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How to Open a Restaurant in California Successfully

If you want your restaurant to take over the world, start it in California. The Golden State’s list of famous restaurant alumni is unparalleled: Taco Bell, International House of Pancakes, Baskin Robbins, Jamba Juice. McDonald’s started in Cali, as did In-N-Out. California also gave us Jack in the Box, Peet’s Coffee, and the Cheesecake Factory — to say nothing of such landmarks as Spago, Chez Panisse, Nobu, and French Laundry. Oh, and you’re not gonna believe this, but you know California Pizza Kitchen? Yup. You guessed it.

If California feels like a separate country, that’s because it punches like one. Its Germany-sized, $3.1 trillion (that’s with a “T”) economy represents a sixth of the entire United States GDP. Its agriculture industry is larger than any other two states combined, fueling a massive and varied food scene. Across California you’ll find more than 72,000 restaurants and bars employing just shy of 2 million people, comparable to the population of Phoenix. Anything you want here, you can get. Except — maybe whatever you’re about to begin cooking.

Cali is a gargantuan state with deep pockets, vibrant farms, a rich restaurant legacy, global cultures, a steady avalanche of tourists, and tens of millions of hungry people. Starting a restaurant in California may not be as straightforward as starting one in Texas or in Florida, where business regulations are less onerous, but it’s still a path to huge opportunities. Here’s how to get started. 

How much does it cost to open a restaurant in California?

Look, California is expensive. There’s no way to discount that fact. It is the third-most expensive state in the country for everything from cost of living to gasoline to a head of lettuce – exactly the sorts of things you’ll likely need to get your restaurant up and running.

There are a few basic costs when opening a restaurant that are fairly universal and other costs (like licenses and taxes) that are state-specific, which we’ll get to in a minute. In general, the start-up cost to open a restaurant in California, or anywhere, has a floor of about $200,000 to $300,000. And that’s before deciding on basic decisions of what kind of restaurant and where.

How to pick a location and what to know about zoning rules?

Trying to pin down greater Los Angeles is like getting justice in Chinatown: forget it, Jake. The largest metropolitan area on the West Coast and the second-biggest city in the country, LA is California’s true melting pot (and Texas’ arch-rival as the country’s taco capital.). The city’s sheer size and all its possibilities can be intimidating. Thankfully, LA County provides would-be restaurateurs with a simple checklist that walks you through the steps you’ll need to open your hit fusion location. This guide includes links to a property-search platform as user-friendly and interactive as Zillow or any real estate app. And once you’ve found a potential property, LA County’s Zone Information and Map Access System (ZIMA, we kid you not) will show exactly what kind of zoning you'll be working with.

When people talk about California hot spots, San Diego often gets overlooked. And for no good reason at all. The southern gem is the perfect place for any restaurateur looking for a laidback back feel and a food community that loves its seafood. To find the best place to set up shop in San Diego, dial up the city’s development center website for an easy-to-use property search engine and a simple two-page guide on exactly where you need to start, including a required Plan Review submitted to and approved by the County of San Diego. 

To the uninitiated, San Jose may seem to be America’s most easily overlooked overgrown suburb. For the expert foodie, San Jose is home to some of the best immigrant-founded and -run restaurants on the entire California coast. Whether you’re looking to open a high-end restaurant aimed at the internet set or a shop adored by locals, you’ll need to come correct. As “the capital of Silicon Valley” it should be no surprise that all your questions regarding zoning, permits, and the like are all on the city’s icon-heavy website.

For a town long known for good vibes and free love, San Francisco and the Bay Area have strayed far from their reputation. Now it basically costs money to breathe outside air, and opening a restaurant can cost upwards of $750,000. You need permits for everything from basic signage to “open flame” permits. For a city that out-Californias California, San Francisco does try to guide would-be business owners as best it can through the various requirements, beginning with its business portal and an easy-to-use “Find My Zoning” searchable map. Tip: it’s easiest if you’re rich when you get started.

The official capital often gets regulated to the kid’s table when people talk of California’s food scene. But Sacramento, the one inland city on this list, is a workhorse when it comes to delicious dining — how better to do pull off farm-to-table than to move closer to the farms, after all? In addition to the required local plans and permits, Sacramento County has a search map detailing the necessary zoning and property info for its more than 400,000 land parcels. And navigating Sacramento’s zoning, permits, and rules is a bit more dry and straightforward than flashier cities. Here, for example, is Sacramento County’s Zoning Code, in black and white.

What licenses and permits are required to open a restaurant in California?

If California is a country, then its counties and cities are its states, with each one operating at its own tempo. This is especially true when it comes to the required licenses and permits needed to open a restaurant.

A few all-purpose licenses include a food handler’s license for any employee who will prepare, cook, or serve at the establishment with at least one employee on staff who has passed a Food Safety Manager certification exam. If you want to serve booze, you’ll need a liquor license from the California Department of Alcoholic Beverage Control (ABC).

Those are some of the basics that pair nicely with some of the mandatory insurance policies. In addition each county has its own requirements for licenses and permits. Thankfully, the state has a straightforward and easy-to-use search engine to guide you through the hoops you need to jump through, no matter your city or county.

What equipment do I need to open a restaurant In California?

Warm and sunny. That’s what everyone loves about California. Every day, warm and sunny. Great. Now consider how warm and sunny your patrons actually want to be.

There are the obvious decisions to make about the basic operational equipment you’ll need for both front of house and back of house. Big ticket items like a POS system, coolers, ranges, and all the usual refinements. It’s also worth considering the climate your clients will be mingling in.

This means preparing for pleasant, open-door days with industrial air curtains between the inside and outside areas. As for that dream patio, it's best to plan for every patron no matter how finicky. Are they too warm and sunny? Consider investing in an outdoor misting system and restaurant-grade patio covers and screens.

It’s a challenge to keep outdoor customers as comfortable and happy as they would be in the well-regulated inside. But incorporating such equipment into your plan and budget can be the difference between a dull indoor experience or the coolest place in town, no matter the weather.

ADA accessibility in California

As with the rest of the country, the primary framework for California’s disability regulations is the federal Americans with Disabilities Act (ADA). But California also has a long history of ensuring fair access for everyone, beginning in 1959 with its historic Unruh Civil Rights Act.

Unlike federal ADA lawsuits with a cap on damages, this state law allows plaintiffs to sue for up to $4,000 each time they face an accessibility barrier. All this to say that the state takes its ADA accessibility very seriously and you should, too.

One thing to keep an eye on: In the past few years, there has been a rash of accessibility lawsuits filed in California by a small number of individuals and groups. The effort has drawn praise, scrutiny, and media attention.

Restaurant health inspections in California

Restaurant health inspections, like licenses and permits, are regulated and monitored on the county level. If you’ve been around the state, you’ll recognize this in the different ways counties show their passing grades. Los Angeles County and the County of San Diego, for instance, use the graded A through C system. The city and county of San Francisco keeps it purely professional with restaurants being declared “Good,” “Adequate,” “Needs Improvement,” and “Poor.” Until 2014, Santa Clara County, the home of Silicon Valley, didn’t even have a system for scoring restaurants.

Yet the state does have some basic standards. Tucked into the Food and Drug branch of the Department of Public Health like sliced cucumber in a California roll is the statewide Retail Food Code. The 140-page document lays out the minimum standards for general food safety requirements and sanitary best practices.

To bone up on how to pass your local health inspection with top marks, be sure you know exactly which one of the 52 California counties you plan to have your restaurant and research how that county inspects restaurants and publishes findings on its website.

Insurance: No one’s favorite subject

As with anywhere else, you’ll need strong and diverse insurance to cover every aspect of your California restaurant. Don’t try to be a hero and figure it all out on your own. Even the state recommends working with a licensed insurance broker-agent, an expert go-between who will help you navigate the web of coverage you’ll need.

In general, needed restaurant coverage falls under general liability, property insurance, and spoilage insurance. In addition, California requires every employer to have workers compensation insurance and unemployment insurance.

Insurance, of course, is based on the idea of “plan for the worst, hope for the best.” To that end, it behooves every California restaurateur to specifically plan for and insure against two semi-regular events: wildfires and earthquakes. You want your food to be lit and earth-shattering. Your hard-earned investment shouldn’t be.

What to know about taxes in California

The rumors about California and taxes are (mostly) true. At 7.25 percent, the state has a sales tax rate among the nation’s highest. There’s also a mandatory, statewide local tax rate of 1 percent and individual district tax rates that can range from 0.10 to 1 percent. All told, California’s combined tax rate of 8.82 percent puts it in eighth place among the 50 states and the District. So there’s that!

There are of course other tax considerations. For guidance on those restaurant requirements, the state has an online guide covering alcohol tax, mobile food taxes, and everything in between. One of the state’s big focuses, and a good place to start, is understanding the 80/80 rule, which basically establishes that sales tax can be attached to establishments in which 80 percent of the sales come from food and 80 percent of that food is served hot and/or on-site.

[Photo by Lukas Souza on Unsplash]

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