Restaurants Ask Food Delivery Companies To Revise Commission, Discounts

With the hotel industry on its knees due to the pandemic, restaurants have asked food delivery aggregators to review its commission structure, reduce discounts and levy new fees for deliveries.

A Times of India report said that restaurants are demanding Swiggy and Zomato to implement changes and do away with ‘forced platform discounting’. They said these changes were essential to stave off closure.

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) has initiated talks on commission structure with online platforms as dine-in service remains muted.

Currently, major players Swiggy and Zomato are said to be operating at just 30-40% of their pre-Covid orders. Despite the government’s SOP for dine-in restaurants to reopen, there are a few who have opened due to extra cost they will have to incur to implement these SOPs.

Over the last week, about 20% of restaurants have opened in the country for dine-in with limited footfall. A Zomato spokesperson reportedly 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.

Swiggy reportedly 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 said.

The development comes at a time when Zomato and Swiggy are chasing exclusive deals with restaurants to improve their business and deal with Amazon’s entry in the food delivery business. Zomato and Swiggy are evoking the force majeure clause that frees restaurants from tying up with another food aggregator. Swiggy and Zomato are bringing these changes to local restaurants and national chains as well.