What food-lover hasn’t imagined starting their own restaurant? The hustle and bustle of the kitchen, the appreciative customers, the excitement of devising your own dishes and designing your own menus. Though the creative opportunities are many, the restaurant industry is also one of the most heavily-regulated in America. This is understandable — everybody wants their food to be safe. If you are going to own and run a restaurant, the best way to serve your customers is to know the lay of the legal land. Not only will this help you as a business owner, but it will ensure that nobody will ever have reason to close you down. There are three laws that you should know before you start your own restaurant that will help you with your business.
The Food Safety Modernization Act (FSMA)
The Food Safety Modernization Act was passed in 2011, and it was the most sweeping change in the mission of the Food and Drug Administration in decades. The Food and Drug Administration is responsible for ensuring our food system is safe from contamination, and their reach extends from the fields to the kitchens. The FSMA established guidelines in order to monitor the food supply chain. According to Restaurant Business Magazine, restaurants, as the last link on that chain, have to monitor the food they receive to ensure that it is safe. If you ordered a shipment of frozen chicken, for example, you would have to check to make sure that it hasn’t thawed. The law is nuanced, though. It regulates everything from lettuce to restaurant supplies, and often in different ways for different restaurant types. Knowing where you fit in with these standards can help you keep your food safe and your menu fresh.
Depreciation Changes in the Tax Cuts and Jobs Act
As anybody who runs a restaurant knows, things wear out. Dishwashers break down, fridges freeze over, and tablecloths tear. As they wear out, you, as the business owner, can write off that damage on your annual tax return. This is called depreciation, and it is used both to reflect the annual wear and tear that a valuable machine (say, a rotisserie oven) experiences every year and to incentivize restaurateurs buying new equipment. Formerly, the IRS used a formula to depreciate items by a little bit every year. Now, a business can depreciate the entire value of an item in the year that they buy it. So if you decide to start a restaurant selling rotisserie chicken, you can write off the cost of that oven the year that you buy it, potentially saving yourself thousands of tax dollars in the critical first year of your business.
Fair Labor Standards Act (FLSA)
The FLSA was enacted in the 1930’s, but it is still applicable to much of the restaurant industry. It establishes such standards as a minimum wage, overtime pay, pay deductions, youth employment, and a tipped wage. Everybody is familiar with these standards today, to be sure, but restaurateurs need to be especially aware of the rules surrounding tipped wages. Simply put, the wages for tipped employees may seem low, a mere $2.13 an hour, but in fact you, as the manager, have to be sure that their wages plus tips add up to at least the minimum wage. This makes for tough bookkeeping. While the profit from all the espressos you sold may all be computerized, tracking the bills in the tip jar can be a lot more challenging. When you start a restaurant, it is best to have a system in place to ensure that all of your employees are getting the wages they are entitled to. Otherwise, you may end up in serious legal hot water.