Why should government's regulations be observed when setting up a restaurant?

One reason is that you might not be allowed to open. There are many other reasons. You need to follow health and safety for the good of your staff and customers. If you have poor standards, people will not come to your restaurant, so following regulations helps. You restaurant is likely to get more positive reviews. Regulations give you a help in knowing what standards you need to meet and even surpass to be a very good restaurant. So there are many good reasons to follow regulations.