Business Law 101 / Restaurants

By Albert L. Kelley

Restaurants are one of the hardest businesses to operate. While many people think they can open and run a restaurant, more restaurants go out of business each year than any other industry. It is estimated that 60% of all restaurants close within 3 years. Why is it so hard to run a restaurant? Well, it starts with the set up.

First, every restaurant should be incorporated. A corporate of LLC entity is essential as the likelihood of lawsuits are high for the industry. Between slip and fall issues, food safety issues, liability is a major issue. You may recall the ecoli outbreak at Chipotle. They were sued by over 100 people. There have been additional suits since then for customers who allegedly contracted norovirus. These lawsuits and the related fallout cost Chipotle hundreds of thousands, not to mention bad press. And the risk isn’t just to customers. Injuries happen to staff too. Between cuts, burns, falls and strains, employees are more likely to get hurt than customers. If the restaurant is not incorporated, these liabilities can fall on the owner.

Unlike retail stores, there are certain procedures restaurants must go through before opening. Aside from the same procedures of every other business (incorporation, obtain EIN, obtain sales tax number)., a restaurant must also go through other procedures. First, they must be inspected by the local fire department. Fire codes for restaurants are very stringent. If the restaurant is going to fry anything or use a basic cooktop, a fire suppression system, or hood, must be installed. If however, they are merely baking, a hood system is not required. In addition, there must be fire extinguishers available at various locations. Each year, the fire department will reinspect to make sure there is not too much grease build-up on the hood system and that the system is charged and working.

The restaurant will also have to go through an inspection by the Department of Business and Professional Regulations. These inspections include checking to ensure all coolers are at the correct temperature, that food containers are properly marked and sealed, that the restaurant is clean and free of rodent droppings or cockroaches, that the dishwashing area is properly designed and that there are handwashing facilities available.

In addition all food handlers in the restaurant must obtain a food handlers card (valid for three years) from the Department of Health within 60 days of starting business. This training provides lessons on sanitation, personal hygiene, preventing cross contamination, time and temperature issues with handling food, vermin control, and issues regarding foodborne illnesses.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of four law books: (“Basics of Business Law” “Basics of Florida’s Small Claims Court”, “Basics of Florida’s Landlord/Tenant Law” and “Basics of Starting a Florida Business” (Absolutely Amazing e-Books)). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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