Business

Restaurants Protest Food Delivery App’s Deep Discounts

Food delivery

The National Restaurant Association of India (NRAI) has written another letter to the food inventory and delivery platforms with eight broad issues that they want these platforms to address immediately. This is a continuation of hoteliers and restaurant owners’ protest against food service aggregators (FSAs) such as Zomato, Swiggy, and others.

Earlier this month, the Federation of Hotel & Restaurant Associations of India (FHRAI) also warned food aggregators such as Zomato, Swiggy, Nearbuy, Dineout Prius Heights, EazyDiner, and Magicpin of nationwide protests if they continue with their practices and schemes.

The whole issue is part of various complaints regarding ‘unethical’ practices of gaining profit by cutting into the restaurant’s margins and profits. The discounting policy of Zomato, Swiggy, and others, has come under heavy criticism recently.

NRAI representatives have written to the top executives at UberEats, Swiggy, Zomato, and Foodpanda after weeks of protests by the restaurant association including a delisting campaign in Delhi-Haryana and Mumbai region, urging restaurants to sign out of these services.

“Discounts are a privilege and are extended on occasion. However, in the current environment, deep discounts, ranging from 30-70 percent, are being deployed 365 days of delivery platforms. This distorts the market and hinders the profitable growth of the sector. These discounts are not sustainable nor are they beneficial to the industry at large “the letter said.

The operators have displayed strong resentment at the current status of transparency, forced discounting, uneven commission structure and general high-handedness of the aggregators in the food delivery space.

NRAI’s letter has also raised concerns on the lack of unified commission structures across restaurants. Each restaurant is charged differently and has been given different guidelines according to their business growth and financial status. This allows the FSAs to personalize each contract to get more profit out of the restaurants. Uniform contract regulations look to tackle this.

To start with, platforms like Zomato and Swiggy used to pay the total cost of the food items to the restaurants, while offering a heavy discount to their customers, bearing the aggregate cost themselves. This model was never sustainable. And those inherent problems in the model are at the core of these issues.

Brief research into ordering experience across several FSAs reveals that customers are still offered the food at near about the same price mentioned in the restaurant menu even after applying all these discounts. At the same time, the restaurants are no longer paid the total cost and instead paid through a non-transparent ‘after-discount’ mechanism.

Amidst all these allegations, it is speculated that US giant Amazon is also entering into the food delivery space in India. This will further increase the competition in this ecosystem. It now remains to be seen how market leaders like Swiggy and Zomato will handle this competition.  Despite the mounting pressure, neither Zomato nor Swiggy have released an official statement about the demands and issues stated in the latest NRAI letter.

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