For many churches, renting out facilities to local businesses or other non-profits makes a lot of sense. It can be a way of fulfilling your mission while bringing in much needed revenue.
But there are many things to think about before opening up your church’s kitchen doors. Especially when food preparation is involved.
Things can get complicated when it comes to mixing a non-profit with small businesses. The last thing you want is to jeopardize your non-profit status or find you are in breach of health department regulations.
Let’s take a look at the benefits and points to consider when renting out your church kitchen.
Disclaimer: The materials available at this website are for informational purposes only and not for the purpose of providing legal advice.
Why Rent Out Your Church Kitchen?
Many churches have some kind of kitchen to feed the congregation or cater to community events. You might be looking for ways to get more use out of your existing kitchen or are thinking about building a kitchen in place from scratch.
Whatever the situation, renting out your church kitchen has many potential benefits.
It could help you:
- Fulfill your mission
- Make a deeper connection to the local community
- Bring in new members to your congregation
- Support local non-profits and increase community engagement
- Bring in extra revenue
A host of wonderful benefits awaits, so what are you waiting for? Well, it’s not quite as simple as just putting an ad out for kitchen tenants. There are a number of legal, organizational, and financial considerations that must be addressed first.
6 Factors to Consider When Renting Out Your Church Kitchen
Before you dive into the world of commercial kitchen rentals, you must ensure that renting out your kitchen doesn’t affect the normal running of your church. Although it could bring in new members and potentially add revenue, you don’t want to end up owing a huge property tax bill because you didn’t get the right legal advice first.
Here are the main points to consider before you rent out your church kitchen to the public.
Will It Affect Your Non-Profit Status?
The biggest question is how will taking in revenue affect the non-profit status of the church. It’s a complicated issue and the answer will depend on your own circumstances and how you plan to rent out the space.
The central question is likely to be: are the profits related or unrelated to your declared mission?
The basic idea is that profits garnered in support of the mission – that you submitted to the IRS to gain non-profit status – are not taxable. This includes income that is necessary for the operation to survive.
But any profits unrelated to the mission are subject to Unrelated Business Income Tax (UBIT).
For example, if part of your mission is to support needy people in the community, and you made a profit renting your kitchen to a local soup kitchen in order to feed homeless people, the income is related to your mission.
But if you profited from a wedding caterer coming in and using the kitchen, this may not be related to your mission, unless that wedding caterer is low-income or part of a workforce development program.
Generally speaking, nonprofits are charged UBIT when they are engaged in profit-making activities on a regular basis. The tax is there to stop non-profits from having an unfair advantage over other businesses, so if you only plan to rent your kitchen out occasionally, you may be fine.
Get Your Kitchen Up To Code
Once you’ve decided that you can go ahead without compromising your nonprofit status, you need to take a close look at your kitchen. It must be a licensed commercial kitchen to be used to sell food to the public.
If you’re building from scratch, make sure to carefully plan out your kitchen starting with its core purpose. Determine the equipment and different areas you’ll need and build it to the health and building regulations for your area.
If you have an existing kitchen, it must have certain features to pass the health inspection. Typically, this means the correct:
- Windows, doors, and proper ventilation
- Flooring, drainage systems, hand washing sinks, and plumbing
- Fire detection and suppression systems like alarms, sprinklers, and extinguishers
- Lighting and electrics
- Preparation equipment and food storage areas
You’ll also need to complete a food safety plan known as a HACCP, which details how you will deal with hazardous situations, proper food storage, and do your best to avoid any outbreaks of foodborne disease.
Be sure to get in touch with your local health department agent to ensure your kitchen is up to code and ready to safely receive renters.
Kitchen Management & Staffing
Will you need staff to manage the operation? Renting out a commercial kitchen isn’t easy, especially if you are renting to multiple clients. There are a number of administrative and organizational systems to put in place before you open your doors to tenants.
Depending on the size of the kitchen and how many renters you can handle, you may have to consider the following:
- Hiring management, administrators, and cleaning staff
- Implementing a scheduling system
- Regular kitchen and equipment maintenance
- Rules and procedures for rentals and cleanliness
- Documentation, including invoices, health code compliance, and contracts
This may seem like a lot, and it can be a full-time job running a shared commercial kitchen. Luckily, there are tools on the market to help you stay on top of all these tasks.
The Food Corridor is a trusted source of resources and tools for shared kitchen operators of all kinds, including industry reports, toolkits, and how-to guides. In fact, their Shared Kitchen Operations Manual is the most comprehensive set of policies and procedures available.
The Food Corridor’s shared kitchen management software has been developed specifically for the purpose of renting a commercial kitchen. It takes the pain out of running a commercial kitchen rental space, with all the tools and features you’ll need.
Setting a Fair Price
To avoid accusations of giving any unfair benefit, your church must charge a fair market price for kitchen rentals. The best way to figure out the going rate is to consult with local professionals or other commercial kitchens to figure out the local market conditions.
There are a number of churches already listed on The Kitchen Door, the country’s largest directory for shared commercial kitchens. This licensed church kitchen in Wakefield, Rhode Island, for example, lists details of the facilities, business hours, and going rates.
Researching businesses in your area, contacting realtors, and talking to other churches is the best way to figure out a fair price for your kitchen rental. You can also check out 5 Factors to Consider When Assessing your Local Market Conditions.
Do You Need a Lease Agreement Or an Event Use Agreement?
When thinking about contracts for your tenants, it’s important to distinguish between a lease agreement – a long-term rental agreement – and an event use agreement – a one-off contract to rent the space.
A lease agreement ties you into a longer-term commitment to provide the space but it could be a better solution for regular rentals.
An event use agreement would be more appropriate for one-off or infrequent rentals. It allows you to set the terms for that particular rental so you know exactly where you stand. It would be more appropriate for a one-off fundraiser or a catered event like a wedding.
Vetting Potential Renters
For any commercial kitchen, avoiding problem tenants is a priority and it’s easier said than done. Attracting the right tenants keeps your kitchen community strong and prevents issues down the road.
As a church with its own values and mission, it’s even more important to be careful who you do business with. Your values should be aligned with renters and they should be on board with your mission. Getting the right mix is vital to maintain a healthy and respectful culture in your kitchen.
The best way to vet candidates from the start is to create a set of guidelines that renters must adhere to. It’s a good idea to consult with a legal professional to make sure your guidelines are watertight and provide any necessary protections.