of Occupancy
After obtaining a food service license and paying the food license costs, you will need to obtain a certificate of occupancy to prove your building is properly constructed, zoned, and maintained. This is another one of the requirements to open a restaurant that varies by location, so be sure to check your local government’s website for details on how to proceed. Costs vary, but a certificate of occupancy will typically run you around $100.
This is also a good time to check on your space’s occupancy capacity, as you will need to plan your restaurant floor plan around this restriction. Set aside a spot at the front to clearly post this requirement as well as any other restaurant licenses and permits you are required to display.
5. Outdoor Seating Permit
On the topic of seating, consider if you’d like to set up any outdoor seating at your restaurant. Outdoor seating has been especially popular recently, but it’s not as simple as just setting up tables outside.
In many areas, you’ll need to apply for outdoor seating or outdoor use permits before going ahead and using the space. Check with your local government or business association to find out more about what kind of requirements are involved with outdoor seating in your area and which restaurant permits might be required.
6. Building Health Permit
A certificate of occupancy might not be the only permit you need to prove your building’s worthiness! In some states, you will also be required to obtain a building health permit from your local health department, which can cost anywhere from $50 to $1,000.
Much like a food service license, this restaurant permit will also require an initial building inspection as well as regular random inspections meant to ensure continued compliance. Even if your state doesn’t require a building health permit, it’s good to have an inspection to make sure the space is up to health code and there’s no mold hiding in the walls.
7. Employee Health or Food Handlers Permit
Your building isn’t the only thing that will require a health permit – any employees handling food and drink will likely need to obtain permits as well. Requirements again vary by state, but many states require each employee to attend a food safety class and obtain a food handlers license.
This license can cost anywhere from $100 to $500 depending on your state, so be sure to check the requirements from your local health department.
Food service licenses and health department inspections can sometimes require an employee on-site to present their food handlers permit, and the guidelines laid out in the food handlers class will be inspected during health department visits.
Be sure to take notes on these requirements, follow the guidelines closely and have your employees keep their food handlers license ready.
8. Resale Permit
The next restaurant permit on the list a resale permit. This permit will allow you to buy ingredients sales tax free and instead charge the sales tax to the customer at the time they buy the meal. Check with your state to learn any specific requirements, but these will typically be free or no more than $50.
You will also have to keep careful records of sales taxes accumulated and collected, as you will need to report them to the state yearly. Set aside a binder or cabinet for this purpose and closely keep track of all payments made to the state.
9. Sellers or Sales Tax Permit
In many states there’s a second permit needed to open a restaurant and collect sales tax, and it will either be called a sellers permit or a sales permit. While the resale permit lets you forego sales tax on whole ingredients, this restaurant permit authorizes you to collect sales taxes on your menu items.
This permit will typically be free, but you might need to put down a deposit to protect against any sales taxes you may be unable to pay if your restaurant unexpectedly closes.
Requirements to open a restaurant will vary by locality, so again be sure to contact your local government to learn about the requirements and registration process. Much like the resale permit, you will also need to keep track of sales taxes levied and collected and reconcile them at the end of the year.
10. Sign Permit
Before you can start any restaurant promotion, you may need to obtain a sign permit from your local government. Requirements can vary drastically by jurisdiction, but they will typically place restrictions on sign size and placement. Some areas may even require you to hire a local contractor to install signs or run design ideas past a city council.
The permit itself will cost anywhere from $20 – $50, and be sure to run any intended modifications or sign installations by your building landlord as well to avoid any additional costs or fines.
If you plan on using any self-ordering restaurant kiosks, digital menu boards, or kitchen display systems to upgrade your restaurant, be sure to check the copyright laws on any images you include. When possible, try to feature images of your own restaurant and food! This helps to avoid copyright infringement and keeps your business at the forefront of customers’ minds.
11. Music License
No good restaurant is complete without the perfect background music, but it’s unfortunately not as simple as just pressing play on the radio. Spotify or Pandora are great for personal listening, but if you plan on playing music in your new establishment be sure to get a music license from a Performance Rights Organization (PRO) like ASCAP, SESAC, or BMI.
If you’d rather go a third-party route, consider going through a licensed music solution like Rockbot that will pay these fees for you. Copyright fees for playing unauthorized music can be upwards of $30,000, so play it safe and pay the $250 to $500 for a music license instead.
12. Liquor License
If you plan to serve liquor in your establishment you will also need to apply for a liquor license. Some states may even require separate liquor, beer, and wine licenses, so be sure to check on your local guidelines and licensing requirements.
Obtaining this restaurant license can be a lengthy process – sometimes as long as a year – so get the process started with your local agency that oversees alcoholic beverage permits as early as possible. Liquor licensing is also one of the most costly requirements to open a restaurant, typically costing anywhere from $1,200 to $40,000.
Carefully consider the kind of restaurant you want to run and the market you’d like to serve, and decide if you’re willing to eat the cost of this permit. If so, add it to the list of restaurant licenses and permits you’ll need and set aside a spot for this food license cost in your budget.
13. Liquor Bonds and Liability Insurance
If you do decide to serve alcohol in your new establishment, you may also need to take some additional steps depending on your location. In New York, for example, you will need to purchase both a liquor bond and a liquor liability policy.
Liquor licenses can range from several hundred to $15,000, depending on the state, and will be accompanied by a small processing fee.
These expenses will help to protect your business from any accidents or injuries that may occur due to the alcohol served in your establishment. They will also ensure any alcohol taxes and penalty fees levied on the alcohol you serve are covered by a third party in the event you are unable to pay them yourself.
14. Dumpster Placement Permit
Running a restaurant can, unfortunately, generate a lot of waste, and you’ll need a place to put all that waste. Not only will you need a dumpster, but you’ll also need a dumpster placement permit. Check your city website for application details and costs, but expect to pay between $10 and $100 weekly.
Trash or recycling collection fees may also be involved in local waste disposal. Check with your local jurisdiction for more information and details on recyclable and compostable materials and collection schedules.
Other Considerations
Although not specifically in the category of restaurant licenses and permits, before you open your restaurant you should also check any additional kitchen equipment, fire suppression, and food safety regulations in your area. You should also research your options for property insurance, workers compensation insurance, and personal liability protection, especially if you plan to serve alcohol.
Additionally, be sure to consider any additional restaurant concepts you want to include and check if they will require a permit as well. Valet parking, pool tables, and live entertainment all require their own permits, so be sure to do your research on each requirement to open a restaurant and go in prepared!
Takeaways
Clearly, the requirements to open a restaurant involve a long list of restaurant licenses and permits. Save yourself the headache and pay close attention to all the requirements so you can avoid going into opening day missing a food service license or running out of money because you didn’t budget for the health department permit costs.
There’s also no consistent set of guidelines between locations, so be sure to carefully check your local guidelines and stay organized. The US Small Business Association (SBA) offers many helpful resources to guide you through the process, and you can contact your local government directly with any additional questions.
