How to start a restaurant in California in 7 steps
If you’ve been dreaming of starting a restaurant in California, we’ve got your back. This Huckleberry small business guide will help get you started on the right foot to owning your own restaurant in The Golden State.
1) Create a restaurant business plan
First, make a plan for your eatery. Here’s what you’ll need to decide before you move forward with starting a restaurant:
- What is your restaurant concept? Quick service or on-trend fine dining? Food truck or high-end rooftop? Think through who your target customers are and what kind of food and environment you love the most.
- What kind of food will you serve? Thinking through your menu can help you know how many people to hire, what equipment to buy, and what kind of food inventory you’ll need. Don’t be afraid to start simple!
- What will your restaurant name be? Pick a name that you love (and, of course, one that’s not already taken in your area). But also choose a restaurant name that reflects your restaurant concept and target market.
- Where will your California restaurant be located? The location of your eatery can contribute to your financial success and the amount of customer traffic. Select a place that’s easily visible and accessible whenever possible. And make sure to research the nearby competition!
2) Get your paperwork done: Registering and licensing a restaurant in California
Now that you’ve made some high-level decisions, it’s time to take steps to make things official in your state.
a) Register your restaurant business in California
Once you’ve picked your name, you’ll need to register it with state and local authorities and start applying for the proper California restaurant permits and licenses (more on that later!).
Choose a business structure
After you’ve created a business plan and chosen a name, you’ll need to pick a business entity structure and register your restaurant in California under that method.
- Sole proprietorship: This type of business consists of one person, the business owner, with no employees. It can be run under the owner’s tax ID or social security number. You still must secure all licenses, zoning clearances, and permits to run a food or restaurant business as a sole proprietor. Under this structure, you are personally liable for any debts and actions of your restaurant business.
- Partnerships: There are two different types of partnerships: general and limited. Each type involves two or more people running a restaurant as co-owners. In a general partnership, partners have equal rights and responsibilities and take on equal responsibility for liability. Limited partnerships have one or more general partners with additional, separate limited partners who invest in the business. The general partners are responsible for managing the business (and take on all liability), while the limited partners are responsible for debts up to their investment only. In California, registering a general partnership at the state level is optional (you must still secure all relevant licenses and permits for your restaurant), but registering a limited partnership is required.
- Corporations: Corporations are separate legal entities from the business owner. This can limit your liability as the restaurateur and place the responsibility for taxes and liability on the business itself and any shareholders. You must file an Articles of Corporation with the California Secretary of State to create and operate as a corporation.
- Limited Liability Company (LLC): An LLC is a popular choice for small business owners. This business structure can give your personal assets the protection of a corporation (and allow for others to help manage the business) but is taxed differently. You must file an Articles of Organization with the California Secretary of State. You also need to keep an operating agreement for your restaurant on file at your office.
Think through what structure works best for your restaurant concept. Regardless of what structure you choose, you will want to register your restaurant name with the State of California to protect it. Check out this detailed guide on starting a business in California for more information.
Reserve or register your restaurant name in California
If you’ve got a great business name ready and you’re still in the process of selecting your business structure and completing your business paperwork, you can reserve your name with the state. To do so, you can file a name reservation request with the California Secretary of State for $10 for 60 days. This name reservation can be applied for again as needed.
It’s not too common for restaurant owners to operate as a sole proprietorship (for liability and hiring reasons). But suppose you’re running your eatery as a sole proprietorship (and will have no other employees, such as a food truck or cart). In that case, you can protect your business name by filing a fictitious business name statement with your county recorder.
b) Apply for your EIN
You’ll need an Employer Identification Number (EIN) for your business for tax purposes. Luckily, it’s quick and easy to get one (and free!). You can get an EIN here.
c) Get the necessary permits for restaurants in California
To operate a restaurant legally in California, you’ll need to make sure all the required paperwork and food safety precautions are in order before you open your doors. This includes meetings with the health department, public health inspections, and licenses needed to charge sales tax.
This part can take a while—and it’s hard work. So roll up your sleeves, and let’s dive in!
What are the requirements to open a restaurant in California?
The requirements to open a restaurant in California can vary depending on the county and city where the business is located. In general, you’ll need to have appropriate health permits, including food handlers certifications, alcohol sales permits and California liquor licenses (if applicable), waste management permits if necessary, a California business license (business tax certificate), property and health inspections completed, music licenses (if needed), and more. You and your staff will also need specific food safety training to serve food.
The California Governor’s Office of Business and Economic Development CalGold search tool can provide details specific to your area.
How much does a food license cost in California?
The cost of a food license in California depends on your location, size of establishment, concept, and more. For example, in Los Angeles County specifically, the 2021-2022 food license fee for a restaurant varies between $319 to $1,438 depending on the number of seats in the establishment and level of risk. Fees for other food service operations—such as food trucks and carts, cafeterias, and market food vendors—may be lower or higher depending on size and risk level.
What is the difference between an alcoholic beverage license and a food license?
Alcoholic beverage licenses and permits allow businesses and their employees to sell and serve alcoholic beverages. In contrast, a food license or permit governs food items’ safe selling, preparation, and serving. Make sure to explore all alcohol and food service licenses that may be necessary for your restaurant. Remember, these can differ based on the city or county you live in or the type of alcoholic beverages you sell.
For a broader list of permits to consider, check out our comprehensive guide to starting a restaurant business.
3) Figure out your financial plan
Creating a financial plan for your restaurant is where you’ll really need to dig in and do your research. Owning your own restaurant can be risky, and a smart budget is the key to success.
Here’s what you’ll need to financially consider when opening a restaurant in California:
- Think through starting costs. How much will you spend on California licensing and permits? How much can you budget for your location? What will you spend on restaurant equipment? What will you spend on inventory before opening day?
- Consider regular inventory costs. How much will your regular menu cost to produce? Research the price tag before you commit to a certain cuisine.
- Estimate operating costs. How much will it cost to keep your restaurant running each day? Consider overhead, labor costs, and what you need to spend to run your restaurant daily.
- Project your revenue. Think through what you might sell in the first year you’re open. (And set realistic expectations.) How much capital do you need to have to run your restaurant before it turns a profit?
How much money do I need to open a small restaurant in California?
The amount of money you need to open a small restaurant in California depends on several factors: your overall concept, location and zoning, type of cuisine, alcohol license and permits (if necessary), and more. One professional restaurant publication estimates that restaurateurs will spend a median of $450 per square foot on opening costs.
How do I fund a restaurant business in California?
Think through how you’ll fund initial restaurant startup costs. From using personal savings to crowdfunding through your social network, there are many ways to meet your business’s initial needs creatively.
Explore business credit cards or small business loans in your area if needed. You can connect with your local chapter of the U.S. Small Business Association for guidance, including information about funding programs for small businesses.
4) Get restaurant insurance
Buying business insurance should not be the last thing on your to-do list. You’ll need the proper coverage in place before you start hiring.
Below is a quick overview of important restaurant insurance coverages you might need:
- Workers’ Compensation: Workers’ comp is required in California, even if you only have one person working for you. This coverage protects your employees if they get injured or sick from work. If you don’t purchase it, there are serious consequences. (But you can get a simple and quick estimate for workers’ comp coverage with our 60-Second Workers’ Compensation Calculator.)
- Liquor Liability Coverage: This protects your restaurant if you or your staff over-serve an inebriated customer who then causes damage to someone or something else. While this is not required in California, it’s strongly encouraged if your restaurant serves alcohol. Other insurance coverages will not protect you or your staff if they over-serve customers.
- Restaurant Endorsement: This package of coverages specifically protects restaurants from a wide variety of situations that could involve loss—such as food contamination and spoilage.
- General Liability Insurance: This policy is very important to have. It protects your restaurant if someone sues you for injury or property damage. That could easily put you out of business without the right coverage in place.
- Property Insurance: This one’s pretty straightforward. Property insurance protects your building (and the stuff inside).
- Commercial Auto Insurance: Run a food truck or do your own deliveries? If there’s a vehicle you use in connection with your restaurant, you’ll need this coverage.
5) Plan your restaurant and kitchen equipment
Once you’ve created a restaurant business plan, you’ll need to determine what tools and equipment you’ll need to serve the food on your starting menu. Remember, start simple—you can always purchase more equipment later as you grow.
Make sure to think through everything you’ll need to serve customers on day one. Depending on your concept, local, and menu, your list could include any of the following (and more!):
- Dining tables and chairs
- DecorPoint of sale (POS) system
- Prep tables
- Food storage
- Food processors
- Deep fryer
- Chef knives and cutting boards
- Cooking utensils
- Plates, silverware, and glassware to serve guests
6) Hire employees
Now you need to hire the right restaurant workers to help run your eatery. But remember, before you start the hiring process, you need to have workers’ compensation insurance in place. Don’t skip this step! (Get California workers’ comp insurance online in minutes.)
The U.S. Small Business Administration—especially your local California SBA chapter—can help, but don’t forget to check your local city and county guidelines, too, for all California labor laws you’ll need to follow. For more detailed info, learn how to hire your first employee in California, or check out this list of new employee forms.
Each person you hire will need training not only for how your restaurant business operates, but they’ll also need food safety training and a California Food Handler Certificate.
Is there a minimum wage in California?
Yes, there is a minimum wage in California. If you have fewer than 25 employees, the minimum wage is $13 per hour. If you have more than 25 employees, the required minimum wage is $14 an hour.
Make sure to consider these costs in your operating budget and plan for your staffing needs accordingly.
7) Advertise your new restaurant
Once you’ve started the hiring process and have an estimated open date in the near future, it’s time to market to those first customers.
Creating a marketing plan for your restaurant business can sound intimidating at first, but it can also be a lot of fun! You can start advertising your eatery to your community in several ways—many of them at low cost. Some initial marketing efforts could include the following tasks:
- Build your website. Include your location, hours, menu, and more! And include photos if you have them. You can even do this yourself through a platform such as Wix or Squarespace.
- List your restaurant on Google and Yelp. This is how you’ll get those great restaurant reviews. And you’ll need to set up Google My Business for your restaurant too. This helps your community find you.
- Get your restaurant on social media. Create a Facebook account, showcase your entries on Instagram, and more. Keep your contact info, website, and hours up to date on each of these platforms.
- Buy online geo-targeted ads. Using Facebook and Google ads can be an affordable way to market your new restaurant.
- Partner with delivery services in your area. List your business on popular delivery apps like GrubHub. While this can take a cut of your earnings, your new restaurant will be more visible to customers.
- Clear signage, brochures, and door hangers. Signage around your location and advertising through door hangers and brochures are great ways to announce your new restaurant to the neighborhood.
- Get your friends and customers talking. Good word-of-mouth marketing speaks volumes. Customers that love your restaurant will talk about it. Create a great dining experience that’s welcoming and memorable, and you’re on the right track.
Opening a restaurant is an adventure
Owning and running a restaurant in California (or anywhere, really!) is hard work, but it can be a meaningful and fun venture. Whether you’re starting up a Korean BBQ food truck or a high-end rooftop culinary experience, we’re here to help.
Huckleberry business insurance simplifies one task on your to-do list. Get insurance for your new restaurant or bar in minutes—it’s easy and completely online.