When it comes to the restaurant business, there is no debating the fact that the United States has become a global hub, attracting a lot of investments and start-ups across several countries, including India. According to National Restaurant Association statistics, the US boasts of around one million restaurant locations with nearly 15 million working employees, all set to generate sales worth $898 billion in 2022.
However, despite the global interest in opening up a restaurant in the US, a large percentage of Indian citizens still remain a little skeptical about the viability of the process. That’s why we have put together an article that covers all the significant requirements and considerations that you need to keep in mind if you’re thinking about opening a restaurant in the US.
Can a Foreigner Open a Restaurant in the US?
The short answer to this burning question is, yes. A foreigner can open a restaurant in the USA. However, before doing so, there are various requirements that foreigners need to fulfill to stay in compliance with US laws and sustain their businesses.
As a foreigner trying to open a restaurant in the USA, you need to be completely up-to-date with all the peculiarities of international laws, since all the issues related to business transactions fall under this category. You need absolute clarity on issues related to US corporate laws, import and export, customs laws, tax issues, and immigration. Here is a list of all the broad requirements that you need to consider.
Requirements for Opening a Restaurant in the US
There are several ways for you to gain authorization for opening a restaurant in the US, depending on the type and extent of your investment. However, there are some basic visa requirements that you must fulfill in each case.
Arm’s Length Investment
If you’re just looking to invest in a restaurant from a safe distance, all you need to do is form an LLC, hire someone to handle management, and inject cash. If you’re thinking along the lines of an arm’s length investor, you don’t even need to set foot on US soil.
To work and invest as a non-immigrant, you will require an E2 visa to obtain employment authorization. Keep in mind that this visa is only available for certain eligible countries.
If you’re looking to invest a heavy amount, say over $500,000, you can avail of the EB5 immigrant visa for your endeavors. Besides, you can start your groundwork and research for the business with B1 and B2 visa categories. If you already own a restaurant in your home country, you can also use the L1 visa category to start your business.
Apart from the initial hurdle of visa requirements, you will require several legal permissions related to running the business, such as licenses, permits, and zoning law certifications. Even obtaining certain visas, such as the E2, E5, or EB5 visa, is a complex process that requires much paperwork. Hence, we recommend that you hire a licensed and reputable US attorney to discuss all the US laws and regulations before moving further with your actions.
How Much Does It Cost to Open a Restaurant in the US?
Before we go forth with the actual procedure for opening a restaurant in the US from India, let’s try to get an estimate of the initial start-up cost of the business. After all, it is always beneficial to have a look at the cost statistics in your sector before you start planning your venture.
Despite a lot of variations evident in the initial cost per square foot within the restaurant business, you can still get a rough idea from surveys and statistics from those restaurants that match your concept, space requirements, and sales-to-investment ratio.
A report by Restaurant Owner gives a breakdown of cost estimates for restaurants in three different quartiles, based on responses from restaurants from all quarters with varying sizes, locations, decor, and style.
Restaurants in the lower quartile require an estimated start-up cost of $175,500. This nearly amounts to a start-up cost of $60 per sq foot. The initial kitchen and bar equipment cost amounts to about $40,000. Restaurants in the lower quartile usually cover 2000 sq feet of space and produce annual sales worth $550,500.
If you’re looking to invest in a median quartile restaurant, you can expect an initial start-up cost of $375,500, with nearly $95,000 for the kitchen and bar equipment alone. Having said that, you can also expect a higher return on investment with an average sales-to-investment ratio of 2.8:1.
In the upper quartile, restaurants generally require at least 5000 sq feet of space. Consequently, the start-up cost goes up to at least $750,500. These businesses do enjoy a much higher return on investment. However, they take at least a year to become profitable.
How to Open a Restaurant in the US from India?
Opening up a restaurant in the US from India does involve a few complications, but if you are diligent about all the steps of the process and keep all legal considerations in mind, you can soon own a hugely profitable business venture. Here, we have put together the complete procedure to follow if you are still wondering how to open a restaurant in the USA from India.
Decide Your Restaurant’s Legal Entity
As an Indian citizen, you will face some restrictions on owning certain types of legal entities, such as corporations, limited liability companies, partnerships, and sole proprietorships. These restrictions also apply to your business partners, even if they are US residents.
However, as this part of the process is crucial to protect your assets and limit liabilities, we recommend you take the assistance of an experienced US attorney to navigate these waters.
Dealing With Business Immigration
As we said already, you will require a non-immigrant or immigrant visa to get work authorization in the US to efficiently manage your restaurant from the country.
According to US laws, you cannot work on your business with a B1 or B2 business visitor visa. However, you can do your initial legwork with them, such as taking part in meetings and negotiating contracts. To actually work for your restaurant, you need an E1, E2, EB5, or L1 visa, according to your qualification.
Handling Tax Implications
Even if you live in India, you will be taxed on the income you generate from your restaurant in the US. You will also need to log your credentials with the US Internal Revenue Service (IRS). Hence, it is imperative to hire an efficient accountant or tax lawyer to fully understand all the tax implications and tax treaties between India and the USA before you start generating revenue from your business.
Obtaining Licenses and Permits
Being subject to the zoning laws of the states, restaurants need a variety of permits and licenses, which can range from 10 to 15 in number according to the location. Here are some crucial points related to zoning laws and licenses for you to remember.
Commercial Use License
The location of your restaurant should be in an area that allows commercial use. You also need to have legal permission to run your restaurant within that zone.
Outside Seating License
Certain zoning restrictions also apply to outside seating in restaurants. Make sure that you have all the required licenses if you wish to avail this option in your restaurant.
- You will need various other business permits, such as certificates of occupancy, according to the laws of your particular state and city.
- In certain states, your restaurant may be prohibited from making more than one-fourth of your annual sales from chicken wings and bone-in chicken.
- According to the services you provide in your restaurant, you will have to obtain other licenses such as a liquor license, food service license, and music license.
- You will also need insurance and must maintain certain standards to pass regular health inspections.
Managing a Restaurant in the US From India
Even when you are done with all the legal complications and paperwork connected to opening a restaurant in the US, you’re still left with the day-to-day management of operating the business. Hence, you can either hire someone to handle management responsibilities or form a partnership with a local citizen to look after the business operations.