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Zomato faces pushback threat from eateries over claim for commission hike

The food delivery company has recently started to re-negotiate its terms with many restaurants across cities as it tries to increase its take-rates and improve profitability in a low-growth environment

February 28, 2023 / 06:28 AM IST

Angered by Zomato’s move to raise its commissions by a few percentage points, restaurants are looking to launch a massive pushback against the food delivery company.

The food delivery company has recently started to re-negotiate its terms with many restaurants across cities as it tries to increase its take rates and improve profitability in a low-growth environment, according to people close to developments.

Also read: Zomato seeks hike in commission from restaurants: Report

Sources say that Zomato’s premise for approaching the eateries has been that the commissions were kept lower till this point to help them tide over pandemic blues and help new-to-online restaurants make the transition to food delivery. For these reasons, it had offered rates that were 4-6 percentage points lower than competitor Swiggy in many cases.

However, restaurant owners are not ready to buy such arguments.

“Any contract is exclusively between two parties. If Zomato wants to revise its rates upwards for some restaurants where it is lower than Swiggy, is it also open to revise downwards in cases it is may be higher than Swiggy?,” said the owner of a Mumbai-based restaurant.

“If they are not ready to do it both ways, then this move smacks of cartelisation. We may have to take a legal recourse once again,” he added.

To be sure, Zomato and Swiggy do not offer uniform rates to restaurants. The structure of commission may be in the broad range of 15-30 percent based on the volume of orders, average order values, strength of a restaurant brand in its category and what services it is availing of, among other things.

“It is not as if restaurants are earning a lot of money and many are still trying to make up for the hardships suffered during the pandemic,” said a Bengaluru-based restaurateur.

“It is certainly not feasible if aggregators suddenly raise rates now and there will definitely be a major pushback against it. Some have also been given subtle warnings that if the new rates are not accepted, it might hurt their discovery on the platform,” he added.

According to a source close to the developments, Zomato is planning to have the re-negotiation of terms over the next month. It is hoping to convince more restaurants to avail of its B2B grocery service Hyperpure and advertisement service which will bring down the effective commission rate from the eateries’ point of view.

At the end of the December quarter, Zomato had 209,000 active restaurants listed on its platform, compared to 191,000 a year earlier.

"We keep reconsidering our commissions to make sure they are competitive and sustainable for restaurant partners as well as Zomato," said a Zomato Spokesperson in response to queries on the matter.

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first published: Feb 27, 2023 06:11 pm