Out-of-state restaurateurs find fewer rules, surprise costs in South Florida

Experts agree one of the incentives driving restaurateurs to move from the Northeast to South Florida is the region’s comparatively lax regulations on opening new businesses.

“Generally speaking, South Florida is one of the most restaurant-friendly [areas] in the country,” said Omar Ali-Shamaa, a lawyer who represents restaurants at Miami-based Wolfe Pincave. “I haven’t really encountered obstacles we have here that aren’t in other states. It’s usually the opposite.”

What’s more, some local municipalities have rolled back requirements to make opening a business even easier, said Ali-Shamaa said.

For example, most cities still allow eateries to conduct business with increased outdoor seating capacities first instituted in the early months of the Covid-19 pandemic. Restaurateurs from states such as New York – which currently does not allow indoor dining and is limited by cold weather – see this rolled-back regulation as a major draw to the region.

This in addition to the fact that local city and county governments have sped up the process for business owners to be approved to open new restaurants.

“The timeline has gotten a little quicker,” he said. “Inspectors are going out a little faster, and they’re allowing more variance on things like capacity, which speeds up the process.”

Making the process even quicker, many out-of-state restaurateurs are moving their businesses into second-generation spaces, meaning retail real estate where another restaurant was the previous tenant.

In many cases, that means the restaurant owner doesn’t need to apply for new permits. Owners instead transfer the operating licenses from Company A to their Company B, which is a cheaper process.

Mario Carbone, co-owner of New York-based Major Food Group, which opened its first South Florida eatery Tuesday, previously said the group was able to open its restaurant in just three months. It was a second-generation space, which facilitated the quick turnaround, he said.

The caveat

Not everything is less expensive and easier for restaurants coming to South Florida, however.

Luis Gazitua, principal at Coral Gables-based JAG Insurance, said many of the out-of-state restaurateurs he’s dealt with all run into the same sticker shock: hurricane insurance.

“After I give them the quote on hurricane or flood insurance, many can’t believe how expensive it is,” he said.

Hurricane and flood insurance isn’t unique to South Florida, but the premium rates are higher along the Florida coast than anywhere else in the country, Gazitua said. He added that a restaurant owner could oftentimes see 80% of their annual insurance bill go toward hurricane insurance.

“It’s as expensive as it gets,” he said.

Because of this, Gazitua said, many new restaurants will choose not to carry hurricane or flood insurance during the first or second year in business. It oftentimes takes about two years for a restaurant to turn a monthly profit, so in the meantime, owners will skip paying the high insurance premiums.

He advised that if restaurateurs are thinking about skirting hurricane or flood insurance as part of their opening costs, they should consider opening farther inland.

“If you’re looking to avoid buying certain policies, then I would look to mitigate potential risks,” he said. “A restaurant inland is not going to have the same premiums as somewhere like Miami Beach.”