From Zomato to Swiggy, food delivery companies set to face more heat

File photo of a Zomato delivery executive
It seems that the woes of food delivery giant Zomato and others are about to worsen. 

After the National Restaurant Association of India (NRAI) initiated the #LogOut campaign to delist member restaurants, the Federation of Hotel & Restaurant Associations of India (FHRAI) is also planning to organise protests, mainly against Zomato and a few others.

Based on widespread complaints along with acute condemnation and agitation from its members, regional associations and affiliated associations, FHRAI has called upon food service aggregators to engage in a fruitful dialogue at the earliest. This will help in arriving at a win-win outcome for all, failing which they warned of nationwide protests. Echoing similar demands as NRAI, in a letter to Zomato, Swiggy, Nearbuy, Dineout Prius Heights and EasyDiner, among others, FHRAI pointed out to the unethical business practices and called for review of all their schemes. 

FHRAI further stated that as a technology partner, by merely hosting its members’ inventory, food service aggregators cannot hold sway and arm twist the traditions and aspirations of millions of entrepreneurs in India. “Unfortunately, this new way of impractical, unaffordable and unconscionable discounting has put the hospitality industry in a very awkward situation. The most common complaint about the food service aggregators is about the contracts being one sided. These contracts aren’t even consistent across the industry and almost always unfair towards start-ups as against established brands. Moreover, the agreement terms are not sacrosanct as they are frequently and unilaterally changed from time to time and always in favour of the food service aggregators,” said Gurbaxish Singh Kohli, vice-president, FHRAI.

The FHRAI has also pointed to the unreasonably high commissions, payment terms and arbitrarily applied additional charges as well as unethical practices by the food service aggregators. 

“Penal commissions of 25 per cent are now standard. Such high charges merely for offering a platform are unjustified. Commissions are not standard and customised to exploit the start-ups which are indicative of an exploitative and dominant behaviour. Payment terms are not adhered to and are easily violated for the slightest excuse without recourse to any easy dispute resolution,” said Somaraju, treasurer, FHRAI. He also alleged that GST is being charged on the commission, and steep commissions are being charged from merchant establishments under the pretext that it is for both discovery and sales promotion. 

Food service aggregators are also allegedly charging separately for delivery and also billing customers an additional delivery charge. “All this effectively translates into arm twisting our members to subscribe to such initiatives using their dominant position. Restaurants are constantly but subtly threatened to participate in deep discounting schemes without respite throughout the year with one scheme getting replaced by another. Our members are neither given an option nor the opportunity to agree. Nor are they even consulted,” said SK Jaiswal, vice-president, FHRAI. Over the last few weeks, Zomato has been hit by a host of problems around its restaurant partners leaving its premium membership service Zomato Gold. 

Succumbing to the pressure last week created by close to 2,000 restaurants all over the country leaving its platform, Zomato founder Deepinder Goyal, in a series of tweets, admitted that his firm made mistakes with its premium subscription service ‘Gold’ and would make changes to appease restaurants. 

Making changes to the Gold subscription service has also been one of the long-standing demands of Zomato’s biggest investors.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel