How to Start a Cafe or Restaurant in England and Wales

Suppose you have finally decided to start a restaurant or cafe in England and Wales. You are excited, but you also have questions about the legal formalities you will need to follow before you open your doors. This article will briefly outline some general business tips cafe and restaurant owners should consider. It will then go on to consider:

• commercial leases; 
• what licenses and certificates you will have to obtain; and 
• the importance of business insurance. 

Your Business Plan

All good cafes or restaurants start with a solid business plan – the more detail you can plan for, the better. 

As a start, you should be prepared to answer specific questions about your cafe or restaurant business model, such as:

• how you will finance the up-front costs of the business; 
• what your sales and cost projections will be; 
• what your restaurant concept is — that is, what sort of ambience or vibe do you intend to have; 
• who your target customer is;
• how you will build, develop, and market your brand; and
• what employees you will need to hire. 

Additionally, the financial elements of your business plan are of particular importance (not least because you are in the business of monitoring your clients’ accounts). Therefore, you should consider your:

• need to seek outside investors up-front; 
• cash flow forecast; 
• break-even analysis; 
• profit and loss forecast; and 
• balance sheet forecast. 

Start-Up Costs 

Most businesses fail within the year because they do not adequately account for their upfront costs. Therefore, when you start as a cafe or restaurant owner, you must consider:

• how much it will cost to rent the premises; 
• what sorts of equipment you will need, (e.g. gas ranges, espresso machines, vending machines, coffee grinders, storage hardware, counter equipment, serving equipment, and any office or accounting equipment); 
• licensing and certification fees; 
• fees for legal or consulting services;
• websites and marketing fees; 
• recruitment and training fees; 
• the cost of insurance policies; 
• waste disposal;
• point of sale systems;
• phone, internet, and the cost of utilities like heating and gas; and
• the cost of your start-up inventory (such as coffee beans, alcohol and other beverages, and dry and refrigerated food).

What Business Structure Will You Adopt?

The four most common business structures are:

• sole-trader;
• unincorporated partnership;
• limited company; and
• limited liability partnership (LLP). 

As a cafe or restaurant owner, you should be especially aware of the implications of being a sole trader versus trading through an incorporated company, particularly as it relates to limiting your liability. 

Incorporating your business through a company or an LLP could help limit your liability.

Know Your Tax Liability 

The amount you will pay in tax will depend on your business structure. Importantly, on-premises consumption of food or beverages such as alcohol is also subject to their own Value Added Tax (VAT). 

Business Bank Account 

It could be a good idea to have a bank account in place before trading with suppliers and opening your doors to customers. Depending on what business structure you choose, you will want to consider what sorts of banking services you may need.

Commercial Leases 

Deciding on your business location is a crucial step — as they say, a good location is key. However, regardless of where you choose to run your business, you will need to negotiate a lease for the premises (unless you intend to buy the freehold outright, which is unusual for new hospitality business owners). 

The lease agreement will largely govern the relationship between you and your landlord. At its most basic level, it proves your right to exclusive possession of the premises. 

Items to Negotiate

The main thing to negotiate will be the rent. You should undertake thorough market research to ensure you understand the going rates for similar premises.

For commercial leases, payment is usually quarterly. However, you can negotiate more or less frequent payments.

Other common terms you should negotiate include:

• any service charges, 
• what insurance provisions you and the landlord will need to have in place; 
• which party is liable for keeping certain elements of the premises in repair; and 
• to what extent you can sublease the premises or sell the lease to a third party. 

You will also need to ensure you can actually operate a cafe or restaurant from the premises. Therefore, you may want a solicitor to review the property and liaise with the local authority.

Regulations, Licenses, and Certifications

If you serve food or beverages on-site, there are many essential regulations in place designed to protect consumers. If you fail to abide by these regulations, you can be held criminally and civilly liable. 

Regulations 

There are several different laws in place to protect consumers. These laws are enforced by several different agencies, though local authorities enforce most regulations. 

In most cases, you will need to register with your local authority as part of these regulations. 

Licenses 

You will also need to check with your local authority to ensure that you comply with all licensing requirements, such as needing licenses to serve alcohol or stay open past a particular hour. 

Certifications 

Depending on what kinds of equipment you are operating in your new restaurant, you may need to obtain specific safety certificates. Usually, this is regulated by the local authority. 

Insurance 

Insurance is a way to mitigate the risk of being held financially liable if something goes wrong. 

There are three main kinds of insurance you will want to obtain:

• public liability insurance; 
• employers’ liability insurance; and 
• building & contents insurance.

Public Liability Insurance 

Because you will have customers (as well as possibly employees) in your business’ premises, the law considers you to be an occupier. This makes you potentially liable for any injuries that happen in your restaurant or cafe. 

Therefore, public liability insurance can help you cover the cost of any claim made against you or your business if an injury or death occurs on your business premises. 

Employers’ Liability Insurance 

If you employ others, by law you must obtain employers’ insurance. This protects you and your employees from any injury or death that happens in the course of their employment. 

Building and Contents Insurance

A good buildings and contents policy will protect your inventory and equipment from any damage caused by fire and flooding. It can also protect the premises itself from such damage. However, depending on your commercial lease, you may not find it necessary. Finally, depending on the policy, it can also protect from theft and criminal damage as well. 

Key Takeaways

Firstly, you should make sure you have a well-organised business plan in place before you open your cafe or restaurant doors. Next, you will also want to consider how you will pay for your business, such as if you will raise money from outside sources. Other important factors to consider include what business structure you will use, what the important elements to negotiate in your commercial lease are, ensuring you understand all the licensing and regulatory requirements for the sale of on-premises food and beverages. Finally, you will want to ensure you have three key insurance policies in place. 

If you need help with how to start your cafe or restaurant business, LegalVision’s business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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