How to Open a Restaurant in Colorado

Getting ready to open a restaurant in Colorado? To help you get started with your own restaurant, we put together a comprehensive step-by-step guide for how to open a restaurant in Colorado. Opening a restaurant is a huge undertaking with dozens of steps and mountains of paperwork. Writing up a solid restaurant business plan and securing funding for your restaurant are some of the first things you’ll need to do so that you can afford all the building blocks of your business, including your licenses and permits. 

One of the most critical parts of opening a restaurant is being compliant with local laws. So when you’re opening a restaurant, cafe, bar, or any other food business, you’re going to need to get your licenses and permits in order. A liquor license, a food facility health permit, a certificate of occupancy — they all have varying (and sometimes overlapping) requirements, so it’s important to know exactly what you need to get to legally open a restaurant in your particular city or county in Colorado.

We’ll go into all the steps that would-be restaurateurs in Colorado need to know — whether you’re opening a craft beer brewpub in Denver, a late-night pizza place in Boulder, or a high-end ski chalet restaurant in Aspen.

How to start a restaurant in Colorado

1. Decide on a restaurant concept

What kind of restaurant are you planning to open? Get all your ideas down in one place. Answer the following questions to guide your imagination from a broad web of ideas to a concrete, viable business that you’re ready to invest in.

• What kind of food do you want to serve? What cuisine will you specialize in?

• What other restaurants are nearby? How will your business differentiate itself from the competition?

• Will go full-service and offer lots of seating or operate as a takeout counter with a few small tables?

• What demographics do you want to appeal to? Who’s your target market?

• Will you be opening a small business, or are you dreaming big and aiming to start a chain?

• How many staff members will you need to hire? What style of service will they offer — warm and friendly, or elegant and aloof?

• What will the physical business look like?

Outline your mission and values — and how they’ll impact your brand

While you’re figuring out the hard details of your business, also consider the values you want to embody as a business — and the mission you’ll be working towards. This will help guide your business decisions as you hire staff and build your brand.

At the end of all this idea-crunching, you can start thinking about a name and designing a logo. How will the aesthetic decisions you make reflect your food, your mission, and your values?

2. Create a restaurant business plan

A business plan is the roadmap that will take your Colorado restaurant from idea to bustling business.

First, you’ll need to choose what kind of business entity you’ll be building. Choose between an LLC, sole proprietorship, partnership, S corporation, or C corporation. To learn about the benefits and drawbacks of each approach, read our guide on restaurant business entities.

Plus, different restaurants approach ownership and profit very differently. Some simply have one owner and many employees. Some give investors a stake in the business. Others operate as a co-op, with every employee owning a stake in the business. And a lot of businesses operate somewhere in between, with owners and partners owning the business but all employees getting a little bit of profit share when the business exceeds a predetermined profit threshold. 

Figure out which kind of ownership and profit-sharing structure makes sense for your business, and work with a lawyer and accountant to draw up all the necessary paperwork and contracts.

All this information will need to be built into your business plan, along with sections that touch on the following aspects of your business:

• Executive summary, including your restaurant business name

• Company overview, including your business model

• Industry analysis (target market, location analysis, competitive analysis)

• Marketing plan

• Business model and service model (Quick service restaurant? Fine dining? Fast food? A sit-down dining room?)

• Operations plan (staffing needs, customer service policies and procedures, payroll plan, which restaurant point of sale you’ll get, which vendors and providers you’ll use for produce and laundry and more)

• Financial analysis (investment plan, financial projections like break-even point, expected cash flow, expected costs)

3. Secure Restaurant Financing

It costs anywhere between $95,000 and 2 million to start a restaurant, and very few people have that kind of money lying around. 

Some of the options available to restaurateurs looking to go into business in Colorado include brick-and-mortar bank loans, alternative loans, SBA loans, merchant cash advances, lines of credit, crowdfunding, and turning to friends or family for financial support. They all vary widely in application requirements, how much you can take out, what kind of collateral you’ll need, the type of repayment and the repayment schedule, and how quickly you can receive funding.

To learn more about each of these options, read more about restaurant financing and loans.  

4. Choose a Colorado Restaurant Location

Choosing the right location for your restaurant is critical. You’ll need to do research on the demographics, market, and competition in your location, as well as on the actual restaurant space and its size, visibility, and history.

Laura Frenkel, a commercial real estate agent in Colorado, highlighted the importance of patio space in this state. “You would think in a place with real winters that patios would not be as big, but we will sit outside in February if it’s sunny,” she said.

Buying, leasing, or building restaurant space are all great options, but each has its drawbacks and impacts your need for startup capital. If you’re building a space, or renovating an existing space, you may need to do a plan review to ensure the work to be done will be up to code and in line with local regulations.

Here’s some additional criteria to focus on when evaluating a restaurant location to decide if it's right for your type of business:

• Target market and ideal customer profile

• Real estate market conditions

• Community

• Size of the site

• Previous tenants

• Zoning and previous type of usage of the space

Make sure your restaurant space matches your concept and brand — some concepts make more sense in small spaces, like an intimate cocktail bar with small plates, and others need bigger square footage, like a sports bar specializing in wings, or a family-friendly Chinese restaurant.

5. Apply for Colorado Restaurant Licenses and Permits

Like any other state, Colorado has its own particular requirements around the licenses and permits needed to open a restaurant. Some licenses are administered by the state, while several others are done on a local (city or county) level.

Some of the licenses you’ll need to open a restaurant in Colorado can include:

1. Employer Identification Number (EIN), which connects your business to the IRS. The application can be found on the IRS website, including all instructions and restrictions.

2. Business License, which is issued by the state of Colorado. You can register for and manage your new business license on MyBizColorado.gov.

3. Certificate of Occupancy, which is issued by your city or county if needed, and shows that your space is up to code with local regulations.

4. Retail Food License, which some counties issue through their local health departments, while others go through the state of Colorado Department of Public Health and Environment. All restaurants and retail food establishments need one.

5. A Food Handler’s License, also known as Food Service License or Food Handler Card, is not required state-wide for every employee — but every establishment needs to have at least one trained Food Safety manager. This license shows employees or managers have taken a course teaching them the proper food handling protocols on how to prevent foodborne illness.

6. Sales Tax License, issued by the Colorado Department of Revenue.

7. Liquor License Permits in Colorado are dual-issue, meaning they’re issued by the Colorado Department of Revenue and by your county or city government. It can cost up to $1000.

Learn more about the types of permits, license fees, and license costs in Colorado at MyBizColorado.gov.

6. Develop your Menu and Beverage Program

Plan your menu, either in conjunction with a chef-owner or GM, or by yourself. Either way, prepare to workshop the menu and beverage program with your kitchen and bar staff once they’re hired and trained.

Make sure your menu is full of the types of food and drinks that will make your business stand out among the crowded restaurant landscape — and that your menu is priced to bring in profit.

Learn more about menu design and menu engineering to make the most of your menu.

7. Hire and Train Restaurant Staff

When hiring employees for your restaurant in Colorado, ensure that you are complying with local city and county guidelines for state labor laws.

Your employees are the backbone of your business. From FOH employees making your guests feel welcome, to your cooks making the food that keeps them coming back, to the support staff that keep everything running smoothly, there are dozens of restaurant positions you can hire for.

You have a few options for finding new restaurant employees, including asking around your network, using social media like Instagram and Facebook groups, seeking out new grads from culinary schools in your area, and posting on industry job boards.

In order to attract and retain staff, you need to make your restaurant a great place to work — and providing good compensation and meaningful restaurant employee benefits, including health insurance, will help you stand apart from the pack.

Here are some resources from Toast to help you attract, hire, and retain restaurant employees:

• How to Be a Boss at Restaurant Recruiting

• How to Onboard a New Restaurant Employee

• How to Train New Restaurant Employees

• How to Reduce Restaurant Employee Turnover

To learn even more, go through our video course on hiring and retaining restaurant employees.

8. Invest in Equipment and Restaurant Technology

As you approach opening day, peruse your restaurant technology options and find what combination of products and systems make sense to help you set your operation up for success from day one.

New restaurants should strongly consider investing in the following:

• A cloud-based restaurant point of sale system with handhelds

• Kitchen display screens

• An online-ordering system for restaurants

• Restaurant reporting and analytics

• Restaurant inventory management software

• Restaurant accounting software
  Simple scheduling and team communication

• A restaurant payroll solution

• A restaurant loyalty or rewards solution

• Contactless payment options

Restaurant technology helps your operations run smoothly while helping you track the health and performance of your business. With these insights, you can make changes that help you grow your revenue and become a successful restaurant.

9. Create a Restaurant Marketing Plan

Like anywhere else, a restaurant in Colorado needs a strong marketing plan. Word of mouth can be powerful once you’re up and running, but in order to reach those first customers — and turn them into regulars — marketing channels like social media and email marketing can be extremely powerful.

Learn more about building a restaurant marketing plan with our marketing plan template, our social media guide for restaurants, and our guide to restaurant email marketing.

10. Host a Soft Opening and Grand Opening

Once you’ve got all the moving pieces in place, it’s time to test it all out with a soft opening. Invite your family and friends, and encourage your staff to do the same, to experience the first live run-through of service in your new restaurant — it’ll help you work through any snags that you hit.

Then, you can start planning (and advertising!) your grand opening. Post all over social media, consider sending out flyers around your neighborhood, and ask your network to share the information widely to get as many people into the restaurant on the big day as possible.

You’re good to go!

Opening a restaurant is a long and challenging process, but it’s incredibly rewarding, too. To keep track of everything you need to do within a year of opening, check out our time-bound restaurant opening checklist below.