How to open a restaurant

Opening a restaurant in the US means a local health permit, a certified food manager, a sales tax account, often before the health permit application, and in some states a liquor license capped by population. Start with the number most people get wrong: the claim that 90% of restaurants fail in their first year is a myth. Ohio State researchers who tracked restaurants in Columbus found about 26% closed in year one, and they counted closures for any reason, retirements included.

By Niomi AscotUpdated October 3, 202616 min read

First-year closures: About 26% in Ohio State's Columbus study, not the 90% so often quoted
Federal license: None. The health permit comes from your state, county or city
Health permit timing: Apply at least 30 days before opening under the model FDA Food Code
Certified manager: Required in most places; New York City wants one on duty every open hour
Liquor: Capped by population in California and New Jersey; tied to food sales in Texas
Federal tipped wage: $2.13 cash wage with advance notice; California allows no tip credit

How many new restaurants actually close

Every would-be owner hears that nine in ten restaurants close in year one. The research says otherwise. Ohio State researchers followed more than 2,439 restaurants in Columbus from 1996 to 1999 and found that about 26 percent failed in year one and 59 percent within three years: 57 percent of franchised restaurants and 61 percent of independents. Those counts include closures for any reason, not only bankruptcies. The peer-reviewed paper from that work (Parsa, Self, Njite and King, 2005) put first-year failures under 30 percent, as a 2015 University of Denver review recounts.

A 2014 working paper by Luo and Stark, built on Bureau of Labor Statistics establishment records for the western US, found that 17 percent of independent full-service restaurant startups failed in their first year, against 19 percent for other service startups. Median lifespan was about 4.5 years, but 3.75 years for startups with five or fewer employees. The paper traces the nine-in-ten figure to a 2003 television advertisement.

So most openings survive year one, three-year closures in Columbus still passed half, and the smallest openings ran shorter lives. Many Columbus owners who closed blamed family issues such as divorce, poor health or a wish to retire, and all of them mentioned the hours the business took. Budget your working capital and your own time as carefully as the build-out.

Choose the model before you sign a lease

Five decisions shape every permit and every dollar after them.

Full-service or limited-service. County Business Patterns counted 258,626 full-service and 270,088 limited-service restaurants with paid staff in 2023. California defines limited-service as a place where customers “order food or beverage items and pay for those items before the items are consumed” (California Labor Commissioner), which matters for wage law.
Independent or franchise. The FTC’s franchise buyer’s guide says you must receive the disclosure document at least 14 days before signing or paying, royalties can be a share of gross income owed “even if you are losing money”, and agreements can run 20 years with no automatic renewal. Chains of 20 or more locations owe FDA calorie labeling.
New build or takeover. In Los Angeles County, buying an existing restaurant without major remodeling goes to the district office, while new construction or major changes go through plan check (LA County Environmental Health). Houston’s health department asks owners to contact it before buying or leasing.
Alcohol or not. Where licenses are capped by population, the license decides whether a full bar is possible at all, and at what price.
Dine-in, delivery or both. Delivery-only brands follow their own Google Business Profile guidelines, and app commissions change the menu math.

Small is the norm: about 64.5 percent of full-service establishments in that Census file had fewer than 20 employees, and the National Restaurant Association reports that 7 in 10 restaurants are single-unit operations.

The outlook

The National Restaurant Association’s 2026 State of the Restaurant Industry projects $1.55 trillion in sales, real growth of 1.3 percent and employment of 15.8 million. It also warns that uneven traffic and rising costs will keep squeezing profit, with tighter budgets hitting low- and middle-income diners.

The wages you will pay, from O*NET, which republishes Bureau of Labor Statistics 2025 wage data and 2024 to 2034 projections (openings count growth plus replacement):

Occupation	Median pay (2025)	Employed (2024)	Growth to 2034	Openings to 2034
Food service managers	$33.36/hr, $69,390/yr	352,800	Faster than average (5% to 6%)	42,000
Chefs and head cooks	$30.03/hr, $62,470/yr	197,300	Much faster than average (7% or more)	24,400
Restaurant cooks	$17.98/hr, $37,390/yr	1,460,200	Much faster than average (7% or more)	250,700
Waiters and waitresses	$16.94/hr, $35,230/yr	2,329,700	Decline (-1% or lower)	456,700
Bartenders	$16.51/hr, $34,340/yr	756,700	Faster than average (5% to 6%)	129,600

Cooks are where a new kitchen competes hardest for staff; server jobs are projected to shrink, yet turnover still opens 456,700.

Health permits and food safety

The national rules

There is no federal license to open a restaurant. FDA says oversight is “typically handled at the state and local levels”, and restaurants are exempt from FDA facility registration under 21 CFR 1.226.

FDA publishes a model instead. The FDA Food Code 2026 is posted for states and localities to adopt, but adoption lags: FDA’s 2024 report found only 7 states had adopted even the 2022 edition. Inspectors enforce your state’s or city’s own code, which may be several editions old. The 2026 model asks for:

Plans approved before you build or convert a space, showing the menu, expected food volume, layout and the make and model of equipment (8-201.11 and 8-201.12).
A permit application at least 30 calendar days before opening (8-302.11).
Inspections at least every six months, unless the regulator uses a written risk-based schedule (8-401.10).
A person in charge who is a certified food protection manager from an accredited program (2-102.12).

ServSafe, run by the National Restaurant Association, is one accredited manager certification, with a proctored exam. The 2026 changes add food defense training, written employee illness policies and a ban on jewelry on arms and hands while preparing food, a plain ring excepted.

Zoning comes first: the SBA warns that ordinances can restrict or ban specific kinds of businesses in an area. Each city below also requires a certificate of occupancy. Under the ADA, the Justice Department’s Title III primer requires an accessible route to every dining area, including raised, sunken and outdoor ones, and accessible tables spread through the room. In an older building you remove barriers where “readily achievable”, and a Section 190 deduction of up to $15,000 a year helps pay for it.

Health permits in three cities

City	Agency	Permit	Key requirements as the agency states them
New York City	NYC Department of Health and Mental Hygiene	Food Service Establishment (General) permit, $280, plus $25 for frozen desserts	A Food Protection Certificate holder on duty during all hours of operation; a Certificate of Authority to Collect Sales Tax and proof of workers’ compensation and disability insurance with the application; you may open 22 days after applying, and an unannounced inspection follows; renew yearly
Los Angeles County	LA County Public Health, Environmental Health	Public Health Permit, issued after plan check and fee payment	Plans go to EH Plan Check, then to local building and safety; every building approval must be in hand before the final EH inspection; Long Beach, Pasadena and Vernon run their own health departments
Houston	Houston Health Department	Food establishment permit, fees on the state DSHS structure	Two sets of scaled plans to the Houston Permitting Center; a certified food manager on site for the pre-opening inspection, booked at least 14 business days ahead; permits do not transfer to another address or owner, are posted in public view and renewed annually

New York City. Scores set the letter grade: 0 to 13 points is an A, 14 to 27 a B, 28 or more a C, and the card must be visible to people passing by (NYC Health). The Food Protection Certificate costs $114 for the in-person course and exam, or $24 for the exam after a free online course, as of October 2026 (NYC Business). A room for 75 or more people indoors needs a Place of Assembly Certificate of Operation and then a yearly FDNY permit.

Los Angeles County. Restaurants are inspected one to three times a year. State law (Health and Safety Code 113947.1) requires one owner or employee per facility to hold an accredited food safety certification. That person need not be present at all hours, cannot be the certified person for a second facility and must recertify every five years; a new or newly bought facility has 60 days to comply.

Houston. Texas DSHS permits only where no local health department does, requires a certified food manager in its areas (with some exemptions), gives food handlers 60 days from hire to certify and wants a sales tax ID before any permit application (Texas DSHS guidance). Houston adopted the FDA Food Code and the Texas Food Establishment Rules on September 1, 2025 and dropped its employee-based fees (Houston Health Department). Fire permits, the certificate of occupancy and grease trap inspections are separate city steps (City of Houston).

Liquor licenses in California, New Jersey and Texas

Alcohol is licensed by the state, often with a city or county step on top, and the systems sit far apart:

State	Agency	License	Key requirements as the agency states them
California	Department of Alcoholic Beverage Control	Beer and wine licenses; general licenses for beer, wine and spirits	Beer and wine licenses are available year-round; general licenses are capped by county population and issued only in a once-a-year priority period, or bought from a current holder in the same county; $19,840 priority application, $1,565 person-to-person transfer from January 1, 2026
New Jersey	Division of Alcoholic Beverage Control	Plenary Retail Consumption License (Type 33) for bars and restaurants	Since 1948, generally one consumption license per 3,000 residents; towns often auction new ones; most buyers purchase an existing license at a privately agreed price
Texas	Texas Alcoholic Beverage Commission	Mixed Beverage Permit (spirits, wine and beer); Food and Beverage Certificate	No population quota on the commission’s license page; the certificate requires being a “restaurant” under the law or keeping alcohol at 60 percent or less of total sales; local option areas can be dry or beer-only

California. The 2026 window for new general licenses ran September 14 to 25. Entrants need 90 days of California residency, a drawing happens only when applicants outnumber licenses, entrants not drawn get the fee back minus $100, and winners have 90 days to file. Miss the window and the only route to spirits is buying a license in the county.

New Jersey. The cap still held in 2024; since August 1, 2024, a capped town with a qualifying shopping mall may issue up to four Shopping Mall licenses. The ABC handbook (revised November 2015) adds a trap: an unlicensed restaurant may not advertise B.Y.O.B. in any fashion, and a violator is a disorderly person.

Texas. Check whether the address is wet, dry or beer-only before you sign; in practice that one lookup can rule out a site.

Elsewhere, ask your state alcohol agency what your address allows before signing.

Setting up the business

Entity and EIN. The SBA notes that an LLC shields personal assets in most cases, while a sole proprietor answers personally for business debts. In practice, restaurant landlords usually want a personal guarantee anyway. The EIN is free.

Sales tax comes early. Texas DSHS wants the sales tax ID before the health permit application, and New York City wants the state Certificate of Authority with it, which the city warns can take weeks. California’s seller’s permit is free (CDTFA), and CDTFA flags restaurant quirks: mandatory tips, corkage fees and cover charges can be taxable, and hot coffee to go is not taxable while soda and alcohol always are. Under its 80-80 rule (over 80 percent of receipts from food, over 80 percent of that food taxable), a restaurant without separate records for cold to-go food owes tax on all sales.

Tips and payroll tax. Per the IRS, employees report cash tips of $20 or more a month to you by the 10th of the next month, and you pay the employer share of Social Security and Medicare on them, with a credit for part of it on Form 8846. A large food or beverage establishment, where tipping is customary and more than 10 employees worked on a typical day the prior year, files Form 8027 and must allocate tips when reported tips fall below 8 percent of gross receipts.

A recruiting point. For 2025 through 2028, workers can deduct up to $25,000 of qualified tips (IRS), phasing out above $150,000 of modified adjusted gross income, or $300,000 for joint filers (IRS).

Insurance. California requires workers’ compensation even with one employee; Texas private employers can choose not to carry it in most cases; New York City wants proof with the health permit. Some states make liquor liability a license condition: Minnesota will not issue or renew a retail license without proof of financial responsibility, including at least $50,000 for bodily injury to one person. Elsewhere landlords and lenders usually ask for it, alongside general liability, property, spoilage and business interruption cover.

The kitchen, equipment and software

Texas DSHS lists the minimum: a three-compartment sink (a dish machine may also be used), handwash sinks in prep areas, hot and cold water under pressure at every sink, a mop sink and a thermometer in each holding unit. A private home may not be used for food establishment operations.

Under Food Code 4-205.10, equipment certified for sanitation by an ANSI-accredited program is deemed to comply, which in practice means NSF-listed equipment, used or new, with the spec sheets kept. Los Angeles County asks for spec sheets on equipment, ventilation, water heaters and finishes, says professionally drawn plans are best, and leaves grease interceptors to local building departments. The hood and fire suppression, the walk-in and the dish machine are usually the largest equipment lines, and in practice the hood is the one most likely to hold up an opening date.

Toast runs only on approved Toast hardware and is a payment facilitator that partners with processors, with hardware and implementation as its upfront costs. Compare contract length, processing rates and terminal ownership. DoorDash’s tablet costs $6 a week after the trial.

Pricing, tips and delivery fees

Menu prices usually start from plate cost (the ingredients in each dish), add labor and occupancy targets, then get checked against nearby menus. The one published benchmark found is a rule of thumb, not a measured average: the University of Denver review puts rent, lease or mortgage at 7 to 9 percent of revenue.

Service charges are not tips. Under 29 CFR 531.55, a compulsory charge such as 15 percent of the bill becomes part of your gross receipts and cannot count toward the tip credit. California also taxes mandatory tips.

Delivery commissions. As of October 2026, DoorDash charges 15, 25 or 30 percent on delivered orders depending on the plan, 6 percent on pickup and nothing through its Online Ordering product, and pickup requires app prices to match in-store prices. New York City caps app delivery fees at 15 percent of each order, transaction fees at 3 percent and basic service fees at 5 percent, and apps there must share customer data on request unless the customer opts out (NYC Consumer and Worker Protection).

Fixed fees with published amounts, as of October 2026: the New York City health permit at $280, California’s priority general liquor application at $19,840 and its transfer fee at $1,565. In New Jersey, where buying an existing liquor license is the usual route, the price is a private deal between buyer and seller, so it can be the largest single cost in the plan. No startup cost estimate with a published method turned up, so none is given here.

Hiring and safety

Eating and drinking places employ 11.6 million people, nearly 30 percent of them under 20, according to OSHA, and every worker has the right to hazard training in a language they understand.

Tipped wages under federal law. A tipped employee regularly receives more than $30 a month in tips (29 U.S.C. 203). You may pay a cash wage as low as $2.13 an hour (29 CFR 531.50) if tips bring the employee to the $7.25 federal minimum (29 U.S.C. 206), a tip credit of up to $5.12, and only after telling tipped staff the terms in advance (29 CFR 531.59). You, your managers and your supervisors may not keep any part of employees’ tips, credit or no credit, and tip pools are limited to employees who customarily receive tips.

State law can require more. California allows no tip credit at all, bars deducting card processing fees from tips and keeps owners and managers out of tip pools. Its $20 fast food minimum, in force since April 1, 2024, covers limited-service chains with at least 60 establishments nationwide, so an independent single-unit restaurant falls outside it.

Training. For cooks, Registered Apprenticeship pairs paid work with a mentor and a portable credential, and 90 percent of apprentices stay employed afterward; a culinary cook apprenticeship is one listed program.

Injury records. Full-service restaurants, limited-service eating places and drinking places are on OSHA’s partially exempt list and do not keep the routine injury logs unless asked in writing. Ask OSHA what must still be reported.

Finding your first customers

Start the Google Business Profile before you open. Google lets an unopened business set an opening date up to a year ahead. Once verified, the profile appears 90 days before that date and carries a “Recently opened” tag for 90 days after, but customers cannot leave reviews or photos until you open. Fill the wait with posts and build-out photos.

Restaurants also get Order with Google, Reserve with Google and a menu editor. Three profile rules catch new restaurants: list dine-in hours (takeout hours only without a dining room), never point the menu link at a third-party delivery service, and keep permanent signage with your name at the address. Our Google Business Profile work covers this setup.

Plan for reviews from the first service. In BrightLocal’s 2026 Local Consumer Review Survey, 47 percent of consumers would not use a business with fewer than 20 reviews, 74 percent look for reviews from the last three months, and 89 percent expect owners to respond. The FTC’s review rule, in effect since October 21, 2024, covers incentives tied to a particular sentiment and review suppression, so ask every guest for an honest review and never filter out complaints. Here is how a review routine runs.

Local Services Ads are narrow. Food and beverage is a pilot only in Atlanta, Boston, Indianapolis, Miami and San Jose, where the only verification requirement is a verified profile. Dining cannot earn the Google Verified badge, and Google’s dining booking partners are Resy, SevenRooms, Toast and Tock.

Delivery apps bring reach at a price. Push pickup and direct ordering where you can. Openings that start strong usually run a soft opening, invite local press, post short kitchen videos, pitch catering to nearby offices and collect email or text sign-ups from the first night. The restaurant marketing playbook covers what diners check on the map before they choose.

What trips up new owners

Assuming the county regulates you. Long Beach, Pasadena and Vernon sit inside Los Angeles County but run their own health departments. Call before you lease.
Staffing the certificate wrong. New York City needs a certificate holder on duty every open hour; California needs one certified person per facility who cannot cover a second location.
Signing before the liquor answer. In California, a full-bar concept that misses the September window waits a year or buys a license.
Planning to move a permit. Houston permits do not transfer between addresses or owners.
Underestimating the hours. The failed owners in the Columbus study all mentioned the time a restaurant demands.

Frequently asked questions

Do I need a license to open a restaurant?

Yes: a health permit from your state, county or city, plus building approvals, a certificate of occupancy and a sales tax registration. There is no federal restaurant license.

Is it true that 90% of restaurants fail in the first year?

No. Ohio State’s Columbus study found about 26 percent closed in year one, counting closures for any reason, and BLS data for the western US put independent full-service startups at 17 percent.

How long do restaurant permits take?

It depends on the city and the space. The model Food Code wants the application 30 days before opening, New York City lets you open 22 days after applying, and Houston books pre-opening inspections at least 14 business days out.

Do I need ServSafe certification?

You need a certified food protection manager from an accredited program in most places, and ServSafe is one. New York City uses its own Food Protection Certificate.

How do I get a liquor license for a restaurant?

Apply to your state alcohol agency and usually the city or county. California issues new general licenses once a year, New Jersey caps them by population, and Texas ties its Food and Beverage Certificate to food sales or the legal definition of a restaurant.

Can I pay servers $2.13 an hour?

Under federal law, only with advance notice, tips that reach $7.25 an hour and every tip kept by staff. California allows no tip credit.

Do I need workers’ comp for a restaurant?

In most states, yes, once you hire. California requires it with one employee, while Texas makes it optional for most private employers.

When should I set up a Google Business Profile for a new restaurant?

As soon as the lease is signed. The profile can show 90 days before opening, and reviews open the day you do.

Sources

Checked on October 3, 2026. Rules and fees change, and many are set state by state or city by city: confirm the current requirements with the agency that issues them before you apply.

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