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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.

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