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In 2023, restaurant openings in the U.S. were higher than pre-pandemic levels, with many hopeful restaurateurs diving into the industry despite the risks. However, the food industry can be unpredictable and volatile. If you’re planning to open a restaurant in California, legal planning is crucial to avoid common pitfalls that lead to failure.
This blog from Schneiders & Associates will give you key tips and things to remember when opening a restaurant. Keep reading for more information to give yourself the best chance to have a successful and compliant California restaurant.
Choosing the Right Business Entity for Your California Restaurant
Selecting the correct business structure is a foundational decision. In California, you have several options:
- Sole Proprietorship: Owned by one person, offering full control but no separation between personal and business assets. This could expose you to personal liability for business debts.
- Partnership: Shared ownership between two or more people. In a Limited Partnership (LP), one partner has unlimited liability, while others have limited liability. A Limited Liability Partnership (LLP) offers limited liability to all partners.
- Limited Liability Company (LLC): A popular choice for restaurants, offering liability protection while allowing profits and losses to pass through to personal income. Note that LLC members in California must pay self-employment taxes.
- Corporation: Offers the highest level of liability protection as it’s a separate legal entity. However, corporations in California face double taxation—first on profits and then on dividends to shareholders.
For many California restaurant owners, an LLC or corporation is often recommended to protect personal assets from potential lawsuits. Consulting a California business attorney can help you choose the best structure and handle all necessary paperwork.
Navigating Zoning Laws in California
Location is critical to your restaurant’s success, but zoning laws can impact your choices in California. Ensure the area you’re eyeing is zoned for commercial use and allows for the type of restaurant you plan to open. If you want outdoor seating, make sure it’s permitted in the zone.
Securing a Favorable Lease in California
If buying property isn’t an option, renting a space will likely require significant renovations, especially if the site wasn’t previously a restaurant. Protect your investment by negotiating a long-term lease with favorable terms, including clauses about rent increases. A California real estate attorney with restaurant experience can help ensure your interests are protected.
Obtaining Necessary Licenses and Permits in California
California restaurants must secure multiple licenses and permits before opening:
- Business License: Register your business with the state.
- Certificate of Occupancy: Confirms the property is zoned correctly and up to code.
- Food Facility Health Permit: Essential for meeting California’s strict food safety standards.
- Seller’s Permit: Required to collect sales tax.
- Liquor License: Necessary if you plan to serve alcohol. Be aware that California has strict regulations around liquor licenses, including availability and transferability.
- Additional Permits: If you offer music or dancing, you might need a live entertainment license or a sign permit for exterior signage.
A California attorney can help you navigate the complex permitting process and ensure compliance with all state and local regulations.
Prioritizing Patron and Employee Safety
California law requires regular health inspections to ensure food safety and strict Occupational Safety and Health Administration (OSHA) standards to protect workers. Familiarize yourself with specific OSHA regulations, especially if you plan to hire minors, as California enforces additional protections for young workers.
Selecting the Right Insurance Coverage
Accidents happen, especially in restaurants. To protect your business from costly lawsuits, ensure you have comprehensive insurance, including:
- General Liability Insurance: This covers injuries to customers on your property.
- Property Insurance: Protects the building and contents against damage.
- Liquor Liability Insurance: Necessary if you serve alcohol.
- Workers’ Compensation Insurance: Mandatory in California, covering employees injured on the job.
- Business Interruption Insurance: Covers losses if your restaurant temporarily closes.
- Food Contamination Insurance: Covers losses from spoiled food.
- Automobile Liability Insurance: Required if you offer delivery services.
Work with an insurance agent familiar with California’s restaurant industry to tailor your coverage.
Protecting Your Restaurant’s Intellectual Property
Your restaurant’s name, signature dishes, and tagline are crucial to your brand’s success. Protect these assets by registering trademarks with the help of a California intellectual property attorney.
Understanding Franchise Considerations
If you’re buying a franchise, be prepared for additional legal complexities, including reviewing the franchise disclosure document and agreement. A California franchise attorney can guide you through these processes.
Partner with a California Business Attorney to Safeguard Your Restaurant’s Future
Opening a restaurant in California is an exciting venture, but navigating the legal landscape can be daunting. Don’t let legal oversights derail your dream. By partnering with Schneiders & Associates, you can protect your investment, comply with state regulations, and focus on what you do best—delivering an exceptional dining experience. Whether you’re just starting or expanding, our firm guides you every step of the way. Contact us today to ensure your restaurant is set up for long-term success.