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How to Start a Restaurant or Catering Business inOntarioLast Verified: 2010-06-29

TABLE OF CONTENTS

1. Basics to Getting Started2. Industry Overview3. Regulations4. Financing5. Taxation6. Managing Your Operation7. Catering 8. Associations 9. Other Resources

1. BASICS TO GETTING STARTED

Starting a business can be a rewarding undertaking, but it comes with its challenges.Before starting a business in Ontario, it is wise to do your research. There are severalissues to consider such as regulations, financing, and taxation, managing your business,advertising and much more.

For further information:see the documents:

Business Start-Up Info-GuideFinancing for Starting a Business Info-GuideTaxation Info-GuideEmployment Regulations Info-Guide

For regulatory or legal questions, it may be useful to contact a lawyer that deals withbusiness regulations through the Law Society of Upper Canada's Lawyer ReferralService.

For further information:call 1-800-268-8326visit the website: Law Society of Upper Canada's Lawyer Referral Service

2. INDUSTRY OVERVIEW

Maintaining High Health Standards

As a restaurant operator, your main preoccupation should be to maintain high healthstandards. Maintaining traffic in your restaurant depends on it, as your restaurant will

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probably be inspected and appraised. Important steps to take into consideration whendealing with health issues include:

food temperature control;protection of food from contamination;employee hygiene and hand washing;maintenance and sanitation of surfaces and equipment that come into contactwith food;maintenance and sanitation of surfaces and equipment that do not come intocontact with food;maintenance and sanitation of washrooms;storage and removal of waste; and pest control.

For further information, call your local Public Health Unit.

Designing your Restaurant and Calculating Seating Capacity

Depending on your experience, finances, location and customers, you will have todecide on the type of restaurant you want to operate (traditional, ethnic, specialty,coffee shop, fast food, cafeteria, self-serve, etc.), and aim for a practical, useful layoutthat will set the mood. It would be good to have all of the following:

seating/waiting areas, serving room, cashier area, rest rooms, bar (optional);one or more areas from which you can view the entire restaurant;lighting, signs and obstacle-free traffic flow;a variety of seating arrangements: 50% of customers come in pairs; 30% comealone or in groups of three; and 20% in groups of four or more;adequate room - the suggested square footage requirements per chair are: 10-20sq. ft. in traditional restaurants, 10-12 in cafeterias, 7-17 in coffee shops;a kitchen that allows efficient and effective food preparation and interactionbetween staff;safety in movement, dry and cold storage, dish washing, an area for staffspersonal items;convenient delivery zone, ease of cleaning and maintenance, and properventilation and lighting.

To determine the maximum potential of your restaurant and break-even point:

1. determine desired profit - convert to percentage of sales to get sales required;2. determine number of operating days - divide number of days into sales to get

average daily sales;3. estimate volume percentages for meal periods (breakfast, lunch, dinner);4. multiply figures in step 3 by average sales per day to get dollar volume per

period;5. determine average check per meal period;6. divide dollar volumes in step 4 by average check for the number of patrons per

period;7. estimate a) average seat occupation per meal period; and b) time per meal

period;8. divide time per period by average occupation to get seat turnover per period;9. divide possible seat turnover into number of patrons to get number of seats

required per period;10. take the largest seating requirement in step 9 and add a 20% safety margin for

the seating capacity.

Source: Western Regional Office, Manitoba Industry, Trade and Mines

3. REGULATIONS

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Business Regulations Info-Guide

This document will assist you in navigating federal, provincial and municipal regulationsthat apply to a number of industries and businesses.

For further information:see the document: Business Regulations Info-Guide

Environmental Assessment and Approvals

For many of the small or medium-sized business in Ontario, complying withenvironmental regulations is just a part of their day-to-day business. However, not allbusinesses are sure whether or not they are subject to specific environmentalrequirements. Some of the most common regulations include air permits, hazardouswastes, and water quality. For more information on whether your restaurant should becomplying with these regulations please contact the Ministry of the EnvironmentEnvironmental Assessment and Approvals Branch.

For further information:please call 1-800-461-6290 or 416-314-8001visit the websites: The Ministry of the Environment and Your Business Environmental Approvals for Business

Canadian Food Inspection Agency (CFIA)

The Canadian Food Inspection Agency provides a lot of information on food safety,including food safety tips.

For further information:please call 1-800-442-2342 or 613-225-2342visit the website: Canadian Food Inspection Agency

Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA)

The Ministry of Agriculture, Food and Rural Affairs website contains a lot of informationon food safety, including information on the Food Safety and Quality Act.

For further information:please call 1-888-466-2372 or 519-826-3100visit the website: Food Safety

Ontario Ministry of Health and Long-Term Care (MOHLTC)

The Ministry of Health and Long-Term Care website contains information on healthissues, including locations of Public Health Units and publications on food and watersafety.

For further information:please call 1-800-268-1154 or 416-314-5518 visit the website: Food Safety - Publications

The Smoke-Free Ontario Act

As of May 31, 2006, the Ontario government prohibited smoking in all enclosedworkplaces and enclosed public places. The legislation also strengthened measures toensure only those 19 years of age and older can buy cigarettes and phased out thedisplay of tobacco products beginning May 31, 2008.

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For further information:please call 416-327-7737visit the websites:Smoke-Free Ontario: LegislationSmoke-Free Ontario Act

Alcohol and Gaming Commission of Ontario (AGCO)

The Alcohol and Gaming Commission of Ontario is a regulatory agency that reports tothe Ministry of Consumer Services. Its mandate is to regulate the sale, service andconsumption of alcoholic beverages. It manages alcohol licences in Ontario.

For further information:please call 1-800-522-2876 or 416-326-8700visit the website: Alcohol and Gaming Commission of Ontario

AGCO - Bring Your Own Wine (BYOW)

Bring Your Own Wine

The Bring Your Own Wine initiative improves customer service by allowing patrons tobring commercially made and unopened wine to participating licensed establishments.Licensed establishments such as family and fine dining restaurants, cafes, hotel andmotel restaurants and similar types of restaurants are eligible for BYOW. Licensedbanquet rooms located in a hotel or motel are also eligible.

Participation in the BYOW initiative is voluntary for eligible licensed establishments, andestablishments are free to set their own policies for how they offer the service. Someestablishments may choose to offer BYOW only on slow nights of the week or only onspecial occasions.

Licensed establishments offering this service may also charge a corkage or service fee,require minimum food orders and/or limit the number of bottles a patron can bring.

How to Apply for a Bring Your Own Wine (BYOW) Endorsement:

Interested licensees must apply to the Alcohol and Gaming Commission of Ontario(AGCO) for an endorsement to their existing liquor license. Participating licensedestablishments are not charged an endorsement fee.

A liquor sales license is issued for the sale and service of beverage alcohol in licensedareas where light meals are available. When a liquor sales license is combined with anendorsement, the licensee may sell and serve beverage alcohol under specificcircumstances.

An endorsement is an addition that is only valid when combined with an active liquorsales license. In order to apply for a BYOW endorsement, licensees should visitthe AGCO website to print an application form. Once completed, the application shouldbe mailed to the Alcohol and Gaming Commission, Licensing and Registration at 20Dundas Street West, 7th Floor, Toronto, Ontario, M5G 2N6.

For further information:call 1-800-522-2876 or 416-326-8700visit the website: Bring Your Own Wine (BYOW)

Municipal Regulations

Keep in mind that specific municipal requirements may also apply, depending on thecity where the business will be located. Local municipalities may be responsible for theadministration of certain business licenses and they are also responsible for theadministration of certain provincial laws, like the Health Protection and Promotion Act,

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which governs community health standards.

For further information:visit the website: Association of Municipalities in Ontario

Related legislation:

Alcohol and Gaming Regulation and Public Protection ActLiquor Licence ActWine Content and Labelling Act, 2000Health Protection and Promotion ActSmoke-Free Ontario ActFood and Drugs Act

4. FINANCING

Financing for Starting a Business Info-Guide

This document is designed to help you navigate through the federal and provincialgovernment programs available to individuals starting a business in Ontario.

For further information:see the document: Financing for Starting a Business Info-Guide

5. TAXATION

Dealing with Business Taxes

All businesses must be aware of the various taxes that may apply to their product orservice. Depending on the type and location of products or services being offered,federal, provincial and/or municipal business taxes may apply. For information specificto your organization you should consult an accountant or financial professional.

For further information: See the Taxation Info-Guide

Other Resources:Ontario Ministry of Revenue: 1-866-668-8297Small Business Tax Help (MOR)

Canada Revenue Agency: 1-800-959-5525Canada Revenue Agency (CRA)

Prepared Food and Beverages

The following will help you understand how to charge the Harmonized Sales Tax (HST)on prepared food and beverages.

For further information:see the websites: Prepare for Ontario's HST: Point-of-Sale Rebate for Qualifying Prepared Food andBeverages $4.00 and UnderHarmonized Sales Tax for Ontario - Point-of-Sale Rebate on Prepared Food andBeverages

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Coupons and Gift Certificates

The information in this guide explains how HST applies when various types of couponsand gift certificates are redeemed towards the purchase of goods.

For further information:see the website: How to treat coupons and gift certificates

6. MANAGING YOUR OPERATION

Insurance

Insurance needs for businesses vary greatly. It is best to choose an insurance agent orbroker familiar with your size of business and, in particular, an agent familiar with yourtype of operation. If you don't have an insurance agent, it could be a wise decision toask other business owners in your area to recommend one.

Your local restaurant association may also have information about insurance packagesspecifically tailored for restaurants. The following list is included to remind you not tooverlook the complex areas of business insurance. It is best, however, to discuss yourspecific requirements with your insurance agent.

Basic insurance:

fire insurance (extended coverage on buildings and contents);liability insurance;burglary protection (theft coverage); anddishonesty insurance (covers thefts by employees).

Marketing/Advertising

Word-of-mouth advertising and good public relations are often the best ways ofpromoting your business. Depending on your market and its size, also consideradvertising with flyers, business cards, brochures, newspapers (especially for holidaypromotions), radio, TV, the phone book and the Internet. Also, bear in mind that asatisfied customer is good advertising. Referrals are also a valuable way of makingcustomers aware of your products or services.

A website is also a good marketing tool. It should have details to describe the location(your address, telephone and fax numbers, and directions on how to get to yourestablishment), hours of operation, services offered, credentials and anything else youthink may be of interest to potential customers. However, once you launch a website,you should update it on a regular basis. For more information on reaching yourcustomers online see the following documents:

Online MarketingPros and Cons of Social Media

Participating in community events is another way of advertising your business. Youmay also want to hold events that will promote your business. No matter how youchoose to market your business, it is wise to track how your clients became aware ofyour establishment - this may help determine your future advertising strategies.

The Competition Act governs misleading advertising and deceptive marketing practicesfor all businesses in Canada. The Act, which is administered by Industry Canada,defines which marketing practices are illegal and the process of complaint investigation.

For more information:please call: 1-800-348-5358 or 819-997-4282 visit the website: Competition Bureau

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Market Research

It is essential that you know who your customers are, what they need or want, andhow to reach them. You should have solid understanding of these if you are going torun a successful business.

For further information:see the document: Market Research and Statistics

Employing people

Employment Regulations Info-Guide

This Info-Guide is designed to help you navigate through the federal and provincialgovernment regulations on employment.

For further information:see the document: Employment Regulations Info-Guide

Choosing Your Location

Choosing the right location for your business is important. Considerations include theneeds of your business, where your customers and competitors are, and such things astaxes, zoning restrictions, noise and the environment. For most businesses, anappropriate location is critical.

Furnishing and Equipment

Before you open your restaurant, you will probably want to buy tables, chairs, lightingand decorative items. You might also need a kitchen, a bar and dinner wares. Themenu, size of restaurant and kind of service will determine the type of equipment youwill require. For assistance in this area, you might want to try to get the advice of asales representative or consult trade publications and manufacturers' websites. Whenchoosing equipment it is important to consider not only affordability, but also the after-sales service and repairs.

Financing your Equipment

Restaurants sometimes buy used equipment as a cost-saving measure. Sources of usedequipment could be a restaurant that is closing or dealers in second-hand equipment.The drawback to this approach is that, often, there are no guarantees with thepurchase.

Planning your Menu

Plan your menu carefully. Try to know what items your customers prefer and how theylike them prepared. Try to provide variety while maintaining stable cost averages. Menu prices are a combination of food costs and what is needed to meet expenses andrealize a profit. Generally, the price of an item is approximately three times the foodcosts, depending on restaurant type, operating expenses and competitors' prices. Toestablish pricing:

estimate your sales - counter-balance higher cost items tagged with lower mark-up, with higher mark-ups on lower cost items;maintain a desired overall food cost percentage, usually 33-40% of gross sales,and a normal margin of profit; andbalance items ranging in popularity - monitor high demand items which can

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determine your success.

7. CATERING

A catering business follows many of the same regulations as a restaurant. You shoulddecide whether you want to run your catering business from your home as differentregulations may apply.

For copies of these regulations, you can call your local health department and speakwith a food inspector.

For further information:visit the websites:Public Health Unit LocationsHealth Protection and Promotion Act

Liquor License for a Catering Business

License Endorsements

Liquor Licence Act allows for the addition of a variety of special conditions to a saleslicense. This special condition is referred to as a license "Endorsement".

Catering Endorsement

The holder of a catering endorsement may sell and serve liquor at a catered event in anunlicensed area of a licensed establishment and at a catered event away from thelicensed premises in an unlicensed area where a LCBO - Special Occasion Permits wouldotherwise be required.

For further information:visit the website: Catering Endorsement

8. ASSOCIATIONS

Canadian Restaurant Foodservices AssociationOntario Restaurant Hotel & Motel AssociationCanadian Culinary FederationToronto Vegetarian AssociationBaking Association of CanadaCanadian Health Food AssociationToronto Food Business Incubator (TFBI)

9. OTHER RESOURCES

Related Publications

Saving Energy Dollars in Hotels, Motels and Restaurants

Statistics

Statistics Canada is the official source for social and economic statistics and products. You may want to take a look at:

Restaurant, caterer and tavern statisticsThis publication presents the monthly estimates of total receipts of restaurants,caterers and taverns both at the national and provincial levels;Food Expenditure Survey (FOODEX) public use microdata file

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Date Modified: 2009-11-27Top of Page

Important Notices

This survey provides estimates of food expenditures and quantities purchased byhouseholds (includes food and beverages from restaurants by type of restaurant).

Related Reading

How to Start an Event Planning Business in OntarioBusiness GuidesBuying the right business - Business Development Bank of Canada

NEED MORE INFORMATION?

Click: Canada BusinessCall: The Business Info Line, a collaboration between ServiceOntario and IndustryCanada, at 1-888-745-8888Visit: Find a Community Partner Location near you

DISCLAIMERS

Information contained in this document is of a general nature only and is not intendedto constitute advice for any specific situation. Users concerned about the reliability ofthe information should consult directly with the source, or seek legal counsel.

Some of the organizations listed above are not subject to the federal Official LanguagesAct or the French Language Services Act of Ontario. Their services may not be availablein both official languages.