Precautions for canteen outsourcing

In practice, many companies outsource staff canteen to a contractor with relatively mature supply chain system and catering service experience. The food safety and staff health are the top two risks of a canteen, so laws and regulations have set special restrictions and requirements regarding the management of a canteen. If a company ignores relevant regulations and practical rules, it may encounter food safety accidents, administrative penalties and other risks. In view of this, let’s talk about the precautions for canteen outsourcing.

First of all, we have to clarify a cognitive misunderstanding, that is, “If a company outsources to a qualified and experienced contractor, the company has outsourced all liabilities”. Article 35 of the “Food Safety Law”(Amended in 2021) stipulates that, “The State adopts a licensing system for food manufacturing, food sales or catering services shall obtain a permit in accordance with the law.” In addition, Article 9, paragraph 3 of the “Administrative Measures for Food Business Licensing “stipulates that, “When government organs, institutions, social organizations, private non-enterprise entities and enterprises apply to operate ‘canteens in entities’, the applicants shall be the subjects set out in the registration certificates of such government organs, institutions and social organizations or in the food business license.” Therefore, the company has to obtain a food business license if it plans to set up a staff canteen in the company to provide centralized meals.

You may have a doubt that if the company has obtained a food business license, then it is not necessary for the contractor to obtain such license.

Article 28 of the “Implementing Regulation for the Food Safety Law “stipulates that, “The entities with centralized dining requirements, such as schools, nurseries, nursing homes, and construction sites, shall implement systems for control of raw materials, cleaning and disinfection of tableware and kitchenware, retention of food samples etc. for their canteens, and conduct self-inspection of food safety in canteens on a regular basis pursuant to the provisions of Article 47 of the Food Safety Law. Whoever operates a canteen of an entity with centralized dining requirements on a contract basis shall obtain the food business license in accordance with the law, and shall be responsible for food safety of the canteen.” Those entities with centralized dining requirements listed in Article 28 are special entities, so there are disputes on whether normal companies’ canteen shall obtain the food business license. It is necessary to analyze the practical rules and cases released by the supervision authorities.

In practice, some local market supervision and administration authorities release rules that when a unit applies for the food business license for canteen outsourcing, it shall provide the food business license of the contractor. So a company shall firstly check whether the local authority has such similar requirement. If there is no similar requirement, whether it is risky for a company to outsource the canteen to a contractor without the food operation license?

The case retrieval results show that:

First, normally, the authorities would decide that the contractor has provided catering services without obtaining a food business license, and punish the contractor for violating the provisions of Article 35 of the “Food Safety Law”.

Second, the outsourcing company might be punished as well. Article 122, paragraph 2 of the “Food Safety Law” stipulates that, “Parties who provide manufacturing or business premises or any other facilitation when they are aware that the food manufacturer or business operator is committing an illegal act (including such entity has not obtained a food business license) stipulated in the preceding paragraph shall be ordered by the food safety supervision and administration department of the People’s Governments of county level and above to stop the illegal act, the illegal income shall be confiscated and a fine ranging from RMB50,000 to RMB100,000 shall be imposed; where the illegal act compromises the legitimate rights and interests of consumers, such persons shall bear joint and several liability with the food manufacturer or business operator of foodstuffs and/or food additives.” For example, the punishment decision (No. 292019001364) issued by Hu Shi Jian Qing Chu Zi (2019) states that, “In order to provide catering services to employees, the party contracted the business premises to the contractor who was responsible for operation and management, and borne profit and loss. But the contractor has not obtained the food business license.” In this case, the administrative authority not only punished the contractor, but also held that the party signed a contract agreement with the contractor to provide business premises to the contractor provided catering services without a food business license, so the party should be imposed with administrative penalties.

To sum up, regarding the outsourcing of canteens, it is recommended to pay attention to the following issues.

First, both the company and the contractor should obtain the food business license. In addition, it is recommended to prescribe in the agreement that the contractor should ensure such license should be validity continuously, and the relevant liability in case of violation (such as the company’s unilateral right to terminate the contract, compensation for losses, etc.).

Second, from the perspective of reducing risks and liabilities, it is recommended to stipulate the contractor’s responsibility for ensuring food safety, and emphasize the contractor’s management ability, obligations and liability for breach of contract or infringement, by which the authority could identify the contractor as the main body engaged in food production and operation activities in individual cases.

Third, in the daily operation, companies should urge the contractor to implement the food safety management system. It is suggested to carry out irregular spot checks on the contractor’s business activities by referring to the provisions of GB 31654-2021 “National Food Safety Standard & General Hygienic Code for Catering Services” and relevant regulations, and retain relevant evidence.