How to Open a Restaurant in Delaware

Delaware, despite being the second smallest state in the country, punches above its weight in the culinary world. Interlaced with rivers and facing the Atlantic Ocean, fish and seafood are popular choices for visitors and locals alike. Have you been contemplating joining Delaware’s restaurant scene with your very own food destination?

Whether or not you choose to serve Delaware’s most popular item (any containing crab), opening a restaurant in this state will be a challenging journey. To help you navigate the process, we have created a step-by-step guide to support you as you commence your new career as a restaurateur.

Opening a restaurant usually starts with the basics of any business: creating a plan and securing funding to get things up and running. Once you’ve got these out of the way, it's on to the multitude of restaurant licenses and permits your state, county, or city requires.

Liquor licensing, occupancy permits, food safety, and business registration are just a few of the regulatory requirements you will need. Our guide can help you learn exactly what Delaware requires from restaurants in order to operate safely and legally — whether you’re opening a crab shack in Dover or a coffee shop in Newark.

Step by Step: Starting a restaurant in Delaware

1. Defining your restaurant concept

Leave no stone unturned – now is the time to unfurl all your ideas and sort through the good, great, and everything else. Make a list of pros and cons for each idea to help logically carve out the final concept. Using the following prompts, you can refine your ideas into a practical, appealing business that will attract customers and return on investment.

• What's on the menu? Will you serve a single cuisine or experiment with a fusion?

• How do you picture the physical structure and design of your restaurant?

• Is this business a smaller, independent store, or are you planning to expand across multiple locations using a chain model?

• What type of customers are you targeting? Which demographics do they fall under?

• Are you offering fine dining service? Will there be a limited number of seating options? Can you operate as a takeaway only or a combination of different service options?

• Have you identified your restaurant competitors? Where are they located? How will your business stand out from the rest?

• What size team will you need to operate this business? Are you seeking to offer customers a distinguished, refined experience or create a more relaxed, welcoming environment?

While you’re figuring out the concrete details, it's useful to make sure your decisions align with your values. As you continue to make decisions for your restaurant—hiring, how service runs, what’s on the menu—these values will influence the broader business mission you’re working towards.

After all the tough questions have been untangled, it’s time to get creative. Every restaurant needs a name and a logo – what will yours be? Think about the themes you want to bring to life with your new business and how they can be reflected in a symbol or graphic design.

2. Creating your restaurant business plan

A business plan is a crucial resource on your journey to transform your concept into a thriving Delaware restaurant.

There are several options regarding the kind of business entity you can register as. You can select from an LLC, partnership, sole proprietorship, S corporation, or C corporation. We have written a guide to the pros and cons of restaurant business entities, which you can read to help decide what option suits you best.

All restaurants handle ownership and profit distribution differently. Some have a sole owner with a team of employees, while others offer investors a share in the business. Co-ops allow employees to own a portion of the company. Many businesses fall somewhere in between, with owners and partners taking charge and sharing profits with employees when earnings surpass a set threshold.

You will need to establish what model of ownership and profit-sharing makes sense for your situation. It is recommended that you work with an accountant and a lawyer to help you draft clear and legally sound paperwork and contracts.

All the above needs to be incorporated into your business plan, as well as the following list:

• Company overview, including your business model

• Executive summary, including your restaurant business name

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

• Business model and service model (Quick service or fine dining? Fast food or sit-down experience?)

• Operations plan (team size, SOPs, customer service policies, payroll plan, POS software and systems, your chosen vendors and providers for consumables)

• Marketing plan

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

3. Financing your restaurant

The baseline costs of opening a restaurant can range from $95,000 up to $2,000,000, which is a large amount of money for most people to source quickly. 

Some options available to restaurateurs looking to enter business in Delaware 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 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.

Restaurateurs in Delaware may consider a variety of financing options. You can opt for traditional bank loans, alternative financing, SBA loans, merchant cash advances, lines of credit, crowdfunding, or choose to seek support from friends and family. Each option comes with different application requirements, amounts, collateral, repayment terms, and processing timelines.

It’s important to evaluate which option aligns best with your needs and financial goals. You can explore each option in more depth by reading our guide about restaurant financing and loans.

4. Choosing a location in Delaware

As the saying goes, location is everything—and it's certainly true in the case of any new restaurant. To find the right spot, you'll have to look into each candidate area's demographics, current competition, and market trends. The physical aspects of your space, such as size, history, visibility, and building condition, are all important to inspect before making your decision.

Purchasing, leasing, or constructing a restaurant space are all viable options, but each comes with its own challenges and affects your initial financing amount. If you're refurbishing a building or starting from scratch on an empty lot, it's quite likely you will need a plan review to ensure the project meets local, state, and zone regulations.

Don't forget the following criteria, which are important when selecting a Delaware location for your new business:

• Target market and your ideal customer profile

• Previous tenants

• Zoning

• Real estate market conditions

• Size of the site

• Previous occupancy usage

• Surrounding community

It's also important to choose a space that aligns with your restaurant concept and brand — certain service methods will work better in different settings. For instance, a cozy dessert shop needs less square footage than a group-focused pizzeria or a family-style burger joint.

5. Applying for Delaware business licenses and permits

Delaware’s state government regulates some certifications, while others are controlled at a local or county level. Some permits may have overlapping requirements from both levels of government, so ensure your research is thorough. Delaware restaurant permits and licenses for your new business may include:

1. Federal Employer Identification Number (FEIN), which connects your business to the IRS. You can find the application (and all instructions and restrictions) on the IRS website.

2. Food Establishment Permit, provided by Delaware's Department of Health and Social Services. You can learn the specifications for this permit and find the application form on the Business First Steps website.

3. General Business License, issued by Delaware's Department of Revenue to all business owners in the state. The application form can be found on the One Stop website.

4. A liquor license is granted by the Office of the Delaware Alcoholic Beverage Control Commissioner (OABCC). Learn how to apply for your liquor license on the OABCC website.

5. Certified Food Protection Manager, meaning that at least one person in your restaurant must be qualified in a state-accredited food safety course.

Delaware has a dedicated online portal for new business owners that details all legal requirements from the state. Visit the Delaware One Stop website to learn more about registration, licensing, hiring, and withholding regulations within the state.

6. Developing your food and beverage range

Draft your menu with the input of trusted, experienced culinary professionals. This may be a fellow restaurateur, your head chef, or simply someone who knows a good menu when they see one.

Hold this first edition loosely – once you’ve begun serving customers, you can work with your floor staff to tweak the menu as customer feedback is received.

Ensure your menu is priced to maximize profits and designed to match your overall brand and presence. It also needs to include appealing, distinctive dishes made with quality ingredients that will stand out to customers and keep them coming back for more.

To help you develop a stellar menu, we have designed multiple guides about menu design and menu engineering.

7. Hiring and training Delaware restaurant staff

Once you are ready to start hiring staff for your restaurant, ensure that you are complying with Delaware state labor laws, as well as any guidelines in your local city and county.

For most restaurateurs, hiring is a big part of business management. Front-of-house, kitchen, support staff, and other roles are all vital to the satisfaction of your customers and overall business success. You will likely have a wide variety of positions to fill in your restaurant, and it’s important to seek out the best talent available in your area.

There are several ways to find new restaurant staff, such as tapping into your network, leveraging social media platforms (Facebook job groups or your business' existing channels), reaching out to recent culinary school graduates, and listing roles on job websites (e.g., Indeed, Glassdoor).

To attract and retain top talent, you need to create an appealing work environment. Offering competitive pay and valuable employee benefits, like health insurance, can set your restaurant apart from others.

We have developed a collection of resources to help you navigate advertising for, hiring, and retaining staff in your restaurant:

• How to Be a Boss at Restaurant Recruiting

• How to Train New Restaurant Employees

• How to Onboard New Restaurant Staff

• How to Reduce Restaurant Employee Turnover

We also put together a comprehensive video course on hiring and retaining restaurant employees for you to utilize during the recruitment process.

8. Investing in restaurant technology

Now you're getting closer to opening the doors, it's wise to consider restaurant technology options and think about what combination of products and systems will help you conduct business effectively and consistently.

Restaurants starting out are all advised to consider the following investments:

• Restaurant reporting and analytics

• Kitchen display screens

• Simple scheduling and team communication

• An online ordering system for restaurants

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

• Contactless payment options

• A restaurant loyalty or rewards solution

• Restaurant inventory management software

• Restaurant accounting software

• A restaurant payroll solution

Quality restaurant technology will be a fundamental part of your operations, and without the right tools, you will struggle to track your business's performance and growth. Incorporating tools like those listed above will help you evaluate your restaurant's position and make decisions that improve results and upscale revenue.

9. Creating a restaurant marketing plan

A restaurant in Delaware is like any other state, making a robust marketing strategy a necessity. For an established business owner, word of mouth can be enough to get people in the door. 

For new owners, however, attracting customers for the first time requires more than a few casual conversations. Authentic, consistent marketing campaigns greatly assist in turning one-time visitors into loyal fans and advocates. 

You can learn how to promote your restaurant to customers with our marketing plan template, our social media guide for restaurants, and our guide to restaurant email marketing.

10. Hosting soft and grand openings

Once you've checked off all the parts of your plan, it's time to hold a soft opening. Think of this as a test run — invite friends, family, and your staff’s network to experience the first full service in your restaurant. This soft opening will help you identify any issues that might crop up during service.

After that, you can go all in on the planning and promotion of your official grand opening. Use social media to share the details, distribute flyers in your area to any likely customers, and ask your network to spread the word to help attract a crowd for the launch.

FAQs

How much does it cost to open a restaurant in Delaware?

The start-up cost of opening a restaurant in Delaware varies depending on your concept. The typical range is between $95,000 and $2 million, which is no small sum for most people. With this in mind, it is highly recommended that small businesses apply for any funding available to them.

What permits do I need to sell food in Delaware?

Besides registering your establishment (e.g., partnership) and linking your business with the IRS, other state requirements include:

• General Business License

• Food Establishment Permit

• Liquor License (if you wish to sell alcohol)

How much is a business license in Delaware?

A Delaware general business license costs $75 a year for the first location and $25 a year for each additional location your business has. This license renews annually, but after your first year in business you can pay for up to 3 years' licensing in advance.