Starting A Business: Licensing and Permits For The Food Industry
One of the more important requirements of starting a business is making sure you have all the necessary associated permits and licences within your chosen industry. The food service industry is made of restaurants, hotels and inns, as well as catering and vending companies. The most important regulations that business owners in this sector have to comply with are health and safety permits, licenses for the selling of liquor and tobacco as well as zoning permit to operate in certain locations.
We speak to Cindy Leibowitz of CL Legal Consulting, who gives us a break down of these licenses and permits that are required when opening a new food service business.
What kind of licenses/permits do I need when starting a new small business in this industry?
Business licenses – In terms of the Businesses Act (1991), where a person is starting a business with the purpose of selling or supplying any foodstuff in the form of meals for consumption on or off the business premises, or any perishable foodstuff, then that business is required to hold a business license. Therefore, any person who wishes to start a new restaurant, even if it is a take-away restaurant, will need to apply for a business license under the Businesses Act.
There are certain instances where a restaurant does not need such a license. For example, a restaurant business which is carried on by an educational institution where the profits derived from the business are devoted to the purpose of that or another institution. Accordingly, a school tuck shop would probably not need a business license under the Businesses Act.
Health and safety – Under The Health Act (1977), there are the Regulations Governing General Hygiene Requirements for Food Premises and the Transport of Food, in terms of which any person who handles food or permits food to be handled, such as a restaurant, is required to possess a certificate of acceptability.
Liquor licensing – If you plan on selling liquor in your restaurant, then you will need a liquor license. The granting of liquor licenses is dealt with at provincial level, which means that every province within South Africa has its own specific laws governing liquor licensing.
Sound and music – Further, if you plan on playing music in your restaurant, even if it is background music, then (depending on certain factors) you will need a license from The Southern African Music Rights Organisation (SAMRO) as well as a license from The South African Music Performance Rights Association (SAMPRA). These are two completely separate companies, and therefore two separate licenses. A license from SAMRO covers the copyright in the actual song (i.e. the composition and the lyrics), and the royalties payable by you in terms of this license will be distributed by SAMRO to music publishers and songwriters. On the other hand, a license from SAMPRA covers the copyright in the recorded version of the song, and the royalties payable by you in terms of this license will be distributed by SAMPRA to certain record companies.
“The requirements for a business license may differ from one local municipality to the next”
Why do business owners need to obtain such permits and licenses?
A restaurant is required to hold a business license and a certificate of acceptability due to the impact which owning a restaurant and selling food may have on public health and safety if certain standards are not adhered to. In relation to liquor licensing, due to the socio-economic effect of alcohol abuse, it is essential that the supply of alcohol is regulated, and that restaurants are required to hold licenses to sell liquor.
Music licenses are necessary for the protection of intellectual property rights. A license from SAMRO is necessary to protect the intellectual property of composers and authors by providing them with adequate accreditation and compensation. A license from SAMPRA is necessary to protect the intellectual property of record companies by providing them with adequate accreditation and compensation.
Where can I apply for them?
The location of the restaurant will determine where you will apply for a business license, a certificate of acceptability and a liquor license. For a business license and a certificate of acceptability, you would need to apply to the local municipality within which your restaurant is situated. In relation to liquor licenses, each province has its own Liquor Authority/Liquor Board which is responsible for the granting of licenses to the restaurants within that province. For music licenses, you would need to contact SAMPRA and SAMRO directly to obtain licenses from each of them.
What are the requirements for each of the permits and licenses?
The requirements for a business license may differ from one local municipality to the next, so it is advisable that you contact your particular local municipality to find out the specific requirements applicable to your restaurant. For a certificate of acceptability, you will generally be required to provide information regarding the nature and type of food being handled on the premises, the nature of the handling (e.g. preparation, packing, processing etc), and certain other information.
In relation to liquor licenses, the requirements may differ from one province to the next, so it is advisable that you contact your local Liquor Authority/Liquor Board to find out the specific requirements applicable to your restaurant.
SAMRO and SAMPRA each have their own requirements for obtaining a license. In an application for a license from SAMPRA, for example, you would be required to inform SAMPRA whether the music used in the restaurant is played via TV, radio or other means; the floor space of the restaurant etc.
What are the repercussions that business owners may face if they do not have the proper documentation?
Where a restaurant does not hold the required business license, certificate of acceptability or liquor license, it is an offence under the applicable law. The offence may be punishable by way of a fine and/or imprisonment. Where a restaurant plays music without the required music licenses, then this may constitute a copyright infringement in terms of South African copyright laws, and the restaurant may be sued by the copyright owner.
What are some other laws and legal aspects need to considered when opening a restaurant?
One would need to be mindful of certain other laws when starting a business in the food service industry. The Tobacco Products Control Act (1993) contains certain requirements regarding smoking in public places, such as restaurants. In addition to this, as a restaurant owner, you fall within the hospitality industry, and there are certain labour laws which you may be required to adhere to in relation to your employees, and there are certain bargaining councils which operate within the industry.
Further, in terms of the Consumer Protection Act (2008), the customers which dine at your restaurant are entitled to good quality food and service, and you may incur a liability claim under the Consumer Protection Act if this is not adhered to. The good news is that, if you own a restaurant which is part of a franchise, then the Consumer Protection Act may actually work in your favour. In terms of the Consumer Protection Act, the franchise agreement between yourself and the franchisor must contain certain prescribed clauses, which protect you as a franchisee.
On the commercial side of the business, you will most probably be leasing premises out of which your restaurant will operate, and this will mean signing a lease agreement. It is also likely that you will need to sign supply agreements with the companies which supply you with the produce used in your business. It is advisable to ask an attorney to review these agreements so as to ensure that they do not contain any hidden clauses which may be detrimental to your business.
- This is a first in what will be a series of articles focusing on licensing and permit requirements for each industry.
About the contributor: Cindy Leibowitz (BA cum laude, LLB cum laude, Advanced Company Law I and II) is the owner of CL Legal Consulting. Cindy is an admitted attorney with 8 years’ experience in corporate, commercial law, drafting contracts, commercialisation of intellectual property, media and entertainment law, IT law, statutory compliance and providing general legal advice to clients.
This article contains generic references to some of the main licenses, permits, laws and legal aspects to be considered when opening a restaurant. This article should not be construed as a comprehensive overview of all of the legal requirements associated with operating a restaurant. It is advisable that you consult with an attorney in order to obtain more detailed advice.