What Business Licenses are Essential for Opening and Managing a Restaurant?
You’ve dedicated months, possibly even years, to the launch of your new restaurant. The executive and sous chefs are in place, the menu is meticulously crafted, and contractors are putting the final touches on your space. In the midst of this, mundane business matters like license and permit applications might slip down your to do list.
This article will delve into:
- Federal employer identification number
- Basic business license
- Liquor license
- Resale permit and seller’s permit
- Health permit
- Food handling and safety permit
- Building license or permit
- Signage permit
- Music license
- Local permits for restaurants
- Maintaining restaurant licenses and permits
- Consequences of operating without licenses and permits
However, it’s paramount that you address and maintain the various licenses and permits required for your restaurant business.
Restaurants face stringent regulations from state and local authorities, often entailing intricate licensing processes. Additionally, the restaurant industry is subject to rigorous law enforcement and inspections due to public health and safety concerns. Every restaurant must have the necessary licenses before it can commence operations.
The following is a selection of common licenses, registrations, and permits needed to launch your new restaurant. Since states and local jurisdictions have more authority in regulating these matters than the federal government, specific requirements can vary based on your restaurant’s location, including the state, city, and sometimes even the county or municipality.
Federal employer identification number
The IRS employs your employer identification number (EIN) to monitor and collect taxes from you and your employees. You can apply for an EIN online through IRS.gov and receive it promptly. Alternatively, you can choose to apply by phone or mail, which takes one to five weeks.
Basic business license
A business license grants you the right to operate your restaurant within a specific jurisdiction. If you have existing restaurants in various cities or states, you’ll still need a business license for your new restaurant.
To apply, contact the business license department of your new restaurant’s city. During the application process, you’ll pay an initial fee and set reminders to renew your license as necessary. The city’s zoning department will inspect your space to confirm it complies with zoning for restaurant use and parking requirements, where applicable.
If your restaurant engages in activities regulated by the federal government, such as selling alcohol or handling meat products, you’ll need a federal business license as well.
Before you can serve alcoholic beverages at your establishment, you must obtain a state-issued liquor license.
The requirements and costs of this license vary by state. You’ll typically have various options, including beer and wine licenses and hard liquor licenses. If your restaurant is situated near residential areas, be prepared for possible opposition from the local community. Some states may require a hearing in which local residents voice concerns and provide input regarding granting this permit to your restaurant due to the potential negative impacts of alcohol sales on the community.
Some cities may also necessitate local alcohol licenses or approvals before applying for state-level licenses. In certain cases, city or county governments may limit the number of licenses available in a neighborhood or on a block, making it difficult for new restaurants to acquire a license.
Additionally, businesses serving alcohol at retail must register as retail beverage alcohol dealers with the US Alcohol and Tobacco Tax and Trade Bureau (TTB). This registration must be completed before commencing business and is location-specific. TTB registration is perpetual, but any changes to an existing registration must be reported by July 1 each year.
Resale permit and seller’s permit
Will your restaurant operate in a state with sales tax? If the answer is yes, you’ll need a resale permit and a seller’s permit.
A resale permit prevents double taxation on specific items, allowing your establishment to purchase certain items, such as wholesale food inventory, tax-free, provided they are used to create products for resale. In your restaurant’s case, these resale products would be the prepared meals. The seller’s permit enables your restaurant to charge and collect sales tax from your patrons.
In nearly every restaurant, you can find a displayed grade, like an “A” or “98%,” on the wall. These grades are assigned by the local health department as part of the health permit process. Every new restaurant must obtain a health permit from the city or county health department.
However, the permitting requirements vary by municipality. Generally, the process involves a plan review before construction begins, along with the submission of a menu, a list of on-site equipment, and a food safety plan. To keep your permit, your restaurant will undergo periodic inspections by the health department. Officials will assess whether you and your staff adhere to standard food management practices and maintain clean facilities.
They may assign a letter or numerical grade based on cleanliness, which must be displayed prominently in your restaurant. Failing these inspections could result in fines and potential loss of your restaurant’s health permit and operational ability.
Food handling and safety permit
Sometimes known as an employee health permit, this certification confirms that you, as the owner, and your staff have completed the required food safety, storage, preparation, and sanitation training mandated by the state.
A food handling and safety permit is often obligatory for anyone involved in storing, preparing, packaging, serving, or providing food for human consumption. Typically, owners and managers are required to obtain food handling permits, which may also include dishwashers, servers, and bartenders, depending on state regulations.
Building license or permit
A building license is essential for any restaurant to ensure the location’s operational safety. This may include clearly marked and functioning fire extinguishers, fire escapes, and emergency exits. Additionally, you may need an occupancy license, often issued by the local fire commissioner.
Before displaying that appealing new sign announcing your establishment, check with local city or county officials to determine if a sign permit is necessary. Your local government might have specific rules regarding the type of sign, its size, location, and lighting to maintain the community’s character and safety.
Technically, you can’t simply play music from your phone in your restaurant, especially if it’s copyrighted—regardless of whether you’ve purchased the albums or subscribed to a streaming service. You need a music license.
If your restaurant intends to play music, live or recorded, you must obtain proper licenses from a performing rights organization to comply with federal laws and avoid penalties. Additionally, restaurants allowing dancing may need an additional license, often referred to as a cabaret license.
Local permits for restaurants
- Depending on local and state regulations, your restaurant may require the following:
- Zoning permit
- Land use permit
- Certificate of occupancy
- Place of assembly permit
- Certificate of inspection
- Catering license
- Site cleanliness permit
- F.O.G. (Fats, Oil and Grease) permit
- Dumpster placement permit
- Sidewalk café permit
- Alarm permit
- Fire and police department permit
- Valet parking permit
- Live entertainment license
- Pool table license
Maintenance of restaurant licenses and permits
Obtaining the necessary licenses is just the beginning. Beyond renewing existing licenses and permits, your business may encounter changes, such as relocating within the city or changing its corporate structure, necessitating new or amended licenses. Additionally, your state or local government might introduce new business requirements. Designate someone to monitor renewals and events that trigger license amendments to ensure your restaurant remains compliant.
Consequences of operating without necessary licenses and permits
Restaurants operating without the required permits or with expired permits are susceptible to penalties imposed by state and local authorities. Penalties range from fines and cease-and-desist orders to criminal penalties, such as jail time and probation. Many cities, counties, and state health departments collaborate with third-party agencies for enforcement of business licensing compliance and conduct onsite food and health safety inspections to verify compliance. Given these severe penalties, it is crucial that restaurant businesses obtain and maintain the appropriate licenses.
Discover More About Restaurant Licensing
CookSafe.org can assist you in navigating the intricate regulatory and licensing challenges encountered in the restaurant industry.
To learn more about how Cooksafe.org can support your business license needs, get in touch or call 470-601-0545.