The deadlock over commissions between the hotel & restaurant association FHRAI and food aggregators Zomato and Swiggy shows no signs of easing.
On Monday, restaurant lobby Federation of Hotel and Restaurant Associations of India (FHRAI) had written to food-service aggregators Zomato and Swiggy requesting them to reduce the commission charged on restaurant takeaway services by 5 percent, with retrospective effect from May 2020.
The big shift
One of the biggest changes in the food business since the lockdown is the shift towards takeaways and food delivery through aggregators. Thanks to this shift, food-service aggregators have been raking it in as delivery orders have risen significantly.
Restaurants, meanwhile, are struggling to keep going as the lockdown restrictions meant dine-in services were not allowed in many markets. Where services have been allowed to resume, consumer fears of contracting Covid have meant footfalls are low.
This has forced the restaurants to depend on the takeaway and delivery business, and consequently on the food-delivery services.
Generally, food aggregators charge commissions in the range of 18-25 percent.
So far, the restaurant association has not received any response to the letter it sent on October 12 demanding a reduction in commission.
The letter was addressed to Zomato founder Deepinder Goyal and Swiggy Co-Founder and CEO Sriharsha Majety.
FHRAI is the apex body of the Indian Hospitality Industry, representing 55,000 Hotels and 5,00,000 restaurants across the country.
Moneycontrol reached out to both Zomato and Swiggy to ascertain their stand on the commission reduction sought by FHRAI.
Zomato: We’re supporting our partners
In response to a Moneycontrol query, a Zomato spokesperson said: “All our efforts are focussed on supporting our partners in these difficult times. With this in mind, we have already made our takeaway services commission free for our restaurant partners and are encouraging more restaurants to enable this service for their customers.”
Takeaway involves the customer placing the order via the food aggregator’s app and collecting it rather than having it delivered.
Pradeep Shetty, Senior Vice President of the Hotel and Restaurant Association Western India (HRAWI) and Joint Secretary of FHRAI, pooh-poohed Zomato’s assertion. “Making commissions zero in cases where the consumer comes to the restaurant to pick up his food really does not sound like a great contribution towards the beleaguered Industry.” Takeaway was never Zomato’s business, he added, “hence making the commissions zero is hogwash”.
In fact, asserted Shetty, “during the Covid restart and also Pre-Covid, it (Zomato) demanded exorbitant onboarding charges from restaurants”. He said this is an example of how an ecommerce company is swiftly entering the core business area of restaurants.
In a response to a Moneycontrol query, a Swiggy spokesperson said: “As a key player in the ecosystem, Swiggy has been constantly working with the restaurant partners to create win-win propositions, particularly during this challenging phase that we all found ourselves in.”
“To support the industry, which has been grappling with lower dine-ins for a few months now, we introduced the ‘Jumpstart Package’ aimed at aiding restaurants’ recovery and growth,” the spokesperson added.
The food-delivery aggregator said it has supported over 50,000 restaurants through initiatives like enabling safety and hygiene protocols, packaging solutions at subsidised rates, improving cash flows and providing marketing assistance through Business Booster packs. The ones that availed the business booster package were able to fast-track their recovery by 30-40 percent, he claimed.
In response to Swiggy’s comment, FHRAI’s Shetty told Moneycontrol that all the initiatives mentioned by Swiggy were nothing but another avenue to extract further discounts from beleaguered restaurant owners, who, he claimed, were now forced to give away almost 50 percent of their revenues through commissions and discounts.
“Surprisingly, Swiggy increased commissions at the onset of the Covid pandemic. Surely, these are not Industry-supporting initiatives. The claims on business booster package is a farce and unproven to our knowledge,” Shetty said.
Restaurants continue to struggle under the pandemic and reduction in commissions by Swiggy and Zomato would help alleviate their stress, emphasises Shetty.
Boom time for deliveries
A report released by Zomato on its website in August 2020 shows that the company has delivered 7 crore food orders since the lockdown was imposed in March.
In July, Swiggy released its ‘StatEATistics report: The Quarantine Edition’, which showed that the company has delivered 4 crore orders since the lockdown, across food, groceries, medicines, and other household items.
Before the Covid pandemic, both Swiggy and Zomato delivered 20 lakh orders, on average, in a month.