Launching a Food Services Business

Chances are you want to open a restaurant, bakery, cafe, or bar because food and good drinks are your passion – not because you're in it to get rich. And it's true that if your business is going to take off, it has to be a labor of love. At the same time, all the passion in the world will only go so far without adequate planning.

If you're new to the world of business, you may be wondering where to get started. Sure, you've got your menu down, but what about business licensing? Food safety regulations? And how do you ensure your restaurant's name isn't already taken?

Fret not. We've put together this starter guide that can point you in the right direction for these questions and more. Follow these steps to help turn your dream of owning a restaurant, deli, or catering operation into a reality.

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Step 1: Register Your Food Services Business

Step 1: Register Your Food Services Business

Registering Your "Doing Business As" Name

Your establishment's name is more than a signifier for customers – it's also how your business will be legally distinguished. The process of registering your business involves applying for a "Doing Business As (DBA)" name. This isn't the same as trademark protection or incorporation. Rather, your DBA…

  • Lets your state government know that you are doing business as a name other than your personal name or the name of your limited liability corporation (LLC).
  • Spares your business from defaulting to your personal name or the name of the entity that owns the business (if you decide to incorporate).
  • Is required on all government forms, such as your your application for employer tax IDs, licenses, and permits.

When deciding a name for your business, be sure you pick a name that isn't trademarked already (lest you face a costly copyright infringement lawsuit!). You can use the U.S. Patent and Trademark Office's trademark search tool to make sure your selection isn't already taken.

Your location will dictate whether you should register your DBA with your county clerk's office or with your state government.

Registering Your Food Services Business with State Agencies

The type of business you own will determine whether you need to register with your state government. For instance, the following types of establishments require state registration:

  • Corporations.
  • Nonprofit organizations.
  • Limited-liability companies or partnerships.

However, if you operate your establishment as a sole proprietor, you don't need to register at the state level. Many states require that sole proprietors use their own name as their business name unless they formally file their DBA name.

If you decide later on to change the type of business you own, you can. To learn more about the various business structures, check out the Small Business Administration's guide, "Choose Your Business Structure."

Step 2: Get a Business License

Step 2: Get a Business License

Most business owners, regardless of their industry, will require some kind of license or permit to operate legally in a commercial capacity. As a food services business owner, you'll have to carry both federal and local licensing if you plan to sell and serve alcohol. To legally sell alcohol, register your business with the U.S. Treasury's Alcohol and Tobacco Tax and Trade Bureau (TTB). You will also need to obtain federal permits from the TTB, too, for tax purposes. For local alcohol permit and licensing information, you will need to contact your local Alcohol Beverage Control Board.

In addition to alcohol-specific licenses and permits, you need to carry food service and general business licenses, but regulations vary depending on where you live, the size of your business, and your industry. To find out which licenses or permits your business needs, use the SBA's "Find Business Licenses & Permits" search tool.

Step 3: Understand Basic Zoning Laws

Step 3: Understand Basic Zoning Laws

When choosing your business location, you must take local zoning regulations into account. Zoning laws define…

  • Property that can be used residentially.
  • Property that can be used commercially.

Because of these ordinances, property zoned for residential use cannot be used for a commercial building, and vice versa. Before you make any commitments, ensure your building is properly zoned for commercial food service.

Step 4: Adhere to the Regulations that Govern Food Service

Step 4: Adhere to the Regulations that Govern Food Service

As a food services business owner, you will have to comply with federal and state laws that govern food preparation, food safety, and product labeling. (Learn more about federal food regulations from the SBA's Food and Beverage Service Business Guide.)

Your county's Public Health Department is responsible for overseeing commercial food production activities at the local level. This may include regular inspections to ensure your food retail business is clean and employs sound food preparation and handling practices. Regulations vary from state to state, so be sure to check out what your Public Health Department requires. You can find your state's information on FoodSafety.gov's map, "State Public Health Departments."

Step 5: Get a Loan for Your Food Business

Step 5: Get a Loan for Your Food Business

Starting a business can be a costly endeavor, and you may need some help getting your finances together. If so, you may consider applying for a loan to help cover startup costs. And there are numerous federal, state, and local financing programs designed specifically for small-business owners and entrepreneurs. The SBA's Loans and Grants Search Tool can help you get an idea about the funding options available to you.

Documentation Checklist: What You Need for Small Business Loan Applications

Applying for a small business loan involves a thorough assessment of credit factors. So your potential lender will likely need documentation to help evaluate your application. Having the following documents on hand before you begin applying for loans can help streamline the process:

  • Personal background information. This may include previous addresses, names used, criminal record, and your educational background.
  • Resumes. If you are applying for a loan to start a new business, your lender may require that you have management or business experience.
  • Business plan. Business plans are always part of the loan application process. Be sure yours includes projections of profit, loss, and cash flow, as well as a balance sheet.
  • Personal credit report. Your lender will obtain your personal credit report, but it's important you have your own, too. That way, if there are any issues in your credit history, you can address them early on with your lender. (You can get a free credit report at annualcreditreport.com.)
  • Income tax returns. Prepare for your lender to require personal and business income tax returns from the past 3 years.
  • Financial statements. If you own more than a 20 percent stake in your business, be ready to submit signed personal financial statements.
  • Bank statements. Don't be surprised if your lending program requests a year of personal and business bank statements as part of your application package.
  • Collateral. While some loan programs don't require collateral, others do. In either situation, you may want to go ahead and prepare a collateral document. This document should describe the value of your personal or business assets that will help you secure your loan if you default.
  • Legal documents. Your lender may require you to submit any or all of these documents:
    • Business licenses.
    • Business registrations.
    • Certificate of Incorporation (if applicable).
    • Contracts with third parties.
    • Franchise agreements.
    • Commercial lease.
Step 6: Create Shareholders' and Partnership Agreements

Step 6: Create Shareholders' and Partnership Agreements

If your business operates as a corporation, you'll need to create a shareholders' agreement (aka a buy-sell agreement). This contract outlines…

  • When and how shares in a corporation can be bought and sold.
  • How the control and management of the company is parsed.
  • How to resolve disputes between shareholders.
  • How to protect the competitive interests of the company.

A shareholders' agreement ensures shareholders are treated fairly, especially when company shares are sold.

If your business operates as a partnership, you'll need to draw up a partnership agreement. Partnership agreements explicitly detail the relationship between the business partners, as well as their obligations to the partnership. This agreement will give you and your partners the opportunity to define…

  • Your expectations of each other.
  • The amount of capital each will invest in the business.
  • The role you will both play in the business.
  • Salaries and distributions.

For both contracts, you will likely want to employ the help of an experienced attorney to ensure your paperwork passes legal muster and will hold up in court, if necessary. These contracts can be long and complex: they should outline action steps for handling business expectations, stakeholder representation, funding, and dispute resolution. It's handy to have an expert weigh in and mediate negotiations.

Additional Resources for Food Business Owners

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