Foodtech company Zomato is reportedly seeking to increase its commission fees for restaurant chains by 2-6% as the company’s losses continue to mount, but several restaurant operators have refused to accept the demand. Sources cited by ET revealed that Zomato has been contacting restaurants for the past week, telling them that they could be delisted if they do not comply. The foodtech giant has also reportedly threatened to reduce their visibility and delivery radius. However, many restaurants have reportedly stood firm, leading to a new conflict between Zomato and restaurants.
The National Restaurant Association of India (NRAI) has said that it would take up the issue of increasing commissions with Zomato on behalf of its restaurant partners. Zomato has a variable commission rate for their restaurant partners, ranging from 18-25% per delivery depending on their individual setup. Zomato declared that they routinely reassess their commissions to ensure a balance between the sustainability of their restaurant partners and Zomato.
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This development follows Zomato’s net loss of INR 346.6 Cr in Q3FY23, which increased by 38% sequentially, despite the company’s operating revenue increasing sequentially. The food delivery sector of their business took a dip in the December quarter with revenue down 1% to INR 1,565 Cr from Q2FY23’s INR 1,581 Cr. Additionally, average monthly transacting users fell to 17.4 million in the December quarter from 17.5 million in Q2 FY23. Amid the slowdown in the food delivery business, Zomato has withdrawn from 225 cities across India citing poor performance.
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Since the year 2020, Zomato and Swiggy have had a dispute with their restaurant partners. It has been claimed by the latter that the food aggregators provide excessive discounts to increase their customer base, leading to unsustainable business practices. Furthermore, restaurant partners have claimed that platforms charge uneven commissions. In April 2022, the Competition Commission of India (CCI) launched a probe into the conduct of both Zomato and Swiggy, following a complaint by the NRAI.
Zomato’s move to increase commissions is expected to further fuel tensions between the company and its restaurant partners. The foodtech giant has been aggressively pushing to expand its business in India, even as it faces increasing competition from rivals such as Swiggy, Amazon, and Uber Eats. With the NRAI and other industry bodies likely to intervene in the matter, it remains to be seen how Zomato will navigate this latest conflict with its restaurant partners.
