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Food delivery cos asked to cut offers, commission

Bengaluru: As economic activities pick up across the country, restaurants are now pressing online food delivery platforms like Swiggy and Zomato to change commission structure, reduce discounts and levy new fees for deliveries. The aim is to be able to stave off closure of restaurants. 

Restaurants are telling platforms to bring these changes, and especially do away with ‘forced platform discounting’ without which they said they can’t sustain operations in what is the ‘new normal’. This comes when restaurants have been allowed to open their dine-in services, but government guidelines and overall safety concerns of consumers have meant less footfall in these physical outlets. The new safety and cleaning measures are adding to the costfurther, restaurant owners said. 

Typically, online platforms charge 20-25% of order value as commission, depending on multiple factors like brand, exclusivity and consumer reach. The National Restaurant Association of India (NRAI) confirmed it has begun talks on this matter with online food aggregators as dine-in service remains muted. 

“This is an opportunity to redraw the contours of the business. We have begun a discussion on commission structure with online platforms,” said NRAI president Anurag Katriar. As offline business remains a pale shadow of pre-Covid-19 levels, online orders are the only major source of revenue, for now. At the same time, Swiggy and Zomato are also still operating at just 30-40% of their pre-Covid orders and have laid off 12-15% of their corporate staff in order to cut losses, as TOI had reported earlier. According to a Mumbai-based restaurateur, the average order value is around Rs 400 and then there is typically a 30% discount all around the year, on an average. “So customers pay around Rs 280 for that order and platforms will charge 20-25% commission on that. If the platform discount is reduced, the absolute value of the commission can be realised at a lower percentage of order value. This will help restaurants in the current situation. Platforms can generate additional revenue on each order by implementing charges such as convenience fee, and other such measures,” this person said, who has held initial talks with both Zomato and Swiggy.

Over the last week, about 20% of restaurants have opened in the country for dine-in with limited footfall. NRAI national management committee member Amit Roy, who is based in Bengaluru, said about 30% of restaurants have opened in the city so far with little business. “Aggregators are giving some sort of deal, but it’s not a long-term solution. So, with the commissions, it hasn’t helped a lot of people,” added Roy. 

According to him, some of the restaurants and home chefs have started WhatsApp groups that help with not paying a cut to any platform. Typically, consumers in these groups get the delivery through platforms like Dunzo.

A Zomato spokesperson said its commissions have always been in line with the value it delivers and the cost it incurs. “They (fee) have also been designed to ensure sustainability and growth for every stakeholder — our restaurant partners, delivery fleet, and us. Whether restaurants directly offer discounts on Zomato or not has always been and continues to be their own choice. We have been proactively cutting down discounts being offered on the platform and are only rolling them out when they support our restaurant partner’s growth and bottom-line goals,” the company added. Earlier this month, TOI reported the company was going to focus more on food delivery and relatively less on grocery as more restaurants open in the coming weeks. Swiggy said its focus, in the short term and mid term, remains to work through the current phase with its partners by enabling business continuity and boosting organic growth. “Our strategic investments in Swiggy Access (central kitchen for restaurants) and BrandWorks (co-creates brands with restaurants) are bolstering these efforts, while the reduced levels of discounting and transparent commission structures will support restaurant partners during the time it takes for dine-in revenues to return to a scale where the pre-pandemic financial viability gets re-established,” a Swiggy spokesperson added.