Are you passionate about food and want to make it a professional career? Are you looking to set up a restaurant? About 8 out of 10 new businesses fail in the first year of opening. Welcome to the harsh reality that is the food industry. Although setting up your restaurant can be a costly exercise, with enough business and legal information, your restaurant could be a raving success! As a restaurant owner, you will mostly likely be involved in tasks such as designing a menu, choosing the décor, hiring and training staff, managing financial accounts and ensuring a high standard of customer service. But what are the business and legal issues you must account for when establishing your restaurant?

The Game Plan

It cannot be stressed enough – Plan, plan, plan! As a general rule of thumb, the more planning and market research you undertake prior to setting up your restaurant, the more likely your restaurant will profit in the long term.

Market research generally involves getting an in-depth insight into the economic considerations that will help identify your business strategies and potential target markets. Socioeconomic and demographic research into the location of your restaurant will drive the marketing promotions and pricing and even the type of food you will serve. You must further identify any competitors close to your restaurant, such as other restaurants and cafes. With this vital information, you will be able to determine whether there is a potential market to start up your restaurant. Do not skip or rush this important step – it is a common mistake that most failed restaurant businesses commit!

Business Structure

The second crucial step is selecting the best business structure for your restaurant. The most common business structures are as follows:

  • Sole trader: one person controls the whole business and therefore acquires all the profits and is responsible for all debts accrued. It is the simplest and cheapest business structure.

Requirements: Australian Business Number, business name registration and trademark registration,

  • Partnership: is a relatively inexpensive and simple business structure, involving two or more co-owners setting up the business. Accordingly, the partners share the profits and act on behalf of each other for the business.

Requirements: Australian Business Number, business name registration and trademark registration,

  • Company: Under Australian Corporations Law, a company must be registered. Although companies usually incur higher start-up costs and fees, the liabilities of the company’s shareholders may be reduced to share capital.

Requirements: Registration of Australian company, Australian Business Number, business name registration and trademark registration.

  • Trust: involves an individual (a trustee) operates the business for the benefit of another (beneficiary or beneficiaries).

Requirements: Australian Business Number and trademark registration.

Therefore, each business structure has different legal requirements. It is strongly recommended that you seek professional advice prior to establishing your restaurant business.

Licensing, Qualifications and Permits

You must also ensure you have the appropriate licenses and permits in your state prior to establishing your restaurant business.

Food Business License

The next step is to obtain the right food business license within the state. Different rules and regulations apply to different categories of food business. Each state regulates its own food business classifications so it is advised that you visit the appropriate authority:

Food Health and Safety Regulations

The Australian New Zealand Food Standards Code (FSANZ) and Food Act 2003 (NSW) regulates the food and safety standards. A very strictly applied regulation in the restaurant industry, for instance, is the food handling standards. This is to ensure hygienic measures are enforced properly. Such regulations include wearing gloves when preparing food and cleaning up the kitchen space on a daily basis.

Food Safety Supervision

In most Australian states (NSW, VIC, SA, QLD and ACT), the appointment of a Food Safety Supervisor is legally required at all times. The Food Safety Supervisor must be registered under the specific food classification your restaurant is in (through the Retail & Hospitality, Food Processing, Transport & Distribution or Health & Community) and must attend training in food safety and handling compliance obligations.

Outdoor Dining

If you seek to enable customers to dine outside, you must provide appropriate tables and chairs on a foodpath. Café owners may also be required to obtain an outdoor dining licence from the relevant local council.

Serving Alcohol

Will you be serving alcohol to your customers? If so, you will need to acquire the appropriate liquor license from the Office of Liquor applicable in your state. For instance, if your restaurant is in NSW you must obtain a liquor license from the NSW Office of Liquor Gaming and Racing. It is also important for all the employees who will be serving alcohol to have the required Responsible Service of Alcohol certificate (RSA).

Basic Training

So you have finally reached the stage of hiring staff. Now it is time to make sure they are provided with the proper training. You are legally obligated to conduct training on basics and food, health and safety regulations. It is up to you how you would like them to be trained, whether it be online, in a classroom, through manuals or in-house training.

Conclusion

At the end of the day, setting up a restaurant is 20% passion for food and 80% business. So before you starting splurging on restaurant décor and planning your menu, you must ensure you:

  • Conduct as much market research as you can; and
  • Comply with the legal requirements in relation to food safety and licensing.

All these considerations can be extremely difficult without the proper business and legal experience and it is strongly recommended that you speak to a lawyer after considering the above factors. A lawyer at LegalVision will gladly assist you with the set up of your business, so do not hesitate to call us 1300 544 755.

Lachlan McKnight

Next Steps

If you would like further information on any of the topics mentioned in this article, please get in touch using the form on this page.