What Is a Kitchen Rental Contract?
A Kitchen Rental Contract is a contract between a kitchen rental space provider and a chef or caterer who is renting space from the kitchen space provider. These contracts typically exist between companies that have what’s called a "commissary kitchen." A commissary kitchen is a commercial kitchen, which is typically available for rent or for lease to people in the food service industry. For example, a kitchen rental space provider may have a kitchen that they rent out to chefs for specific events as well as do their prep during the week .
Therefore, it’s important that if you are a company involved in this kind of relationship that you have a kitchen rental contract to protect your business and yourself through legal means. This is the reason why we always recommend that you go through an attorney if you are in this industry, because there is a lot at stake with entrepreneurs going into this space without the proper contracts tailored to their situation.
Key Provisions of a Kitchen Rental Agreement
A kitchen rental contract, whether you are the landlord or tenant, should have many of the same clauses and specific provisions you would typically see in a residential or commercial lease. The lease should include the duration of the tenancy, the amount of rent, the security deposit, and kitchen access times — as well as any special provisions to which the landlord and tenant have agreed. The following common clauses should be used: Duration: It is important to specify when the tenancy begins and ends. The tenant may be renting the kitchen for a few hours a month, from 9:00 p.m. to 2:00 a.m. every Wednesday on a month-to-month basis. Or the kitchen could be rented out for a period of one year. Make sure the term is clear. Amount of Rent: As with any lease, the amount of rent should be specified and conditions under which rent must be paid. For example, the lease may stipulate that rent must be paid at least three days before the tenancy begins. If rent isn’t paid, the lease could be terminated by the landlord without notice to the tenant. Alternatively, penalties may apply to the tenant for overdue rent. Security Deposit: A security deposit is often charged in case the tenant damages the property or fails to make a payment. For example, rent is due by the 28th of each month and a $50 penalty is levied for any late rent paid beyond the 10th of the following month. The amount of the security deposit may be equal to one month’s rent. The lease should stipulate that any amount deducted from a security remains for repairs and/or cleaning must be accounted for and the tenant may inspect the premises in order to see the repairs that were performed and that the security deposit is being fairly returned. Kitchen Access Times: It’s essential that the landlord and tenant specify when the kitchen is available. Is it available every evening from 6:30 p.m. to 11:00 p.m.? Is it available once a month at certain times? Is it available daily for the tenant? If the kitchen is available only once a week or once a month, it is important to specify which day of the week (or month) it is available. Termination Clause: Any agreement should clarify if either party can terminate the agreement. If so, how much notice must be provided? Without a termination clause, the tenant may show up for an expected use of the kitchen only to find that the landlord has rented out the space to someone else. The lease may provide an option to renew but does not have to do so. The above are only some of the clauses you should include in your kitchen rental agreement.
Legal Ins and Outs of a Kitchen Rental
While kitchen rentals are a convenient option for novice and seasoned chefs alike, there are some legal considerations that both renters and owners should keep in mind before renting to avoid ending up on kitchen court. Zoning Laws: Local zoning laws may govern the types of activities that can be done in commercial kitchens, with the goal of promoting safety, health, and quality of life. Vague zoning ordinances can work against local kitchen renters, so it’s better to be safe than sorry when in doubt. Local ordinances may also restrict what types of signage can be used if a rented kitchen is used to conduct business and sell food products. Health and Safety Regulations: Health and safety regulations in the food and beverage industry primarily fall under two categories – federal and state requirements. Facilities must comply with the food, labor, and sanitation laws set by federal and state agencies like the U.S. Food and Drug Administration (FDA) and the Ohio Department of Health, for example. Any and all kitchen facilities that serve or sell food must meet these established guidelines and standards in accordance with state and local laws. Liability for Equipment and Loss of Business: If a contract or lease doesn’t specify who is responsible for damaged equipment and the loss of business, both parties can find themselves exposing themselves to unnecessary risk and expense.
The Advantages of Commercial Kitchen Rental
We have touched on the drawbacks of renting a professional kitchen, but this is a platform with more benefits than negative aspects.
First of all, it helps save you money. Depending on how you divide your working hours, you may find that sharing the space, whether it’s with one other small business or 10, it’s going to be the economical option for your business.
Then there’s access to top-quality equipment. You’ll find that commercial kitchens are outfitted with stainless steel counters, loads of storage space, and plenty of high-efficiency equipment that you simply won’t find in even the most well-equipped home kitchen.
Finally, there are practical advantages. If another business comes to you with a task that requires more equipment than you want to invest in yourself, you can use one of these shared kitchens to fulfill their needs. If you want to scale up your business, similar business owners may even allow you to rent space with them in their own kitchens.
There are a number of situations where these rentals are advantageous. If you’re a hobby baker who has found a niche through your social media accounts, you may find it convenient to rent commercial space through platforms like Commercial Kitchen HQ. It gives you the credibility of working out of an actual restaurant while providing you with a stage large enough to produce a significant amount of product.
Some caterers rent commercial kitchens for stints ranging from one day to permanent use. These larger spaces come outfitted with multiple ovens, industrial-sized refrigerators, and pantry storage, making it easy for you to bulk up on neighbors if necessary. As a catering business steadily grows, it becomes relatively easy to scale up your own operation thanks to your new neighbors.
Still other businesses that make use of commercial kitchens are food trucks. When you’re choosing food truck-specific commercial kitchens, you’ll find that they are well equipped to provide you with what you need. This is actually a more complicated endeavor than you may expect, as food trucks are held to a standard that is higher than that of even the most successful caterer. Luckily for you, these commercial kitchens are equipped to help ensure that your food meets the standards of even the strictest health departments.
Invest in your business by investing in your kitchen.
How to Negotiate Kitchen Rental Agreement
When entering into negotiations for the rental of kitchen space and equipment, you will undoubtedly need to discuss the rental terms and conditions. There are a variety of different terms that should be considered in a kitchen rental contract, namely rent, security deposit, utilities, "use of kitchen equipment", and provisions for the landlord maintaining the kitchen.
Rent Generally, commercial rent for kitchen space is negotiable; however, in any negotiations it is always a good idea to know the market rate for kitchen rentals in your area.
Security Deposit In terms of security deposit, don’t be shortchanged on your business. It is important to maintain a healthy working capital and not have too much money tied up in security. One month’s rent is sometimes the industry standard. So, if your rent is $1,500, you may want to pay a one-month security deposit. However, be prepared to live with whatever you negotiate with your landlord.
Utilities When it comes to utilities, consider how much you will be using the utilities and determine if the kitchen will be responsible for the cost of the consumption of the utilities. If you will be sharing the space with other tenants, consider that you may owe a prorated share of the monthly utility bill. On the other hand, if you are the sole tenant renting the actual kitchen space and equipment, you probably will be responsible for paying the entire utility bill each month.
Use of Kitchen Equipment This is a huge issue that you should consider carefully before signing a contract. For purposes of this discussion, kitchen equipment refers to any and all equipment you might use to prepare and package your food: pots and pans, stoves, ovens, food packaging or sealing machines, mixers and blenders, etc.
In some cases, you may need specialized equipment to properly run your business, i.e. a blast freezer to freeze foods quickly, a commercial smokehouse, or a certain style of convection oven for baking or preparing certain foods. In these instances, you need to discuss with the landlord if you can install the necessary equipment and if the landlord wants a price for using the equipment. Will you be paying the landlord an extra amount per month for using the equipment? If you are not paying more for the use of the equipment, does the landlord require you to pay for equipment repairs or replacement? If so, ask yourself, do I really want to pay for the upkeep and repairs on someone else’s equipment? If you end up renting a space that does not have any equipment you really need , then you are at the mercy of the landlord if something breaks. You will have to hope that the landlord replaces the equipment or makes the repairs quickly if you need to continue doing business.
Also consider how the kitchen will be used. In this respect, you may want to consider asking your landlord to agree to allow you to have the kitchen inspected and you should have the right to bring in someone to inspect the kitchen. Make sure the kitchen is up to code. Inspect the fire extinguishers and make sure they are charged and up to code. Ask to see the maintenance records for the equipment in the kitchen. Check the smoke detectors to ensure that they work. You may be in the kitchen for five or six days a week, but if a fire breaks out and you are not present, you don’t want to wait for the fire department to issue a pass until your equipment was up to code. In the past, I have seen small fires start on stoves in various locations in the kitchens I leased. In addition, consider negotiating permission from the landlord to keep the kitchen locked at night and also at certain times throughout the day. You may want to shut down from 2-4 p.m. every day, so you may want to prohibit any access to the kitchen during that time period. I have seen people break into a kitchen and steal food or ingredients, or worse, if someone was permitted to use your kitchen, damages may have occurred to your equipment or ingredients or raw materials while you were gone. You may be liable for any or all of these damages.
Landlord Obligations and Conditions The contract should also specify the landlord’s obligation to clean the kitchen and conduct a deep cleaning every month, year, or other period of time. Landlords, especially in older buildings, may not have cleaned the kitchen in some time. Ask to see recent kitchen inspection records and have the right to see these reports when you request them from your landlord. If however, the areas in the kitchen are dirty you may want to ask the landlord to clean certain areas before you enter into a lease. I have entered into lease agreements where the kitchen has been deemed unsanitary and needed a deep cleaning before the tenant would enter into the lease. A landlord will generally agree to clean the kitchen but will require time to complete the cleaning. Do not just sign the lease and lease the facility without having all matters concerning kitchen inspections and cleanliness at the same time you discuss the lease of the premises.
Kitchen Rental Mistakes to Avoid
When it comes to entering into a contract with a kitchen rental space, there are a few common mistakes that people make. First, they fail to read the contract fully and simply check off "everything is okay" as they are skimming through it. Second, people sign a contract without a clear exit strategy. Finally, people are not negotiating the terms of the contract to their favor.
In order to avoid these common mistakes, you should do the following:
- Read the entire contract before you sign it – don’t just skim through the contract. You should highlight any vague or unclear terms, ideas or concepts that need clarification. If you have a question, reach out to the owner – they are in this business to help and to ensure that you have the best experience. I find it best practice to do this with a highlighter while I am thinking and reading the contract. That way, you will forget what exactly you were trying to clarify and/or remember. Therefore, you should do this with a highlighter and a red pen in hand. Keep in mind, even if you do not ask for clarification or contact the owner to ask for further clarification – the owner should be available to reach out to you to clarify any issues he might have seen while creating the contract in the first place.
- Have an exit strategy. Although this tip is very important, it is often overlooked. If you enter into a contract and fail to know what the exit process will be, then you could be stuck in a contract for a year before you know how to get out of it and even who to contact.
- Negotiate the contract. Although it feels weird or rude, you should negotiate the contract. Most of the time, owners of uses kitchens are more than happy to comply with any requests or any changes you might want to make. Keep in mind, they are in the business to rent kitchens – especially if they own multiple kitchens.
I know that I was guilty of at least one of these mistakes and wish that I would have asked for clarification when I had the chance. However, do not fret – everyone makes mistakes. The important thing is to learn from it and to ensure that you do not make the same mistake again.
Handy Resources and Tools for Kitchen Rental Contracts
There are various resources and tools for those looking to draft or utilize contracts with kitchen rental spaces that can help guide the general structure, language and general best practices of kitchen rental contracts.
The Small Business Administration ("SBA") has stated a (non-exhaustive) list of items that should be included in a Commercial Lease. It is essentially a "best practices" list to help with negotiation and drafting of a Commercial Lease. The SBA can help refer you to resources for getting legal and/or accounting advice, but ultimately will point you to the private sector for assistance with the drafting of the lease. SBA even has a searchable database to find availably Small Business Development Center to assist with drafting and/or negotiating the lease.
When renting a commercial space, the SBA provides some general guidance on basic areas to focus, by stating in part: The U.S. Restaurant Association is another resource for individuals interested in renting commercial space for kitchen rental . While their focus is on helping people start a new restaurant, they also provide general information on budgeting and finance, researching your market, restaurant design, building and remodeling, and other topics.
Entrepreneur Magazine has an entire section dedicated to the leasing process and the commercial lease. Entrepreneur does not specifically address kitchen rental spaces, but as an old adage goes, "A lease is a single document that benefits both parties provided that a negotiation is involved." This suggests that the same issues and challenges for commercial space generally can be applied to the challenges faced for kitchen rental spaces.
This list is by no means exhaustive and is meant solely to provide individuals with resources that may assist in the preparation, negotiation and/or execution (or advice thereof) of a Commercial Lease without relying solely on the counsel of an attorney.