UPDATE: This article was originally published in May 2015, but due to its popularity it was updated with brand new information on 28 September 2021.
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.
[UPDATE: 28 September 2021]
What are the costs for a business license for a food business?
Depending on whether you are a hawker or informal trader, or you run another type of food business such as a takeaway or restaurant, or guest house, the tariffs differ for each. Anyone with a food business should either apply for a business license or trading permit – the application process can be done online or you can do a walk-in at your local municipality.
Hawkers and informal traders
Whether you are a hawker or informal trader who sells meals or perishable food, or you own an accommodation establishment (such as a hotel, guest house, lodge or bed and breakfast), you need to apply for a trading permit at your local municipality, according to the City of Ekurhuleni. The trading permit must get renewed on an annual basis. Trading permits can cost from *R200 for hawkers and *R850 for accommodation establishments. An occasional event trading permit can cost from *R250 per event.
Other food businesses
If you are selling or supplying meals/ food from a restaurant, a takeaway, tuck shop, spaza shop, fast food outlet, supermarket, grocery store, or wholesaler, you need to get a business license and can have it renewed every year. It can cost from *R850 for a business license.
Other licenses that you apply for and pay separate tariffs for including the provision of health facility or entertainment, inspection fee for Fire and Safety inspection, and the grading of the stalls or demarcated space for trading.
*Prices/ tariffs are set annually and are subject to change. You need to inquire at your local municipality about their tariffs.
The application process
According to the City of Johannesburg, the application will be forwarded to five departments to check that the requirements are met for:
- Environmental health
- Noise and air pollution control
- Public safety
- Urban planning
- Building control
Once all five departments have returned a recommendation for approval, only then your business license or trading permit will be issued.
What do you do if you are moving your food business?
For those who already have a business license in one province but would like to apply for a license for a food outlet in another province, you need to apply again at the local municipality that you want to trade-in. This is because the requirements can include having your landlord’s signed consent (where your food outlet will be), as well as consent from the Town Planning Department.
COVID-19 Opportunities: Delivery Services
The restaurant industry will experience major changes due to the COVID-19 pandemic with a shift to food delivery for many restaurants.
We take a look at what regulations restaurants will need to adhere to when delivering food.
Options available for delivery
Restaurants may deliver their own food, however according to a Food Focus article, ‘R638 Regulations Governing General Hygiene Requirements for Food Premises, the Transport of Food and Related Matters,’ regulation 638 of General Hygiene Requirements for Food Premises, the Transport of Food and Related Matters Gazette no. 41730 requires business owners to adhere to the health and safety regulations as set out in the Regulations Governing General Hygiene Requirements for Food Premises, the Transport of Food and Related Matters, taking into account standards and requirements for the transport of food. These include the prohibition of transportation of food:
- In a vehicle that has not been cleaned
- Together with contaminated or waste food
- Together with poison or harmful substance
- An object that may contaminate or spoil the food
2. Other options
Register your restaurant on one of the following food delivery platforms. They are beneficial as they have a large footprint and can expose your business to new customers. However, take note that these delivery platforms operate within a certain radius and take commission for handling delivery.
- Uber Eats
- Mr Delivery
Access Unilever’s Food Delivery Template. Available here for download.
You can also see below, the Ultimate Legal Guide to opening a Restaurant in South Africa
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.