Restaurants decry Zomato's cancellation rules; food delivery app responds

Restaurants and food delivery app Zomato are at loggerheads once again, this time over cancellation clauses in business agreements.

The issue flared up on Twitter after restaurant owner Riyaaz Amlani tweeted on Friday that Zomato was acting against the interests of the restaurant industry.

Posting screenshots of Zomato’s new business agreements – which include a clause saying it will suspend online ordering services if restaurants reject more than one order a day or if the size of the rejected order is more than 3% of the total value of orders from that restaurant – Amlani added sarcastically: “True support to the restaurant industry when they are facing the most challenging time of their lives.”

Amlani is the chief executive and managing director of Impresario Handmade Restaurants, which runs the well-known Social and Smoke House Deli restaurants.

In its response to Amlani on Twitter, Zomato said this wasn’t a new policy and would apply only to restaurants with a high rejection rate. “This policy has helped reduce rejection rates by 50% already, which is a big win for our customers and our restaurant partners,” it said.

The IPO-bound company said further that food delivery was clocking higher numbers than the pre-Covid-19 period.

“This in itself is testament to the strong support restaurants have received in these tough times,” it said.

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Zomato added that in all rejected orders, it passes on the collected refunds to customers.

“We think it’s only fair to do that when we don’t live up to the promise of consistency of service,” it said.

Online food-delivery players such as Zomato and Swiggy had been severely hit at the onset of the nationwide lockdown last year in March. However, as the lockdowns eased and supply of restaurants increased for home delivery, they were able to rack up order numbers.

In fact, both Zomato and Swiggy said they witnessed a record number of orders by the end of last year, especially during the holiday season.

Anurag Katriar, president of the National Restaurant Association of India (NRAI), said restaurants receive around 80% of home delivery orders through apps such as Zomato, and only the remaining come directly.

“Zomato makes unilateral changes in its offers to customers without consulting restaurants and backs it up with a threat to delist them if they do not agree,” Katriar said.

“What Zomato is doing is not in the spirit of true partnership. It is very predatory and one-sided,” he added. “That is why there is need for an equitable ecommerce policy where the interests of millions of people (who work in the restaurant industry) are not compromised due to the greed of certain agencies.”

Countering the claims, Zomato said that it was open to dialogue and had earlier made changes to its Gold (now Pro) programme and rolled back or made changes to its policies after taking feedback from restaurants.

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The tussle between the restaurant industry and the food-delivery aggregator had escalated much before the onset of the Covid-19 pandemic, but the outbreak and resultant lockdowns led to a sharp decrease in dining-in and a corresponding increase in home delivery orders. In fact, some of the restaurants had even opted out of using food aggregators for home deliveries and had even launched the hashtag #logout on Twitter in 2019.

The delivery business comprises about 10-12% of the overall business of a restaurant.

“Restaurants get 20-28% of the profit margin from food delivery apps,” said Katriar. “It is no more a commission, it is a partnership.”


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