By Mehjabeen Haider / Aman Ahmed
The Food Service/Business Industry has been rapidly growing especially with the internet boom and technology penetration.
The food tech boom and the reasons for this growth in Online Food Business is because of ease of ordering, affordable price, quick delivery and access to various kinds of food to consumers.
FBO
A Food Business Operator (“FBO”) as per Food Safety Act 2006 has been defined “as any undertaking, whether private or public, for profit or not, carrying out any of the activities related to any stage of manufacture, processing, packaging, storage, transportation, distribution of food, imports and including food services, sale of food, or food ingredients”.
An E-commerce FBO is simply a FBO carrying out business through E-commerce.
Cloud Kitchen
Cloud Kitchen or ghost kitchen is a food outlet operating online through E-commerce Point of Sale (“POS”), Cloud Kitchens are witnessing an explosive growth these days. Cloud Kitchens take orders by these service providers through cloud-based server (without retail dine-in and pickup location) which directly links with the user’s profile. As per Red Seer Management Consulting’s report the Cloud Kitchen industry is projected to become $2 billion industry from a $400 million in 2019. The industry has received a major push due to Covid-19 causing a surge in food orders and drop in dine-in preference. In addition to this Cloud Kitchens offer low operations cost, simplified menu, no overhead costs, competitive pricing and great food quality.
LEGAL COMPLIANCES
1. GST Registration
Under Section 22 of the Goods and Service Tax Act, 2017, business providing services having an overall turnover of more than Rs. 40 lakhs (Rs. 10 lakhs in North-East and hilly states) has to be registered for GST. Benefits such as input tax credit and other GST related benefits can be obtained through registration. GST registration can be done through online GST portal.
Documents Required:
- Ownership docs including electricity bill, tax receipt (Business Owned)
- Rent agreement with electricity bill of the owner (Rented Business)
- NOC in case the property is not owned nor leased
2. Trademark Registration
Registration of trademark becomes vital considering the ever-increasing competition in the sector and will also provide a unique identity to the entity in the market which will in turn help in the safeguarding of the brand. One can expect a certain degree of consolidation of the sector and trade mark or brand registration can help in this.
3. Food License
All FBO’s are required to obtain Food license from FSSAI through Food Licensing and Registration System (FLRS), which is an online system launched by FSSAI to facilitate FBOs license / registration certificate and tracking system.
FBO’s providing listing services to sellers, restaurant and manufacturers etc. are not required to own food license. Furthermore, all FBO’s are required to display their registration numbers on their e-commerce website/application.
4. Packaging Requirements
FSSAI (Packaging) Regulations, 2018 aims to restrict and regulate the use of materials in packaging of foods. The Regulations provide a detailed list of packaging materials that may be used for the packaging of specific categories of food products and also prescribe specific requirements/ restrictions in their regard. It prohibits the use of recycled plastics including carry bags for packaging, storing, carrying or dispensing articles of food. Further, considering the carcinogenic effect of inks and dyes, these Regulations prohibit the use of newspaper and such other materials, commonly used for packing/ wrapping food articles and prescribe adherence to the applicable Indian standard for printing inks for use on food packages.
5. Delivery Compliance
Considering food safety and consumer priority, FSSAI has notified guidelines for delivery by E-commerce FBOs for compliances.
- An indicative image of the food on delivery E-commerce platform should be provided enabling the customers to eliminate any misrepresentation.
- Mandatory information as per the FSSAI Act displayed on the E-commerce platform. For eg. shelf life and directions from preservation etc.
- Only fresh food can be delivered by restaurants and E-commerce platforms. The food should have a remaining shelf life of 30% (thirty per cent) or should be delivered 45 (forty-five days) prior to the expiry date.
- The food should only be handled and delivered by trained personnel and should reach consumers safely with utmost caution from the time of preparation to delivery.
Further, FSSAI issues frequent advisories and notifications for delivery on the basis of prevailing conditions. For eg. Number of advisories are issued to restrict spreading of Covid-19.
6. Data Privacy
Technology plays a crucial role in functioning of E-commerce FBO’s. For Cloud Kitchens, orders are facilitated through various POS including websites/apps and third-party aggregators. In addition to this, sales and location data is very important to FBOs to plan their business and target the consumers. Therefore, the whole business relying on the data, these entities are required to comply with IT and data privacy laws. A robust IT infrastructure should be in place to store and process the consumer data. A privacy policy should be adopted provisioning for following:
- Purpose of storage
- Consent
- Disclosures
- Third party sharing
- Payment processing
- Security.
7. Fire and Safety (Cloud Kitchens)
License with regard to fire and safety has to be obtained by the service provider from the local municipal office stating the information of the premises and the safety norms complied with by the service provider.
8. Shops and Establishment Act (Cloud Kitchens)
Registration has to be made by the service provider to the local chief inspector or other inspectors in accordance with the provisions of the Shops and Establishment Act of the respective State. Registration certificate shall be granted upon successful verification by the government officials.
Documents Required:
- Pan Card
- Identity Proof
- Address Proof
- Details of the employees
9. Trade License (Cloud Kitchens):
Trade license has to be obtained in order to run the business in the market and are usually obtained through the local municipal corporation with the inclusion of certain fee.
10. CONSUMER COMPLAINT:
All the E-commerce based FBO’s should have a consumer complaint redressal mechanism in place to promptly address and resolve the complaints received from the consumers.
The Special Edition is only for information purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein. Endeavoured to accurately reflect the subject matter of this alert, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this. This isn’t an attempt to solicit business in any manner