The question arose concerning a Kosher restaurant on Kings Highway that built a Sukka on the sidewalk in front of the store, in the public domain. Is it permissible to build a Sukka in the public domain, and may one use such a Sukka on Sukkot?
The Talmud Yerushalmi in Masechet Sukka (listen to audio recording for precise citation) tells of a Jew named Gamliel who built a Sukka in the marketplace. Rabbi Shimon Ben Lakish passed by, saw the Sukka, and scolded Gamliel, rhetorically asking who allowed him to build a Sukka in the marketplace.
On the basis of this episode, the Rama (Rabbi Moshe Isserles, Poland, 1525-1572) writes (Orah Haim 637; listen to audio recording for precise citation) that one should not construct a Sukka in the public domain. He adds, however, that if a person did construct a Sukka in a public area, it nevertheless may be used in fulfillment of the Misva of Sukka. The later authorities debate the question of whether one would recite a Beracha when using a Sukka in such a case. The Magen Abraham (commentary by Rav Avraham Gombiner, Poland, 1637-1683) maintained that one does not recite a Beracha when using a Sukka constructed in a public domain. He contends that even if we can assume that all the local Jews implicitly granted permission to the Jew to build his Sukka on that site, we certainly cannot make such an assumption about the local gentiles. As such, the Sukka was built illegally, and thus a Beracha should not be recited. However, the Mishna Berura (commentary by Rav Yisrael Kagan, 1839-1933) cites many other authorities who dispute the Magen Abraham’s ruling. In their view, although one should not build a Sukka in public property, if such a Sukka was built it may be used with a Beracha.
Ideally, then, restaurants that wish to build a Sukka should do so on their premises. If this is not possible, then they should apply for permission from the local authorities, from whichever municipal body that is responsible for the public property in question. If permission is granted, then certainly the restaurant may build the Sukka and the Sukka is perfectly valid. And even if formal permission is not granted, so long as the authorities do not protest, the Sukka is considered legal and may be used, with a Beracha. Since they see the structure and choose to ignore it, they in effect grant implicit permission to the Jew to have a Sukka at that site, and the Sukka is therefore perfectly valid for use.
Summary: A restaurant that wishes to build a Sukka for its customers in a public domain should ask for a permit from the relevant municipal body. Nevertheless, even if formal permission was not granted, so long as the authorities do not protest against the Sukka it may be used, and one may recite a Beracha when using this Sukka.