Checklist In Starting Up / Opening A Restaurant In San Diego, California

Updated January 2019

By Ethan Watts

What follows is a general "checklist" or a collection of steps for consideration when opening up a restaurant in San Diego, California. This list is not intended to be comprehensive and is not necessarily appropriate for all restaurant entrepreneurs considering starting a restaurant in San Diego, but rather is a list of steps that can be referred to for ideas and is based on years of experience in assisting restaurant owners with starting and operating restaurants in San Diego.

  • CONCEPT. The following are options for consideration in determining the "concept" for your restaurant:
    • 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 with whom you discuss / share your restaurant ideas
      • 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. Before opening your restaurant, consider performing due diligence such as the following:
    • Survey target market with email blasts, direct mailers, social media, etc.
    • Research the following:
      • Market, trends and competitors
      • Demographics
        • Consider purchasing demographics report on credit card or public utility data
        • Examples of free demographics data can be found at American FactFinder
    • 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. You will likely benefit from engaging certain professionals to assist you with opening up a restaurant, and you may also consider partnering with other individuals:
    • 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
      • Business broker (for purchasing existing business)
      • Attorney
      • Marketing firm
      • Designer
    • Consider partnering with others who can compliment your talents and resources not only in starting the restaurant but in ongoing operations
  • BUSINESS FORMATION. There are numerous issues, including legal and tax-related issues, to consider when forming your business for opening a restaurant:
    • Consult with a lawyer and a tax adviser, such as a CPA, to determine the correct business entity for your restaurant. Some options include:
      • Sole proprietorship
        • Advantages: No formalities or filings with the secretary of state required (however, other governmental filings may be required in some cases, such as 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 (however, other governmental filings may be required in some cases, such as a fictitious business name registration and, although not required, at a minimum a written partnership agreement should be utilized)
        • 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 liabilities, 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 liabilities and 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 liabilities and 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, as required
      • Register securities or file a notice of exemption, if applicable
  • FINANCING AND FINANCIAL OPERATIONS. Consider the following with respect to raising restaurant startup capital and in ongoing financial operations:
    • 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(s)
      • 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 (or business 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 (and/or purchasing an existing business)
      • 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 - see e.g. https://www.ada.gov/business.htm
  • EQUIPMENT AND SUPPLIES. Unless you are purchasing an existing restaurant business with all necessary equipment and supplies, the following is a general list of ideas for your new restaurant:
    • 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. The following is a list of some of the legal permits, licenses and registrations that may be required for opening your restaurant in San Diego:
  • EMPLOYEES. In addition to the following, consider engaging professionals, such as employment and staffing specialists and employment law counsel:
    • Help wanted ads and posts
    • Hire employees such as the following:
      • chef
      • general manager
      • managers
      • supervisors
      • waiters
      • hostess / host
      • dishwashers
      • etc.
    • Develop job descriptions, pay rates, benefits package, hours
    • Employee and operational manuals
    • Train employees
    • Ensure appropriate employees have applicable food safety and sanitation certifications
    • Engage a payroll company
    • Get forms together (e.g. I-9 , W-4s)
    • Hiring practices and standards must be in compliance with applicable discrimination laws and pass the business necessity test
    • Background checks must comply with federal Fair Credit and Reporting Act (15 USC §§ 1681 et seq.), California Consumer Credit Reporting Agencies Act (Civil Code §§ 1785.1-1785.36), California Investigative Consumer Reporting Agencies Act (Civil Code §§ 1786 – 1786.60).
      • 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
      • Confidentiality agreement / nondisclosure agreement ("NDA")
      • Employee handbook with acknowledgment of receipt
      • Authorization for payroll deductions
      • Benefits application form
    • Consider independent contractors where possible, but consult with employment law counsel
      • 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
        • 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
        • Depending on the independent contractor agreement, may not be able to terminate without cause (or risk breach of contract)
        • Need to continuously monitor relationship, and it is recommended to consult with counsel, to make sure the relationship is legitimately an independent contractor relationship because penalties for misclassification are high and disputes concerning independent contractor versus employee status can be costly
  • INSURANCE. Consider securing insurance for the following, some of which may be required for certain restaurants:
    • 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, SERVICE MARKS, TRADE SECRETS, COPYRIGHTS, LOGOS, BRAND IDENTITY. Consult with an intellectual property attorney in obtaining trademarks, service marks and copyrights, as needed, and in securing and protecting trade secrets.
  • MARKETING / ADVERTISING.
    • Digital and online marketing including through website, social media, online restaurant review sites, 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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