How to open a restaurant in California
With the largest economy and highest population in America, California is a premier choice for restaurateurs seeking to open a business or expand their operations. The Golden State also has a rich culinary history with plenty of international fare.
Whether you're searing mouthwatering burgers, stir-frying sensational Pad Thai, or shaving off juicy slices of kebab, there's space for it in the stomachs of hungry Californians. But, before you can begin serving your awaiting customers, you'll need to know how to open a restaurant in California.
There are several legal and practical procedures to take care of before getting a business license and firing up the flatiron, such as filling permits and securing a space. To help guide you through the process, this step-by-step recipe for success explains how to get your California eatery started.
#1 Dream up an idea and develop a business plan
Restaurants in California begin just like restaurants in any other part of the world: with an idea. Deciding on a type of cuisine, aesthetic, and menu is important. But, for legal purposes, there are some more technical details you'll want to determine, including:
• A proposed name for your restaurant
• The location you plan to operate in
• Any partners or investors you want to go into business with
• Whether or not you're going to employ anyone
Having this information established and ready to present to government entities is crucial. As you apply for the required permits to obtain your business license and start operations, these and other aspects of your business plan will determine the exact actions you need to take.
#2 Choose and establish an entity type for your business
Prior to applying for a license, you'll need to decide exactly what type of business you want to start. That doesn't involve choosing between serving Mexican, Mongolian, or Malaysian, either. It means determining the legal entity structure for your business, a process that involves deciding:
• How to legally register your restaurant between you and your potential investors
• How revenue will be split amongst owners and investors
• Who will be on the hook for any potential liabilities arising from your restaurant
• The taxation laws that will apply to your business
There are a variety of different entity types to choose from in California depending on the business's ownership structure, including:
C Corps – Corporations can protect you from liabilities by existing as separate "owners" of a business, rather than the business being in the restaurateur's name. They're a common strategy in restaurants seeking to expand through franchising.
Limited Liabilities Companies (LLC) – LLCs are like corporations, but their tax rules are different and they have unique laws governing the business practices of their owners.
Partnerships – If you don't plan to go into business alone, there are a variety of different partnership types through which you can register your restaurant. Limited Partnerships, General Partnerships, and Limited Liability Partnerships all present different degrees of ownership and liability for the various parties involved in a business.
Sole proprietorships – If you want to own your restaurant in your name, receive all of its profits, but also be responsible for all of its liabilities, then a sole proprietorship is the way to register your business. Sole proprietors are in full creative and financial control, but also are the only ones accountable for operating costs such as wages, rent, and loans.
Once you decide how to register your business, you can file with the California Secretary of State or other relevant boards to declare your business a legal entity. This secures your restaurant's name and has you ready to move on to the next step, obtaining an Employer Identification Number (EIN).
#3 Get Your Employer Identification Number (EIN)
Technically, getting an EIN may not be a necessary step for every single restaurateur establishing operations in California. However, more likely than not, it will be a legal requirement for most owners seeking to build a successful restaurant. If you plan on doing any of the following, then you must obtain an EIN before opening day:
• Employing anyone (even a single prep cook) to work for your business
• Operating your business as any type of partnership or corporation
• Serving alcohol and paying the associated taxes on it
• Getting funding from investment firms or trusts
In the vast majority of cases, you'll probably be required to get an EIN for your restaurant. Luckily, there are several simple ways to apply for one through the Internal Revenue Service (IRS), including:
• Their online platform
• Over the phone
• Via fax
• Through the mail
Whatever method you choose, once you have your EIN, you're free to employ all the line cooks, wait staff, and hosts you need to run your restaurant smoothly. Just keep in mind that for each employee, there will be extra paperwork come tax season.
#4 Determine tax obligations
The entity type through which you register your restaurant, amount of employees you have, and various other factors will all affect your obligations come tax time. Business write-offs, property taxes, and paycheck withholdings all need to be taken into consideration as well.
Each restaurant has a unique tax situation. Thankfully, there are several resources at the state and national level to help you determine your dues and pay your debts, including:
• The California Franchise Tax Board
• California Department of Tax and Fee Administration
• Employment Development Department
• California Tax Service Center
• The IRS
After submitting the right tax documents to ensure your business's revenue flow is documented, you can move on to another nitty-gritty, yet crucial step: getting insurance.
#5 Insure your operations
Insurance needs, like tax obligations, vary from business to business. Whether or not you employ anyone, own the property you operate out of, or do delivery-only can affect the type of insurance your restaurant needs. To ensure you're legally insured, consider a business owner's policy that can cover obligations such as:
• General liability
• Employee Insurance
• Commercial property insurance
#6 Get Food Handler Cards for your employees
Unless they're strictly staying away from the kitchen, all of your employees must obtain a California Food Handler Card. The card is awarded after the successful completion of a test on foodborne illness and basic hygiene practices. Passing it is a must for all:
• Head chefs, line cooks, sauciers, and anyone else working in food preparation
• Wait staff
#7 Obtain obligatory local licenses and permits
After your employees are certified to handle food, you're almost ready to apply for your business license and start serving your delicious food. Depending on your location, however, there may be other miscellaneous local licenses and permits you need to obtain. For instance, some of the certifications necessary for Los Angeles County include:
• Building and construction permits
• Burglar alarm permits
• Zoning approval
• Fictitious business name licenses
• Liquor licenses
• Food-selling permits
• Various other permissions and approvals
Local regulations vary, so be sure to check with California's Office of Business and Economic Development (OBED) for the specific laws in your locality. No matter where you are in California, however, part of fulfilling legal business requirements is finding a place to operate in that satisfies local zoning laws.
#8 Find a space to operate out of
The final step before applying for your business license is finding a space that satisfies zoning requirements. If you're planning on hosting dine-in guests, then factors such as the neighborhood and amount of foot traffic should be taken into consideration as well.
Unfortunately, California is one of the top three most expensive states to rent in. Across the state, commercial spaces go for a premium - especially those located in popular neighborhoods.
If you plan on doing delivery-only, however, you can save quite a bit of money at this step by choosing to operate out of a ghost kitchen. Ghost kitchens offer an exceptional option for starting a restaurant in California as they offer:
• Locations that are already legally approved for use as commercial kitchens
• Equipment that's optimized to make quickly turning out delivery meals easier
• The ability to lease space solely for the hours you use it, rather than on a monthly basis
Whether you go the savvy route with a ghost kitchen or opt to offer a traditional dine-in experience, finding a commercially-approved space is crucial. Once you do, you can finally apply for your business license and begin dishing out your delicacies.
#9 Apply for a business license
Getting a business license is the final avocado to slice before your restaurant is cleared to commence operations. Depending on the county, you may be looking to apply for a:
• Business License
• Business Tax Certificate
• Another related license or permit
OBED, like with other licenses, will be able to guide you on the exact procedure and permit that you need. Then, once your business is fully licensed, you can finally open your doors to hungry customers.
#10 Grow your business and expand operations in California
If you're trying to expand your successful restaurant business into California, you'll have to adjust to life in the camera's eye - this is true even outside Hollywood. Californians are most likely people to boast about their lives on social media, including showing off the gourmet cuisine that they're munching on.
Take advantage of this likelihood to gloat by imploring them to share on social media with:
• Discounts for tagged posts
• Unique, memorable packaging for delivery orders
• Impeccable presentation that diners would be remiss not to snap pictures of
Along with their tendency to share, Californians were found to have the most connections on popular social media sites. Thus, enticing an Angelino or San Diegan to share your food means reaching a wide (and hungry) audience.
Then, once your dishes have made the rounds on Facebook and Instagram, customers are crazy for your cuisine, and the size of your current operations can't keep up with demand, it's time to expand.
Start or grow your restaurant in ghost kitchens from CloudKitchens
Ghost kitchens from CloudKitchens are a savvy solution for Californian restaurateurs seeking to expand and owners from across the nation looking to break into the Golden State's food scene. They put your restaurant on the fast track to opening day by:
• Providing an operational space approved with all the building-related permits needed to open a restaurant, meaning you don't need to take the time to get them
• Offering affordable spaces leasable for the hours you need them
• Supplying the equipment you need to get your restaurant going, meaning less time building capital or seeking investors.
CloudKitchens offers the ghost kitchen space you need to turnout delicious food without the hassle. Whether you're an established restaurateur seeking expansion or a young chef trying to burst onto the culinary scene, our functional equipment is ready to serve your future food fanatics.
Take a tour of a CloudKitchen to learn why they're an exceptional next step on your journey as a culinary chef.
Bureau of Economic Analysis. Gross Domestic Product by State and Personal Income by State, 4th Quarter 2022 and Year 2022. https://www.bea.gov/
California Secretary of State. Starting a Business – Entity Types. https://www.sos.ca.gov/
Internal Revenue Service. Do You Need an EIN?. https://www.irs.gov/
Internal Revenue Service. How to Apply for an EIN. https://www.irs.gov/
California Secretary of State. Tax Information. https://www.sos.ca.gov/
United States Small Business Administration. Get Business Insurance. https://www.sba.gov/
California Restaurant Association. California Food Handler Card. https://www.calrest.org/
Governor of California’s Office of Business and Economic Development. Business permits and other requirements in the City of Los Angeles (Los Angeles County) for business types: Restaurant.
U.S. News States With the Highest Rents in 2022. https://www.usnews.com/
Governor of California’s Office of Business and Economic Development. CalGold. https://www.calgold.ca.gov/
Consumer News and Business Channel. New ranking calls out California for social media narcissism. https://www.cnbc.com/
Teneo. The Most Socially Connected States Survey. https://www.teneo.com/
More insights & stories
There’s more where that came from.
Get in the know and check out our additional insights