Roadblocks for Restaurants: How Entrepreneurs Get Caught in a Permitting Maze
Most people aren’t surprised to learn that restaurants face a number of licensing, registration, and inspection requirements. In fact, local health department inspection scores prominently displayed on the windows of most restaurants might be the most common regulatory documents encountered by the average person.
But what many people miss is the complete web of permitting required to open up a restaurant—a web that forces entrepreneurs to navigate complex local building and state food code requirements that are often poorly explained and inconsistently enforced. These burdens fall most heavily on independently owned restaurants, which have fewer resources and operate on thinner margins than chains. 1
Despite these challenges, independently owned restaurants make up more than half of all restaurants in the United States. 2
Given the specific needs of different types of restaurants (different cuisines may need vastly different kitchen equipment, for example), even opening up in a building that already has some components of an industrial kitchen might require extensive renovations, and therefore time-consuming back-and-forth with local officials to obtain required approvals. Any change or addition involving the structure of the building, mechanical components, plumbing, electrical work, or even signage each requires its own permit, with fees typically scaling based on the cost of the renovations.
San Francisco’s requirements under the California Environmental Quality Act (CEQA) stand out as a particularly shocking example of how burdensome these processes can be, especially when combined with other local regulations. The state of California has some of the strictest environmental regulations in the country. 3
CEQA requires local government agencies to consider environmental impacts as part of their decision-making processes, and San Francisco’s unique environmental review requirements under CEQA are particularly burdensome. This review—which requires additional permits, paperwork, and even public hearings—can easily add tens of thousands of dollars to the cost of starting up. 4
Environmental reviews can halt some entrepreneurs’ plans for years as they work through the system.
Other permits, like those for sprinkler systems and grease traps, are also commonly required for restaurants, and come with their own fee structures and inspection schedules. In addition to the added cost to apply for and acquire such permits, business owners must often engage in lengthy scheduling conversations with multiple agencies ranging from local fire departments to health and building inspectors, sometimes receiving conflicting advice about which permits they need, or in what order they should be acquired. Local governments have an important health and safety interest in ensuring the proper functioning of such systems, but permitting and inspections should be streamlined and straightforward so as to not be unduly burdensome for entrepreneurs.
Many business owners, like Jesse Rice in Indianapolis, have even reported being failed by one inspector for something that a different inspector had determined to be compliant with the code. This uncertainty leads to an especially frustrating situation for the business owner, whose opening day is put on hold due to inspectors’ inconsistency—and who must then continue to pay rent on the space while dealing with government delays.
In 2019, Joey and Emily Ward opened Southern Belle in Atlanta, a restaurant that serves farm-to-table cuisine in an historic building—with a second speakeasy restaurant, Georgia Boy, hidden inside. For Joey, a seasoned veteran of the restaurant industry, it was an opportunity to enjoy the creative freedom that running an independent restaurant provides. His wife, Emily, a practicing lawyer, handles the legal and regulatory side of the business, while her father, an MBA, contributes his business acumen.
But despite their level of expertise, Joey and Emily found the process of starting up so complicated that they had to hire two teams of expediters—one to manage local permits, and the other to manage liquor approvals with the state. At the outset, Emily tried to research the permitting requirements for starting a restaurant on her own, but she quickly realized that it would be a full-time job. She notes that when she could not find an answer online, she would call agency officials, only to be told that she needed to talk to a lawyer. “It was so frustrating not knowing what to do other than to hire somebody to make things magically happen.”
Joey adds that the single most difficult part of the process for him was not knowing what to do and exactly when and how to do it: City approvals alone range from historical-preservation and parking requirements to abiding by fire codes and earning the support of neighborhood associations. For someone looking to start small, the level of uncertainty involved in applying for licenses and permits could prevent them from opening at all if they do not have the resources to pay thousands for paperwork and hire lawyers to shepherd them through the process. “If you have to hire expediters, that means the system is broken; . . . you shouldn’t have to guess and then hope you guessed right.” To make things easier, city officials in Atlanta should create a true one-stop shop for starting a business—a single location with step-by-step guides for completing the steps needed to get to opening day.