Friday, November 26, 2010

So You Want to Open a Restaurant Or “Dancing With a Gorilla”

imageThis article was written by Tom Snell, SCORE Orange County Management Counselor

You have planned, planned and planned. You have developed and tightened the concept, not only do you have your menu but all the food costing done too. You have a mental picture of the layout and all the decor and colors. You've been over your cash flow many times. Your marketing plan is great. You can practically taste the food.

Best of all, between you and your Uncle Charlie you've come up with 30% cash down on the loan you somehow got from a bank. Somehow, you've talked your wife into letting you put up the house as collateral. You are definitely on a roll!

Now all you have to do is dance with the 800 pound gorilla. That's what I call the collective regulatory agencies that are there to tell you what you can and can't do. When you dance with the gorilla you must understand that it leads, and you follow.

Before I call the gorilla capricious or ugly or just a bad dancer, let's make it clear that these agencies have the best interest of the public in mind. They are trying to protect all of us from our own collective screw ups.

So pull out your dance card and write in for the first dance with the Environmental Health Department of Orange County, or just the health department as most people call it. Here you must submit your detailed plan of the restaurant you plan to open. They will put it under review and let you know if it is acceptable as is, or needs the adjustments they will point out for you – ad nauseam.

This is not the last time you'll hear from the first partner on your dance card. Save another space on your dance card, because they will come back and inspect the restaurant to be sure you built it the way you said you were going to.

The next dancer is the County Clerk where you must apply to register for the name of your restaurant. Assuming the restaurant name is something besides your own personal name, they will have to clear it to be sure no one else is already using that name. If your name is cleared then you will start the process known as DBA shorthand for” doing business as,” calling for you to publish your name registration in local papers.

None of this is particularly difficult, but it does take time, and you will have fee charges along the way. You will now start to feel the time pressures of everything coming at once.

The City Clerk is your next dance. Here's where you go to get your business license – you hope. The city essentially decides if they want you in the city. For example, they could say "no thanks" if there are too many bars in the area already. Or they just don't really want a cage fighting theme bar in their city. Here also, the local fire and police have a voice, especially if you are planning entertainment or a bar.

If you are planning to serve alcoholic beverages, you must get permits from the ABC, shorthand for the Alcoholic Beverage Commission, the state of California's regulatory body for licenses for the service of alcoholic beverages. The two normal avenues for restaurants are wine and beer only, or full alcoholic beverage service. They investigate this to be sure you are an upright and honest dude .

Next, you must prepare for federal income taxes by applying to the IRS, where they will give you an employment identification number (EIN) so that you can withhold federal taxes and Social Security taxes from your employees’ paychecks. I know you just can't wait !

Other California stuff. This includes filing for your state income taxes (franchise tax board) employment taxes, if you have employees (Employment Development Department) workers compensation and lots of colorful labor laws put out by the Department of Industrial Relations and the US Department of Labor). You're certainly are going to comply with these, aren't you?

You haven't stepped on the gorilla's toes yet? There are still chances!

How about the Coastal Commission for example. No, I don't know how far inland their authority goes. If you can see water and sand from your restaurant, you're probably under their control. The individual seaside cities are in charge of enforcing the rules of what you can do under the coastal commission rules.

The gorilla has a lot of steps and knows every dance. So be prepared, because this is all a major part of opening a restaurant, in Orange County or anyplace else. Give my regards to the gorilla.