As with any commercial kitchen, the cloud kitchen space can be broadly
divided into two – the preparation area and the storage area. Kitchens that have
a cold storage area may also have a freezer room. Kitchens may also have
specific areas to receive delivery of raw materials, packaging and labelling area,
and areas from where the cooked food is sent out to be delivered to the
customer. All of this may require significant structural alterations to the
premises to create a self-contained kitchen. Lease contracts should therefore
provide that the operator of the cloud kitchen shall have the right to undertake
necessary structural alterations to the building.
Third-party users: Operators setting up commercial cloud kitchens for use by
third parties, or as part of shared kitchens, should also ensure that the lease
agreement allows for the use of the premises by third parties (i.e. the users).
Therefore, the lease agreement should include the right to license or sublicense
the premises to third party users.\
Nature of usage: Additionally, the operators should ensure that the lease
agreement should specify the nature of usage of the premises in broad terms.
Terms such as “cloud kitchen”, “ghost kitchen”, etc.” should be avoided as these
terms can be ambiguous and restrictive in nature. Instead the usage may be
described as “setting up and operating a commercial kitchen having one or
more kitchen units.” This will ensure that both single unit kitchens for use by a
single user/ operator and shared kitchens that contain multiple units for use by
multiple users are covered.
Loading bay and parking spaces: Commercial kitchens require regular supplies
to be brought in, as well as outgoing deliveries being made of packed food.
Operators should ensure that the premises has adequate ingress and egress
spaces, and appropriate areas that would be used as loading bays. Loading
bays may be marked out in a map attached to the contract. Lease deed may
also provide that the loading bays should not be used for storage.
Cloud kitchens depend entirely on deliveries to reach their products to their
end customers. Typically deliveries are conducted using two-wheelers. Lease
agreements should therefore provide for adequate parking space/ slots for the
delivery personnel. Operators should ensure that the parking slots made
available to it are adequate keeping in view the scale of their operations.
It is therefore pertinent that the premises where a commercial kitchen is
established is a commercially licensed property and the same is operated in
compliance with the guidelines issued by local authorities. Additionally, the
operator would be required to obtain operating licenses including FSSAI
licenses, Health/Trade licenses, Fire NoCs, and PCB NoCs as may be applicable
from state to state.
The utility connections in the premises must also be commercial in nature.
These connections would be in the name of the owner of the premises, and it is
the responsibility of the owner to ensure that the proper category of
connections have been obtained, and maintained for the premises. Failure can
result in fines or disconnection of the utility services.
Technical due diligence: Adequate due diligence over the prospective premises
should enquire inter alia into the nature of the premises (commercial,
residential, or mixed), the type of utility connections provided and their
adequacy, the availability of adequate drainage and waste-disposal facilities
(for food/ oil waste), adequate extraction facilities for kitchen fumes, and
adequate facility for receipt of raw goods. Adequate availability and storage for
fresh water is also an important consideration. Appropriate provisions for
drainage and waste disposal and extraction facilities may need to be built in to
the existing structure of the premises, if not already provided. Certain premises
may also require increased additional fresh water storage to be provided.
These must be pre-negotiated with the owner, and provided in the contract.
Equipment: Furnishing a kitchen space with appropriate equipment may be an
expensive proposition for many. Operators therefore also have the option to
take on lease not only the space, but also the kitchen equipment from a third
party vendor. Operators taking kitchen equipment on rent should ensure that
the contract provides the exact specifications of the equipment they propose to
take on rent, as well as copies of their manuals, and warranty details. Delivery
of such equipment should be deemed to have been made only once the
equipment has been confirmed to be operating in the manner as desired. A
lease for a typical modular commercial kitchen setup may also include
installation and removal of the same by the vendor, and the terms for the same
should be provided in the agreement as well. The term of the equipment lease
should in no case extend beyond the term of the lease, as upon expiry of the
space lease, the operator would be required to hand-over the vacant
possession of the space to the owner.
If specialised equipment is not available in the kitchen, users should ensure that
these can be procured externally and integrated into their kitchen unit/
operations. Users may also check if the use of the kitchen units also allows
them access to cookware, in which case such items should be recorded as an
inventory in the agreement, and it would be the users’ responsibility to return/
replenish them.
Lease term: Leasing a space to set-up a kitchen and taking up a unit in a co-
working kitchen space are two distinct ways of starting up a food business.
However, as with any food business, it is best to bear in mind that many
restaurant start-ups do not make it past the first year of operations. Therefore
for self use kitchens (i.e. single unit kitchens for use by the operator itself) it is
advisable to have a smaller lease term initially for the kitchen space with the
option of renewing it periodically. This may be a critical point for negotiation
since many owners may insist on an extended lock-in period to ensure
continuous occupancy of their premises/ units. Alternatively, they may charge a
premium for a smaller initial lease term.
Loading docks can be used for receiving raw goods by prior appointment. This
is to prevent cross-contamination of produce, and to ensure that the raw
materials are safely received and in a clean and hygienic environment. Since
multiple users may require access to the loading dock, it becomes imperative to
ensure that there are no conflicts of slots either. Contracts therefore will
provide for penalties in case of usage of loading docks for purposes other than
receiving raw materials, or unapproved use of the loading dock that conflicts
with other users, or actions that adversely affects the sanitation and hygiene at
the loading dock.
Commercial kitchens are also mandated by law to ensure safe and efficient
disposal of waste products generated during the cooking process. Kitchen
waste may include spent oil, animal tissue, plastic and cardboard wastes, etc.
Contracts may require that the waste generated at the kitchen be segregated
and the disposal of the same to be carried out in the manner prescribed under
the operations manual. Failure to abide by the waste segregation and disposal
terms may incur a heavy penalty, and may even result in the termination of the
contract.
Even though the operator is required to ensure appropriate licences have been
taken for commercial kitchen operations, the user may also be required to take
appropriate licenses to undertake a restaurant business. The contract may
require that the licenses be obtained by the user as a pre-condition to the
execution of the contract. The user would be required to ensure that the
licenses remain valid for the duration of the contract, and the contract may
have provisions for termination in case of a lapse of such requisite licenses.
Signage: Since cloud kitchens do not have a dine-in facility, and no customer is
expected to visit the facility, operator may not allow for additional signage to be
displayed in the facility. The kitchen units would typically be numbered, and the
signage in place at the facility would be keeping in view of the required local
health and safety guidelines (i.e. statutory declarations, emergency numbers
and directions, etc.)
Cleaning: Cleaning will primarily be the responsibility of the user to ensure the
cleanliness of their respective units. However, the overall responsibility to
ensure the cleanliness and hygiene at the facility (including of the common
areas) shall lie with the operator. Users should ensure that such obligation of
the operator is clearly provided in the contract. Additionally, due to fears of
cross-contamination, operators should also be obligated to ensure that all
users abide by their respective cleaning obligations, and to take appropriate
actions in case of any identified default. Failure to ensure the overall cleanliness
of the facility should give the user the right to claim indemnity/ damages from
the operator, and/or seek termination of the contract.
Facility failures: Kitchen equipment may suffer failures, and there may be
occasions when the kitchen or any portion of it is rendered unfit for use (e.g. in
case of a fire, or obstruction in the drainage system, non-receipt of utility
services, etc.). Fixing of faults and ensuring the kitchen facility is normally
operational is the responsibility of the Operator. However in cases of crippling
issues, the user should be able to refrain from paying the usage charges for
such time as they are unable to use the kitchen facility. In the event they are
required to relocate to a new premises due to closure of the kitchen, the user
may also negotiate appropriate reallocation costs and damages with the
operator.
Operator lease: Cloud kitchen operators may not necessarily own the premises
wherein they have set up the kitchen facility. Operators may have taken the
premises on leasehold basis. Consequently, the term of the shared cloud
kitchen contract would be co-terminus with the original lease. Users should
ensure that the lease term is long enough to allow them uninterrupted
operations from the facility.
The essential clauses of the cloud kitchen agreement are mentioned
below:-
. 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.
. 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.
. 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.
. 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.
. 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.
4. Lease Term and Renewal
● For single-operator kitchens, consider shorter initial lease terms with
renewal options to accommodate business uncertainties.
• For kitchens serving third-party users, longer lease terms with non-
disturbance clauses are advisable to ensure operational continuity.
3. Loading Bays and Parking
● Provide for adequate ingress, egress, and designated loading bays for
regular supply deliveries and outgoing food dispatches.
● Ensure sufficient parking spaces or slots for delivery personnel,
typically two-wheelers, aligned with the scale of operations.
Summary Table of Key Lease Elements for Cloud Kitchen
Lease Element Cloud Kitchen Specifics
Premises Description Carpet area, kitchen zones,
storage, delivery areas
Usage Rights Broad commercial kitchen use,
right to structural changes
Shared Use License/sublicense rights for third-
party users
Loading & Parking Dedicated loading bays, parking
for delivery personnel
Lease Term Short-term with renewal (single
user), long-term (shared)
Statutory Compliance Commercial license, FSSAI, fire &
party users
Loading & Parking Dedicated loading bays, parking
for delivery personnel
Lease Term Short-term with renewal (single
user), long-term (shared)
Statutory Compliance Commercial license, FSSAI, fire &
health licenses
Equipment Use, installation, maintenance,
inventory management
Alterations Tenant’s right to modify premises
with landlord consent
Rebel Foods offers a case study in multi-brand strategy. By running multiple
restaurant brands from a single kitchen, they maximized efficiency and catered
to diverse consumer tastes. This flexibility allowed them to pivot quickly to
high-demand cuisines and scale across geographies. Their omni-channel
approach—offering food through various platforms, including their own—
reduced dependence on aggregators and improved margins.
Similarly, CureFoods, led by Ankit N. , followed a strategy of acquiring
smaller cloud kitchen brands to build a diversified portfolio. This helped
them tap into various market segments, from fast food to premium dining.
Both Rebel Foods and CureFoods have invested heavily in technology, using
data analytics to optimize operations, streamline logistics, and improve
customer insights.
1.1. The Lessor shall handover the physical possession of the Leased
Premises to the Lessee on ‘as is’, ‘where is’ and ‘whatever there is’’
basis.
lease of premises to set up cloud kitchen deed draft/ detailed drafts
lease of premises to set up cloud kitchen deed draft/ detailed drafts
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8
Drafting a Lease Deed for Cloud Kitchen Premises
A lease deed for setting up a cloud kitchen requires specific considerations
beyond a standard commercial lease due to the unique operational and
infrastructural needs of cloud kitchens. While standard lease deed templates
are available, a cloud kitchen lease must address specialized requirements such
as kitchen equipment installation, space configuration, delivery logistics, and
compliance with statutory regulations.
Key Components to Include in a Cloud Kitchen Lease Deed
1. Description of Premises and Usage Rights
● Clearly specify the leased premises including carpet area suitable for
kitchen equipment, storage, and personnel movement.
● Define the permitted use broadly as “setting up and operating a
commercial kitchen having one or more kitchen units” rather than
terms like “cloud kitchen” or “ghost kitchen” to avoid ambiguity and
restrictions.
● Include rights to undertake necessary structural alterations to install
kitchen equipment and create specialized zones (preparation, storage,
cold storage, packaging, delivery dispatch).
● Address whether the lease includes pre-installed kitchen equipment or
if the tenant will install their own.
2. Shared Kitchen and Third-Party Usage
● If the cloud kitchen operates as a shared kitchen with multiple users,
ensure the lease allows licensing or sublicensing the premises to third
parties.
● Demarcate user-specific areas and common facilities clearly to avoid
disputes.
3. Loading Bays and Parking
● Provide for adequate ingress, egress, and designated loading bays for
regular supply deliveries and outgoing food dispatches.
● Ensure sufficient parking spaces or slots for delivery personnel,
typically two-wheelers, aligned with the scale of operations.
4. Lease Term and Renewal
● For single-operator kitchens, consider shorter initial lease terms with
renewal options to accommodate business uncertainties.
● For kitchens serving third-party users, longer lease terms with non-
disturbance clauses are advisable to ensure operational continuity.
5. Statutory Compliance
● Confirm the premises is commercially licensed and compliant with
local regulations.
● Tenant’s responsibility to obtain necessary licenses such as FSSAI,
health/trade licenses, fire safety certificates, and pollution control
●
clearances should be clearly stated.
6. Equipment and Inventory
● Specify rights and responsibilities regarding kitchen equipment use,
maintenance, and inventory management.
● Allow for installation of specialized equipment if required by the
tenant’s menu.
7. Alterations and Maintenance
● Clarify the tenant’s right to make structural alterations and the
landlord’s consent process.
● Define maintenance responsibilities for premises and equipment.
Additional Considerations
● Insurance and Liability: Address insurance coverage for the premises
and kitchen operations.
● Utilities and Services: Specify provisions for electricity, water, waste
disposal, and other utilities critical to kitchen operations.
● Termination and Exit: Define conditions for termination, handover
procedures, and restoration of premises.
Resources for Drafting
While specific cloud kitchen lease deed templates are not widely available, you
can adapt standard commercial lease agreements by incorporating the above
clauses. For example:
● Standard commercial lease templates can be found at Startup India or
UIIC websites.
● Detailed guidance on negotiating cloud kitchen leases is provided by
Ikigai Law, which outlines the unique requirements and terms to
include.
● Basic lease deed formats are available on legal document sites but will
need customization for cloud kitchen specifics.
Summary Table of Key Lease Elements for Cloud Kitchen
Lease Element Cloud Kitchen Specifics
Premises Description Carpet area, kitchen zones,
storage, delivery areas
Usage Rights Broad commercial kitchen use,
right to structural changes
Shared Use License/sublicense rights for third-
party users
Loading & Parking Dedicated loading bays, parking
for delivery personnel
Lease Term Short-term with renewal (single
user), long-term (shared)
Statutory Compliance Commercial license, FSSAI, fire &
health licenses
Equipment Use, installation, maintenance,
inventory management
Alterations Tenant’s right to modify premises
with landlord consent
user), long-term (shared)
Statutory Compliance Commercial license, FSSAI, fire &
health licenses
Equipment Use, installation, maintenance,
inventory management
Alterations Tenant’s right to modify premises
with landlord consent
This approach ensures a comprehensive lease deed that addresses the
operational, legal, and logistical needs of a cloud kitchen business. For drafting
assistance, consulting legal professionals familiar with commercial kitchen
operations is recommended.
References: Ikigai Law detailed guidance on cloud kitchen lease contracts
Startup India Commercial Lease Agreement template Standard lease deed
formats for adaptation
search internet and compile what kind of legal issues might clients might
run in if they are running cloud kitchen out of leased premises ? my aim is
to protect my client through contract
search internet and compile what kind of legal issues might clients might
run in if they are running cloud kitchen out of leased premises ? my aim is
to protect my client through contract
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8
Legal Issues Clients Might Face Running a Cloud Kitchen from Leased
Premises
When operating a cloud kitchen in leased premises, clients can encounter
several legal challenges that need to be proactively addressed in the lease
contract to protect their interests. These issues arise mainly due to the
specialized nature of cloud kitchens, which differ from traditional restaurant
leases.
Key Legal Issues and Risks
1. Restrictive Use Clauses in Lease
● Many commercial leases have narrow use clauses specifying the type
of business or cuisine allowed. Cloud kitchens require broad use rights
●
to operate multiple restaurant brands, change menus, and switch
licensees without landlord consent. Restrictive clauses can limit
operational flexibility and growth.
2. Transfer, Subleasing, and Licensing Restrictions
● Cloud kitchens often license kitchen space to multiple restaurant
operators. Lease agreements that restrict assignment, subleasing, or
sublicensing without landlord approval can cause operational
disruptions and legal disputes.
3. Lease Term and Continuity Risks
● Cloud kitchens need uninterrupted access to premises. Short lease
terms or leases co-terminus with other agreements may risk eviction
or forced relocation, impacting business continuity.
4. Zoning and Regulatory Compliance
● Premises must be zoned for commercial kitchen use and allow 24/7
operations. Non-compliance with zoning laws or operating hour
restrictions can lead to penalties or forced closure.
5. Alterations and Equipment Installation
● Cloud kitchens require installation of specialized kitchen equipment
and may need structural alterations. Lease clauses requiring landlord
consent for alterations or prohibiting removal of equipment can create
conflicts.
6. Utilities and Operating Costs Allocation
● Shared utilities (electricity, water, gas) can be complex to meter and
allocate fairly among multiple kitchen users. Disputes may arise over
cost-sharing if not clearly addressed in contracts.
7. Statutory Licenses and Food Safety Compliance
● Failure to obtain or maintain mandatory licenses such as FSSAI, fire
safety, health/trade licenses risks fines, suspension, or shutdown.
8. Liability and Insurance
● Liability for damages, food safety incidents, or accidents in leased
premises must be clearly allocated. Insufficient insurance coverage
can expose the tenant to significant risks.
9. Termination and Exit Conditions
● Lease terms should clearly define tenant and landlord rights on
termination, including handling of leasehold improvements and
equipment removal, to avoid disputes at lease end.
Contractual Protections to Include
To safeguard your client, the lease agreement should:
● Include a broad and flexible use clause allowing multiple restaurant
brands, menu changes, and delivery-only operations without landlord
approval.
● Permit assignment, subleasing, and licensing of kitchen space to third
parties with minimal landlord interference.
● Ensure a sufficiently long lease term with renewal options to secure
operational stability.
● Confirm zoning compliance and unrestricted operating hours for cloud
kitchen activities.
● Allow tenant to make necessary alterations and install equipment with
clear terms on landlord consent and removal rights.
● Define utility metering and cost allocation mechanisms fairly among
kitchen users.
● Specify tenant responsibility for obtaining and maintaining all statutory
licenses and compliance with food safety laws.
● Allocate liability and insurance obligations clearly to protect tenant
interests.
● Detail termination procedures, including handling of leasehold
improvements and equipment to avoid disputes.
Summary Table of Legal Issues vs Contractual Protections
Legal Issue Contractual Protection
Restrictive use clauses Broad, flexible use clause covering
multiple brands
Transfer/sublease restrictions Permission for assignment,
sublease, licensing
Short lease terms Long-term lease with renewal
options
Zoning and operating hour limits Confirmation of zoning and
unrestricted hours
Alterations and equipment Tenant rights for alterations,
installation, removal
Utilities cost allocation Clear utility metering and cost-
sharing provisions
Statutory compliance Tenant obligation for licenses and
regulatory compliance
Liability and insurance Clear liability allocation and
insurance requirements
Termination and exit Defined exit terms for
improvements and equipment
By addressing these issues in the lease deed and related contracts, you can
significantly reduce legal risks and operational disruptions for your client
running a cloud kitchen from leased premises.
Sources:
Ikigai Law on cloud kitchen lease contracts and shared kitchen terms
iPleaders and BareLaw on legal compliance and lease agreements for cloud
kitchens
IndiaFilings and Dr. Abhinav Saxena on statutory licenses like FSSAI
so client is leasing commercial premises for cloud kitchen. client will install
kitchen machines at his own cost. I want to allow client to have third party
(other than lessor/lessee) use the kitchen premises . how do I include this
clause? will this amount to sub leasing?
so client is leasing commercial premises for cloud kitchen. client will
install kitchen machines at his own cost. I want to allow client to have third
party (other than lessor/lessee) use the kitchen premises . how do I
include this clause? will this amount to sub leasing?
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5
To allow your client (the lessee) to permit third parties (other than the lessor/
lessee) to use the kitchen premises, you should explicitly include a clause in the
lease agreement granting the right to license or sublicense the premises to
third-party users. This is particularly important for cloud kitchens, which often
operate as shared facilities or license kitchen space to multiple restaurant
brands or operators.
How to Draft the Clause
You can use language similar to the following:
"The Lessee shall have the right, with prior written notice to the Lessor, to grant
licenses or sublicenses to third parties (other than the Lessor or Lessee) for the
use of the leased premises or any part thereof, solely for the purpose of
operating commercial kitchen units. Such licensing or sublicensing shall not be
deemed to constitute an assignment or sublease under this Agreement,
provided that the Lessee remains primarily liable for all obligations under this
Lease."
Does This Amount to Subleasing?
● Licensing vs. Subleasing:
○ Subleasing generally refers to transferring a portion of the lessee's
interest in the premises to a third party, often giving them exclusive
possession of a defined area for a term.
○ Licensing or sublicensing is typically a right to use the premises (or
part thereof) for a specific purpose without transferring exclusive
possession or creating a landlord-tenant relationship between the
○
third party and the lessor.
○ In cloud kitchen arrangements, it is common to use license or
sublicense agreements, not subleases, for third-party users. This
distinction is important because most leases restrict subletting but
may allow licensing if specifically permitted in the contract.
Best Practices
● Explicit Permission: Ensure the lease deed explicitly permits licensing
or sublicensing to third parties for kitchen use.
● Nature of Use: Describe the permitted use broadly, such as "setting up
and operating a commercial kitchen having one or more kitchen units,"
to avoid ambiguity or restrictive interpretation.
● Primary Liability: The lessee should remain responsible to the lessor
for all lease obligations, even when third parties are using the
premises.
● Compliance: Ensure all third-party users comply with the lease terms
and applicable regulations.
Summary Table
Issue Recommendation
Allowing third-party use Insert explicit license/sublicense
clause
Sublease vs. License Use license/sublicense model, not
sublease
Description of use Broadly define as "commercial
kitchen"
Lessee's liability Lessee remains primarily liable to
lessor
References:
● Ikigai Law on cloud kitchen lease contracts and third-party use.
This approach will protect your client and ensure the lease structure aligns with
standard cloud kitchen business models.