How to Open a Restaurant in California

California is home to so many incredible food cities, from Los Angeles to Oakland to San Francisco to Berkeley — not to mention the amazing restaurants in smaller towns across the state. 

If you’re thinking of opening a restaurant in California, you’ll need a big budget, lots of patience, and a real passion for the industry — but it can be incredibly rewarding.

For example, after a few years away, Baroo has reopened a new iteration in LA. “It does feel like a culmination of everything that we have been working on and been dreaming about and thinking about, even since the beginning of Baroo. It feels incredible. We’re kind of in disbelief at this moment,” shared co-owner Mina Park with the LA Times.

In this article, we’ll go step by step and cover what new restaurant owners need to know about opening a business in California.

How to start a restaurant in California

1. Decide on a restaurant concept

Especially in such a saturated market, it’s important to narrow down a unique, profitable restaurant concept. Answering the following questions will help you nail down a viable business idea that you’re ready to invest in.

• What kind of food will you serve? What kind of cuisine will you specialize in? Are you an expert in this cuisine, or will you hire one?

• How will you differentiate your restaurant from the competition nearby?

• Will you offer a full-service experience or open a takeout counter with a few tables?

• What demographics do you want to appeal to? Who’s your target market?

• Will you open a small business, or will you eventually expand and franchise?

• How many staff members will you hire? What style of service will the restaurant offer? What skills do your new staff need?

• What will the physical business look like, from BOH layout to signage?

• How many business owners will be involved in the restaurant?

• Will you serve alcoholic beverages or be a dry establishment?

• What kinds of payment will you accept? Will you be cash-only, take all forms of payment, or take credit card only?

Outline your mission and values — and how they’ll impact your brand

Write down the values you want to embody as a business, and the mission that you and your team will work to achieve every day. It might feel strange at first, but this big-picture thinking will eventually help guide major business decisions, like who you hire and what kind of environment you’ll create for both employees and customers.

Then, take all the information you have about your dream business and choose a business name that ties it all together. Finally, create a visual brand to match, including your logo, color scheme, and the fonts you’ll use on social media, on your menu, and throughout your restaurant space. Check out Budonoki LA’s website to see a cohesive, unique brand in action.

2. Create a restaurant business plan

A restaurant business plan helps your new business secure funding by presenting investors with a feasible, viable path to a successful restaurant. It also helps you open a business bank account, and it provides a roadmap to follow throughout the opening process.

Before you start writing your business plan, choose a type of business entity. Choose from one of five business structures common in the US: Limited liability company (LLC), sole proprietorship, general partnership, S corporation, or C corporation. You can learn about the benefits and drawbacks of each in our guide on restaurant business entities.

Then, pick your profit distribution structure. Will you, the restaurateur and business owner, take home all the profit? Will you have investors who get a stake in the business? Will you profit-share with your employees? Work with a lawyer and accountant to draw up all the necessary paperwork and contracts.

Now you’re ready to create your business plan. Include detailed information in each of the following sections:

• Executive summary, including your restaurant name, concept, and type of food

• Company overview, including your business model

• Industry analysis (target market, location analysis, competitive analysis)

• Marketing plan

• Business model and service model (Quick service restaurant? Food truck? Fine dining? Fast food? A sit-down dining room?)

• Operations plan (staffing needs, customer service policies and procedures, payroll plan, which restaurant POS you’ll get, which vendors and providers you’ll use for produce and laundry and more, which types of business insurance you’ll get)

• Financial analysis (investment plan, financial projections like break-even point, expected cash flow, expected costs)

• Your history and qualifications as an entrepreneur

3. Secure restaurant financing

California food businesses will need a lot of startup capital before they can start the opening process, because opening a restaurant in the US costs from $95,000 to $2 million. In expensive states like California, and especially in impossibly expensive cities like San Francisco, restaurateurs can expect to need a budget on the higher end of that range — and beyond.

Most restaurant owners will need to pursue external funding options, like Small Business Administration (SBA) loans, lines of credit, business loans, crowdfunding, personal loans, bank loans, or alternative loans.

Learn more about each of these options, including application info and time to access cash, in our guide to restaurant financing and loans.  

4. Choose a California restaurant location (and start renovations)

Finding a location is one of the most important parts of opening a restaurant, so do some market research on the demographics of your potential neighborhoods and the restaurant competition nearby — picking the right location is critical to the success of your restaurant.

Buying, leasing, or building restaurant space are available options, each with perks and challenges, with varying impacts on your opening timeline as well as your startup costs.

Here’s a few factors California businesses should consider when evaluating a restaurant location:

• Target market and ideal customer profile

• Real estate market conditions

• Community

• Size of the site

• Previous tenants

• Zoning and previous type of usage of the space

• Foot traffic or car traffic

• How it suits your concept

For more help, reach out to the California Business Investment Services unit of the Governor’s Office of Economic Development (GO-Biz).

5. Apply for California restaurant licenses and permits

Restaurant businesses in California will need to apply for licenses and permits way before they open their doors. Some licenses are administered federally or by the state of California, while others are given by the city and county. Application fees vary widely for different types of businesses in different counties, so consult your local government business center to ensure you’re doing it all correctly.

Follow this guide for new businesses from the California Secretary of State to learn more about the process, and use CalGOLD (The Gold Standard For Permit Assistance) to learn about all the permits needed for businesses in California.

Here’s an outline of some of the license applications and permits you’ll need to open in California:

1. Get a Federal Employer Identification Number (FEIN, also referred to as an EIN), which connects your business to the Internal Revenue Service (IRS) and registers you to pay federal taxes.

2. Register your new restaurant with the California Department of Tax and Fee Administration (CDTFA) to be able to pay sales tax and use tax. Learn more about these and other tax obligations at the California Tax Service Center.

3. Register your business through the CDTFA online portal.

4. Apply for a business license and/or business tax certificate through your local city or county government.

5. Some types of business entities will need to register with the Secretary of State.

6. Apply for a seller’s permit (also known as a sales and use permit)— learn more about the process with the CDTFA guide. You can register for this permit online.

7. Contact your county or city government’s buildings department to learn how to apply for a Building and Construction Permit and/or certificate of occupancy, including plan reviews for new constructions or renovations, and inspections that ensure you’re complying with local ordinances. Some counties will also require zoning approvals.

8. Contact your local health department to get a food facility health permit, a Public Health Operating License and/or a food service license. You’ll likely need to submit plans for review and undergo health inspections. Consult with your county health department to learn if your food facility needs to fulfill any additional health and safety requirements.

9. Apply for a liquor license (also called an alcohol license) through the Department of Alcoholic Beverage Control (ABC). Apply for the license in person and expect at least 45 to 50 days to process the application.

10. The California Department of Public Health says all employees need to have a food handlers card within 30 days of being hired, and every business must have at least one Food Safety Manager. These food safety certifications show that either a manager and each staff member have been trained in the proper food preparation and food storage protocols that prevent foodborne illness.

11. Learn about insurance requirements, including property insurance, general liability insurance, unemployment insurance and worker’s compensation insurance.

6. Develop your menu and beverage program

After all that bureaucracy, this task will be a welcome reprieve: Start drafting your food and drinks menu. Go big, with lots of ideas, and then narrow it down to a cohesive, profitable menu that’s manageable in terms of inventory and prep tasks. Run your menus by your chef, cooks, and bartenders once they’re on board — they can help you refine it.

Learn more about menu pricing, menu design and menu engineering to make the most of your menu.

7. Hire employees, get them trained, and retain them

Every restaurant will need to hire dozens of employess, and turnover is a challenge in restaurants across the country. That’s why it’s worth it to put the work in up front to find (and retain) the best of the best.

When looking for new employees, put calls out to your network and community from previous restaurant jobs, post on social media like Instagram and in industry Facebook groups, reach out to new grads from culinary schools in your area, and post on industry job boards.

You can get ahead of any staffing problems by making your business an outstanding place to work — and by providing good compensation and meaningful restaurant employee benefits, including health insurance. Building staff support into your budget from the beginning means you’ll face less turnover and fewer hiring challenges.

Here are some resources from Toast to help you attract, hire, and retain restaurant employees:

• How to Be a Boss at Restaurant Recruiting

• How to Onboard a New Restaurant Employee

• How to Train New Restaurant Employees

• How to Reduce Restaurant Employee Turnover

• How to Ask Great Restaurant Industry Interview Questions

To learn even more, go through our video course on hiring and retaining restaurant employees.

8. Invest in equipment and restaurant technology

Go through our list of essential restaurant equipment and start shopping: get everything from lowboy fridges to cambros to ovens and smallwares. Then, start thinking about restaurant tech.

Restaurant technology helps your restaurant run smoothly while helping you track the performance of your business. Peruse your restaurant tech options and choose the combination of products and systems that make sense to help you set your operation up for success. New restaurants should strongly consider investing in the following:

• A cloud-based restaurant point of sale system with handhelds

• Kitchen display screens

• An online-ordering system for restaurants

• Restaurant reporting and analytics

• Restaurant inventory management software

• Restaurant accounting software Simple scheduling and team communication

• A restaurant payroll solution

• A restaurant loyalty or rewards solution

• Contactless payment options

9. Create a restaurant marketing plan

Two of the most effective marketing channels for restaurants are social media and email marketing — and they’re vital for restaurants trying to succeed in very crowded markets like LA or San Francisco.

Posting on social helps share what your restaurant is about, including your food, your location, and your team. Then, once you get those guests in the door, you can share promos and offers with them through email marketing — and they’ll come back for another meal.

Learn more about building a restaurant marketing plan with our marketing plan template, our social media guide for restaurants, and our guide to restaurant email marketing.

10. Host a soft opening and grand opening

Invite your family and friends, plus the family and friends of your whole team, and run through service for the first time. This will help you find any snags you hadn’t predicted, and update your business’s processes so the grand opening goes smoothly.

Afterwards, start planning (and advertising!) your grand opening — post all over social media, reach out to local media, post flyers, and do whatever else you can think of to get the word out. Fill the restaurants and run through your first service for real.

You’re ready!

To keep track of everything you need to do within a year of opening, check out our time-bound restaurant opening checklist below.