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Food and Beverage (F&B) Business in Gurgaon

As per latest tech trends, when food meets technology to reach the customers, it is termed as Food Tech startups. In a city like Gurgaon, food startups have significant advantages as it is one the hottest place in India to launch a food business. With multinational crowd, demand for new options for food is ever increasing and on-demand (home delivery) provides immense convenience to end-users.

Originally published here.

food tech beverage laws india

Online Food Startup: Business Model

Latest companies and startups in F&B space are establishing innovative business models. For example, kitchen in the cloud model embodied by FoodPort allows players to run their own kitchen instead of outsourcing or aggregating.

Another category is aggregators, which is well known due to the likes of Zomato and Swiggy. In this model, the aggregators provide interactive web-based platforms and mobile apps to users to connect with restaurants. Such interaction provides a diverse range of options, including managing the listings, taking food orders online, food delivery, etc.

Paradigm Shift

Traditional food stores are changing their business model completely from offline to online due to high rentals and unbearable maintenance costs. For example, Buenowhich had an outlet in DLF CyberHub (CyberCity), recently shifted to an online food company model.

Angel Investment & Venture Capital Funding

Food tech startups are buzzing with funding news in recent past. For example, InnerChef, a food-technology company based in Gurgaon, recently announced pre-series A funding. InnerChef delivers ready-to-eat and ready-to-cook meals by providing an online fresh food delivery platform offering fresh paninis, salads, combos, snacks and desserts throughout the day.

Business Validation

Due to huge corporate base, Gurgaon is largest market in India for customer validation and although numerous food tech startups have received angel funding and influx of venture capital investments, only a few will survive in future because the market is all set for consolidation.

Food Startups and Law

There are some crucial legal considerations associated with food business and appropriate measures are required to minimize the risk / liability. Specifically, to launch and grow a food startup / business quickly, it would require formulating strategy to handle potential issues relating to corporate law, employment law, intellectual property rights, and taxation.

Initial steps to start a food tech startup include determining an appropriate corporate structure by incorporating a legal entity (private limited company, partnership, OPC, LLP etc.)

With a view to have clarity regarding management roles, co-founders agreement (shareholders agreement) should be executed having detailed provisions for role of founders (directors or promoters), commitments, cash investments, shareholding pattern, vesting schedule, lock-in period, dispute resolution mechanism, and exit procedure. This helps in smooth functioning of business. Similarly, appropriate contracts, agreements and legal documents should be executed with Investors, manufacturers and third party vendors.

Intellectual Property (IP) ownership should be clearly stated in all documents and agreements. As a standard practice, all IP rights (patents protecting technology, trademarks protecting brand names and copyrights protecting other artistic works) should generally be owned by the company.

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Rahul Dev is a Patent Attorney & International Business Lawyer practicing Technology & Corporate Laws. He is reachable at info (at) techcorplegal (dot) com &@rdpatentlawyer on Twitter

In June, I attended Echelon, Asia’s largest technology conference featuring 50+ global speakers, investors, startups, entrepreneurs, and prominent tech corporations.

Originally published here.

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I got a chance to listen to Udemy’s Co-Founder and chairman, Eren Bali, who spoke about building a marketplace business.

What I really liked about the presentation was the way he dissected the marketplace business model while discussing best practices about designing the business. It was quite similar to how a lawyer analyzes various legal issues during a business transaction.

While explaining various components of a marketplace business model, Eren discussed that to start the business, the main goal is to connect demand and supply, which means acquiring more and more users to connect them with the supply side.

Other subsequent components of marketplace business include discovery, pricing, payment, user experience and support.

An important approach explained by Eren was to categorize all components as centralized or decentralized. In other words, if marketplace intends to control any component, it can be called centralized while if it is left to the supply side, it can be categorized as decentralized. For examples, companies like Uber tend to embody the marketplace as completely centralized wherein Uber manages almost everything except driving, whereas companies like Airbnb, ebay, craiglist etc. embody marketplaces as decentralized, wherein the supply side manages most of the stuff.

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His presentation and video are embedded below for more details.

[youtube https://www.youtube.com/watch?v=UmaIJKiU4aE]

Building a Marketplace Business from e27

[slideshare id=35919232&w=427&h=356&fb=0&mw=0&mh=0&style=border: 1px solid #CCC; border-width: 1px 1px 0; margin-bottom: 5px; max-width: 100%;&sc=no]

Legal Challenges

While managing a marketplace business, business owners have to consider and manage certain important legal concerns, some of which are discussed below:

Legal Liabilities

When you walk into a physical store to buy a product and question the store-owner in case of any defect in the product or issue related to electronic payment, a similar problem can also arise while buying a product from an online marketplace. In digital space, third-party vendors usually sell their products through marketplaces that are not owned by them, and consequently, the legal liabilities are also divided among marketplace owners and such vendors. Exactly who is liable for what and whether the liabilities are civil and / or criminal in nature, this will depend upon exact nature of transaction, issue faced by the end user, local laws, and other related factors.

For example, if there is a payment related issue, mostly the liability will lie with the marketplace as they are the ones who facilitate the transactions between buyers and sellers by providing a payment gateway. Similarly, faulty product will become liability of the vendor. In any case, liabilities will be a combination of basic contract law (between buyer and seller, buyer and marketplace business owner, seller and marketplace business owner), consumer laws (basic rights of buyers), data protection laws (mostly with the marketplace business owner), cyber laws, criminal law (mostly with both seller and marketplace in case of infringement of intellectual property rights like patents, trademarks, copyrights, designs, by selling of counterfeiting products by sellers through marketplace), and the like. Similar analysis can be applied while providing services through marketplace business, such as Uber, AirBnb etc.

Accordingly, it is advisable for marketplace business owners to have, (i) appropriate terms and conditions mentioned on their websites that are in line with domestic and international laws, (ii) appropriate contracts with external vendors (sellers) to ensure a smooth transaction with the buyer and prevent transactions pertaining to fake (counterfeit) goods that can result in intellectual property (IP) infringement. This is just an illustrative list of legal measures and based on exact marketplace business model, the exact legal requirements can be quite detailed.

About the Author: Rahul Dev

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