The Licenses and Permits Needed to Open a Restaurant
If you're planning to start your own restaurant, it's easy to spend most of your time focusing on the exciting parts of the process. Although creating the theme, building the menu, and figuring out how much it costs to open a restaurant are all crucial pieces of the puzzle, ensuring you have all the licenses and permits needed to open a restaurant is equally important.
Paperwork isn't anyone's favorite activity, but there are several restaurant licenses you'll need to obtain in order to operate your establishment legally, as well as several others you may need to consider. Restaurant licenses and permits often cost anywhere from $1,300 to $18,000 – but they can be more expensive depending on your location and business model.
Starting with the essentials, we've compiled a list of common permits and licenses for restaurants along with information on how to obtain them. Navigate to a specific topic from the table of contents or keep reading to browse the full list.
The Most Important Restaurant Permits and Licenses
1. Business License
Average Cost: $50 to $200
A business license is a permit or license issued by the federal, state, or local government that is required for your restaurant to operate legally1. Guidelines vary by region, so the specific requirements of this license depend on where you plan to open your restaurant. To obtain your license, start at the local level by contacting the license center in your area or by visiting their website. To learn more about the process and location-specific requirements, visit the U.S. Small Business Administration's website2.
2. Employer Identification Number
Average Cost: Free
Also known as a Federal Tax Identification Number, an Employer Identification Number (EIN) is issued by the Internal Revenue Service (IRS) to identify your restaurant as a legal entity for tax purposes. You can apply for an EIN on the IRS website3 or via phone, mail, or fax. Note that the IRS only issues one EIN per "responsible party," or person, per day, so plan ahead when applying.
3. Certificate of Occupancy
Average Cost: $100 to $1,000+ (Varies by location)
This legal document is considered proof of safety for your restaurant's location and is required for newly built structures, newly purchased structures, and renovated structures4. To obtain this certificate, contact your local government to set up an inspection of your space. This will typically include checks for fire safety, plumbing, electrical, and other building code requirements. If any issues are found, you'll receive a deadline to make corrections before an additional inspection is conducted.
4. Food Service License
Average Cost: $100 to $1,000 (Varies by seats, employee count, and location)
To cook and serve food on-site at your restaurant, you'll need a food service license5. This license can take a different form and name based on your location and business model; however, the general process is similar to a certificate of occupancy. Review the health and safety codes for food preparation in your area, ensure your restaurant meets those requirements, and contact your local health department 6 to apply for the license. A health inspection will follow, and passing affirms that your restaurant meets the requirements to serve food safely to the public.
5. Sign Permit
Average Cost: $50 to $250+ (Varies by location)
While signage for your restaurant is an important part of aesthetics and marketing, it also must comply with local government regulations. There may be guidelines around placement, size, and brightness of signs or banners that need to be considered as part of the creative process. These regulations vary based on location7, so start by contacting your local county government for details about the application process. You will likely need to coordinate with the city as you design your signage and potentially make alterations to gain approval.
6. Employee Health Permit
Average Cost: $5 to $15 per employee
Employee health permits – also known as food handler certifications – are granted to individuals who serve, prepare, or handle food, affirming they are properly trained in food safety. There is also a more rigorous course you can complete to earn a food manager certification that is typically more expensive ($100 to $150). Ensuring your staff is trained in food safety is an essential part of operating a restaurant and earning passing scores on periodic health inspections. Some states even require one or more employees to have a food manager certification. Learn more about the certification process and your state's requirements at NEXT Insurance8 or ServSafe9.
7. Seller's Permit
Average Cost: Free
Also referred to as a sales and use tax permit, a seller's permit allows your restaurant to collect sales tax on the goods you sell10. These are specific to individual states, so you may be required to collect local taxes, state taxes, both, or neither depending on your location. It is your responsibility to determine which taxes you need to collect and remit, so consider contacting the Department of Revenue to clarify and apply for a permit if necessary before you begin making sales.
8. Resale Permit
Average Cost: Varies by location
A resale permit or certificate is a document provided by a retailer to another business, usually a wholesaler, to indicate an intent to resell the goods being purchased11. In the case of a restaurant, for example, having a resale permit will allow you to make food purchases from suppliers without paying tax. Instead, you'll collect sales tax from each customer once that food is prepared and sold. Effectively, this prevents the goods from being taxed twice. Requirements for this permit depend on your location, so check with your state government to determine if you need one and how to apply.
9. Liquor License
Average Cost: $300 to $14,000+
If you plan to sell alcohol at your restaurant, a liquor license is essential. The exact type of license you need depends on a few factors12 such as your state, the type of business you're opening (e.g. bar vs. restaurant), and which days you plan to sell alcohol. Some states may also require a separate license to serve beer and wine. Work with your state government as early as possible to understand which license(s) you need and ensure the location you're considering would even be allowed to sell alcohol based on zoning laws. It can take several months to be approved, so starting early will also help make certain you're ready to begin serving for your grand opening.
10. Music License
Average Cost: $250 to $500+
Background music is a popular way to add to the atmosphere in your restaurant, but there are regulations around what type of music you can play to stay compliant with copyright laws. According to Cloud Cover Music13, most artists join performing rights organizations (PROs) that control licensing for their music. To legally play that artist's music in your restaurant, individual licenses must be purchased directly from the PRO they're associated with. Restaurants smaller than 3,767 square feet in size are exempt if music is played only from a radio, TV, cable, or satellite source. This exemption doesn't apply to music streamed from services like Spotify, however, so be sure to research which licenses you may need based on the type and source of music you intend to play.
11. Live Entertainment License
Average Cost: Varies by location
In some cities and states, additional permits are required to have live music or entertainment in your restaurant. These permits have different names depending on your location, but some examples are entertainment permits, special entertainment permits, and special event permits. Check with your local governing body if you plan to have live entertainment to determine if you need this additional permit.
12. Dumpster Placement Permit
Average Cost: Varies by location
It's not uncommon for restaurants to dispose of garbage and food waste in large dumpsters outside the main building; a dumpster permit may be required in these cases14. Regulations vary from city to city and typically depend on the size and placement of the dumpster. Contact your local government or waste management company for more information.
13. Valet Parking Permit
Average Cost: $250 to $500+ (Varies by location)
If you're opening an upscale restaurant or your parking space is limited, you may choose to offer valet parking. In some cities, this requires a special permit. Typically, you provide your business information, the valet vendor you're working with, and details about the parking spaces you intend to use. Contact your local government to learn more.
14. Pool Table Permit
Average Cost: $100 to $750+ (Varies by location)
This may come as a surprise, but some cities require a license to have pool tables in your bar or restaurant. The structure varies by region, but it's common for there to be an application fee along with an annual licensing fee per table15. Ask your local government for clarification if you plan to have pool tables in your building.
Make a List and Check it Twice
With so many licenses and permits needed to open a restaurant and the time it takes to acquire them, it's important to plan ahead and do your due diligence to make sure you're prepared for opening day. As you work through paperwork to obtain the ones you need, create a system to keep track of your progress and note important information, like renewal dates, for your records. If you're still in the early stages of developing your dream concept, check out our guide on restaurant startup costs to help you through the process of purchasing restaurant equipment and other essentials.
Resources
- What is a Business License & Do You Need One? Forbes. Accessed June 2022.
- Apply for licenses and permits. U.S. Small Business Administration. Accessed June 2022.
- Employer ID Numbers. Internal Revenue Service. Accessed June 2022.
- What is a certificate of occupancy, and do I need one? Bankrate. Accessed June 2022.
- What Is a Food Service License? 2ndKitchen. Accessed June 2022.
- State Retail and Food Service Codes and Regulations by State. U.S. Food & Drug Administration. Accessed June 2022.
- Understanding Signage Permits: What You Need to Know. Scout Services. Accessed June 2022.
- Food handlers license requirements by state: NEXT Insurance guide. NEXT Insurance. Accessed June 2022.
- ServSafe Food Handler. ServeSafe. Accessed June 2022.
- What Is A Seller's Permit And How Do I Get One? Forbes. Accessed June 2022.
- What is a resale certificate and who can use one? Sales Tax Institute. Accessed June 2022.
- How to Get a Liquor License: The State-by-State Guide. Nerdwallet. Accessed June 2022.
- The Restaurant Owner’s Guide to Playing Licensed Music. Cloud Cover Media. Accessed June 2022.
- Dumpster Permit Information. Budget Dumpster. Accessed June 2022.
- Application for Billiard Table License (PDF). City of Framingham. Accessed June 2022.
