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CHECKLIST IN STARTING UP / OPENING A RESTAURANT IN SAN DIEGO, CALIFORNIA

2008

[In Progress]

  • CONCEPT
    • Create your own concept
    • Consider buying a franchise
    • Consider purchasing an existing restaurant
    • Draft a business plan
      • Include a confidentiality agreement to give to those you discuss / share your ideas with
      • Include your goals and strategies
      • Include your proposed menu
      • Include your proposed menu pricing
      • Include your target market analysis
      • Include your projected staffing needs
      • Include your projected financing needs
      • Include sales and profit analysis from best to worst case scenarios
  • DUE DILIGENCE
    • Survey target market with email blasts, direct mailers, etc.
    • Research the following:
      • Market, trends and competitors
      • Demographics
        • Consider purchasing demographics report on credit card or public utility data
    • Consider purchasing prospect lists from the chamber of commerce
    • Consider hiring a marketing firm to help with the research
    • Taste test your menu
  • THE TEAM
    • Consider hiring professionals early in the process, such as:
      • Restaurant consultant
      • Accountant – early to get the numbers together for the business plan, especially if you need outside financing
      • Real estate broker
      • Attorney
      • Marketing firm
      • Designer
    • Consider partnering with others
  • BUSINESS FORMATION
    • Consult with a lawyer and an accountant to determine the correct business entity for your restaurant
      • Sole proprietorship
        • Advantages: No formalities or filings with the secretary of state required (except for, in some cases, a fictitious business name registration)
        • Disadvantages: Personal liability for the owner
        • Other: Pass-through taxation
      • Partnership
        • Advantages: No formalities or filings with the secretary of state required (except for, in some cases, a fictitious business name statement)
        • Disadvantages: Personal liability for the partners
        • Other: Pass-through taxation
      • Limited partnership
      • Limited liability company (LLC)
        • Advantages: Owners in most cases are not personally liable for the business debts, and fewer formalities than corporations required.
        • Disadvantages: Requires filing with the secretary of state and possibly securities registration
        • Other: Pass-through taxation
      • Corporation
        • Advantages: Owners in most cases are not personally liable for the business debts, and flexibility in raising capital
        • Disadvantages: Requires filing with the secretary of state, formalities in maintaining the corporation and possibly securities registration (or a notice of exemption)
        • Other: Taxation at both the corporate level and shareholder level
      • S Corporation
        • Advantages: Owners in most cases are not personally liable for the business debts, and flexibility in raising capital
        • Disadvantages: Requires filing with the secretary of state, formalities in maintaining the corporation, restrictions on the number and status of shareholders and possibly securities registration (or a notice of exemption)
        • Other: Pass-through taxation
    • Form the business entity
      • File appropriate documents with the secretary of state, if need be
      • Register securities or file a notice of exemption, if need be
  • FINANCING
    • Consider the following sources for startup financing:
      • Personal savings
      • Family or friends
        • In the case of family or friends, make sure to document the transaction and clarify the terms
      • Loans
        • Inquire at the Small Business Association to see if your business will qualify for help
      • Investors
      • Partner
      • Purveyors
        • See if your purveyors will defer payment of your bills or otherwise lessen the burden during startup
    • Set up business bank accounts
    • Work with your accountant to set up the books and establish a plan for regular financial reporting
    • Obtain a credit card processing system
  • LOCATION, LOCATION, LOCATION
    • Consider engaging a real estate broker to help find the space
    • Check with the chamber of commerce, zoning boards, and other local agencies / offices for help in finding a place
    • Consider hiring an attorney to assist in negotiating a lease
      • Consider asking for a rent abatement while setting up
      • Consider sharing a percentage of sales with the landlord to help keep rent at a manageable rate
    • Once in the space:
      • Set up utilities
      • Engage a pest control company
    • Engage contractors, architects and interior designers as needed
    • Consider trash services, dumpsters, grease removal, recycling
    • Obtain building permits
    • Obtain certificate of occupancy
    • Obtain Fire department permit
    • Elevator inspections
    • Compliance with ADA (www.usdoj.gov/crt/ada/adahom1.htm)
  • EQUIPMENT AND SUPPLIES
    • Consider new versus used and buying versus leasing
      • Computer
      • Fax / phone
      • Reservation system
      • Kitchen equipment
      • Signage, business cards, takeout bags, letterhead, napkins, other printed material, etc.
    • Locate equipment suppliers
    • Locate food / beverage source suppliers
    • Obtain purchasing sheets for all products
    • Purchasing agreements with purveyors
    • Purchasing manual
  • PERMITS, LICENSES AND OTHER LEGALITIES
    • Liquor license
    • Safety / sanitation / hazard issues
    • Employee cerificiation for safe food handling
    • Zoning / building codes
    • wage and hour laws
    • Health code compliance / health department permit
    • Business license
    • Employer tax ID
    • Building permits
    • Certificate of occupancy
    • Fire department permit
    • Elevator inspections
    • Seller's permit
  • EMPLOYEES
    • Help wanted ads
    • Hire employees
      • chef
      • general manager
      • managers
      • supervisors
      • waiters
      • hostess
      • dishwashers
      • etc.
    • Develop job descriptions, pay rates, benefits package, hours
    • Employee and operational manuals
    • Train employees
    • Each establishment must have at least one employee who is certified in food safety and sanitation
    • Engage a payroll company
    • Get forms together (e.g. I-9 , W-4s)
    • Hiring standards must pass the business necessity test
    • Background checks must comply with federal Fair Credit and Reporting Act (15 USC §§ 1681 – 1681u), California Consumer Credit Reporting Agencies Act (Civil Code §§ 1785.1-1785.35), California Investigative Consumer Reporting Agencies Act (Civil Code §§ 1786 – 1786.56).
      • General requirements:
        • Notice
        • Authorization
        • Certify compliance to credit agency
        • Provide copy to applicant
        • Provide notice of adverse action
    • Paperwork checklist for employees:
      • Offer letter
      • Employee contract
      • I-9 / W-4 / government forms
      • Agreement to arbitrate
      • Employee handbook with acknowledgment of receipt
      • Authorization for payroll deductions
      • Benefits application form
    • Consider independent contractors where possible
      • Advantages of independent contractors:
        • Employer does not pay the usual employer contributions for:
          • State employment tax
          • Social security
          • Federal unemployment tax
        • Employer does not need to provide benefits such as life or medical insurance, vacation, sick time, pregnancy time or retirement plan
        • Employer decides whether to provide workers compensation
        • Labor laws and wage and hour laws do not apply
          • Wage and hour laws: Labor Code §§ 200-272, 500-856, 1171-1205
          • National Labor Relations Act (29 USC § 151 et seq) and Fair Labor Standards Act (29 USC § 201 et seq) do not apply
        • Reduced risk of discrimination claim
        • Minimized potential for wrongful termination claim
      • Disadvantages of independent contractors:
        • Loss of control – cannot control how the contractor performs the service
        • Cannot terminate without cause (or risk breach of contract)
        • Need to continuously monitor relationship to make sure it is legitimately an independent contractor relationship because penalties for misclassification are high
  • INSURANCE
    • Property
    • General liability
    • Liquor liability
    • Auto
    • Workers’ compensation
    • Unemployment
    • Flood, earthquake, etc
    • Employment practices insurance
    • Loss of business income insurance
    • Food contamination and spoilage
  • TRADEMARKS, TRADE SECRETS, COPYRIGHTS, LOGOS, BRAND IDENTITY
  • MARKETING / ADVERTISING
    • Website, email, etc.
    • Mailers, tv, radio, newspapers, trade publications, word of mouth

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The above discussion is intended to be a general commentary on legal issues. Each situation is different and this article is not intended as legal advice. Further, nothing in this article is intended to create an attorney-client relationship.