New York City has long been one of the most sought-after places to open a restaurant. It’s also the most populous city in the country with more than eight million people and counting; that’s a lot of hungry mouths to feed, so it’s no wonder more and more restaurant owners are setting up shop. Data from the National Restaurant Association shows that there are almost 45,000 food establishments in New York City, so restaurant entrepreneurs can expect stiff competition. But there’s still room for business growth.
Having a successful restaurant in New York City is no easy feat, especially for those who are looking to transition from staff to owner. Fredrik Berselius, chef and owner of two-Michelin-starred restaurant Aska notes the challenges:
“From having my focus always centered on a kitchen environment, I suddenly became involved in things like negotiating leases, applying for permits and overseeing design and construction…my approach shifted to be more expansive in the sense that I was now in charge of [not] just one element of the picture, but of the whole thing. Each decision holds a lot more weight and risk because the responsibility ultimately ends with you.”
Despite the stressful demands of running a restaurant, if done successfully, there are plenty of rewards. Here are several important steps to keep in mind when opening a restaurant in New York City.
Step 1: Create a Business Plan
Not having a business plan is a recipe for disaster. Just like any other business, there’s no way you can pull off opening a restaurant without a solid and comprehensive plan. This will guide you through everything from registering your business and getting the right documents, to finding suppliers, creating a menu selection, and hiring employees.
A major component of a business plan is determining the type of business model you’ll operate on. For example, if your restaurant is an LLC, a Limited Partnership, or a Corporation, you’ll need to register with New York state authorities. On the other hand, if you operate as a sole proprietor or under a General Partnership, you need to register with the county clerk.
Next, you need to decide what types of food and drinks you’ll sell. Your offerings will play a role in the kinds of permits and licenses that you need. You’ll also need to have a New York sales tax ID from the state in order to apply for the necessary permits and licenses.
Step 2: Find the Right Location
When it comes to real estate, the key is “location, location, location.” The same holds true for restaurants. Where you operate plays a significant role in the success or failure of a business. When looking for the right space in New York City, consider how much you can afford. You will most likely lease the restaurant space—do you have the resources to pay rent every month?
Each borough of New York City has a completely different vibe, which means your concept might perform great in one of them, but terrible in one or more of the others.
- Manhattan is the borough that comes to most people’s mind when they think of New York City—Times Square, Central Park, the Empire State building. While you can find almost any type of restaurant that you would want in Manhattan, this is the most expensive borough to both live and do business in. For a new restaurant owner with limited capital, the high cost of real estate and intense competition are both reasons to consider an area outside of Manhattan.
- The Bronx offers a cheaper alternative to Manhattan and still features tourist attractions like The Bronx Zoo, Yankee Stadium, and Little Italy. Plus, schools like Fordham University and Manhattan College means there are plenty of hungry students looking for a place to eat. If you’re just starting out in New York City, The Bronx could offer an affordable place to start
- Brooklyn is quickly becoming the “it” spot for hip, young millennials. If this is the target audience you’re trying to attract, then Brooklyn is the place to be. But keep in mind, while this area is becoming increasingly popular, you can expect your operating costs to increase as well
- Queens is home to New York City’s largest borough and houses nearly two million people. Astoria is one of the most well-known neighborhoods in Queens and boasts beautiful parks, plenty of restaurants, and nightlife all while being a quick subway ride away from Manhattan. This could be an ideal area for restaurants looking to cater to young families and professionals
- Staten Island is often New York City’s overlooked borough, but is home to several historical sites, museums, and botanical gardens and offers another less expensive alternative to Manhattan and Brooklyn.
Keep in mind that in New York City your location has to be in an area zoned for businesses. To save yourself time and money, consider taking over a space that was already a restaurant. If your constructing a new space, you’ll have to find a registered architect and engineer to submit your blueprints to the Department of Buildings.
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Step 3: Get Your Licenses and Permits in Order
This is probably the least fun aspect of opening a restaurant, but there’s no way around it; you need to have all your licenses and permits in order. At a minimum you’ll need:
- A business registration with the state of New York. The filing fees will be between $100-$120 depending on which county you’re registered in.
- A valid New York restaurant permit. The restaurant permit fee in NYC is $280, and because it expires after 1 year, it must be renewed annually for an additional $280.
- A New York Food protection certificate. Free online food protection courses can be found on the NYC Health website and the final exam only costs $24.60.
- A New York issued issued liquor license. If you plan on serving liquor, you’ll need to know how to get a liquor license, and thankfully it’s not too difficult in NYC.
Luckily this process for obtaining all of these permits is fairly straight forward. You can fill out your business information online through New York City’s Department of Small Business Services and will be guided through a step-by-step process of the requirements your business needs, as well as links to all the applications. Be sure to give yourself plenty of time to fill them out and make sure you have your Employer Identification Number (EIN). If you don’t have one yet, you need to apply through the IRS.
In addition, you should also keep in mind there are several regulations restaurants need to follow such as:
- Kitchen Equipment Regulations: commercial cooking equipment, such as ovens, stove, and fryers must have a range hood.
- Fire Suppression Regulations: commercial kitchens need to have a fire suppression system in place, and these plans must be registered with the New York City Fire Department.
To save yourself time, and a headache, consider hiring a licensed professional who can help you through this process. He or she will be the one to submit plans and necessary applications to the proper authorities to make sure you’re in compliance with all New York City regulations.
Step 4: Find the Right Insurance
Protecting your restaurant from the very beginning is essential. Restaurants face several serious risks such as customer lawsuits, fires and damage to property, employee injuries, and food poisoning. Insurance is the best way to protect your business assets against these risks. Some policies are legal requirements, while others are designed to meet specific business requirements. Some policies to consider are:
- General Liability Insurance: This protects your business against financial losses due to claims associated with third-party personal injury and damage to property.
- Workers Compensation Insurance: A legal requirement for restaurants in New York City, workers compensation pays for the medical bills and rehabilitation costs if an employee is injured on the job.
- Commercial Property Insurance: This protects your business against fire or other incidents that can damage the property.
- Liquor Bond: This is required to apply for a liquor license, which mandated by the New York State Liquor Authority for restaurants that sell alcoholic drinks.
- Liquor Liability Insurance: If you plan to offer alcoholic beverages, this is an insurance policy that you need to have. It protects your business in the event a customer causes bodily harm or property damage after drinking alcohol.
- Food Contamination Insurance: Your restaurant may experience equipment or power failure which results in spoiled food items. Make sure to carry this insurance to protect your business against losses and legal fees associated with food poisoning claims.
Step 5: Build Your Team
There’s a reason many companies have dedicated HR teams—looking for the right people is both time-consuming and challenging. Luckily for New York City restaurants that search should be slightly less difficult, as the restaurant industry accounts for 9% of the employment in the state.
In the restaurant industry, managers also have to deal with high turnover, and specific legal requirements. For example, in New York City the minimum wage for tipped employees is $10 per hour. In addition, the New York City Health Department requires that a manager passes a food protection course and that a manager must always be present when the restaurant is open. To avoid any citation from health inspectors, make sure all your employees understand how to properly handle and store food.
There are also ways you can streamline your restaurant operations. POS systems, for example, make it easy to manage employee schedules, seating charts, sales, accounting, and more.
Opening a restaurant in New York City is both exciting and rewarding, but it’s also extremely challenging. There are so many factors to take into account and it requires a ton of hard work and discipline. But with these tips in mind you will surely be able to make your goal a reality.