Zomato asks restaurants to raise commissions

The restaurant operators, however, have refused to accept the demand, triggering a fresh conflict between the two, they said.

“This is happening for a week now. Some of us have been told we could be delisted, our delivery radius could be reduced, or visibility could be lowered on the platform, if we don’t adhere to their demand. We have not agreed,” an executive at a national restaurant chain said, requesting not to be named.

Kabir Suri, president of the National Restaurant Association of India (NRAI), which has more than half a million members, said: “We will take this up with Zomato on behalf of our restaurant partners.” Suri is a cofounder of Azure Hospitality, which operates Mamagoto and Foxtrot restaurant brands.

A Zomato spokesperson said in response to ET’s query: “We keep reconsidering our commissions to make sure they are competitive and sustainable for restaurant partners as well as Zomato.”

For the past two years, Zomato has been charging a commission of 18-25% per order for deliveries, depending on its arrangement with restaurant partners.

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Another restaurant industry executive said Zomato wanted parity with other aggregators like Swiggy that charged higher commissions in many cases.”It is good to see Zomato’s focus on unit-level profitability, but this might disturb the unit economics of restaurants drastically,” said Karan Tanna, founder and chief executive of food tech company Ghost Kitchens.

A sudden 5-6% increase in commission (including GST) might lead to disparity of commissions between Swiggy and Zomato, said Tanna, who’s company operates more than 1,200 Internet restaurants, which don’t have physical outlets and do only deliveries. “If there is a gradual increase, then it would lead to a stable transition for restaurants.”

Zomato’s move comes after the company reported a net loss of Rs 347 crore for the October-December 2022 quarter, wider than the Rs 63.2 crore loss posted a year earlier. The platform’s revenue rose 75% from a year earlier to Rs 1,948 crore.

Anurag Katriar, founder of Indigo Hospitality, which runs Indigo Deli and Neel restaurants, said: “Various restaurant chains have been approached in multiple cities including Mumbai, Delhi and Kolkata by Zomato to increase commissions. It is being done selectively, so far, and industry associations will be discussing this with the aggregator.”

Growth in Zomato’s food delivery business slowed significantly in the December quarter with the return of dine-out and travel, and this was more pronounced in India’s top eight cities, which drive a majority of the demand on the platform.

In a post-earnings letter to shareholders, Zomato chief executive Deepinder Goyal had said the slowdown was a result of “a few temporary factors” and that “we believe that the long-term opportunity remains large and exciting”.

Aggregators Zomato and Swiggy have been in conflict with restaurant partners for over three years now. Restaurant operators allege that the aggregators offer deep discounts to add to their customer base, which make their businesses unsustainable. They also accuse the platforms of charging uneven commissions and masking of data.

The matter escalated to the Competition Commission of India, when the NRAI filed a complaint against the online food ordering platforms.