Sponsored by Avalara
When people dream about running a restaurant, they think about developing a menu that delights guests and providing an experience that generates repeat business. No one looks forward to filling out forms and compiling spreadsheets. But these mundane tasks are crucial because they enable the restaurant to comply with the many licensing requirements on the state, county, and local levels.
As the brand grows and adds locations, the process of applying for and keeping track of many different business licenses becomes even more complex. From liquor licenses to permits related to cooking equipment, operators face the challenge of complying with rules from multiple jurisdictions. It can be difficult to keep track of all the licenses, and the application and renewal processes can become arduous. Automating the process and partnering with third-party experts can help.
Identifying licenses
First, restaurant owners need to figure out which licenses they must apply for and from which government entity.
“Foodservice operators are usually focused on health permit-related requirements and often do not realize that separate general business licenses may be required,” says Lorraine Cody, business license lead consultant for Avalara.
Cody explains that general business licenses are handled by a separate authority from health permits. While health permits may be a prerequisite for the issuance of a business license, a business license is usually not a prerequisite for a health permit. To determine which business licenses are required, foodservice operators can go online to research which authority would issue such a license, or they can call or visit that authority.
And foodservice establishments often need additional licenses besides the general business licenses. A certificate of occupancy certifies that the restaurant’s building has been properly built and maintained. While a foodservice license is issued by the state or county health department.
One common mistake, Cody points out, is foodservice operators may fail to address licenses and permits that may be required for activities that are incidental or unrelated to their foodservice operations. This includes fire prevention requirements or hazardous materials permits for their CO2 beverage systems or storage of other materials onsite.
There are also permits for the operation of a fire or burglar alarm system, and other permits that may be required for equipment installed onsite such as grease traps, hood suppression systems, and emergency generators.
There are many more licenses, and since they are issued by multiple entities, operators are challenged with figuring out which licenses they need and where to get them. For example, a business might receive a foodservice license from the state’s department of health, and the liquor license from the state department of revenue. While some licenses are good for as long as the operator owns the business, many of the licenses expire and need to be renewed annually, a costly and time-consuming task.
Growing to new locations
When the foodservice operator expands to new locations, the business must apply for licenses and permits for these sites. There are state-specific requirements, and some states have different names for various licenses. For example, there are terms such as seating licenses, foodservice permits, health permits, and restaurant permits. Businesses that collect sales tax must apply for sales tax licenses, sales tax permits, or seller’s permits, which are all different names for the same thing.
Operators need to find the appropriate licensing entities in each new eatery’s municipality, county, or state. The restaurant also must register to pay sales tax in each new state. Some localities require foodservice managers to complete food-safety certification programs. Franchised brands run into even more complicated requirements as they open locations in new markets, run by various franchisees.
Most foodservice establishments have long known the benefits of investing in software for everything from accounting and taxes to point-of-sale systems to third-party delivery. For digitally savvy and forward-thinking restaurant concepts, it makes sense to invest in a solution that can organize and maintain business licenses, especially as the concept expands to new locations.
“Avalara maintains an up-to-date database of all municipalities that require general business licenses and can easily advise if a license is required and provide the forms and information needed to apply,” Cody says. The solution can manage business licenses across multiple locations and concepts.
Avalara offers business-licensing compliance software that provides support with license research, registration, and filing for new, existing, and expanding businesses. For more information, visit www.avalara.com/us/en/products/business-licenses.html.