Learn how to open a restaurant in Canada, including steps, startup costs, timelines, and what to expect when launching your food business.
The foodservice industry in Canada is worth approximately $135 billion – and growing at a rate of 17.6% annually so it’s no surprise that so many people are looking to find a way in. In this article we’ve outlined the key steps of how to open a restaurant in Canada including the first steps, the varying costs, and the required rules, permits, and regulations.
Successful entrepreneurs begin with a well-researched plan. Read on to learn how to open a restaurant, from initial concept to bricks-and-mortar realization.
Initial Steps to Open a Restaurant in Canada
A profitable business requires a clear concept.
Define the type of restaurant you want to operate
Ask yourself: What kind of food are you offering? Will you have table service or run a spot for easy grab-and-go meals? Why have you chosen a particular location? Who are your customers and what is it about your restaurant that makes them choose to go there instead of other nearby eateries? How will you stand out among the competitors operating within the same market?
Drill down and focus on the details you’ll need to include in a business plan
Your business plan is a document you’ll present to potential investors and financers but it’s also a tool that will help you have a clear and fulsome picture of your project. Your plan should tell the story of the restaurant you want to open: begin with an engaging and attention-catching summary of the project that communicates your enthusiasm. Introduce team members (your head chef, a business partner, other investors) and explain why you’ve chosen to work with them by highlighting their experience and qualifications.
Demonstrate that you’ve done your research
Include a market analysis that shows you understand who your customers and competitors are, and how your concept aligns with current industry trends.
Add information about your proposed menu (with prices) and staffing plan and offer a budget that takes into account not only your operating costs but your marketing and promotions strategy. Financers will pay close attention to your projected profit and loss statement, your provisional balance sheet, and your cash flow plan so make sure that these elements of your business plan are well thought out and triple checked for accuracy.
Understand local zoning and permit requirements
Develop a strong understanding of local zoning and permit requirements for your location – are you allowed to have outdoor seating? What time are you permitted to open and close? How large can your signage be? Is there convenient parking nearby or will you rely on foot traffic? Prioritizing this research can help you steer clear of road blocks that could delay your launch and cost you money.
What You Need to Legally Open a Restaurant
The legal requirements to open and operate a restaurant in Canada can vary according to both provincial and municipal laws. The following is an overview of the requirements you’ll need to meet but potential restaurateurs must consult their local governments to ensure compliance.
Generally speaking, you’ll have to consider the following:
- Deciding on a business structure and registering with the government to receive a business tax number as either a sole proprietorship, a partnership, or a corporation
- Obtaining a municipal food premises permit and ensuring you meet provincial health and safety standards
- Completing a food handling certificate (required by most Canadian provinces)
- Applying for a liquor licence (if you plan to serve alcohol)
- Making sure that your location meets building, fire and occupancy standards by scheduling inspections and acquiring the necessary permits (which might also include permits for signage, outdoor seating, and waste disposal
Key legal obligations
The list of legal obligations for restaurant owners can seem daunting but the rules and regulations put in place for the food industry exist to protect owners, their employees, and the public. Restaurant owners should prioritize accessibility, safety, and sanitation standards as outlined by municipal public health boards, provincial employment standards such as dress codes, minimum wage, and holiday or overtime pay, and insurance requirements that cover general and employer liability as well as property and equipment, and of course taxation.
Tips for compliance
No one goes into opening their first restaurant already an expert on compliance. Be proactive by checking in with the local authorities responsible for licensing and public health as early on as possible – ideally immediately after you’ve chosen a location. If permits and inspections feel far outside your area of expertise, hire a trusted lawyer with experience in this area of law to help you navigate the legalities and a bookkeeper or office manager to implement a system for record-keeping, taxes, and payroll.
How Much Does it Cost to Open a Restaurant in Canada?
How expensive is it to open a restaurant? From food trucks to fine dining, the cost of opening a restaurant in Canada can vary – a lot. Even two locations within the same city can come with very different price tags due to factors like size, required renovations, infrastructure upgrades, and neighbourhood demographics. The startup cost of opening a mid-size casual dining spot in Toronto, for example, is around $500,000 and while this number can provide a benchmark, each project comes with its own unique set of demands and costs.
Startup cost breakdown
When building your startup budget (which should account for at least three months of operating expenses) be sure to include the following cost components in your budget:
- Location costs including a security deposit and first and last months’ rent
- Renovation costs that also consider the cost of alterations that bring the location into compliance with health, safety, and accessibility laws
- Equipment costs (everything from walk-in refrigerators to flat ware)
- Inventory costs (everything from food to take out containers)
- Permit, legal, and professional consulting fees
- Payroll, uniforms, and training and certification costs
- Marketing expenses
- Extra unexpected costs like urgent repairs
Ongoing expenses and working capital
Once you open, you’ll need to budget for ongoing and recurring costs such as:
- Employee payroll
- Rent, utilities, and insurance
- Restocking food, beverages, and other supplies
- Royalties (if you’re a franchisee)
- The maintenance of working capital so that you always have several months of operating costs available in order to manage your cash flow
Opening a Franchise Restaurant
One of the greatest risks that comes with opening a restaurant is the uncertainty around whether or not customers will be drawn to your idea. Franchise restaurants offer a reliable, proven concept and brand recognition. Franchises are provided with established menus and training protocols and benefit from large marketing campaigns. In return, they are required to pay franchise fees and royalties and to use equipment and suppliers that are standard across each store. Although opening your own restaurant is one option, entrepreneurs with a smaller budget can explore cheap franchises in Canada as a more accessible way to enter the business.
Financing and Funding Your Restaurant
If your personal savings won’t cover the cost of opening a restaurant there are other options for financing. Entrepreneurs can apply for small business loans from Canadian banks or seek support through federal and provincial business grants or regional development funds. The Canadian Small Business Financing Program offers assistance to business owners in applying for and securing loans.
Entrepreneurs might also choose to seek out investors or partners to help cover the cost of a launch.
Ways to lower upfront costs
Launching a business is a big task, even if the business itself is a small one. If you’re concerned about high upfront costs, there are ways to lower or stagger your spending. Consider these strategies:
- Start smaller than your end goal – test out your concept with a pop-up event, shared kitchen, or a food truck before investing in a bricks-and-mortar location
- Phase your restaurant roll-out – launch with a lean menu and limited seating before taking on the renovations required to expand
- If possible, choose pre-owned equipment, furniture, or decor before upgrading to brand new
Choosing the right financing option
Your source of financing will impact your overall budget so consider your funding carefully before committing. A bank loan will mean that you’ll have to factor in repayment amounts (plus interest) each month. Don’t jump at the first loan or credit line you’re offered. Shop around to compare interest rates and terms. Your financing should align with your tolerance for risk and your plans for growth.
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Tips for Success When Opening a Restaurant in Canada
While there’s no single recipe for restaurant success, there are certain steps and strategies entrepreneurs can adopt that will guide them in the right direction.
- Start with a detailed and exhaustive business plan and rely on it as your road map while remaining open to the possibility that you may have to pivot and adapt in the face of an unforeseen challenge
- Do your homework when it comes to market research and test what you’ve learned by hosting a pop-up event or a focus group – a soft opening period can also offer an opportunity to gauge customer reactions
- Focus on offering consistent quality and service through careful hiring and thorough training
- Manage your inventory carefully and avoid unnecessary waste
- Create a well-considered budget and stick to it – put your accounting system to work for you and keep a close eye on the metrics it reveals
- Develop and leverage your brand through franchising and/or marketing efforts
The restaurant industry offers challenges and rewards for Canadian entrepreneurs. Successful restaurateurs are meticulous planners, careful and realistic with their budgeting, and proactive in making sure they understand the industry and its regulators.
The information provided in this article is for general informational purposes only and does not constitute legal, financial, or investment advice. Franchise laws in Canada are governed at the provincial level and vary by jurisdiction. Readers should consult qualified legal and financial advisors familiar with the applicable provincial franchise legislation before making any franchise-related decisions.
