Starting a Restaurant, Bar or Coffee Shop in Alberta
Last Verified:
2005-10-20
The following is intended to provide an overview of potential license, permit or registration requirements when considering the establishment of a restaurant in Alberta. This document was prepared by Canada Business and contains a series of steps and issues to consider in carrying out your project. The extent to which the information will apply to you will depend on the circumstances related to your situation.
For further information on individual topics identified herein, contact
The Business Link Business Service Centre. Since this document is only meant as a guide, the Canada Business service centres will not accept responsibility for business decisions made based on the information provided.
TABLE OF CONTENTS
BASICS TO GETTING STARTED
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Before proceeding, reference should be made to the Business Start-up Info-Guide for your region which offers information on the steps involved in establishing a new business.
Starting a business can be a rewarding undertaking, but it comes with its challenges. Before starting a business, it is wise to do your research. You should also make sure you are suited for entrepreneurship, and understand that significant effort may be required. As such, you should thoroughly enjoy the field you are getting into, and you must believe in your product or service as it may consume much of your time, especially during the start-up phase. There are many issues to consider such as regulations, financing, taxation, managing your business, advertising, and much more. For more information, see the document:
Checklists for Going Into Business.
The following is additional information to consider.
INDUSTRY OVERVIEW
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The Food Service industry is:
- demanding—expect long days, often 10-15 hours per day. You must excel in many areas such as food preparation and service, management, marketing, meeting people; purchasing, inventory control and personnel administration;
- governed by federal, provincial and municipal laws. Understand all pertinent regulations before making any decisions, especially before purchasing or leasing a building.
Albertans have the highest food service sales per capita in Canada spending 39% of their household food dollars, or 11% of total income, in food service establishments.1
A few years ago, the statistical bodies of Canada, the U.S. and Mexico got together to come up with a classification that was the same for all three countries, so that data collected in all three countries on a specific industry could be compared accurately across country boundaries. This system is called the "North American Industrial Classification System" or NAICS (pronounced "nakes").
- NAICS codes are:
- 722110 Full Service Restaurants
- 7222210 Limited-Service Eating Places
- 722410 Drinking Places (Alcoholic Beverages)
Types of Operation
Depending on your experience, finances, location and customers, decide on the type of restaurant:
Traditional
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cater to a variety of customers
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must excel in service, food preparation and inventory control due to lengthy menus
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popular in tourist areas, but declining in general
Ethnic
Specialty
Coffee Shop
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offer a wide variety of quick, pre-prepared dishes
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heavy traffic flow is needed for high customer turnover
Fast Food
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normally franchise operations offering limited menu. For more information regarding a franchise, see the document
Checklists for Franchisees
- attractive to beginning operators
Cafeteria
Self-serve
Types of Liquor Operations
- The neighbourhood bar
Neighbourhood bars are usually gathering places for people from within a radius of one to two square miles from your location. "Regulars" who frequent neighbourhood bars tend to be blue-collar workers. They are often older, heavy drinkers of low-to-medium income. They seldom care about fancy decor or gimmicks, but just want a relaxing place they can stop on the way home from work for a drink or two and some companionship. Patrons of neighbourhood bars tend to be married males who are 35 or older, who live or work in the neighbourhood.
- The pub/tavern
A pub/tavern strives for a more intimate, congenial atmosphere and usually caters to a younger crowd of single people with money to spend. Successful pubs feature comfortable decor and an amiable bartender. The real secret to success here is to creating an atmosphere that brings people together. Pubs can draw from a wider radius than a neighbourhood bar. Especially with advertising aimed at women.
- The night club
A night club is usually a larger location featuring live entertainment on a regular basis, and dancing is often the main attraction.
Choosing Your Location (see document
Store Location - "Little Things" Mean a Lot)
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.
Layout and Design
Aim for a practical, useful layout, while setting the mood. Make sure you have:
- 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.
Calculating Seating Capacity
To determine the maximum potential of your restaurant and break-even point:
- determine desired profit—convert to percentage of sales to get sales required;
- determine number of operating days—divide number of days into sales to get average daily sales;
- estimate volume percentages for meal periods (breakfast, lunch, dinner);
- multiply figures in step 3 by average sales per day to get dollar volume per period;
- determine average check per meal period;
- divide dollar volumes in step 4 by average check for the number of patrons per period;
- estimate a) average seat occupation per meal period; and b) time per meal period;
- divide time per period by average occupation to get seat turnover per period;
- divide possible seat turnover into number of patrons to get number of seats required per period;
- take the largest seating requirement in step 9 and add a 20% safety margin for the seating capacity.
Preparing Menus and
Setting the Right Price
Plan your menu carefully. Know what items your customers prefer and how they like them prepared. 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;
- balance items ranging in popularity—monitor high demand items which can determine your success.
REGISTRATION, LICENSES, PERMITS AND REGULATIONS
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Business Name Registration
Alberta businesses are usually registered as either a sole proprietorship, partnership or limited company (incorporation). If your considering incorporating, your business may be incorporated Provincially or Federally. If the business will be operated primarily in one Province then Provincial incorporation may be desirable. For further information about Alberta Incorporation see the document Incorporating an Alberta Corporation
If the business will be operated in a number of provinces, Federal Incorporation may be desirable. If you incorporate Federally, to do business in Alberta you must also register with Provincial Corporate Registry. For general information on federal incorporation see the document Federal Business Incorporation - Canada Business Corporations Act (CBCA)
Licenses, Permits and Regulations
All businesses must comply with licenses, permits and regulations. When creating a business, the entrepreneur must contact the municipality involved, along with the provincial and sometimes Federal government.
Each Alberta municipality has the authority to issue permits and business licenses. Since there is no uniformity throughout the province regarding municipal licenses for businesses, you should consult with the appropriate local officials to determine how your business will be affected by local regulations and licensing requirements. Businesses must meet the zoning by-laws that control property uses in their municipalities.
Examples of licenses, permits and regulations that could apply to you when starting your restaurant, bar or coffee shop may include, but are not limited to:
Licenses/Permits
Regulations
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- fire safety standards / regulations (local municipal office)
- Zoning bylaws (local municipal office)
- Smoking -
Smoke-Free Places Act and bylaws (local municipal office)
- Food and Drugs Act
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Alberta Server Intervention Program (ASIP), a mandatory training program for anyone selling or serving liquor in the province. http://www.asip.ca or call (780) 436-6335 in Edmonton or 1-877-436-6336 toll free.
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You can get permit, license and regulation information by contacting your local city hall, town, village, or rural municipal office. Contacts for local, provincial and federal governments can be found in the government listings of your telephone directory or on the Provincial/Territorial Web site. The following website contains information about all Alberta municipalities: http://www.gov.ab.ca/ma/cfml/profiles/index.htm
TAXATION
The three levels of government (federal, provincial, and municipal) have distinct responsibilities and taxing authority. See the document
Taxation Info-Guide
Guide for Canadian Small Businesses - Canada Revenue Agency
The Guide for Canadian Small Businesses provides useful information on a broad range of issues, such as how to set up a business, the GST / HST, excise taxes and duties, importing / exporting, payroll deductions, and income tax. The guide is targeted primarily at new and prospective small businesses. It provides a comprehensive overview of tax and customs related information that established small businesses may also find useful.
For a copy of the guide, please call 1-800-272-9675, see the document Guide for Canadian Small Businesses or visit the Web site at http://www.cra-arc.gc.ca/E/pub/tg/rc4070/README.html
MANAGING YOUR OPERATION
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Employment Standards - Alberta Human Resources and Employment
Employment Standards provides information and education for both employers and employees on minimum standards of employment in Alberta.
For further information, please call Province-wide at (780) 427-3731 (toll free by dialling 310-0000, then entering 427-3731), see the document Employment Standards or visit the Web site at http://www.gov.ab.ca/hre/employmentstandards/index.html
Health Care Insurance Premiums - Alberta Health and Wellness
According to Alberta's legislation, employers with five or more eligible employees are required to establish a group plan. Employers include companies, businesses and institutions located in Alberta.
For further information, please call (780) 422-1212 (Edmonton) or 1-800-272-8864 (toll-free for elsewhere in Alberta), see the document Alberta Health Care Insurance Plan Group Coverage Fact Sheet
Payroll Deductions - Canada Revenue Agency
The Trust Accounts Division works to ensure that employers and workers meet the withholding, remitting and reporting requirements of the Income Tax Act, the Canada Pension Plan, the Employment Insurance Act and the Excise Tax Act. It also ensures they meet the requirements for provincial tax withheld at source.
For further information, please call 1-800-959-5525, see the document Trust Accounts Division or visit the Web site at http://www.cra-arc.gc.ca/payroll
New Employer Visits - Canada Revenue Agency
CRA officials are available, on request, to visit new employers on their own premises. This service provides new employers with a chance to discuss concerns they may have about recording, withholding, or reporting requirements for employee earnings, income tax, Canada Pension Plan, or Employment Insurance contributions. Our staff can also provide advice on GST filing requirements, inform new businesses about challenges they may encounter, and advise them on where to get information and assistance from us when they need it.
New employers wishing to take advantage of this program should contact the Revenue Collections Division of any tax services office. Addresses and telephone numbers are listed at http://www.cra-arc.gc.ca/contact/prov/ab-e.html, as well as in the Government of Canada section of the telephone book. For additional details, please call the Business Enquiries Line at 1-800-959-5525.
Social Insurance Number (SIN) - Human Resources and Skills Development Canada
A Social Insurance Number (SIN) is a unique nine digit number assigned to an individual and used in the administration of various programs, namely, Employment Insurance and the Canada Pension Plan. Employers who want to remit income tax deductions and premiums based on an employee's income must ensure that the employee produces a SIN card within three days after being hired.
For further information, please call your local Human Resource Centre of Canada see the document Social Insurance Number - SIN or visit the Web site at http://www.sdc.gc.ca/asp/gateway.asp?hr=en/cs/sin/0300/0300_in022.shtml&hs=sxn
Workers' Compensation Board (WCB) - Alberta
Workers' compensation is a comprehensive no-fault workplace liability and disability insurance system that protects both employers and workers against the impact of work injuries. It compensates your injured workers for lost income and covers health care and other costs related to their injury. It protects you from being sued by your workers if they are injured on the job. It also protects your workers from being sued by other workers in the event of a workplace injury.
For information, please call Edmonton (780) 498-3999 or Calgary (403) 517-6000. Call toll free by dialling 310-0000. For more information about WCB insurance see the document Workers' Compensation Board (WCB) - Alberta or visit the Web site at http://www.wcb.ab.ca
Occupational Health and Safety - Alberta Human Resources and Employment
The Occupational Health and Safety Act of Alberta requires every employer, under provincial jurisdiction, to ensure, as far as is reasonably practicable, the health and safety of workers. The provisions of appropriate Occupational Health Services by the employer would be part of this requirement. Alberta Human Resources and Employment, Workplace Health and Safety (WHS), monitors compliance with the Act and associated regulations and provides advice and direction as needed.
For more information about the work environment or work practices contact the Workplace Health and Safety, Call Centre at 1-866-415-8690, contact the Alberta Human Resources and Employment, Workplace Health and Safety (WHS) office nearest you, see the document Occupational Health and Safety or visit the WHS Website at http://www.whs.gov.ab.ca
emerit Certification
emerit Professional Certification, recognized across the country, brings a professionalism and credibility to each of the emerit-trained professions. emerit Certification Occupations include: Bartender, Food and Beverage Manager, Food and Beverage Server, Wine Service.
Alberta Contact:
ATEC (Alberta Tourism Education Council)
401 - Centre 104
5241 Calgary Trail
Edmonton, Alberta T6H 5G8
Telephone: (780) 436-6112
Fax: (780) 436-5404
Toll-free (information): 1-800-265-1283
E-mail: info@atec.ahla.ca
Web site: http://www.atec.ca
Insurance
Insurance needs for businesses vary greatly. One thing that all businesses have in common is that no matter how professionally they're run, there is always a possibility of loss, injury or damage which can force them out of business. To provide proper insurance coverage there is a wide choice of policies, options and deductibles. 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.
Examples of insurance:
- fire insurance (extended coverage on buildings and contents);
- liability insurance;
- burglary protection (theft coverage);
- dishonesty insurance (covers thefts by employees);
- disability insurance;
- Key personnel insurance.
For information on business insurance visit the Insurance Bureau of Canada website at http://www.ibc.ca/en/Business_Insurance/
Marketing/Advertising
Word-of-mouth advertising and good public relations are often the best ways of promoting a restaurant. Depending on your market and its size, also consider flyers, newspapers (especially for holiday promotions), radio, TV, the business pages of the telephone book and the Internet. Also bear in mind that a satisfied customer is good advertising. Contact your local municipal office to check for bylaws on signage. The following website contains information about all Alberta municipalities: http://www.gov.ab.ca/ma/cfml/profiles/index.htm
Internet
A Website should have details to describe the location (your restaurant's address, telephone and fax numbers, and directions on how to get to your restaurant), hours of operation, menus, and anything else you think may be of interest to potential customers. However, once you launch a Website, you must update it on a regular basis.
Participating in community events is another way of advertising your restaurant. You may also hold events that will promote your restaurant, i.e. have a wine or beer tasting evening and choose the menu to suit the occasion.
For more information regarding advertising and marketing, see the following documents:
The Online Small Business Workshop - Marketing Basics covers the basics from developing your customer profile to promoting your business.
The federal Competition Act governs misleading advertising and deceptive marketing practices for all businesses in Canada. The Act defines which marketing practices are illegal and the process of complaint investigation.
For more information, consult the
Competition Act - Misleading Advertising and Deceptive Marketing Practices, administered by Industry Canada or visit the Competition Bureau Web site.
Guide to Market Research and Analysis
Successful businesses have extensive knowledge about their customers and their competitors. Acquiring accurate and specific information about your customers and competitors is a critical first step in market investigation and development of a marketing plan.
In developing a marketing plan, your primary functions are to understand the needs and desires of your customer, select or develop a product or service that will meet customer needs, develop promotional material that will make the customer aware and ensure product or service delivery.
Basic Bookkeeping
A good record keeping system should be simple to use, easy to understand, reliable, accurate, consistent and designed to provide information on a timely basis.
Note: All staff working with cash should be trained to recognize counterfeit currency (see the document
Security Features for Canadian Bank Notes ).
The legal requirement concerning financial records specify only that they be a permanent, accurate and complete record of your daily income and expenses. There are many types of record books and bookkeeping systems available. For example:
- double entry bookkeeping;
- commercial bookkeeping systems;
- one-write systems;
- computerized systems;
- single entry bookkeeping.
Selecting Professional Services
The use of professional services is essential to the success of a small business. Professionals can provide knowledge and expertise in the areas where you may have little. They can round out your management team to ensure your business is operating efficiently.
As an entrepreneur, there are four main areas of professional services with which you may consult:
Furnishings and Equipment
Before you open your restaurant, you will need tables, chairs, lighting and decorative items. You will also need kitchen, 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 may get the advice of a sales representative or consult trade publications and manufacturers' Web sites. List that equipment and its cost to you. An important factor to consider when choosing equipment is the after-sales service and repair and their affordability.
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.
Leasing Equipment— Another alternative is to lease equipment to help keep start-up costs down. To obtain financing for capital leasing for new or used equipment for the creation of your business, see the document
Capital Leasing Pilot Project .
For more information on parts and materials, overhead, stock control and pricing, see the document
Business Plan for Small Service Firms.
On Industry Canada's Web site, you may also want to consult the section on the Canadian Furniture Industry.
Setting Up a Pay System
Pay administration is a management tool that enables you to control personnel cost, increase employee morale, and reduce workforce turnover.
Setting the Right Price
Setting the right price can influence what consumers will buy, which in turn affects the total revenue and the profit. In the end, the right price for the product/service is the price that the consumer is willing to pay for it. Hence, correct pricing decisions are a key to successful management.
Cost Control
In the restaurant business, you must have procedures for controlling inventory and costs. Ask people in the industry for information about procedures for:
- Purchasing— Most of the time, purchasing is done over the telephone, by fax, or online. Often no contract is signed between the purchaser and the supplier; therefore, it is essential that you choose your supplier carefully.
Develop specifications on food brand names, size, quantity, grade/weight, delivery time/place, emergency deliveries, availability and policies for substitutes or damaged goods. Entertain bids from multiple sources and get the best product for the lowest price. Use a Purchasing and Receiving Form.
- Receiving—Check all deliveries against the Purchasing and Receiving Form, focusing on three things: quantity, price and quality (i.e., temperature: frozen goods must be frozen); packaging should be intact. Make sure specifications are met. Careful recording will show short shipments, price variations and weight differences.
- Budgeting and Projecting—Establish a cash budget and maintain cash flow projections on a continual basis.
- Calculating Monthly Food Costs—Determine the actual cost of food consumed and the actual cost of food sold. This is a combination of opening inventories, purchases, adjustments and closing inventories. This ratio should remain relatively constant.
- Calculating Beverage Costs—Record all bottle deliveries and purchases.
- Preparing Food—Make sure staff understand portion sizes (photograph entrees or give written instructions) and set up a recipe reference file to list dishes, portions and supplies needed.
- Storing—Ensure refrigerated and frozen products are quickly placed in a cold storage- storage temperature for dry goods (between 10-21 C) and frozen goods (-18 C or less). Rotate your stock to ensure that oldest items are used first before the new stock.
Checklist for Profit Watching
Making a profit is the most important— some might say the only objective of a business. Profit measures success. It can be defined simply: revenues - expenses = profit. So, to increase profits, you must raise revenues, lower expenses, or both. To make improvements, you must know what's going on financially at all times.
ASSOCIATIONS
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There are many associations that may be of use to foodservice operators. Although it is not necessary to join a association, there can be advantages in becoming a member because they:
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promote and exchange marketing and promotional ideas among members;
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establish and encourage high standards of quality and professionalism;
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potential for group benefits and/or member discounts;
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represent and advocate on behalf of members.
Examples of associations include, but are not limited to:
RESOURCES
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Additional resources which may help restaurant/bar/coffee shop owners include, but are not limited to:
Publications
You may find books, magazines and other relevant print material at
The Business Link Business Service Centre and/or business service organizations in your community that provide business information. Contact the
The Business Link Business Service Centre for the location nearest you. The Business Link library catalogue is online at:
http://www.cbsc.org/alberta/tbl.cfm?fn=edmref_search
Food services competition in the 1990s— this article examines how food service providers and food stores competed for Canadian's food dollars in the 1990s
Canadian Food Inspection Agency - Bureau of Food Safety and Consumer Protection -Information for Restauranteurs and Food Service Operators— this information is an aid in interpreting the requirements of Section 5 of the federal Food and Drugs Act, and other federal legislation which impacts on the advertising and labelling of food.
Saving Energy Dollars in Hotels, Motels and Restaurants - offers information on how to calculate your energy costs and consumption, compare with other facilities, determine where you use energy, invest in energy efficiency retrofits and calculate your savings.
Statistics
Statistics Canada
Small Business Profiles -
Performance Plus - http://sme.ic.gc.ca
Performance Plus provides detailed financial and employment data on small businesses by industry for Canada, the provinces and territories. The Profiles have been produced every two years since 1985, with 2002 being the most current reference year available. The data provide performance benchmarks for the financial planning of start-up and established small and medium sized businesses. Reports are available for:
- Restaurants, Licensed SIC 9211
- Restaurants, Unlicensed SIC 9212
- Take-Out Food Services, SIC 9213
- Taverns, Bars and Night Clubs, SIC 9221
Canadian Restaurant and Foodservices Association
- Research—Provides an overview of the Foodservice Industry
- Industry Issues—Provides information on Industry issues by province or topic
Related Web Sites
Restaurant.ca is a Canadian restaurant guide searchable by area, cuisine, price range, and features.
Supplier e-source a Canadian foodservice industry shopping source.
Canadian Culinary Federation has a job bank where employers can post a job offer.
e-Buyers Guide an online source of products and services devoted to the Canadian restaurant and foodservices industry.
Food Service World highlights both North American and international resources for owners and managers for the foodservice, hospitality and tourism industry.
ADDITIONAL INFORMATION
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When seeking business information, feel free to visit the Web sites for the Business Start-Up Assistant and the Online Small Business Workshop. You may also want to check with your local library, the major chartered banks, your local Chamber of Commerce, educational institutions and business development organizations— some of which offer courses, seminars and workshops.
For general business information, you may contact your local Canada Business service centre by:
- Telephone: Call our toll-free telecentres and speak to a business information officer who will direct you to the best sources of information or refer you to programs and services relevant to your business situation. Some centres have optional recorded answers to frequently asked questions to speed up service.
- E-mail: You can also send your questions via e-mail from the Web site.
- In-Person: Canada Business offers an extensive collection of business-related publications, directories, leading-edge business products (e.g., videos, CD-ROMs) and access to external databases. Business clients can use these materials on their own or with the help of a business information officer. The Canada Business service centres have arrangements with existing business service organizations in communities across Canada to provide Canada Business information. Contact the Canada Business service centre in your region for the location nearest you.
BIBLIOGRAPHY
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Start and Run a Profitable Restaurant, Brian Cooper, Brian Floody and Gina McNeill, First Edition 2000, Self-Counsel Press, USA, Canada
1 Source: Growing Alberta; a comprehensive communications and public relations program that builds understanding and awareness with Albertans on the agriculture and food industry. http://www.growingalberta.com/features/default.asp?id=167
Related Reading
DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.
Links Policy
Some of the hypertext links lead to non-federal government sites which are not subject to the Official Languages Act and the material is available in one language only.
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