A Guide on How to Open a Cafe in California 

Cafes can cater to many types of customers, whether it be college students, old friends catching up, or tired business people on the go. Opening a cafe is a great way for someone to start their food service business on a smaller scale.  

Cafes are usually smaller than full-blown restaurants, with fewer menu items and less attention required per customer.  Still, starting a cafe business entails many of the same steps required for opening a restaurant.  

This guide will walk you through the steps of opening a cafe.

1. Research and prepare your business plan

Although a cafe may seem like a smaller enterprise than a restaurant, it still requires extensive research and planning.  You’ll need to first envision the type of cafe you want to open.  Picture your clientele you want to serve or the atmosphere you want to create.

Then, visit similar local cafes to familiarize yourself, or better yet, work in a cafe for a more substantial grasp of what it takes to create a successful cafe.  It might also be beneficial to study the science of coffee to ensure that you are producing a quality beverage for your customers.  Once you have a vision and possibly some experience, create a business plan.  This should include your target market, start up costs, financial projections, menu, pricing, and name, among other things.

2. Form a company

The type of business entity you create for your cafe will determine the amount of your personal liability and offer different tax breaks.  There are four basic types of business formations: sole proprietorship, partnership, corporation, and limited liability company.

Typically, small businesses choose to operate as a limited liability company (“LLC”), which limits the amount of liability to the businesses assets and shields your personal assets from potential lawsuits.  Unlike a corporation, LLCs do not require a board of directors and shareholders.  Check out UpCounsel’s guide on forming a California LLC. Speaking with an attorney can help you decide which type of business structure would work best with your situation.

3. Find and secure your location

Your vision will dictate where you should open your cafe.  If you see it as a place where people can spend hours studying, working or socializing, consider choosing a location near a university.  Make sure it is easily accessible, whether that means ample parking or close proximity to a major public transportation stop.  

Also, cafes depend heavily on foot traffic, so seek out a location in a busier area.  Zoning ordinances may prevent you from opening a cafe in your desired location, so check with your local department of city planning to make sure that neighborhood is properly zoned and that you can legally operate your cafe.

Once you’ve settled on a location, you will need to negotiate a secure a lease, which can get complicated.  An attorney can review documents and advise you on things you may not have considered.  This is different than renting an apartment.  For example, you will probably want a transferable lease with options to extend and contingencies regarding securing permits. An attorney can help you secure the best type of lease and accompany you through a final walk-through of the premises.  The UpCounsel attorney network has many attorneys with experience in negotiating commercial leases.  

4. Obtain funding

The amount of money you’ll need to open a cafe will vary based on the size of your location, the type of atmosphere you want to create, the amount of renovating you’ll need to do, and whether or not you have the right equipment, among other things.  Funding can be sought through a bank loan, a line of credit, from your own personal savings, assistance from friends and family, a business partner with financial resources, or even government programs meant to bolster small businesses.

5. Acquire licenses and permits

Any small business requires several different permits and licenses and there are even more for food service establishments.  California law requires a cafe owner to obtain the following:

IRS identification number: You must register with the federal government for a Federal Employer Identification Number for tax purposes.

Seller’s permit: A seller’s permit is required for all restaurants in California. This can be done online at the California Board of Equalization website.

Workers’ Compensation Insurance: California law requires employers to have workers’ compensation insurance, even if you only have one other employee.  This can be purchased from any broker or agent authorized to write policies in California.  A list of authorized insurers can be California Board of Equalization website.

Health Operational Permit: This permit is for the sale of edible goods. The cost and rules vary by county.  You will have to apply with your local health department.  With this permit, you are subject to periodic inspections by a health inspector.

Food Safety Certification: California law requires each food facility to have an employee/owner that has passed a state-approved Food Safety Certification exam.  The certification is only applicable to one facility and is good for five years.  California Board of Equalization website.

Food handler permit: Baristas are considered food handlers. All employees that handle food must have a “food handler” permit.  If your employees prepare, store, or serve food, they need to obtain a permit within thirty days of employment.  As an employer, you must keep records documenting that each employee that handles food has a valid permit. Instructions and frequently asked questions about obtaining this permit can be found on Foodhandler USA’s website.

The CalGOLD: California Government: On-Line to Desktops website allows you to search your county and city to see exactly what business permits are required to operate a restaurant and contact information for each agency.

Optional Stuff:

Sign license:  Your city may restrict the type of signage you display outside your restaurant. Before you display a sign, check with your landlord and your local government.

Music License: If you plan on playing recorded music in your restaurant, you will need to obtain a music license. Recorded songs are copyrighted so royalties need to be paid, usually to music licensing companies like Broadcast Music, Inc. (BMI) and the American Society of Composers, Authors and Publishers (ASCAP).  The yearly fees owed to these companies can be quite expensive, but without the license you can be held liable.  In 2011, a restaurant was ordered to pay over $30,000 plus $10,000 in legal fees to BMI for failing to obtain a music license.

If you are renovating your location, you should present those plans with your area’s department of building inspection and fire department to ensure that those plans are in compliance with public safety and accessibility laws.

6.  Buy equipment and find your vendors

The type of cafe you want to open will determine the equipment you will need to purchase. You might need several espresso machines and one drip coffee brewer, or maybe your cafe will only serve made-to-order single-drip coffee.  The amount and type of food you plan on offering will also determine whether you need a prep area, a freezer, and the size of your refrigerator(s).  Most importantly, the coffee is your main draw, so make sure you serve a high quality brew.  Once you find your vendors, you will need to enter into contracts to ensure regular deliveries.

7.  Hire employees

Cafes require fewer employees than a regular restaurant, but you will still want to choose employees that best fit your vision and needs.  Because cafes are usually open early and close late, you will need to hire enough people to cover the two or three shifts you might have.  In addition to baristas, you may want to hire a busboy/dishwasher, unless you only plan on serving beverages in disposable containers. Once you have your staff, be sure to adequately train them to prevent mishaps.  

More information on hiring employees and complying with employment laws can be found on the California Governor’s Office of Business and Economic Development website.

8. Make your customers happy

After all of that preparation and an inspection by your local health department, you’ll be able to finally open your doors and serve the public. You’ll likely be competing with corporate coffee chains, so it is important to distinguish your business from the start.  Don’t forget to advertise in local publications and create a website.  Make sure you offer free, dependable wi-fi and consider offering rewards for frequent customers.  Best of luck and happy brewing!

Before opening a cafe, you may want to consult an experienced attorney to help you secure a lease and form your business entity.  UpCounsel can connect you with many skilled attorneys in your area and within your budget.

Related legal forms and guides:

How to Form a California Corporation
How to Form a California LLC
How to Hire an Employee
Employer’s Tip Reporting Form (IRS)
I-9 Employment Eligibility Form (Department of Homeland Security)
California New Employee Report Form
IRS Form W-4 for Federal Withholdings

 

Need legal help for opening a cafe?

Post a Job on UpCounsel, get free proposals, and Connect with Quality Business Attorneys who can help you with opening up a cafe the right way, legally today.