Cloud Kitchen- Gaining Prominence amidst the Global Impasse. Let's learn the basics of it.

The Universal crisis caused by COVID-19 has led to revolutionary changes in the way the restaurant industry operates. With restaurants and hotels being shut, dark kitchens, ghost restaurants or cloud kitchens are increasingly becoming more relevant. Even five-star chains across the country are counting on delivery operations to survive the crisis. The Oberoi Bengaluru, the Taj Group of Hotels, The Park Hotel and many other top chains are delivering their most popular dishes to customers’ doorsteps in the wake of the ongoing nationwide lockdown. As India’s largest cities have been shut, there is likely going to be an even sharper dip in sales than seen in 2009.

The online food delivery market is projected to grow from a $35 billion industry to $365 billion by 2030, globally, and restaurants’ food delivery sales are growing more than three times the rate of on-premises revenue. Considering the high rentals and the increasingly tightening margins, restaurant operators are now closing up the storefront altogether and moving towards the more economically profitable, Cloud Kitchen business. Cloud kitchens thereby are becoming the need of the hour.

 

Here’s All You Need to Know to Run a Successful Food Delivery Business in India

What Is A Cloud Kitchen

A cloud kitchen, also known as the ghost kitchen, dark kitchen, virtual restaurant, is a delivery-only restaurant format that offers no dine-in facility. Cloud Kitchens accept orders online or through telephone. They primarily rely on online food aggregators such as Swiggy, Zomato, Ubereats and/or websites or mobile apps to accept online orders. 

Cloud kitchens are considered as a low investment, low risk, yet high on profit format since the cost of setting up a cloud kitchen is significantly less as compared to a traditional dine-in or takeaway restaurant.

Cloud kitchens may have their online ordering website and online ordering app or accept orders through various food delivery platforms. Since the primary source of revenue for these internet restaurants is through various food ordering platforms such as Swiggy, FoodPanda, Zomato, etc., it is important to have a check-in system that keeps track of the deliveries and the volume the company generates from different platforms. This will save you the trouble of adding and measuring orders from various ordering systems at the end of each day.

               

The cloud kitchen business provides restaurateurs the opportunity to experiment with different formats and concepts, which has in turn, given birth to varied food delivery business models.

Starting A Cloud Kitchen Business

The low investment and risk, along with the ease in replicating and scaling the business make cloud kitchen, one of the most profitable food business formats in the food industry.

Here are the things you need to consider to open a cloud kitchen business in India.

(i) Location & Property

Undoubtedly, the location and property are the biggest differentiators between a traditional dine-in/takeaway restaurant and a cloud kitchen. A cloud kitchen does not require a location with a high cricket stadium and prime property position. Rather, it can very easily be set up in a 250-300 Sq Ft space since there is no Front of the House.

The cloud kitchen can be in a fairly inaccessible area, but with high customer demand, particularly for a specific kitchen. Residential areas, market backsides, unused parking lots make a perfect cloud kitchen spot. Instead, you can also go for a shared kitchen room, as this helps reduce initial investment.

 

(ii) Licenses 

For many reasons, obtaining proper licenses and certification is important to open a cloud kitchen. Second, getting the licenses in order will save you from legal difficulties. Second, because consumers can not visit the outlet themselves to test for sanitation, food safety and preparation, proper licensing gives them a sense of satisfaction. You can promote these on your website and in your marketing campaigns to convince your customers that you prepare high-quality food.

The major licenses required to start a cloud kitchen business are FSSAI, GST Registration, NOC from the fire department, etc. To ensure that you have these in place before starting a food delivery business.

1.    FSSAI: Food Safety and Standards Authority of India. FSSAI Licenses are mandatory for food-related business in India and must be obtained on behalf of the company and its owner. The license period can range from 1 year to 5 years and must be renewed before expiry. It’s also nice to mention FSSAI on the packaging and invoice to build confidence in our customers about our offers.

2.     GST: GST registration is mandatory for any business in India and also it is recommended to file all the company related taxes timely. GST must be submitted weekly, quarterly and annually. GST also helps to procure licensed vendors, as it reduces the tax amount if all parties have a GST number. Upon obtaining a bank account, we will apply for a GST number.

3.    Trade License: Every business will require to possess a trade license, and so does the cloud kitchen. This can be obtained from the local municipal office by furnishing all necessary documents. Apart from the cost, we might need some extra money to get the job finished. It is a one-time job and its kind of mandatory legal action.

4.    Fire and Safety License: Now it’s not mandatory to start with, but it is great to save yourself from future troubles. This is part of the law, and fire and human health agreements are compulsory for any workplace.

5.     Trademark registration is also very relevant for the cloud kitchen company because the idea of this company doesn’t allow the customer to step in, so the brand name of the business is the customer’s HERO. To protect the brand, the business owner must file trademark applications for the logo, name, wordmark consisting of different colors, patterns to create their unique identity on the market.

 

(iii) Kitchen Equipment & Packaging 

The kitchen equipment depends on the type of cuisine you serve. The basic equipment required to start a cloud kitchen is – stove and oven, refrigerator, knives, etc. Here is a full list of kitchen equipment to operate a food delivery company.

The packaging is a vital part of running a food company. No matter how good the food is, it will end up destroying the whole consumer experience and giving the company a bad name. Packaging also depends on the food type. You’d need plastic containers, bottles, spoons, etc. to ensure proper food packaging.

Because there’s no House Front, you don’t need many people in your cloud kitchen. Only 2-3 people concentrated on preparing and distributing food, you can easily open a shop. When you have several kitchen brands, the same chef will prepare food for various brands. Starting with a small team is best, and you can recruit more staff as incoming order volumes increase.

 

(iv) Staff

Since there would be employees, to stay compliant, the business owner will take care of all relevant rules and laws. Professional tax registration, TDS, PF, Payroll and wage measurement becomes an essential and critical part of the business.

Salary Accounts, PF, etc: Unfortunately, this is the last thing most cloud kitchen owners do as the blue-collar employees aren’t too concerned about paying taxes and getting Provident Fund. When you’re in serious business with a long-term target, it’s important to start the cycle from day 1. It helps the team in the long run, building trust and friendly relationships with everyone.

 

 Generating Online Orders And Marketing

Once you’ve set up the kitchen and staff, generate online orders for your cloud kitchen company.

Since a cloud kitchen doesn’t have a dine-in facility and relies solely on online and telephone food orders, spending on promoting the food delivery brand is important, at least in the initial days. Without a shop with no display boards and signage, online marketing is important in this situation.

a)     Listing Your Cloud Kitchen On Online Food Aggregators

b)     Promoting Your Cloud Kitchen On Online Aggregators

c)      Social Media Marketing  

d)     Search Engine Optimization

e)     Loyalty Programs And SMS & Email

 

Technology Needed For A Cloud Kitchen

Since a cloud kitchen typically relies on online food websites and mobile apps to generate orders, technology plays a crucial role in this business. A cloud kitchen requires an integrated online restaurant ordering system for accepting online orders and for aiding operations

While cloud kitchens involve low risk and high benefit, one should be alert to the competition ahead to make profits. A cloud kitchen will be the next theme. If you plan to grow your company or start a food channel, the cloud kitchen is the safer and wiser alternative considering that you keep it compliant.

 

 Optimizing Food Delivery

Preparing food while generating orders is just one part of the food delivery business. The bigger challenge here is ensuring that your food is delivered to your customers on time and in perfect condition. You can either tie-up with third-party aggregators or logistics company or have your in-house food delivery fleet to fulfill orders. 

Packaging plays a crucial role in ensuring a great delivery service. You need to ensure that the food has been packaged and handled well when it is delivered to the customer.

Conclusion:

Admittedly, the FnB industry seems to be all set to witness the second round of the Food Tech revolution. With the increasing internet penetration, the demand for food delivery will further continue to Tier 2 and Tier 3 cities. 

While cloud kitchens involve low risk and high benefit, one should be alert to the competition ahead to make profits. A cloud kitchen will be the next theme. If you plan to grow your company or start a food channel, the cloud kitchen is the safer and wiser alternative considering that you keep it compliant.

DISCLAIMER- This write-up is based on the understanding and interpretation of the author and the same is not intended to be professional advice.

Regards,

Shubham Katyal

ACS, B.COM

Legal& Secretarial Consultant

Registration Process Under Shops And Establishment Act

                                                                                                                                                                     By Abha

Applicability of Shops & Establishment Registration

Shops and Establishment Act regulates shops, commercial establishments, hotels, clubs, restaurants, eating houses and other places of public amusement or entertainment. Shops and Establishment registration is covered under the state laws of India. Every state has its different set of laws for Shops and Establishment and they are to be followed properly. The employer of every shop/establishment is required to get itself registered under this Act within 30 days of commencement of work. Registration under the Shops and Establishment Act in the case of small businesses including proprietorship firms in the unorganized sector, it serves as a proof for the existence of the business. 

The Shops and Establishment Act registration controls various terms of employment such as payment of wages, work hours, the interval for rest, meals, holidays, leave, and other situations of work of individuals working in various establishments. This registration is necessary for each business place of work excluding those who already come under the Factories Act 1948. Shops & Establishment Registration Certificate is a basic license and required to submit while applying for other licenses. For instance, it is required by most banks as proof of commercial business for the opening of the current account.

Benefits of the Shops & Establishment Registration

1. Proof of Legal Entity-  Shops & Establishment Registration Certificate acts as a legal entity proof of Shops and other commercial establishments which gives a right for doing the business in that particular area.

2. Business Bank Account- This fulfills one of the documentation requirements of banks to open a current bank account which is legal entity proof. As per RBI norms, each shop & establishment is required to open a separate bank account for the daily transactions. Based on the Shops & Establishment registration certificate, you can easily open a current business bank account.

3. No Compliance Cost- Presently, after getting registered shops/establishments do not require any compliance. So, there will be only a one-time cost i.e. cost of obtaining the Shops and Establishment Registration Certificate.

4. Smooth inspections- If an inspector from the state government and local municipality conducts inspection visits for checking the proper working of Shops/establishments and you have the Shops & Establishment Registration Certificate, then you can quickly get over the inspections every time as you are already registered.

5. Government Benefits- Each state has a DIC Department which acts as a policymaker in the respective state for all small business. The Shops License Registration Certificate enables easy availment of various government benefits.

6. Online Facility- Most of the states provide the facility of online Registration under Shops and Establishment, which makes the whole process hassle-free and time-efficient.

Documents Required for Shops & Establishment Registration

Some states have a 100% online process or some states are still following the manual procedure. Since, Shops and Establishment is a state matter and hence, documents and fees criteria differ from state to state. However, the following are a set of documents, which are almost necessary for every state:

1. Photograph of the Shop/Establishment (Any photo of office, Shops, building, etc.)
2. Certificate of Incorporation, MOA & AOA of Company / LLP Agreement of LLP
3. Copy of PAN card
4. List of Directors or Partners and their ID & Address proof
5. Copy of Board Resolution or Partners Consent
6. Address proof of Company/LLP/Partnership/Proprietorship
7. Details of all the employees. if any
8. Proof of address of establishment (Sale deed, rent agreement, NOC)

Apart from the above information, the inspector may ask for further information and the same shall be supplied by the applicant. The fee for the whole process varies on how many workers are on employment in that particular organization/business.

Registration procedure for the Shops and Establishment Act

The following is the registration process for the Shops and Establishment license:

1. Check Applicability- Once you have started your business, then the first thing you must do is to check for necessary licenses. Almost within 30 days from the date of commencement of any business, the employer of the commercial shop/establishment should send an application to the inspector in-charge.

2. Procurement of Documents and Filing of Application- You are required to arrange all the necessary documents (list of documents required mentioned above). The application should be in the agreed form. Moreover, the employer should submit it along with the given fees. The Shops and Establishment Act is a state actor and hence, the process for each state is different. Indeed it depends on the type of establishment/business and the state in which you are applying for registration.

On the satisfaction of the inspector in-charge, the registration of the Shops and Establishment will be successful and the employer will get a registration certificate. Prominently, the registration certificate must be displayed at the establishment, and the employer is required to renew the license periodically as per respective state law. 

Amendment in Shops & Establishment Registration

If there is any change in details submitted at the time of making an application, such as a change in address, the employer is required to apply for an amendment in Shops and Establishment Registration Certificate with the concerned officer, within the prescribed time. In case of closure of the establishment, the employer is required to apply for surrender of the certificate to the respective officer. The officer on being satisfied with the correctness of the application will issue a fresh Registration Certificate for amendment or will serve an order for the cancellation of an existing registration.

Conclusion

The Shops and Establishment Act regulates conditions of work, lists the rights of employees in the unorganized sector and provides a list of obligations for every employer. However, this is best suited for shops all across India, every benefit making foundations, lodgings, bistros, eating circles and joints, eateries, cinemas and for all public places of entertainment.

DISCLAIMER- This write-up is based on the understanding and interpretation of the author and the same is not intended to be professional advice. 

Regards, 

ABHA TYAGI

(ACS, B.COM) 

Legal & Secretarial Consultant 

Finance Minister announces several relief measures relating to Statutory and Regulatory compliance matters across Sectors in view of COVID-19 outbreak

The Union Finance & Corporate Affairs Minister Smt. Niramla Sitharaman today announced several important relief measures taken by the Government of India in view of COVID-19 outbreak, especially on statutory and regulatory compliance matters related to several sectors. While addressing the press conference through video conferencing here today, Smt. Sitharaman announced much-needed relief measures in areas of Income Tax, GST, Customs & Central Excise, Corporate Affairs, Insolvency & Bankruptcy Code (IBC) Fisheries, Banking Sector and Commerce.

The Minister of State for Finance & Corporate Affairs Shri Anurag Singh Thakur was also present besides Shri A.B. Pandey, Finance Secretary and Shri Atanu Chakraborty, Secretary, Department of Economic Affairs.

Following are the decisions with respect to statutory and regulatory compliance matters related to various sectors: —

Ministry of Corporate Affairs

• No additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/ LLPs at large, but also enable long-standing noncompliant companies/ LLPs to make a ‘fresh start’; 
• The mandatory requirement of holding meetings of the Board of the companies within prescribed interval provided in the Companies Act (120 days), 2013, shall be extended by a period of 60 days till next two quarters i.e., till 30th September;
• Applicability of Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of from 2019-2020 notified earlier. This will significantly ease the burden on companies & their auditors for the year 2019-20.
•  As per Schedule 4 to the Companies Act, 2013, Independent Directors are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For the year 2019-20, if the IDs of a company have not been able to hold even one meeting, the same shall not be viewed as a violation. 
• Requirement to create a Deposit reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020.
• Requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30th April 2020, may be done so before 30th June 2020. 
• Newly incorporated companies are required to file a declaration for Commencement of Business within 6 months of incorporation. An additional time of 6 more months shall be allowed. 
• Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Companies Act, shall not be treated as a violation. 
• Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID 19, it has been decided to raise the threshold of default under section 4 of the IBC 2016 to Rs 1 crore (from the existing threshold of Rs 1 lakh). This will by and large prevent triggering of insolvency proceedings against MSMEs. If the current situation continues beyond 30th of April 2020, we may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of 6 months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.
• Detailed notifications/circulars in this regard shall be issued by the Ministry of Corporate Affairs separately.

GST/Indirect Tax

• Those having aggregate annual turnover less than Rs. 5 Crore Last date can file GSTR-3B due in March, April and May 2020 by the last week of June, 2020. No interest, late fee, and penalty to be charged.
• Others can file returns due in March, April and May 2020 by last week of June 2020 but the same would attract reduced rate of interest @9 % per annum from 15 days after due date (current interest rate is 18 % per annum). No late fee and penalty to be charged, if complied before till 30 June 2020.
• Date for opting for composition scheme is extended till the last week of June, 2020. Further, the last date for making payments for the quarter ending 31 March, 2020 and filing of return for 2019-20 by the composition dealers will be extended till the last week of June, 2020.
• Date for filing GST annual returns of FY 18-19, which is due on 31 March, 2020 is extended till the last week of June 2020. 
• Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws where the time limit is expiring between 20 March 2020 to 29th June 2020 shall be extended to 30th June 2020.
• Necessary legal circulars and legislative amendments to give effect to the aforesaid GST relief shall follow with the approval of GST Council.
• Payment date under Sabka Vishwas Scheme shall be extended to 30 June, 2020. No interest for this period shall be charged if paid by 30 June, 2020.

Income Tax 

• Extend last date for income tax returns for (FY 18-19) from 31 March, 2020 to 30 June, 2020. Aadhaar-PAN linking date to be extended from 31 March, 2020 to 30 June, 2020. 
• Vivad se Vishwas scheme – no additional 10% amount, if payment made by June 30, 2020.
• Due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act, Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law where the time limit is expiring between 20 March 2020 to 29 June 2020 shall be extended to 30th June 2020.
• For delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between 20th March 2020 and 30 June 2020, reduced interest rate at 9% instead of 12 %/18 % per annum ( i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged for this period. No late fee/penalty shall be charged for delay relating to this period.
• Necessary legal circulars and legislative amendments for giving effect to the aforesaid relief shall be issued in due course.

Customs 

• 24X7 Custom clearance till end of 30 June, 2020
• Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing applications, reports, any other documents etc., time limit for any compliance under the Customs Act and other allied Laws where the time limit is expiring between 20 March 2020 to 29th June 2020 shall be extended to 30th June 2020. 

Financial Services 

• Relaxations for 3 months
• Debit cardholders to withdraw cash for free from any other banks’ ATM for 3 months
• Waiver of minimum balance fee 
• Reduced bank charges for digital trade transactions for all trade finance consumers

Department of Fisheries 

• All Sanitary Permits (SIPs) for import of SPF Shrimp Broodstock and other Agriculture inputs expiring between 01.03.2020 to 15.04.2020 extended by 3 months
• Delay upto 1 month in arrival of consignments to be condoned.
• Rebooking of quarantine cubicles for cancelled consignments in Aquatic Quarantine Facility (AQF) Chennai without additional booking charges
• The verification of documents and grant of NOC for Quarantine would be relaxed from 7 days to 3 days Department of Commerce Extension of timelines for various compliance and procedures will be given.

Detailed notifications will be issued by Ministry of Commerce.

Source: PIB

DISCLAIMER- This write-up is based on the understanding and interpretation of the author and the same is not intended to be professional advice. 

Regards, 

Shubham Katyal 

(ACS, B.COM) 

Legal & Secretarial Consultant