CLOUD KITCHEN AGREEMENT

CLOUD KITCHEN AGREEMENT

HOW TO DRAFT A CLOUD KITCHEN AGREEMENT?

As soon as internet stepped in, its possibilities expanded in multi-dimensional area. The cloud system is one such possibility which internet opened up for us. We store our photos, stream the movies and even conduct our businesses in the cloud. But to our amaze, its also the one where we order our food, and most of us do not realize it.This has opened a new opportunity for people who want to start a business in food & beverages industry, but do not have finances for that.

 

WHAT IS CLOUD KITCHEN?

Cloud kitchens are commercial facilities which are purposely built to produce food meant for delivery specifically. These are also known as ‘ghost kitchens’, ‘shared kitchens’ or ‘virtual kitchens’. The brands which operate within them for the delivery-only food are called virtual restaurants[1].

The cloud kitchen refers to a place where food is prepared and then delivered at door steps via taking orders through calls or online platforms. They are primarily not into catering dine-in services, their main work is food preparation and delivering it or tie-up with the food ordering platforms such as Uber Eats, zomato, swiggy, dine out etc.

 

DEMAND FOR CLOUD KITCHEN

Since the pandemic has knocked our doors, our affairs with external gatherings have taken a toll. People have the fear of going out to dine-in and pre-corona behavior will take time to come again.

In this situation, when being at home and maintaining physical distancing is a new normal, the cloud kitchen comes as the savior for the food lovers. The food delivery at door steps has been the choice of the people today. Though, pre-corona times too had the craze of food order at home, but now it has set a rapid hike and become a necessity for the world. This resulted in rise in the number of cloud kitchens as it is one of the cost-effective means for making profit in this business of food & beverages.

Here in cloud kitchen, there is no worry of investing money in the ambience as its required in the restaurants, no worry of table management, location and investment  in giving the comfort to the customers.

 

WORKING OF THE CLOUD KITCHENS

  1. Cloud kitchens are commercial food production[2] facilities which are centralized and licensed. Here many restaurants rent space to prepare menu items which are delivery-optimized. There could be many virtual restaurants operating under one roof of a restaurant and the kitchen may seem like the breeding place shared by many providers. There each provider is working for its own orders coming from the customers.
  2. The menu of cloud kitchens are optimized for the ease of production and to maintain the reliability of the quality of food when delivered. The out-of-town located cloud kitchens generally offer drive parking, driver waiting areas and even check-in stations for the flawless driver pick-up. These all are designated for delivering the food to the customers as fast as possible.
  3.  Cloud kitchens are technology-enabled. They really make great use of the food delivery apps such as UberEats, zomato[3] etc. Through all these, they try to find out the choices of food which are in the demand in a particular place, like in their neighborhood. This data leads to their real-time adaptation and optimization.

 

BUSINESS MODEL OF CLOUD KITCHEN

  1. Cloud kitchens have different approaches. They either attach delivery-only brand with the existing restaurant kitchen for running a commissary kitchen/cloud kitchen housing multiple brands. This results in taking advantage of their existing kitchen, staffs, storage, ingredients by just adding delivery-only brands to their dine-in offering. This is the cloud kitchen version 1.0.
  2. When a kitchen does not have any physical store, food truck, or pick-up location for their customers. This version of cloud kitchen is the true version. This dedicated cloud kitchen does not have extra burden which cloud kitchen version 1.0 has.
  3. There are multiple entrepreneurs who rents the kitchen space to many third-party brands and this acts like a co-working space for the ones who prepare food. This is like these entrepreneurs are landlords, though if they want their rented brands to succeed, they may need to promote and provide services to them.

 

CLOUD KITCHEN AGREEMENT

This is an agreement which was made to have a lawful process in the conduction of the business in the cloud kitchen. This agreement defines the rights which are provided to the users while using the kitchen space for its food preparation for delivery. This also mentions the clauses which keep the smooth process of working of multiple brands under the same roof.

In whole, it’s a comprehensive agreement which does not take care of the users of the rented kitchen only, but also try to maintain checks and balances in their working to see whether they are working properly or not. In addition to that, it also tries to protect the interests of the customers.

 

DRAFTING OF CLOUD KITCHEN AGREEMENT

Drafting of cloud kitchen agreement requires the insertion of a few essential clauses to maintain the relevance of the cloud kitchen agreement and which results in the favour of both the company which is renting the premises as well as the customers. The customers who do not have any mean to connect physically with these virtual restaurants really need the assurance that these are not delivering the bad items to them. 

Therefore, a cloud kitchen agreement should be taking care of the needs of everyone, whether its the company which is renting the premises, the users who are getting the area for their cloud kitchen or customers. The rights of everyone are taken care of through this agreement.

The essential clauses of the cloud kitchen agreement are mentioned below:-

  1. Right to use- The company grants the right to the user to use the facilities like using equipment, services, counters, refrigerators, stoves, sinks and many more which company provides to the users on a shared basis. These all are used by the other consumer businesses of company as well, which are also be termed as other users of the company. These all uses made by the users shall be in compliance with certain terms and conditions.
  2. Right to Inspection- The company gets the right by the users to inspect any property belonging to the user or to its available associated staff or stored at the premises at any time, without giving notice to the user, not only by itself but also by its designated agents and all local, state or federal government entities having authority over the company and its operations. In exception cases where it is necessary as per the applicable law, the notice can also be provided to the user before inspection. The company gets authorization by the user to take such steps in its discretion, which the company thinks appropriate to correct any unsatisfactory conditions found during the inspection. It also gives the authority to the company to dispose any user product which pose a danger to the health and safety of the other users or the visitors to the facilities.
  3. Users to maintain safety and sanitization of food equipment:- The user as well as its associated personnel who shall use the facilities on behalf of the user shall require a completion of a course on the safe and sanitary use of facilities , which includes the food equipment as well. This course completion comes up with “Certification of the Food Safety Manager”. The user is also requirement to maintain proper handling of food and safe use of the facilities available.
  4. Users to pay fees and deposit the security:-The users are required to pay the company that amount which is in compliance with the terms of this cloud kitchen agreement. It consists of security deposit, other types of fees and other amount for the facilities as may be required.
  5. Responsibility of the users related to the delivery:- The user is the sole responsible person for the harm and fitness of all personal items delivered to the facilities for the user on its request. If company gives assent to the user for the delivery of equipment or items to the facilities by prior agreement,the company shall not be liable for the condition of items accepted.
  6. Right to access and restrictions to use:- The agreement also provides for the highly restricted access to the kitchen space, taking into the consideration of health and safety perspective. The company also inserts the clause which can restrict the user to use a particular place due to some reasons.

There are many other clauses as well which can be included in the cloud kitchen agreement for making this agreement beneficial for all the three parties and also giving a bit privilege to the company as its is the one which is providing the facilities to all the users. So, what would be in advantage of all the parties as well as the work being conducted is legal or not, that is all taken care of while drafting the cloud kitchen agreement.

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TERMINATION OF THE AGREEMENT

One most important clause is also there in the cloud kitchen agreement which talks about the termination of the agreement, the time period and the criteria which can lead to the termination of the agreement.

This Agreement shall be terminated at-

  1. After the expiry of the duration of the validity of the Agreement;
  2. It can be terminated by either party on 30 days prior written notice to the other party;
  3. If the facilities are destructed by the user.

Many more clauses like this can be inserted as per the desire of the company when it comes to the termination of the agreement.

 

CONCLUSION

The idea of cloud kitchen though emerged recently but its really covering the market of a larger proportion of restaurant industry. In this post-pandemic period, when avoiding going out has become a necessity, at that time, this concept of cloud kitchen is ruling the market.

The home delivery is preferred rather than dining-out, this change is working more in the favor of the cloud kitchens, which were already making a stronger base in pre-corona era. In this time, when more restaurants are moving towards this cloud kitchen concept, its required to have a strong legal structure adhering by the food providers, so that they come out more strongly n this competitive market.

This is really a boosting market which involves low costs and gives the more profits. So, investing in that with making itself legally strong through the agreement will result in the rise of the businesses of this industry.

 

 

- BY URVASHI

 

[1] Restaurants which do not serve food physically on a location

[2] It involves performing chemical and mechanical operations on food in a huge scale as to preserve it.

[3] All these are known food suppliers which act as a platform to deliver the food by tie-up with the food producers