You’ve been working tirelessly on your new restaurant’s launch for months—and have possibly even been dreaming about it for years. Finally, everything is coming together: the executive and sous chefs are selected, the menu is crafted, and contractors are putting the finishing touches on the space. It’s understandable that in the hustle and bustle, a few of the more seemingly mundane business items — such as license and permit applications — could be pushed further down on the priority list.
Compliancemaio 21, 2024
What business licenses and permits do you need to open and run a restaurant?
Yet, it’s critical that you apply for, obtain, and maintain the numerous permits and licenses for your restaurant business.
Restaurants are highly regulated by various state and local authorities, and they often require complex and detailed licensing. In addition, the restaurant industry is subject to rigorous inspections and enforcement of the law due to public health and safety concerns. Every restaurant business needs to be properly licensed before it can start operating.
The following is a list of common licenses, registrations, and permits required to launch a new restaurant. Take note that the list below is not exhaustive. Because states and local jurisdictions provide greater oversight of these regulations than the federal government, the exact requirements will differ depending on the state, city, and sometimes even county or municipality of your restaurant.
Federal employer identification number
Also called an employer identification number (EIN) and a federal tax ID, a federal employer identification number is not a license, but you may be required to obtain one before opening your restaurant business. Businesses that have employees are required to obtain an EIN from the IRS. The IRS uses your this number to keep track of and collect the relevant taxes from you and your employees. You can easily apply online and immediately receive your EIN at IRS.gov. You can also apply via phone or mail and receive your EIN within one to five weeks.
Basic business license
Local municipalities may require you to apply for a basic business license for the right to operate your restaurant but only within a certain jurisdiction. (Other common names for this license include business privilege license and business tax registration.) If you already operate restaurants in different cities or states, you will still need to get a business license for your new restaurant.
To obtain a basic business license for your restaurant, contact the business license department of your new restaurant’s city. When filling out an application, you’ll pay an initial fee. After you receive your initial license, set a reminder on your calendar prior to expiration date to ensure the timely renewal of your license. The city will usually send staff from the zoning department out to your space to ensure that it’s zoned for restaurant use and that parking is adequate (if applicable).
If your restaurant will engage in activities regulated by the federal government — such as selling alcohol or preparing meat products — you’ll need to apply for additional state and/or federal business licenses.
Liquor license
Before you can offer alcoholic beverages at your establishment, you’ll first need to acquire a state issued liquor license.
While the requirements and cost of this license vary by state, you will typically be offered several options, such as a beer and wine license and a hard liquor license, or a restaurant license and a tavern (bar) license. States may also have certain prerequisites and disqualifiers for holding a state liquor license. For example, a person whose alcoholic beverage license was revoked for cause within recent years may be disqualified from holding a state liquor license.
Moreover, numerous counties and municipalities establish criteria and prerequisites to complement the state legislation.
If your restaurant is near residential areas, be prepared for the possibility of pushback from the local community. In some states, given the potentially negative effects that alcohol sales can have on the community, you may have to attend a hearing where local residents can voice their concerns and provide input on the granting of this permit to your restaurant.
Some cities also require restaurants to obtain a local alcohol license or approval prior to applying for the state-level license. Many city or county governments may even cap the number of licenses available in a neighborhood or on a block, making it impossible for a new restaurant to obtain a license. There are also counties designated as "dry," where the local municipality prohibits all alcohol sales, irrespective of state regulations.
In addition to state-level licensure, all businesses that serve alcohol at retail must register as a retail beverage alcohol dealer with the US Alcohol and Tobacco Tax and Trade Bureau (TTB). Registration must be made prior to engaging in business and is specific to each restaurant location. Registration with the TTB is perpetual, however, any change in an existing registration must be reported on or before July 1 of each year.
Easily manage complex requirements
With over 75,000 federal, state, and local jurisdictions, compliance can be daunting. CT Corporation can simplify your compliance needs.
Resale permit and seller’s permit
Will your restaurant operate in a state that taxes sales? If the answer is “yes”, you will need to get a resale permit and a seller’s permit from a state agency.
The resale permit prevents double sales taxation on certain items. It allows your establishment to purchase specific items without tax — for instance, wholesale food inventory — as long as you are using the items to create products intended for resale. In the case of your restaurant, those resale products will be your prepared entrées. The seller’s permit is what allows your restaurant to charge and collect sales tax from your patrons.
Health permit
In nearly every restaurant, you can find a paper displayed on the wall denoting a certain grade — such as an “A” or a “98%”. These grades are assigned by each restaurant’s local health department as part of the health permit process. Every new restaurant must obtain a health permit from its city or county health department.
Permitting requirements vary by municipality, however. The typical permitting process requires plan review prior to the beginning of construction, as well as submittal of a menu, list of equipment to be used on-site and a food safety plan.
To maintain your permit, your restaurant will be subject to periodic inspections by the health department. Officials will check in from time to time to see whether you and your staff are complying with standard food management practices and keeping your facilities in tip-top shape. They may assign a letter or numerical grade based on your restaurant’s cleanliness, which you must then post in a conspicuous area of your restaurant. Failing these inspections could lead to a fine and potentially a loss of your restaurant’s health permit and ability to operate.
Food handling and safety permit
Sometimes called an employee health permit, this certification proves that you — the owner — and your staff has completed all the requisite food safety, storage, prep, and sanitation training required by the state.
A food handling and safety permit is often mandatory for anyone who is storing, preparing, packaging, serving, or providing food for human consumption. Owners and managers are generally required to obtain food handling permits. Depending on your state, this may include dishwashers, servers, and bartenders.
Permitting is generally handled by local health departments, though some states may have additional licensing requirements for food handling and safety at the state level.
Building license or permit
A building license is required for any restaurant in order to verify the location’s operational safety. This can include clearly marked and working fire extinguishers, fire escapes, and emergency exits. You may also need to obtain an occupancy license, which is often issued by the local fire commissioner.
Signage permit
Before hanging up the attractive new sign announcing your establishment, contact your local city or county officials to determine whether a sign permit is required. To protect the character and safety of the local community, your government may have certain restrictions on the type of sign and its size, location, and lighting.
Music license
Unfortunately, you're technically not allowed to just plug in your phone to play music in your restaurant. If the music you want to play is copyrighted — even if you have purchased the albums or paid for the streaming service — you still must obtain a music license.
If a restaurant intends on playing music, live or recorded, proper licenses must be obtained from a performing rights organization in order to be compliant with federal laws and to avoid costly penalties.
In addition, restaurants that allow dancing may be required to apply for an additional license, often called a cabaret license. The cabaret license is issued by the local government.
Additional local permits for restaurants
Depending on the local and state regulations for your restaurant, you may also need to obtain the following:
- Zoning permit
- Land use permit
- Certificate of occupancy
- Place of assembly permit
- Certificate of inspection
- Catering license
- Site cleanliness permit
- O.G. (Fats, Oil and Grease) permit
- Dumpster placement permit
- Sidewalk café permit
- Alarm permit
- Fire and police department permit
- Valet parking permit
- Live entertainment license
- Pool table license
Maintenance of restaurant licenses and permits
Of course, once you have obtained all the necessary licenses, your responsibilities do not end there. In addition to keeping up with the renewal of existing licenses and permits, your business may also experience changes — such as moving to a new location in town or changing its corporate structure — which could require new or amended licenses. Or, your state or local government could introduce new business requirements. Be sure to appoint someone to keep track of all renewals and events that trigger license amendments so that your restaurant can remain compliant.
Consequences of operating without necessary licenses and permits
Restaurant businesses operating without the appropriate permits or with an expired permit are subject to both state and local penalties. Penalties range from fines, cease and desist orders, and even criminal penalties, such as jail time and probation. Many cities, counties, and state health departments have partnered with third-party agencies for enforcement of business licensing compliance while also utilizing onsite food and health safety inspections to confirm licensing compliance. With such severe penalties, it is crucial that restaurant businesses obtain and maintain the appropriate licenses.
Contact CT Corporation’s business license team for more information about how we can help you navigate restaurant licensing requirements.
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