This article is written by Ankita, pursuing a Diploma in Business Laws for In House Counsels from LawSikho.

Introduction

Cloud kitchens may provide their website for online ordering and apps for online ordering, or accept orders through different channels for food delivery. Since the key source of revenue for these internet restaurants is through various sites for food ordering, such as Swiggy, FoodPanda, Zomato, etc. It is necessary to have a check-in system that keeps track of the deliveries and the volume produced from various platforms by the company. By the end of each day, this will save you the hassle of adding and weighing orders from different ordering systems.

Requirement to set up a Cloud Kitchen Restaurant

Location of the Property

The principal differentiators between a traditional restaurant and a cloud kitchen are place and land. A cloud kitchen does not need a high footfall and the location of prime land. Instead, as there is no House Front, it can be mounted easily in a 250-300 Sq Ft space. This reduces the cost of opening a cloud kitchen substantially. The cloud kitchen can afford to be in a fairly inaccessible area, but with high customer demand. A perfect cloud kitchen spot is created by residential areas, market backsides, unused parking lots. Instead, as this helps reduce initial investment, you can also go for a shared kitchen space.

Licensing 

It is necessary to obtain proper licenses and certification to open a cloud kitchen for several reasons. Second, you can be spared from legal troubles by keeping the licenses in order. Secondly, since customers are unable to visit the outlet themselves for hygiene, food protection and preparation inspection, proper licensing gives them a feeling of satisfaction. To persuade your clients that you cook high-quality food, you can promote them on your website and in your marketing campaigns.

Additional licensing and Registration

FSSAI, Shop & Establishment, GST Registration, Fire Department NOC, etc., are the primary licenses to start a cloud kitchen company. Before starting a food delivery business, make sure you have these. For the cloud kitchen business, it is also really necessary that this company’s concept does not allow the client to move in, so the company’s brand name is the HERO of the client. The company owner must file trademark applications for the logo, name, wordmark consisting of various colors and patterns in order to establish their distinctive presence on the market in order to protect the brand.

Staffing

You don’t need a lot of people in your cloud kitchen because there’s no House Front. You can easily open a shop with only 2-3 people focused on preparing and distributing food. The same chef will cook food for different brands when you have many kitchen brands. It’s better to start with a small team, and as incoming order volumes rise, you can add more employees. As there will be staff, the business owner would take care of all applicable rules and laws to remain compliant. A necessary and important part of the organization is skilled tax registration, TDS, PF, payroll and wage calculation.

Online ordering and promotion of the Services

Generate online orders for your cloud kitchen business once you’ve set up the kitchen and staff. Since there is no dine-in facility in a cloud kitchen and relies solely on online and telephone food orders, spending on promoting the brand for food delivery is significant, at least in the initial days. Online marketing is critical in this situation without a shop with no display boards and signage.

• Listing online food aggregators in your Cloud Kitchen
• Online Aggregators to promote your Cloud Kitchen
• Marketing on Social Media
• Optimization Search Engine
• SMS & Email Services

Essential clauses of the Cloud Kitchen Agreement

Right to use facilities 

Grants to the User and the User hereby acknowledges from company the right to use the Facilities, including, but not limited to, stoves, sinks, refrigerators, freezers, counters, individual storage areas and units, and any other facilities, equipment and services that company may provide to the User on a shared basis with other Company’s Consumer Businesses (‘Other Users’), all subject to the shared use of the Facilities. All uses made by the user of the facilities shall be in compliance with certain terms and conditions in all respects.

Inference of use by others

Both aspects of the Declaration relating to cooperation, courtesy and avoidance of disturbance in the use of the facilities shall be followed by the customer and related staff. The User and the Associated Staff shall not make any use of the Facilities which, in the sole discretion of the company, interferes with the orderly operation of the Facilities by means of the Company and/or with the use of the Facilities by other Users allowed to do so.

Inspection and Removal of certain items

The User hereby grants company, its designated agents and all local, state or federal government entities with authority over company and its operations the right to inspect any property belonging to the User and/or Associated Staff present or stored at the Facilities at any time and without notice to the User, except as may be necessary by applicable law. The right of inspection mentioned above shall apply to any private or semi-private storage area or device, whether or not the User or the Associated Staff has independently obtained the use of which has been granted to the User by the company. The User hereby authorizes Company, in its sole discretion, to take such steps as may be appropriate to correct any unsatisfactory conditions found by such inspections and to remove and dispose of, at the sole cost and expense of the User, any User products that pose a danger to the health and safety of the users of or visitors to the Facilities.

Safety and Sanitization of food equipments

Any person comprising the User and any person comprising the Associated Personnel who shall make use of the Facilities for or on behalf of the User shall be required to complete a course on the safe and sanitary use of the Facilities, including food and equipment, known as the “Certification of the Food Safety Manager.” The User shall maintain proper food handling and safe use of the Facilities at all times.

Licensing and Permits

As long as the User and/or Associated Staff continue to use the Facilities, all permits, licenses and other regulatory approvals that may be required for the conduct of the User’s food preparation and/or processing business and the lawful use of the Facilities by the User shall be retained in good standing, including, without limitation, any required business license, sales tax license, sales tax license, seller’s legal use of the Facilities Users shall hold a Food Safety Managers Certificate or any other certificate as required at the Facilities and present a Food Safety Managers Certificate or any other certificate as required a for inspection of the Company upon request, covering all persons using the Facilities for or on behalf of the Consumer.

Fees and Security Deposit

Given the right to use the equipment, the Customer shall pay the Company in compliance with the terms of this Agreement the amount as required by the party to pay such as security deposit, cleaning fee, other facilities as may be required by the company. 

Scheduling of the time

The customer shall arrange the time to use the facilities in compliance with the requirements of this Regulation. With the conditions of the Declaration that apply. Company shall make its fair best efforts to provide access at times so reserved and scheduled by the user to the user’s use of the facilities. Company shall, however, retain the right to decide, in its absolute discretion, that all or part of the Facilities should be closed for cleaning, repair, modification of the Facilities, for required inspections, for purposes of public safety or for any other purpose that Company considers to warrant the temporary closure of all or part of the Facilities.

Signing

Entry and departure shall be made by the user and related staff. By using the back entrance to the building which houses the facilities, to and from the facilities. A sign-in sheet or similar form issued by the Company shall be used by all individuals using the Facilities on behalf of the User to register their entry into and exit from the Facilities. The user shall take all steps necessary to ensure that all employees and related personnel strictly comply with the requirements of this Regulation.

Delivery 

The user is solely responsible for harm to, and failure to, and Fitness for a specific purpose of all personal property items delivered to the Facilities for or at the request of the User, including, without limitation, the supplies and equipment needed for the food preparation or processing business of the User. If, by prior agreement with the Customer, Company decides to allow delivery of any such items or equipment to or on behalf of the User, Company shall not in any way be liable for the condition of the items or equipment thus accepted.

Termination of the agreement

This Agreement shall be terminated: 

(a) Upon expiry of the duration of validity of the Agreement:

(b) By either party on 30 days prior written notice to the other party; and/or (c) if the destruction has made the Facilities significantly unavailable for use by the Customer for the purposes of this Agreement. The duration of this Agreement and any extension period, if not extended by mutual agreement by the parties;

More clauses like this can be added as per need of the company.

Conclusion

Although relatively recent, the idea of cloud kitchens has taken over a large portion of the restaurant industry. The need for cloud kitchens is important, particularly in the post-pandemic period, with the growing preference for home delivery food with the best safety standards, and so is the legal compliance with the same. Whether it is an aggregator-based model or a virtual kitchen model or an outsourced model, adhering to a strong legal structure can be a differentiating factor among competitors in order to remain ahead in this competitive market. Low costs and high benefits are involved in cloud kitchens.

---

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: