Starting a Restaurant in the USA: The Complete Guide

The US restaurant industry generates over $1 trillion in annual sales. It's the largest restaurant market in the world. But it's also fiercely competitive - about 60% of restaurants fail within the first year, and 80% within five years.

This guide covers the fundamentals of opening a restaurant in the United States - from legal structures to permits to realistic costs.

Step 1: Develop Your Concept

Before anything else, you need a clear concept. The US market is saturated - you need differentiation.

• • Cuisine and style: What exactly are you serving and how?
• • Service model: Quick service, fast casual, casual dining, fine dining?
• • Target market: Who are your ideal customers?
• • Price point: What's your average check going to be?
• • Unique value proposition: Why would someone choose you?

Step 2: Create a Business Plan

A comprehensive business plan is essential for securing financing and guiding your decisions.

Essential Sections

• • Executive summary
• • Concept description and menu
• • Market analysis and competition
• • Marketing and sales strategy
• • Management team and organization
• • Financial projections (3-5 years)
• • Funding requirements

Step 3: Choose Your Business Structure

Common structures for restaurants in the US:

• Sole Proprietorship: Simplest, but you're personally liable for everything. No separation between you and the business.
• LLC (Limited Liability Company): Most popular for restaurants. Liability protection with tax flexibility. Formation fees vary by state ($50-$500).
• S-Corporation: Can provide tax advantages but more complex. Often used once profitable.
• C-Corporation: Separate tax entity. Usually only for larger operations or investor-backed concepts.

Most independent restaurants start as LLCs. Consult an attorney and CPA for your specific situation.

Step 4: Secure Funding

Funding Sources

• • Personal savings: Most common, maintains full control
• • SBA loans: Government-backed loans with favorable terms (SBA 7(a) most common for restaurants)
• • Traditional bank loans: Require strong credit, collateral, business plan
• • Investors: Angel investors or partners (give up equity)
• • Equipment financing: Lease or finance major equipment
• • Crowdfunding: Kickstarter, Wefunder, or local campaigns

Step 5: Find Your Location

Location factors to consider:

• • Visibility and foot traffic: Essential for quick service, less critical for destination dining
• • Parking: Critical in suburban markets
• • Demographics: Match your concept to the neighborhood
• • Competition: Some validates demand; too much saturates
• • Rent: Target 6-10% of gross revenue
• • Zoning: Confirm the space can be used for restaurant
• • Existing infrastructure: Kitchen equipment, grease traps, hoods in place?

Lease Considerations

• • Lease term (5-10 years typical for restaurant investment)
• • Personal guarantee (most landlords require it)
• • CAM charges (common area maintenance)
• • Exclusivity clause (protect against direct competitors)
• • Assignment rights (can you sell with the lease?)
• • Tenant improvement allowance (landlord contribution to buildout)

Step 6: Federal Requirements

• EIN (Employer Identification Number): Required for tax purposes. Free from IRS.gov.
• Federal income tax: Varies by business structure. Consult a CPA.
• FICA taxes: Social Security and Medicare taxes for employees.
• I-9 compliance: Verify employee work eligibility.

Step 7: State Requirements

Requirements vary significantly by state. Common requirements include:

• • State business registration: File with Secretary of State
• • Sales tax permit: Required in most states to collect sales tax
• • State employer taxes: Unemployment insurance, disability (varies by state)
• • Liquor license: State-controlled, process and cost vary widely

Liquor Licensing

Alcohol licensing is state-specific and often the most complex permit:

• • Some states have limited licenses (quotas)
• • Costs range from $300 to $50,000+ depending on state and license type
• • Process can take 2-6 months or longer
• • Some states require background checks, fingerprinting
• • May need to notify neighbors, hold public hearings

Step 8: Local Requirements

City and county requirements are where it gets detailed:

Health Department

• • Food service permit: Required before opening. Inspection required.
• • Food handler certifications: Some jurisdictions require certified managers
• • HACCP plan: May be required depending on operations

Building/Fire Department

• • Building permits for construction/renovation
• • Fire safety inspection and permit
• • Occupancy permit (Certificate of Occupancy)
• • Hood and fire suppression system approval

Other Local Permits

• • Business license (city/county)
• • Signage permit
• • Outdoor dining permit (if applicable)
• • Music/entertainment license (if playing music)
• • Dumpster permit

Step 9: Design and Buildout

Kitchen Design

• • Work with a commercial kitchen designer
• • Ensure workflow efficiency
• • Meet health code requirements
• • Adequate ventilation (hood/fire suppression)
• • Proper refrigeration and storage
• • Three-compartment sink and handwashing stations

Front of House

• • ADA compliance (accessibility)
• • Adequate seating and flow
• • Restroom requirements (number based on occupancy)
• • Emergency exits and lighting
• • POS system placement

Step 10: Equipment and Suppliers

Major Equipment

• • Commercial cooking equipment
• • Refrigeration (walk-in, reach-in, prep tables)
• • Exhaust hood and fire suppression
• • Commercial dishwasher
• • Ice machine
• • POS system
• • Furniture and fixtures

Consider restaurant equipment auctions and used equipment dealers for savings of 40-60%.

Finding Suppliers

• • Broadline distributors (Sysco, US Foods)
• • Specialty distributors (produce, seafood, meat)
• • Local farms and producers
• • Beverage distributors

Step 11: Hiring Staff

Labor Laws

• • Federal minimum wage: $7.25/hour (many states higher)
• • Tipped minimum wage: $2.13/hour federally (varies by state)
• • Overtime: 1.5x after 40 hours/week
• • Youth employment: Restrictions for workers under 18

Employer Requirements

• • Workers' compensation insurance
• • FICA tax withholding
• • State/federal unemployment taxes
• • I-9 verification for all employees
• • W-4 and state tax withholding forms
• • Workplace safety (OSHA compliance)

Step 12: Insurance

Essential insurance policies:

• • General liability: Protects against customer injuries ($1-2M typical)
• • Property insurance: Covers equipment, inventory, buildout
• • Workers' compensation: Required in most states
• • Liquor liability: Required if serving alcohol
• • Product liability: Covers food-borne illness claims
• • Business interruption: Covers lost income if you can't operate
• • Umbrella policy: Additional coverage above other policies

Step 13: Technology Setup

• • POS system: Toast, Square, Clover, SpotOn - handles orders, payments, reporting
• • Accounting: QuickBooks, Xero
• • Scheduling: 7shifts, Homebase, When I Work
• • Reservations: OpenTable, Resy, Yelp Reservations
• • Online ordering: Direct through website or third-party apps
• • Inventory management: Many POS systems include this

Timeline: What to Expect

Plan for delays. Permit issues, construction problems, and inspection failures commonly add 2-4 months.

Common Mistakes to Avoid

1. 1. Undercapitalization: Have 6-12 months of operating expenses in reserve. Most restaurants don't break even for 6-18 months.
2. 2. Bad location: Don't compromise on location because of rent. A great location at higher rent often outperforms.
3. 3. Overbuilding: Fancy buildouts don't guarantee success. Start lean, reinvest profits.
4. 4. Menu bloat: Start focused. Quality over quantity.
5. 5. Ignoring marketing: Build your online presence before opening. Have a marketing plan.
6. 6. Neglecting numbers: Know your food cost, labor cost, and prime cost from day one.

The Bottom Line

Opening a restaurant in the US is an ambitious undertaking. The rewards can be significant - financial independence, creative expression, community building. But so are the risks.

Success comes from thorough preparation: a clear concept, adequate funding, the right location, and respect for the regulatory requirements. Don't cut corners on the fundamentals.

Build a team of advisors - an attorney, a CPA, an insurance broker - who understand the restaurant industry. Their expertise will save you money and headaches.

And remember: the best restaurant operators combine passion for hospitality with discipline around the business. You need both to survive.