Starting a restaurant in Los Angeles has its own set of legal considerations, which are specific both to the State of California and to the restaurant industry. The person must undertake the following steps:
- Create a business plan
- Choose the proper business entity
- Obtain proper state and county licenses and permits
- Deal with state and county health and safety regulations
- Getting adequate insurance
- Reviewing franchising issues
- Deal with employees
Creating a Business Plan
Before seriously pursuing a new restaurant in Los Angeles, you will need a specific thought-out business plan. This can include:
- The name
- The overall concept of the restaurant
- A solid financial plan
- Startup costs
- Your target market
- Advertising strategies
Choosing the Proper Business Entity
The type of business entity you choose for starting your restaurant in Los Angeles will affect your amount of personal liability and tax obligations. Actually, there are four basic types of business formations:
- Sole proprietorship
- Limited Liability Company
Each type of these business formations has different requirements, tax implications costs, and levels of liability.
Obtaining Licenses and Permits
Under California law, a restaurant owner must obtain the following:
- IRS identification number: Restaurant owner is required to register with the state of California and the federal government for a Federal Employer Identification Number.
- Seller’s Permit, which is mandatory for all restaurants in California.
- Health Operational Permit: This is required for sale of edible goods, and the costs and rules vary by county.
- Workers’ Compensation Insurance: Under California law employers must have workers’ compensation insurance even if they only have one employee.
- Food Safety Certification: In California, each food facility must have at least one owner or employee who has passed a state-approved Food Safety Certification exam.
- Food handler permit: California law requires all employees that handle food must have a permit to do so.
- In case a restaurant owner intends to serve alcohol in his restaurant, he will also need to obtain a liquor license, handled by California Department of Alcoholic Beverage Control.
Obtaining Adequate Insurance
There are numerous risks associated with opening a restaurant in Los Angeles, such as employees or customers falling or slipping, someone getting hurt from broken glass or hot liquid etc. There are also more common business risks such as theft, fire or other personal injury or property damage. While choosing proper insurance coverage for you restaurant try to make sure that everything, from plates to stoves, is fully covered. In case of personal injuries, make sure to have a good general liability policy.
If you are thinking of opening a restaurant that is a part of a franchise you will be subject to a franchise contract which will likely give the franchisor rights to:
- Choose where other competing restaurants will be located
- Choose the geographic location for dispute resolution
- Block sale of your franchise to any prospective buyers
- Require you to purchase all services and goods and from the franchisor.
There are some particular employment laws that are specifically relevant to restaurants, such as minimum wages for tipped employees or rules regarding different exams and training related to food preparation and handling. Various testing and training rules can be found in in Chapter 3 of the California Retail Food Code.