How to Start a Restaurant in 2026: Permits, Liquor Licenses, Tip Rules, Startup Costs and Prime Cost

Opening a restaurant means running three businesses at once: a kitchen that must pass health inspections, a dining room that sells hospitality, and a payroll with some of the most detailed wage rules in US law. Most new owners plan the menu and the room carefully and underestimate the permits, the tip rules and the cost structure. This guide is for anyone in the US planning to start a restaurant in 2026, from a 30-seat neighborhood spot to a full-service dining room with a bar. It covers health permits under the FDA Food Code, liquor licensing basics, tip and minimum wage rules, startup costs and prime cost with a worked break-even. Rules were checked against FDA, the Department of Labor, the IRS and state and city agencies in October 2026.

Quick answer

To start a restaurant, write a business plan, form an LLC and get an EIN, sign a lease only after zoning and health department plan review confirm the space works, then get your food service permit, certificate of occupancy, sales tax permit and, if needed, a state liquor license plus federal TTB registration. Set up payroll that follows tip credit and tip pool rules, and manage prime cost from day one.

• Health codes are based on the FDA Food Code; the latest edition is the 2026 Food Code

• NYC's food service establishment permit costs $280; most areas require a certified food protection manager

• Federal tipped cash wage: $2.13 an hour, with a maximum tip credit of $5.12 an hour

• Prime cost (food, beverage and labor) runs about 60% of sales in a sustainable restaurant (Restaurant365)

• Our worked example breaks even at about 110 guests a day on a $28 average check

Step one: the concept, the plan and the space

Every restaurant decision flows from the concept: what you serve, at what price, to whom and how. A fast-casual counter needs a different kitchen, staff and location from a full-service dining room with a bar. Write the concept down in a business plan before you look at spaces, because the plan tells you how many covers you need, what rent you can afford and how much money you must raise. The SBA's traditional format works well; our how to write a business plan guide walks through each section, and our coffee shop business plan and food truck business plan show worked examples for smaller food concepts.

The space is the most expensive decision you'll make. A former restaurant with a working hood, grease trap, walk-in cooler and restrooms can save a large share of the build-out, though you'll inherit any code problems. A raw space, or one that was a shop, may need a change of use, new plumbing, ventilation and fire suppression. Before you sign, confirm three things in writing: that zoning allows a restaurant, and a bar if you want one; that the health department's plan review will accept the layout; and what the landlord will contribute to improvements. Ask for a lease contingency on permits and the liquor license, because both can take months.

Health permits and the FDA Food Code

Restaurants are regulated by state and local health departments, not by the federal government directly. What ties the rules together is the FDA Food Code, a model code that FDA publishes and recommends to state, local, tribal and territorial agencies. The latest full edition is the 2026 Food Code. Adoption lags: in FDA's 2024 adoption report, only 7 states had adopted the 2022 edition statewide, 24 states were on the 2022 or 2017 edition, and 36 were on the 2013 edition or later. So the rules your inspector applies may come from an older edition, with local amendments. Ask your health department which code it enforces before you design the kitchen.

The permit process usually runs in this order. You submit plans (floor plan, equipment list with specification sheets, finish schedule, menu, plumbing and ventilation details) for review. You build to the approved plans. The health department inspects before opening, and you receive a food service establishment permit, usually renewed yearly. New York City's food service establishment permit, for example, costs $280. Separately, the building department issues a certificate of occupancy or change of use, the fire marshal inspects hood suppression, exits and occupancy load, and many cities require a sign permit.

From lease to opening day

1. 1

   Confirm zoning and plan review

   Check that the use is allowed and submit kitchen plans to the health department before construction.

2. 2

   Form the business and register for taxes

   LLC or corporation (filing fees $35 – $500), EIN (Free ($0)), state sales tax permit and employer accounts.

   LLC registration
3. 3

   Apply for the liquor license early

   State and local approval can take months; apply as soon as you have a signed lease or lease contingency.

4. 4

   Build out and pass inspections

   Building, plumbing, electrical, fire and health inspections, then the certificate of occupancy and food service permit.

5. 5

   Train staff and certify managers

   Certified food protection manager, food handler cards where required, and responsible alcohol service training.

6. 6

   Soft open

   Friends-and-family service to test the menu, ticket times and costs before the public opening.

Most health codes based on the Food Code require the person in charge to show food safety knowledge and at least one manager to hold a certified food protection manager credential from an accredited program. Many states and cities also require food handler cards for staff: California, for example, requires food handlers to get a card within 30 days of hire, valid for three years. Budget for the courses and the staff time.

Chains face one more federal rule. Restaurants that are part of a chain with 20 or more locations doing business under the same name must post calorie information on menus and menu boards. An independent restaurant isn't covered unless it volunteers, but check state and local rules on allergen notices and menu disclosures.

Liquor licensing basics

Alcohol can lift the average check and margins, but it adds a separate licensing track with its own timelines and costs. Each state has an alcohol control agency, and many cities and counties add their own approvals. License types usually depend on what you'll sell and how much food you serve. California's Department of Alcoholic Beverage Control, for example, issues a Type 41 on-sale beer and wine license for an eating place and a Type 47 on-sale general license for beer, wine and spirits at an eating place. Both require the premises to operate as a bona fide eating place with a suitable kitchen and real meal sales, and both carry Responsible Beverage Service rules requiring servers and their managers to be certified.

Questions that decide your liquor license path

Question	Why it matters
Beer and wine only, or spirits too?	Spirits licenses are often more expensive, scarcer and slower
Does your state cap licenses by population?	In quota areas you may need to buy an existing license from another holder
Is food a minimum share of sales?	Eating-place licenses can require substantial meal sales and a working kitchen
Are you near schools, churches or residences?	Distance rules and local objections can delay or block approval
Who are the owners and investors?	Agencies run background checks on everyone with a financial interest

Beer and wine only, or spirits too?

Why it matters

Spirits licenses are often more expensive, scarcer and slower

Does your state cap licenses by population?

Why it matters

In quota areas you may need to buy an existing license from another holder

Is food a minimum share of sales?

Why it matters

Eating-place licenses can require substantial meal sales and a working kitchen

Are you near schools, churches or residences?

Why it matters

Distance rules and local objections can delay or block approval

Who are the owners and investors?

Why it matters

Agencies run background checks on everyone with a financial interest

There's also a federal step that many guides miss. Under Alcohol and Tobacco Tax and Trade Bureau rules, every business that sells alcohol to consumers is a retail dealer and must register each place of business with TTB before it starts selling. Registration is separate from the state license.

Start the liquor application as early as your state allows, often once you have a lease or a lease contingency. Approvals that involve public notice, local hearings or a license transfer can take several months, and opening without the license means opening without the revenue in your forecast.

Payroll: tipped wages, tip pools and the no tax on tips deduction

Restaurant payroll has rules most other businesses never deal with. Under the Fair Labor Standards Act, a tipped employee is one who customarily and regularly receives more than $30 a month in tips. For those employees, an employer may pay a cash wage of at least $2.13 an hour and count tips toward the rest of the federal minimum wage of $7.25 an hour, a tip credit of up to $5.12 an hour. The credit is only allowed if you told employees in advance how much cash wage you'll pay, how much tip credit you'll claim, that they keep all their tips except through a valid tip pool, and that the credit won't apply without that notice. If an employee's tips fall short, you make up the difference.

Worked example. A server works 30 hours in a week. At the federal minimum, they must end the week with at least 30 × $7.25 = $217.50. You pay a cash wage of 30 × $2.13 = $63.90 and may claim up to 30 × $5.12 = $153.60 in tip credit, but only if they actually received at least that much in tips. If they received just $120 in tips, you owe another $33.60. Overtime for tipped employees is calculated on the full minimum wage, not the cash wage; our overtime guide shows the method.

Tip pools. Federal law bars employers, managers and supervisors from keeping any portion of employees' tips, whether or not you take a tip credit. If you take a tip credit, a mandatory tip pool may include only employees who customarily and regularly receive tips, such as servers, bussers and bartenders, not cooks or dishwashers. If you pay everyone at least the full minimum wage and take no tip credit, the pool can include back-of-house staff, but still not managers. Tips you collect for a pool must be paid out no later than the regular payday for that workweek.

Duties outside the tipped job. The current regulation uses the long-standing dual jobs test: a server who also does related work like setting tables or making coffee remains a tipped employee, but hours spent in a separate job, such as working as a maintenance worker, can't be paid with a tip credit. The stricter 2021 "80/20" rule was struck down by a federal appeals court in 2024 and no longer appears in the regulation. State rules can be stricter than federal law, with higher cash wages or no tip credit at all; California's minimum wage is $16.90 an hour, for example. Where state and federal rules differ, the one more generous to the employee applies.

No tax on tips. For tax years 2025 through 2028, employees in occupations that customarily received tips can deduct up to $25,000 a year of qualified tips, which the IRS describes as voluntary cash or charged tips from customers, including shared tips. The deduction phases out above modified adjusted gross income of $150,000 ($300,000 for joint filers). Employers and other payors must report certain cash tips and the tip recipient's occupation on information returns. It doesn't change your minimum wage obligations, but it does make accurate tip reporting matter more to your staff. Mandatory service charges are generally treated as wages, not tips, so decide your service charge policy with your payroll provider.

Restaurant startup costs

Restaurant startup costs vary more than almost any other small business, mostly because of the space. TouchBistro's guide puts kitchen equipment, smallwares and furniture at $100,000 to $300,000, renovations at around $280,000 on average, and build-out at $300 to $500 a square foot for the kitchen and $150 to $300 for the dining room. Taking over a working restaurant space can cut those numbers dramatically.

Most first-time owners fund a restaurant with a mix of their own savings, investors, equipment financing and SBA-backed loans. The SBA 7(a) program goes up to $5 million and can fund equipment, leasehold improvements and working capital; see our SBA 7(a) loan guide. Lenders will want to see a detailed plan, personal investment and experience running a restaurant.

Try it — cost each menu item before you price it

Ingredient Cost per PlateMenu PriceTarget Food Cost

Gross Profit per Plate₹225.00

Suggested Price at Target₹316.67

StatusWithin target

Food Cost Percentage29.69%

Open the full Food Cost Calculator (PDF, save, compare)

Prime cost: the number that decides profit

Prime cost is your cost of goods sold (food and beverage) plus your total labor cost, including payroll taxes and benefits. It's the largest controllable cost in a restaurant, and the one experienced operators review every week. Restaurant365 puts a sustainable prime cost at about 60% of sales, with full-service restaurants typically running 60% to 65% and quick-service 55% to 60%. Everything else, including rent, utilities, card fees, marketing, repairs and loan payments, has to fit in what's left, with profit after that.

Worked example. A full-service restaurant sells $100,000 a month: about 3,570 guests at a $28 average check. Food and beverage costs are 30% ($30,000) and labor including payroll taxes is 32% ($32,000), so prime cost is $62,000, or 62%. Other costs are $33,000: rent $9,000, utilities $4,000, card processing $3,000, marketing $2,500, repairs $2,000, insurance $1,500, software $500, supplies $2,000, accounting $1,000, loan payments $5,000 and other costs $2,500. That leaves $5,000 a month, or 5% of sales, before the owner's draw and income tax.

Try it — guests a year to break even

Monthly Fixed CostsSelling Price per UnitVariable Cost per Unit

Contribution Margin / Unit₹18.76

Contribution Margin Ratio67%

Break-Even Revenue₹11,10,447.76

Break-Even Units39,659

Open the full Break Even Calculator (PDF, save, compare)

For break-even, treat food cost (30%) and card fees (3%) as variable, or $9.24 per $28 guest, and labor plus other costs as fixed: $62,000 a month, or $744,000 a year. The restaurant needs about 39,660 guests a year to break even, roughly 3,300 a month or 110 a day. It's serving about 119, which is why the margin is thin. A one-point slip in food cost or labor wipes out a fifth of the profit, and ten fewer guests a day almost erases it. That's the case for weekly prime cost reviews, menu engineering with our menu profitability checker, and labor scheduling built on covers, not habit.

Common mistakes when starting a restaurant

The first mistake is signing a lease before zoning, health plan review and the liquor license path are clear. A space that can't get a hood permit or a liquor license can sink the business before it opens. The second is underfunding working capital: new restaurants often take months to build a regular trade, and an owner who spends everything on build-out has nothing left for slow weeks. The third is pricing the menu from competitors instead of from plate costs.

The fourth is getting tip rules wrong, such as including managers in the tip pool or skipping the tip credit notice, which can make you liable for the full minimum wage for every hour. The fifth is losing track of prime cost: weekly inventory counts and labor reports are the earliest warning you'll get. Finally, don't skip the soft opening. A few nights of friends-and-family service will show you the ticket times, bottlenecks and plate costs your plan missed.

Official links

• FDA Food Code 2026The model code behind state and local health rules
• FDA Food Code adoption by stateWhich edition your state uses
• NYC food service establishment permitExample of a city health permit
• California ABC license typesType 41 and Type 47 eating place licenses
• TTB registration, 27 CFR 31.71Federal registration for alcohol retailers
• Tipped employees, 29 CFR part 531 subpart DTip credit, notice and tip pools
• IRS — no tax on tipsDeduction rules for tipped workers

What to do next

Write the plan before you tour spaces: use our business plan generator, cost every dish with the food cost calculator, and test your break-even with the break-even calculator. Then call your local health department about plan review and your state alcohol agency about license availability. If you're starting smaller, our food truck business license guide and coffee shop business plan cover lower-cost ways into food service.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How much does it cost to start a restaurant?

There's no official figure, and it depends heavily on whether the space was already a restaurant. TouchBistro's guide puts kitchen equipment, smallwares and furniture at $100,000 to $300,000 and renovations at around $280,000 on average. Taking over a former restaurant with a working kitchen and hood can cut that sharply, while a raw space can cost far more.

What permits do you need to open a restaurant?

Typically a business license, a food service establishment permit from the local health department after plan review and inspection, a certificate of occupancy, fire and building sign-offs, a sales tax permit, and a liquor license if you'll serve alcohol. Most health codes follow the FDA Food Code, which calls for a certified food protection manager. New York City's food service permit costs $280.

How do I get a liquor license for a restaurant?

Apply to your state alcohol agency, and in many states the city or county too. License types depend on what you'll sell: California, for example, issues a Type 41 license for beer and wine at an eating place and a Type 47 for beer, wine and spirits. You must also register each place of business with the federal TTB before selling alcohol. Approval can take months, so apply early.

What is the tipped minimum wage?

Under the federal Fair Labor Standards Act, employers may pay tipped employees a cash wage of at least $2.13 an hour and claim a tip credit of up to $5.12 an hour, but only if tips bring the employee to at least the full minimum wage and the employer gave the required notice. Many states set higher cash wages or don't allow a tip credit, and the state rule applies when it's more generous.

What is prime cost in a restaurant?

Prime cost is cost of goods sold (food and beverage) plus total labor cost, including payroll taxes and benefits. It's the biggest controllable cost in a restaurant. Restaurant365 puts a sustainable prime cost at about 60% of sales, with full-service restaurants typically at 60% to 65% and quick-service at 55% to 60%.

Can managers share in the tip pool?

No. Federal law bars employers, managers and supervisors from keeping any part of employees' tips, whether or not the employer takes a tip credit. If you take a tip credit, a mandatory tip pool can include only employees who customarily and regularly receive tips, such as servers, bussers and bartenders. Tips collected for a pool must be paid out by the regular payday.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.FDA Food Code 2026 — U.S. Food and Drug Administration · accessed 9 October 2026
2. 2.Adoption of the FDA Food Code by state and territorial agencies — U.S. Food and Drug Administration · accessed 9 October 2026
3. 3.Food service establishment permit — NYC Department of Health and Mental Hygiene (NYC Business) · accessed 9 October 2026
4. 4.License types — California Department of Alcoholic Beverage Control · accessed 9 October 2026
5. 5.27 CFR 31.71 — Registration required at each place of business — Alcohol and Tobacco Tax and Trade Bureau (eCFR) · accessed 9 October 2026
6. 6.29 CFR part 531, subpart D — Tipped employees — U.S. Department of Labor (eCFR) · accessed 9 October 2026
7. 7.What the No Tax on Tips deduction means for you — Internal Revenue Service · accessed 9 October 2026
8. 8.Working Families Tax Cuts — individuals and workers — Internal Revenue Service · accessed 9 October 2026
9. 9.21 CFR 101.11 — Nutrition labeling of standard menu items — U.S. FDA (eCFR) · accessed 9 October 2026
10. 10.How to calculate prime cost in a restaurant — Restaurant365 (secondary) · accessed 9 October 2026
11. 11.Restaurant startup costs — TouchBistro (secondary) · accessed 9 October 2026