Starting any business is hard. About 90 percent of startups fail in the US. That’s a harsh statistic! The first five years are some of the hardest ones, generally. Many new businesses are in the hospitality industry because so many people dream of owning a bar or restaurant. To succeed in this industry and get to year six thriving and earning a profit, a family restaurant requires careful planning, proper registration, and legal compliance. Below is a ten-step guide to starting a small family restaurant business in the US.
1. Write a business plan
Your business plan will become the reference document for many aspects of setting up and running your restaurant. It will cover topics such as
- Business name
- Startup costs
- Ongoing operating costs – rent, utilities, supplies, salaries/wages, etc.
- Identification of target market
2. Create the legal entity
It is vital to decide upon your business structure. You’ll need to decide whether your business will be a sole proprietorship, partnership, limited liability company (LLC), or corporation.
In some ways, it is more important to have a legal structure when the family is involved because relatives and financial commitments can become tricky under stressful circumstances. Investments should be clearly defined and what rights those investments entitle the owner to within the company structure.
3. Small family restaurant: Register for taxation
Before you open, you need to register your restaurant for taxes. To be able to register for taxes, you need an EIN.
Issued by the IRS, an EIN is an Employer Identification Number. Also known as an FTIN (Federal Tax Identification Number) and FEIN (Federal Employer Identification Number), it is like a Social Security Number for your business.
You’ll need to take a little time to understand what taxes you will/may be liable for. You might employ some professional financial advice on this matter.
4. Open restaurant bank accounts and credit card
It makes sense to separate personal and business finances even if your business structure is a sole proprietorship. Not keeping them separate puts personal assets at risk if the business is sued. That is common practice and is known as the corporate veil in business law.
Separation of business and personal also enables easier and better accounting. Shop around for the best business bank account and credit card. A credit card will not only help spread costs but building a credit history will only help your business down the line.
To help prevent contactless credit card theft, consider an RFID card protector. It can help protect your personal data.
5. Set up accounting for the small family restaurant
This set is essential for accurate financial reporting. When you first startup, it may be easy enough for someone to keep records, but as the business grows, you may need to consider dedicated staff or a professional accounting company.
You can also look at integrated software for restaurants. The software can often perform diverse tasks from stock control to staff rotas to point of sale and financial records.
6. Obtain necessary licenses and permits
Your business can face hefty fines or even the threat of closure if you operate without the relevant federal, state, and local business licenses. Regulation and licenses for selling food and drink are very strict.
These requirements differ locally from state to state. As well as information available from your town, city or county clerk’s office, there are plenty of resources online for how to obtain a liquor license in California state, for example.
7. Get insurance
Do not operate without insurance. You will need general liability insurance, but also consider these insurance types:
- Public liability
- Workers compensation
- Property insurance
- Food contamination
- Liquor liability
- Business interruption
8. Create the small family restaurant website
Before creating the website, you need to be happy with the definition of your restaurant. Have you identified your brand and how to represent it? These are usually things like logo, font, color scheme, and tagline/motto. Your website will be an advertisement for your business, so invest time in getting it right.
These are the basic steps in setting up a small family restaurant. Each step requires equal attention. The more attention you give, the more opportunity for success.