How to Open a Restaurant in California
- Workers' Comp Basics
- Business Tips
You want to start a restaurant in California? Fantastic. We’ve done the legwork and put together all the steps for you. Here’s what you’ll need to do:
1. Come up with a business plan
Before you do anything, you need to figure out exactly what kind of restaurant you’re starting and a plan for how you’ll run it.
What do you need to nail down? A lot of things.
Your target market
Saying you’ll serve “anyone who likes tacos” isn’t enough. Customers in their twenties expect very different things than customers in their fifties. So you should decide, right now, who your restaurant is primarily for. (If other demographics show up because of your fantastic food, great!)
Your restaurant concept
Decide who you are. Spell it out. Don’t just say that you’re going for a “hometown diner vibe,” write out exactly how you’re going to create that environment. What kind of dishes will you use? How will your servers greet customers? What kind of music will you play?
The question you’re answering is this: how will you create a cohesive, enjoyable experience that your customers understand and enjoy? Every aspect of your restaurant should tell the same story. If you’re trying to create an upscale American steakhouse but end up playing your favorite Romanian folk music in the background, your diners will be pretty confused. So think through the details of your concept now. If your vision is clear, it’ll make all your decisions easier.
One last thing: keep the concept simple. Training every server to Irish step dance might seem fun on paper, but will be a huge time drain in reality.
What are you actually going to serve? Will you have an elaborate menu or stick with a few specialties? Write your menu out and figure out where the holes might be.
As with your concept, this is a good time to keep things simple, especially if it’s your first time opening a restaurant. Don’t be afraid to get rid of menu items that seem too complex, will overload your kitchen staff, or that you won’t be able to charge enough for in your market.
Your financial plan
Here’s where you really need to do your research. Financial margins in the food business can be razor thin, and you need to be realistic about what it will take to be profitable.
First, decide how much it will cost to get the doors open. How much can you spend on a location? What will you spend on equipment and upgrades? What will you spend on inventory before the restaurant even opens? (For some in the trenches advice, read this expert answer.)
You’ll also need to figure out how much your menu will cost to produce. It’s easy to say that you’ll only serve premium sweet potato fries, but you should take a look at the price tag before you commit.
Then, you’ll need to make some projections about overhead and labor. This means figuring out your projected prime cost and how much it will cost to run the restaurant on a daily basis.
Finally, you’ll need to make an estimate of your revenue—how much your restaurant will sell during the first 12 months of operation. Be realistic. Remember that it will take a while to find customers. (This is a good moment to figure out how much capital you’ll need to fund your restaurant while it accumulates a customer base.)
Once you’ve figured out all of these numbers, you should have a pretty good idea of what your finances look like and how much money you’ll need to get your restaurant off the ground.
2. Create a marketing plan
How, exactly, will you bring new customers into your restaurant?
Here’s where your target demographic will matter a lot. Are you reaching out to Generation Y? Then you should integrate new social media and stay away from billboard buys. But if you’re going after an older, less price-conscious crowd, then maintaining a Snapchat account isn’t worth the energy. So how will you reach them? Send out coupons in local circulars? Buy a television commercial? Target them with Google ads? Now’s the time to ask the hard questions and to research what your competitors are doing to get people in the door. (Here’s some advice on creating a marketing plan for your restaurant.)
That’s a lot to consider. But, remember, if you don’t think about this stuff now, it’ll come back to haunt you. A little foresight now can prevent a massive headache later.
Okay. Let’s move on to the next step.
3. Register your business
Now’s the time to put your business on file with the state of California. There are a few different business formations, but if you’re a new restaurateur, you’ll most likely form a limited liability company (or LLC for short). Here’s how to form an LLC in California.
4. Get funding
Now that you have a business plan, you should know how much money you’ll need to get your restaurant started. If you have those dollars in the bank already, fantastic. If not, you’ll need to find funds before you can move on.
The most likely places to get this money are bank loans, investment from friends and family, and lines of credit. You can also seek out private investors (although finding capital this way is difficult if you’re new to the restaurant industry).
Another option is to find a partner who already has financial resources. If they have industry experience, that’s a big bonus. Connections matter.
5. Find a location
Location might be the most important factor in whether your restaurant survives. If your target market isn’t interested in coming to where you are, there’s no ad campaign that can help you. So, find a location you like and then do your research. Are there enough people in the area to keep your restaurant afloat? Is it near an established competitor? Is the location easily accessible? Is there enough parking to serve your guests?
Be realistic about whether your location is visible, too. Customers won’t visit your restaurant if they can’t find it.
Finally, the ultimate question: can you afford this location? If the perfect spot destroys your financial plan, there’s a good chance that it’s not actually the perfect spot. Move along until you find the right balance between attributes and affordability.
6. Get all your licenses and permits
Here’s a list of licenses and other paperwork you’ll need to operate a restaurant in California:
An IRS Employer Identification Number. You can get this from the IRS here.
A Health Operational Permit. You’ll get this from your county’s local health department. (Find your local health department contact information at the CalGold website.)
A Seller’s Permit. Every restaurant in California needs one. You can register for it online at Ca.gov’s dedicated website.
A Food Safety Certification. Every restaurant in California needs at least one employee that has passed the Food Safety Manager Certification test. Since it’s your restaurant, you’re probably the best bet to get certified! Start studying. Then find an accredited food safety examiner here.
Food handler permits. Anyone who handles food at your restaurant will need one (so, probably everyone), and you’ll need to keep records verifying that you’re in compliance. You can find more information about this requirement at Servsafe.
An alcohol license, if applicable. If you’re serving any kind of alcoholic drinks, you’ll need to grab a permit. You can find information on how that works at the CA Department of Alcoholic Beverage Control.
A sign permit. Some areas require you to get a permit before putting up signage for your company. If you hire a sign company to do the job, they’ll normally take care of this for you. This can take longer than you think, so get on it as soon as you secure your location.
Fire department and occupancy permits. Depending on where you are, you might need to get permits from your local fire and police departments. These will affirm that you’re allowed to have crowds of people in your restaurant and that there are sufficient escape routes in case of an emergency.
(Quick note: This list is as accurate and up-to-date as we could make it. But you should definitely check all this information with state and local authorities. You’ll want to be sure you’ve got the most current, complete information.)
Hey, you made it this far. It’s time to get some help.
7. Hire your first employees
First off, if you’re going to have employees in the state of California, you need to have workers’ compensation insurance to operate legally. The traditional process of getting workers’ comp can take a long time, so don’t procrastinate. You can also get workers’ comp online in about five minutes.
Once you’re legal, start the hiring process. (Here’s a checklist for hiring a new employee in California. You’ll need it.) If you’re new to the restaurant business, you can find more information here about what kind of jobs you’ll need to hire.
Then think carefully about who to hire. It’s tempting to stretch the budget by finding the cheapest possible labor, but that’s actually a bad place to cut costs. Instead, strongly consider hiring the most experienced people you can afford, even if it means tweaking your financial plan a bit. The quality of your team can make or break your restaurant, especially when it first opens. (Imagine your beautiful new restaurant with a string of 1-star Facebook reviews.)
After you’ve hired your team, you’ll need to give them the training they need and make sure each employee has a Food Handler Certificate. Be sure to leave enough time for team members to get comfortable with their jobs before you open the doors—you want your first customers to have a great experience at your restaurant.
8. Pass a health inspection
You’re almost finished.
Before you can bring customers into your restaurant, though, you’ll need to pass muster with the local health inspector. Since California’s retail food code is administered locally, enforcement varies widely. If possible, you’ll want to ask restaurant owners in your area what to expect from your local authority. You’ll also get more information when you get your Food Safety Certification. (And you should absolutely familiarize yourself with the California Retail Food Code.)
9. Put up your website and open your social accounts.
Whatever your marketing plan, you need a web presence. Fortunately, these days it doesn’t take any know-how to create a simple webpage. Companies like Squarespace.com and Wix.com offer a simple, drag and drop interface and their templates look great without a lot of effort.
Whatever else you do on your website, though, be sure you cover the basics: Make sure your restaurant’s name and location are crystal clear. Post your opening hours prominently. Include a copy of your menu so that customers can check it out in advance. All the basic stuff. Visit some other restaurant websites to get an idea of what customers will be looking for.
If social media is a part of your marketing plan, be sure to put links to your social accounts on your webpage and ask people to follow you. And be sure to follow the instructions here to get a head start on your Google, Yelp, and Facebook reviews.
10. Open your restaurant.
Cut the ribbon and pour yourself a glass of champagne. (Just know that you won’t have time to drink it. You’re in the restaurant business now.)
And a quick reminder: if your restaurant is in California, we can get you a workers’ comp quote in about 5 minutes. It’s all easy and online. Tap here to get started.