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Starting a restaurant in India, license for restaurant

Starting a Restaurant in India

Starting a Restaurant in India

The food and beverages industry is one of the fastest growing industries in India spurred by urbanization and an fast growing middle class. The food service industry is currently estimated at 75,000 crore and is estimated to reach 1,37,000 crore in the year 2015  by  the Indian Restaurant Congress held in 2013. With the rising disposable incomes, increasing population of youngsters, the growth of tier II and tier III cities and increasing urge to eat outside of home, it is no wonder the restaurant industry is growing and will continue to grow in the years to come. In this articles we look at the rules, regulations and licenses required for starting a restaurant in India.

Choice of Business Entity

One of the first legal/financial decision to be made by the entrepreneur in the path to starting a restaurant is to choose a business entity (i.e. Proprietorship, Partnership, Limited Liability Partnership, Private Limited Company or One Person Company). Each business entity has its own unique advantages and the best fit for your business will be determined based on the number of partners / investors, size of business and future plans. Further, with the recent introduction and low incorporation cost for Limited Liability Partnership’s and One Person Company in India, it is no longer advisable for entrepreneurs to start a restaurant business as a proprietorship / partnership firm. Proprietorships and partnership firms do not provide limited liability, continuous existence or separation of business/personal assets, when compared to Limited Liability Partnership, One Person Company or Private Limited Company. Therefore, it is advisable for a restaurant business to be started as a Limited Liability Partnership or One Person Company or Private Limited Company.

In instances where two or more persons come together to start a restaurant, Limited Liability Partnership or Private Limited Company is a very good option as these types of business entity are an association of two or more people. In case the restaurant will be owned and managed by a single entrepreneur, an One Person Company would be ideal or the single entrepreneur can enter into the business along with a family member (i.e., wife/husband, brother/sister, father, mother, relative) and opt for a LLP or Private Limited Company.

The annual sales turnover of the restaurant business in the first few years after inception will be a key indicator of the size of the business. In case the restaurant will gross an annual sales of more than Rs.40 lakhs in the first few years, we recommend that the business be started as a Private Limited Company or One Person Company. In case, the annual gross sales of the restaurant business will not exceed Rs.40 lakhs or the capital contributed towards the business will not exceed Rs.25 lakhs, a LLP is advisable as LLPs with less than Rs. 40 lakhs of sales  and less than Rs.25 lakhs of capital contribution do not have to have its accounts audited.

In addition to the number of partners/investors and size of the business, future plans also play a major role in deciding the type of business entity to use for the restaurant business. In case, the entrepreneur has plans for raising bank loan or private equity, a Private Limited Company is always recommended, as Private Limited Company’s ownership is decided by shareholding and the shares of a private limited company can be diluted to raise capital for the business. Also, in case the entrepreneur has plans to establish a chain of restaurant or create a franchising model, a Private Limited Company is recommended.

Food Business Operator License

The Food Safety and Standards Act, 2006 necessitates a Food Business Operator license for anyone involved in the production, processing, import, distribution and sale of food product within India. Therefore, all restaurants need to obtain a Food Business Operator license from the Food Safety and Standards Authority of India. The purview for licensing restaurants fall under the state level licensing authority and can be easily obtained prior to starting the  operations of the restaurant. The food business operator license is granted for 1 year and is renewable.

Shop & Establishment License

The Shop and Establishment Act is regulated by the Department of Labor and regulates premises wherein any trade, business or profession is carried out. This act regulates areas such as working hours, rest interval for employees, opening and closing hours, closed days, national and religious holidays, overtime work, rules for employment of children, annual leave, maternity leave, sickness and casual leave, etc., Shop & Establishment License can be obtained by applying to the State Chief Inspector of Department of Labor.

Service Tax Registration for Restaurant

The 2012 Budget levied service tax on all air-conditioned restaurants that serve liquor. The 2013 Budget expanded the service tax applicability to all restaurants that are air-conditioned. Therefore, all  restaurants that are air-conditioned are required to obtain service tax registration if their annual sales will be more than Rs.10 lakhs. Currently service tax is chargeable at 4.94% in air-conditioned restaurants.

VAT Registration for Restaurant

VAT is levied by the State Government on sale on any goods or items, and the food sold in a restaurant is liable to be taxed under VAT. Therefore, restaurants must obtain VAT registration from the State authorities. VAT is levied by the State Government and so each state government has different rates of VAT.

Trademark Registration for Restaurant

In case the entrepreneur has plans for opening a chain or restaurant or for investing significant amount of time and money into branding, it is advisable to obtain a trademark registration. Trademark registration would provide ownership over the intellectual property created and help deter the use of the branding by competitors.

Bank Loan for Restaurant

Often times a bank loan is required for many entrepreneurs to start a restaurant, and there are many banks that are willing to lend. The sanction of bank loan for restaurant will mainly depend on factors such as proposed business model, experience of promoter and collateral security offered. There are also schemes like the CGTMSE Scheme which provides loan without any collateral; in such cases, the proposed business model and experience of the promoter has to be very strong. Either ways, it is recommendable to approach your nearest banker, discuss the business plan and explore ways to establish a relationship with the bank.

To start a restaurant business in India, visit IndiaFilings.com. Everyday we help many entrepreneurs get their business started intelligently and we can help you establish a great restaurant.

Comments (36)

priyabrata panda9

Nov 04, 2014 at 12:16 PM

Sir,i want to start a resturant busineess in odisha.i know this is a profitable business but i have no capital for investment.i want to take a bisiness loan from indiafillings. Thanks priyabrata panda,odisha

Reply

IndiaFilings

Nov 07, 2014 at 2:46 AM

Dear Priyabrata,

Please email us your phone number to [email protected]. Our Business Advisors will call to help you start a restaurant in India.

Reply

Paras Sharma

Nov 05, 2014 at 10:55 PM

I must say, you have shared few restaurant start-up insights that were not known to me.

I have also written a post about the same topic on my personal blog, i hope you will not mind it accepting it within comments for further reading.

thanks

Reply

kunal

Jan 07, 2015 at 3:49 AM

We need to form an entity between 5 people, preferably an LLP. It is a restaurant business.

We want to know about your services and costs involved as we need to wrap this up by the first week of Jan. The sooner the better. I have left you a msg with my contact info.

Reply

debra morgan

Jan 18, 2015 at 1:02 AM

यो श्रीमती मोर्गन Debra, एक निजी ऋण ऋणदाता कुनै पनि आर्थिक सहयोग को आवश्यकता मा सबै को लागि एक वित्तीय मौका खोल्न छ कि आम जनता सूचित गर्न छ। हामी स्पष्ट र बुझन नियम र शर्त एक अन्तर्गत व्यक्तिहरू कम्पनीहरु र कम्पनीहरु 2% ब्याज दर मा ऋण बाहिर दिन। मा ई-मेल आज हामीलाई सम्पर्क: ([email protected])

Reply

Sarvesh Patel

Jan 21, 2015 at 5:20 PM

I need to open a service firm, I don’t know how I take start-up for that. I want to know about-

1. How I register name of the company.
2. what most important thing to take registration & all legal formalities.

Thanks & Regards,
Sarvesh Patel

Reply

IndiaFilings

Jan 21, 2015 at 10:48 PM

Dear Mr. Patel,

One of our Business Advisors will reach out to you tomorrow. We will help you with all the registration required for starting your business.

Reply

Arvind Nigam

Feb 18, 2015 at 1:28 PM

We are manufacturing of Restaurant, Hotels & Catering Equipment as like, pastry display counter, deep freezer, bain marie, Pizza display counter, chat counter, Etc.

Reply

Arvind Nigam

Feb 18, 2015 at 1:40 PM

We are manufacturing of Restaurant, Hotels & Catering Equipment as like, pastry display counter, deep freezer, bain marie, Pizza display counter, chat counter, Etc.
[email protected]

Reply

Adarsha Kumar

Mar 07, 2015 at 1:30 AM

Hi,

I want to open a take away food centre in Pune. We are two partners. Kindly suggest on entity of the firm & requisite licenses.

Reply

vipin kumar

Mar 29, 2015 at 1:52 AM

I am planning to open a restaurant in ahmedabad at a very good location. Finalized the premises which will be made available to me on rent and know all the government policies but need loan support from any of reputed bank. Please guide me what are bank policies and how much they can lend me. Presently I am working in a central government office and very much willing to run a restaurant.

Reply

vishal

Apr 04, 2015 at 3:35 PM

Interested in starting a restaurant in greater noida. Need assistance

Reply

Saurabh

Apr 07, 2015 at 1:39 PM

I want to start a Restaurant, where and how can I get good commercial utensils and cooks for different food, are there any agencies who supply cooks, can you pls help us on this matter.

Reply

Bhushan Yadav

Apr 10, 2015 at 10:25 PM

Hi India
I want to start a restaurant in Rajasthan and residence of gurgaon in Haryana. How can i got loan from govt or bank. Which type of firm will suitable. Guide us. I am planning to buy a franchise. Guide me and I remembered you till my breath. Thanks

Reply

Santosh

Apr 27, 2015 at 6:43 PM

I want to start a restaurant in Hyderabad on a medium scale.I need to know the process to get a loan through cgtsme.We already run other trading firm (not a restaurant) which has good annual sales.Can I apply loan for a restaurant showing my bank statement of the existing firm?Kindly advice.

Reply

Bhanu P. Singh

Apr 30, 2015 at 7:51 PM

Sir I want to start a restaurent in Haryana . Please guide me in obtaining finances.

Thanks and regards
Bhanu

Reply

Tarun

May 09, 2015 at 2:13 PM

Dear All,
Our firm can help you in all your queries related to Opening a Restaurant business.
You can leave your queries on our Email ID: [email protected] or you can contact us on 011-22486868.

Regards
TN & Associates
011-22486868

Reply

Ajit Sonar

May 12, 2015 at 9:49 AM

Sir,
I want to start Restaurant at Nashik ,so kindly guide me to get loan under CGTMSE Scheme
Thanks & Regards,
Ajit Sonar.

Reply

avinash kotni

Jun 05, 2015 at 11:41 AM

sir i want to start a restaurant business in a town odisha…plz help with the procedure, process of raising finance and interior designing and approximate cost of project…

Reply

Manav Bisht

Jun 14, 2015 at 9:59 AM

Sir, I am planning to serve food to customer from home or through rented shop. It will be not restaurant where customer eat foods. Food order online and we will deliver to customer.

As this is not a restaurant business, because customer not sitting here and not eating food, will the same legal formalities I have to done as compare to regular restaurant business? kindly tell me the legal formalities or govt licence/approval for this type of business.

Thanks in advance

Reply

IndiaFilings

Jun 17, 2015 at 1:08 PM

Dear Sir,

Greetings from IndiaFilings.com, India’s premier online consulting co!!
It is our pleasure to assist you. We think it is better to have a telephonic conversation
With our business adviser, so kindly provide your contact number to guide you better.
Looking forward to work with you in the near future. Have a great day.

Thanks & Regards,
IndiaFilings Team

Reply

Rahul Kumar

Jun 16, 2015 at 12:54 AM

I would like to know how many of the Regulations are applicable for a food business on cart chains. And also the cost involved in these activities in Delhi or UP. Kindly mail me your reply.

Reply

IndiaFilings

Jun 17, 2015 at 10:46 AM

Dear Sir,

Greetings from IndiaFilings.com, India’s premier online consulting co!!
It is our pleasure to assist you. We think it is better to have a telephonic conversation
With our business adviser, so kindly provide your contact number to guide you better.
Looking forward to work with you in the near future. Have a great day.

Thanks & Regards,
IndiaFilings Team

Reply

Kunal Chopra

Jul 07, 2015 at 2:25 PM

Heyy Indiafilings. i want to start my business in resto-bars. I am new to this. so i need your help with the ideas,location as well as the investment as i don’t have that much capital to start it.
Will be thankful to you.

Reply

RAGHAV

Jul 12, 2015 at 11:43 AM

I m interested in opening a fast food restaurant, please contact to discuss further. My contact no is 9628601591.

Reply

dinesh

Sep 09, 2015 at 2:59 AM

hi sir ji

im chef dinesh from
india as i have 15 experience about indian and tandoor food diffrence hotel and restaurant now looking
job abroad and india any if somebody searching indian chef you can contect me
at my email me

thanks

[email protected]

+91 8126377296

Reply

Anuj

Oct 03, 2015 at 4:38 PM

i am starting a take away food counter in panchkula. please suggest as from where i can get an experienced cook or chef. if anyone interested, please contact me @ 9216405241..

Reply

B.Rama Lakshmi

Oct 13, 2015 at 5:40 AM

I am a 50 yr old housewife thinking of starting a restaurant chain with minimum knowledge how to and where to begin.after going to through your website I am more determined to take a step forward to wards my dream.

Reply

Ram Subba Reddy

Oct 18, 2015 at 1:26 PM

To get full restaurant business plan and how much profit a typical restaurant make.
frnchise or not. Adavantages and disadvantages. for more please visit

Reply

Vishnu Sharma

Nov 20, 2015 at 9:24 PM

Sir,
I have land on highway near Sikar, Rajasthan. I want to start a restaurant over there. But I have no finance and expertise in that field. Please help me if possible. I want to start that immediately. Please respond me soon.

Reply

Vishnu Sharma

Nov 21, 2015 at 10:17 PM

Sir,
I want to start a restaurant in my roadside land on highway near Sikar, Rajasthan. I do not have any expertise in that field and need finance also. Please help me. My mobile number is .
.

Reply

Vishal shah

Jan 26, 2016 at 11:50 PM

Hi sir, I want to open a Gujarati food resturant at Vadodara . Pls. Guide me… You can contact me on 9898039628….

Reply

IndiaFilings

Feb 26, 2016 at 7:37 PM

Hi vishal, you can discuss this with our Business Advisors. Please contact 04440247777 or email [email protected]

Reply

vinay

Feb 22, 2016 at 8:38 PM

sir,
I want to start a restaurant business in Varanasi. I know this is a profitable business but i have no idea or rule & regulations in this line.
So, please, guide & help me.

Reply

IndiaFilings

Feb 26, 2016 at 12:32 PM

Hi Vinay, you can discuss this with out Business Advisors. Please contact 04440247777 or email [email protected]

Reply

IndiaFilings

Feb 26, 2016 at 1:34 PM

Hi vinay,
Surly we can help with that please contact our business advisors @ 04440247777 or email [email protected]

Reply

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