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Alexis Brachel, CT's Senior Manager of Business Licenses, discusses business license requirements for restaurants. Because of the amount of interaction with customers, restaurants are one of the most regulated organizations in the United States. Business licenses for restaurants involve multi-level approvals, extensive filing requirements, and a great deal of time to gather supporting documents.
Greg Corombos: Hi, I’m Greg Corombos. Our guest this week is Alexis Brachel. She is Senior Manager in Business Licenses, Governance, and Risk and Compliance at CT Corporation. It is her expertise in business licensing that we will draw on today as we get her advice on licensing specifically for restaurant owners. And Alexis, thanks so much for being with us.
Alexis Brachel: Yes, thank you.
GC: Let’s start with the very basics here. Why is it important for restaurants to be properly licensed?
AB: That’s a great question. Restaurants are highly regulated by various state and local authorities because of the interaction they have with consumers and how they touch the everyday restaurant consumer. So, it’s really important to know that the licenses that are going to be required for restaurants are pretty highly regulated. You’re going to see things like very detailed and pretty finicky inspections that go along with them, along with a lot of the licenses having potentially multiple levels of approval needed in order to obtain that final issuance or final approval for that license. Restaurants cannot operate without being fully in compliance and having all of the licenses they need, or they [will be] subject to a lot of penalties and fines.
GC: What are the penalties for restaurant owners who are not properly licensed?
AB: We have seen restaurants, obviously...If your kitchen is not properly licensed, authorities can come and shut your establishment down. If you are trying to serve liquor, or beer and wine, without being properly licensed, your establishment can be shut down. We’ve seen cease and desist orders. We’ve seen really high fines being justified. We’ve also seen things like probation or even jail time.
GC: Wow. So what type of licenses are typically needed?
AB: So restaurants, like I said, because they are so highly regulated, there are a lot of different licenses that may be required for a restaurant to operate and be fully compliant. Licenses such as food and handling licenses. As I mentioned, liquor licenses a moment ago. There are also differing licenses in that category depending on what you’re serving. If you’re only serving beer and wine, or if you are serving liquor, licenses can be different within that realm. You’re going to see music licenses. So if you have somebody playing music or live music within your restaurant or establishment, there are licenses associated with that. There are also going to be various local level licenses that may be required for your building, for just doing business within a specific jurisdiction that will also be required. And once you add in any potential tax registrations and requirements you have along those lines, it’s really not uncommon to see restaurants have anywhere between I would say five and ten licenses per location.
GC: So quite a checklist is required here, and that’s just for setting up location in a specific spot. What should you consider in the licensing front if you’re expanding your restaurant chain and opening new locations?
AB: Really first and foremost you’re going to want to make sure you have enough lead time up front. That you’re able to properly move and navigate that process and submit any applications for the licenses that are required. Obviously, research those new locations for what licenses are required, and go through the approval process for each filing authority. Something that you’re going to see with the licenses specifically that are required for restaurants, as I mentioned earlier, you’re going to see things like pretty finicky inspections that are required because you have items like kitchens in restaurants obviously that are very highly regulated. So it’s really important that you have enough lead time and work with a trusted partner that’s able to educate you and navigate you through the pretty complex and daunting process of obtaining the multiple licenses that are required for each location.
GC: Some folks might be watching this, Alexis, and thinking, this is starting to sound kind of complex. What processes should owners be prepared for as they get all these licenses?
AB: That is a very good point. The license process is very complex, and again, it’s just the way that restaurants interact with the everyday consumer. If you want to take a look at liquor licenses, for example. I mentioned those licenses depending on what you’re serving. You’re going to see requirements at the very highest level differ potentially if you’re only serving beer and wine, or if you’re actually serving liquor. That is something to keep in mind, and again, work with a partner to understand the requirements and the difference between the various licenses that may be required. Something else to keep in mind, and what makes the process so complex for obtaining liquor licenses, in particular, is that there are various levels of approval that are needed. With a liquor license, you may need to have approvals on all levels. So, government federal, state, county, and local level approvals before you can operate in compliance and have all of the required approvals and that liquor license that you need in order to operate just in one location. A lot of times with these liquor licenses it’s important to know and to mention that there are a lot of supporting documents that need to be submitted with the applications. So you’re going to run into requirements such as fingerprints, potentially background checks that may be required, copies of your food establishment licenses or permits, building permits, lease agreements, all the license and permits you have basically need to be submitted, or at least need to have been approved prior to the issuance of that liquor license. If that has not happened yet, then your approval for your liquor license will be put on hold in many jurisdictions. It’s kind of the last step before you can open your doors and have your grand opening. So it’s really important, again, to have enough lead time to understand those requirements. It can take some restaurant owners multiple months from what we’ve seen just to gather the required supporting documents. Then once you’ve worked with your partner to make sure you have those [documents] gathered together properly, you have the application completed for each level of approval that’s needed potentially, and you submit those to the filing authorities--obviously one at a time, because one approval at one level depends on a past approval from a different level. We’re looking at a potentially five to six-month process. Some jurisdictions won’t take that long. Some could take longer. To make sure that you have those licenses in place by opening [time], you need to give yourself that amount of time, and that’s what goes into obtaining some of the more complex licenses such as those liquor ones.
GC: So you’ve done a good job at doing your research. You’ve figured out the licenses you needed. You’ve taken the time to allow the processes to work out, and you have all the license you need by the time you open your doors. Now once you’ve gone through the checklist, are you good to go? Do you need to renew them? Or do they stay in effect as long as you’re in good standing? How does that work?
AB: You are good to go in a sense, right? You are fully compliant with your new location, you open your doors, you have a successful grand opening, and you can really have that peace of mind knowing that you have all your licenses in place, and you’re not worried about a local authority knocking on your doors and potentially shutting you down and costing you weeks or months of closed doors or fines and potential other items that may come along with that. What you also need to be prepared for are the renewals for each of those licenses. Just as we went through how complex obtaining those initial licenses may be, the renewals often have similar, but differing requirements. So, it’s really important that you work with a trusted partner to make sure that you not only have all the initial licenses in place for you to open your doors, but also that you have a good, solid process in place to manage that portfolio moving forward.
GC: Finally, Alexis, what tips do you have for undergoing an organizational change. Does the chain of command in the restaurant mean that you have to go through new processes with your licenses?
AB: This is a great topic to cover, because we often see people overlook the fact, or they’re under the assumption that any change that’s potentially made at a Secretary of State level, for example, will also trickle down to your business licenses. That is not the case at all. Any change you make at the Secretary of State level with that registration then also needs to be noted and somehow amended on any other business licenses that you have. If you want to take a look at something like a name change. On the face, that seems like a pretty simple process. Potentially you change your name at the Secretary of State on your registration there, and you’re all set. That’s not the case. It is required that you also then go through the process of changing your name on each of the business licenses that you have. And the process for updating the name can really differ based on the nuances of the transactions. In this example--a name change--if your name change is simply a name change and nothing else organizationally is changing, then you may just be able to amend the name on your existing business licenses through a pretty simple process. If there are nuances with the transaction that went along with that name change, such as that name change being potential as a result of a merger, a conversion, an acquisition, something like that, and your FEIN on your existing licenses is also going to be changing, then that process becomes a little more complex. In that instance, it is important to again, take the time to work with a partner, research what is going to be the actual filing path that you need to follow based on the specific nuances of the transaction you’re about to go through, and then, go through each license with a plan in place to avoid any grace period controversies or things like that may potentially require you to shut down your business and work with that trusted partner through the process to make sure that you are getting those changes updated on each of your licenses in an efficient way.
GC: It is quite a bureaucratic journey, but Alexis, you’ve navigated it very well for us. Thank you very much for your time today.
AB: Thank you.
GC: Alexis Brachel, Senior Manager in Business Licenses, Governance, and Risk and Compliance at CT Corporation. I’m Greg Corombos.
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