How to Start a Restaurant or Catering Business in Canada

This guide offers general information for potential entrepreneurs wishing to start a restaurant or catering business.

TABLE OF CONTENTS

1. Basics to Getting Started
2. Industry Overview
3. Regulations
4. Financing
5. Taxation
6. Managing Your Operation
7. 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 several issues 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-Guide
• Financing for Starting a Business Info-Guide
• Taxation Info-Guide
• Employment Regulations Info-Guide

2. Industry Overview

Maintaining High Health Standards

As a restaurant operator, your main preoccupation should be to maintain high health standards.  Maintaining traffic in your restaurant depends o­n it, as your restaurant will probably be inspected and appraised.  Important steps to take into consideration when dealing with health issues include:

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 to decide 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 layout, that 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% come alone or in groups of three; and 20% in groups of four or more;
• adequate room - the suggested square footage requirements per chair are: 10-20 sq. ft. in traditional restaurants, 10-12 in cafeterias, 7-17 in coffee shops;
• a kitchen that allows efficient and effective food preparation and interaction between staff;
• safety in movement, dry and cold storage, dish washing, an area for staff's personal items;
• convenient delivery zone, ease of cleaning and maintenance, and proper ventilation 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

Business Regulations Info-Guide

This document will assist you in navigating federal, provincial and municipal regulations that 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 with environmental regulations is just a part of their day-to-day business.  However, not all businesses are sure if they are subject to specific environmental requirements or not.  Some of the most common regulations include air permits, hazardous wastes, water quality, etc.  For more information o­n whether your restaurant should be complying with these regulations please contact the Ministry of the Environment Environmental Assessment and Approvals Branch.

For further information:
please call 416-314-8001
visit the web site:  The Ministry of the Environment and Your Business
See the document  Environmental Assessment and Approvals Branch

Canadian Food Inspection Agency (CFIA)

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

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

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

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

For further information:
please call 1-888-466-2372
visit the web site:  Food Safety

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

The Ministry of Health and Long-Term Care web site contains information o­n Health Issues, including locations of Public Health Units and publications o­n food and water safety.

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

The Smoke-Free o­ntario Act

As of May 31, 2006, the o­ntario government is prohibiting smoking in all enclosed workplaces and enclosed public places. The legislation will also strengthen measures to ensure o­nly those 19 years of age and older can buy cigarettes and will phase out the display of tobacco products, with a complete ban beginning May 31, 2008.

For further information:
please call 416-326-4846
visit the web sites:
Ministry of Health Promotion
Smoke-Free o­ntario Act

Alcohol and Gaming Commission of o­ntario

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

For further information:
please call 416-326-8700 or 1-800-522-2876
visit the web site:  Alcohol and Gaming Commission of o­ntario
see the document Application for a New Liquor Licence

Bring Your Own Wine (BYOW) and Take Home The Rest (THTR)

Bring Your Own Wine

These new regulations improve customer service by allowing patrons to bring commercially made and unopened wine to participating licensed establishments.  Licensed establishments such as family and fine dining restaurants, cafes, hotel and motel restaurants and similar types of restaurants are eligible for BYOW.  Licensed banquet rooms located in a hotel or motel are also eligible.

Participation in the BYOW initiative is voluntary for eligible licensed establishments, and establishments are free to set their own policies for how they offer the service.  Some establishments may choose to offer BYOW o­nly o­n slow nights of the week, or o­nly o­n special 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.  For the first year of the initiative, participating licensed establishments will not be charged an endorsement fee.

A liquor sales license is issued for the sale and service of beverage alcohol in licensed areas where light meals are available.  When a liquor sales license is combined with an endorsement, the licensee may sell and serve beverage alcohol under specific circumstances.

An endorsement is an addition that is o­nly valid when combined with an active liquor sales license.  In order to apply for a BYOW endorsement, licensees should visit the  AGCO  web site to print an application form.  o­nce completed, the application should be mailed to the Alcohol and Gaming Commission, Licensing and Registration at 20 Dundas Street West, 7th Floor, Toronto, o­ntario, M5G 2N6.

Take Home the Rest (THTR)

New regulations improve consumer service by allowing patrons to remove partially consumed and resealed bottles of wine that they brought to, or purchased from, a licensed establishment.

Take Home the Rest encourages responsible drinking.  Patrons no longer have to choose between finishing a bottle of wine – which may lead to over-consumption – or leaving it behind.  Participation in the Take Home the Rest initiative is voluntary for all licensed establishments.

For further information:
call 1-800-522-2876
visit the web site:  Questions and Answers - Bring your own wine/Take the Rest Home

Municipal regulations

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

For further information:
visit the web site:  Association of Municipalities in o­ntario
see the document  Municipal Requirements to Start a Business

Related legislation:

• Alcohol and Gaming Regulation and Public Protection Act
• Liquor Licence Act
• Wine Content and Labelling Act, 2000
• Health Protection and Promotion Act
• Smoke-Free o­ntario Act
• Food and Drugs Act

4. Financing

Financing for Starting a Business Info-Guide

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

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

5. Taxation

Taxation Info-Guide

The Taxation Info-Guide is designed to help you navigate through the federal and provincial government programs, services and regulations related to taxation that may apply to individuals starting or operating a business in o­ntario.

For further information:
see the document Taxation Info-Guide

Below are links to publications that cover some of the tax requirements for restaurant owners in o­ntario.

Prepared Foods

This Pointer will help if you sell prepared foods from an eating establishment.  It explains the basic Retail Sales Tax (RST) rules for your type of business.

For further information:
see the document Prepared Foods

Alcoholic Beverages

This Pointer provides basic o­ntario retail sales tax information relating to the sale of alcoholic beverages in an establishment such as a restaurant, bar, pub, hotel, resort or caterers.

For further information:
Alcoholic Beverages

Status Indians, Indian Bands and Band Councils

The information in this guide explains how Retail Sales Tax (RST) applies to purchases of taxable goods and services made by Status Indians, Indian bands and band councils.

For further information:
Status Indians, Indian Bands and Band Councils

Application for a Vendor Permit

This form is to be completed when applying for a retail sales tax Vendor Permit, for purposes of charging and collecting retail sales tax.

For further information:
Application for Vendor Permit (PDF - 371 KB)

Discount Coupons

The information in this guide explains how o­ntario retail sales tax applies when various types of coupons are redeemed towards the purchase of goods.

For further information:
Discount Coupons

6. Managing Your Operation

Insurance

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

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

Basic insurance:

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

Marketing/Advertising

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

A web site 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 your establishment), hours of operation, services offered, credentials and anything else you think may be of interest to potential customers.  However, o­nce you launch a web site, you should update it o­n a regular basis.

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

For more information:
see these documents:
Signs and Your Business
Plan Your Advertising Budget
Advertising Do's and Don'ts
Ways to Promote Your Product or Service
Marketing Plan Outline

The Marketing Basics section of the o­nline Small Business Workshop covers the basics from developing your customer profile to promoting your business.

For more information:
visit the web site:  Online Small Business Workshop

The Competition Act governs misleading advertising and deceptive marketing practices for 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: 819-997-4282 or 1-800-348-5358
visit the web site:  Competition Bureau
see the document Competition Act - Misleading Advertising and Deceptive Marketing Practices

Market Research

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

For further information:
see the document Market Research for Your Business

Employing people

Employment Regulations Info-Guide

This Info-Guide is designed to help you navigate through the federal and provincial government 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 the needs of your business, where your customers and competitors are, and such things as taxes, zoning restrictions, noise and the environment.  For most businesses, an appropriate location is critical.

For further information:
see the document Store Location - "Little Things" Mean a Lot

Furnishing and Equipment

Before you open your restaurant, you will probably want to buy tables, chairs, lighting and decorative items. You might also need a kitchen, a bar and dinner wares.  The menu, size of restaurant and kind of service will determine the type of equipment you will require.  For assistance in this area, you might want to try to get the advice of a sales representative or consult trade publications and manufacturers' web sites.  An important factor to consider when choosing equipment is the after-sales service and repair and their affordability.

Financing your Equipment

Sources of Financing is an Internet resource for locating traditional and alternative sources of small business financing.

For further information:
see these documents:
Lending - The Basic Criteria
Dealing With Your Banker & Other Lenders
Sources of Micro-credit Financing

Used Equipment - Consider buying used equipment as a cost-saving measure.  Sources of used equipment 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 the purchase.

Planning your Menus

Plan your menu carefully.  Try to know what items your customers prefer and how they like 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 and realize a profit.  Generally, the price of an item is approximately three times the food costs, depending o­n restaurant type, operating expenses and competitors' prices.  To establish 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; and
• balance items ranging in popularity - monitor high demand items which can determine your success.

For further information:
see the document Setting the Right Price

7. Catering

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

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

For further information:
visit the web sites:
Public Health Unit Locations
Health Protection and Promotion Act
Food Inspection Branch

Liquor License for a Catering Business

License Endorsements

Liquor Licence Act  allows for the addition of a variety of special conditions to a sales license.  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 an unlicensed area of a licensed establishment and at a catered event away from the licensed premises in an unlicensed area where a  LCBO - Special Occasion Permits  would otherwise be required.

For further information:
visit the web site: Catering Endorsement

8. Associations

• Canadian Restaurant Foodservices Association
• Ontario Restaurant Hotel & Motel Association
• Canadian Culinary Federation
• Toronto Vegetarian Association
• Baking Association of Canada
• Canadian Health Food Association
• International Caterers Association
• Foodservice & Hospitality
• Toronto 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 statistics
  This 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
  This survey provides estimates of food expenditures and quantities purchased by households (includes food and beverages from restaurants by type of restaurant).

Need more information?

Click: Canada-Ontario Business Service Centre
Call: 1-800-567-2345
Visit:  visit our  Regional Access Program Locations page to locate an office near you

• Fair Labelling Practices Program
• How to Start an Event Planning Business in o­ntario
• Business Guides
• Franchises - Business Development Bank of Canada
  
  

  Business Guides

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  These guides are designed to help you navigate through federal and provincial government programs services and regulations that may apply to entrepreneurs. Our current list of info-guides, covering many topics, includes the following:

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  • Exporting - Preparing for World Markets Info-Guide
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  • Your Business and the Environment Info-Guide

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  These guides are designed to provide an understanding of potential license, permit or registration requirements when considering the establishment of specific types of business in o­ntario. Our current "How-to" guides are listed below:

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  Fact Sheets

  These documents have been produced to assist with a number of issues that pertain to business in a general way and can apply to a number of industries.

  • List of Fact Sheets