The trouble with Foodpanda
Mumbai: It was late. The men were hungry.
So they decided to order some food using Foodpanda, the online food-ordering marketplace, from a nice restaurant close by. But just as he placed the order, one of the men realized the restaurant had shut down sometime back. In fact, he knew for sure that it had wound up. Then, how come it was still live on Foodpanda? The order had gone through. Foodpanda had accepted it. He wondered and waited.
After about 10 minutes, he received a call. From the Foodpanda call centre. The guy at the other end was apologetic:
“I am sorry, sir, but your order cannot be processed because of a technical issue.”
“What do you mean technical issue?” the man said. “Let me tell you something, the restaurant has shut down. Okay.”
“No, sir, there has been a technical issue. We are extremely sorry, sir. Can we offer you a voucher of Rs.550? You can place an order from any other restaurant. Your order was for Rs.550, so we are offering you a free voucher of Rs.550.” (What’s that? Foodpanda Customer Delight voucher.)
“Okay. Yes, yes.”
The man hung up, bewildered but happy. He couldn’t believe what had come to pass.
And thus began the Foodpanda hack.
Late in the evening.
In a tiny office in Gurgaon.
“It worked for a few months,” says one of the men involved, who didn’t want to be identified. “We tried that restaurant and then a few others, which we knew had shut down. But in the last week or so (last week of August), it looks like they figured it out.”
Sure, but how was the food? “Oh, great.”
And how much did you guys get in terms of freebies?
“Rs.3,000 or thereabouts.”
There are two ways of looking at the incident. One, the folks at Foodpanda had no clue that the restaurant had shut down, which is why the order went through. Two, the folks at Foodpanda knew that the restaurant had shut down, but didn’t care because the restaurant was popular and they didn’t want to lose customers. Because that’s all they cared about—transactions. Extend that to meeting sales targets. And that, to valuation.
Neither explanation makes Foodpanda look very smart.
Certainly not for the 21st century technology start-up it claims to be.
But everyone trips; one swallow doesn’t a summer make. So, here’s more.
‘They couldn’t find the transactions’
The man was not pleased. Not one bit. The owner of a large fast-food retail chain in Mumbai, he was done chasing Foodpanda for payment; nearly Rs.1.5 lakh was due to him, but the company would have none of it. Because it couldn’t find the transactions in the system. So, it was stalling. On 16 May, the retail chain called off its arrangement with Foodpanda. In an angry email, the man put down the issues. Many had to do with orders. Foodpanda would take orders from customers, but not communicate them to the restaurant. Often, customers would directly call up the restaurant to check. Sometimes, the communication would come up to 30 minutes late, resulting in a late delivery (and unhappy customers). Foodpanda didn’t pass on information on cancelled orders. Foodpanda was just not prompt in responding to the issues raised. And so on. Mint has a copy of the email.
“Foodpanda didn’t even know (about the problems),” says the owner of the retail chain, who requested not to be identified. “We monitored all the transactions. But on the company’s side, there was lack of process, lack of ownership. Look, I don’t think its tech is the best, but there was nobody who owned up to this piece and we couldn’t even connect.”
Mint reached out to a few other restaurants in Delhi, Mumbai and Pune. There, too, the sentiment was no different. “For a small chain like us, Foodpanda is a necessary evil,” says the owner of a Chinese fast-food chain, who did not want to be identified. “I mean, customers call us complaining that the Foodpanda voucher is not working. That’s got nothing to do with us. We don’t have to follow up on payment. But if there is a discrepancy, then god help you. A lot of times, we just let it be.”
There’s more. Both summers and swallows.
‘Till this day, I didn’t know this’
Few people inside or outside Foodpanda know that Rohit Chadda, the former co-founder and managing director at the start-up who quit on 13 August, was a director in a company called Crazy Boyz Entertainment Pvt. Ltd. Two other people are directors of the firm—Mohit Chadda, Rohit’s brother, an actor, and a Suraj Suresh Joshi. Late last year, when Foodpanda was looking for production houses to put together its television commercials, the contract was awarded to Crazy Boyz. According to a top official at Foodpanda, who did not want to be identified because he is not authorized to speak with the media, the contract was worth around Rs.3 crore.
In an email reply, Chadda denied it was worth that much. “Contract value was approx INR 75Lakh. Due process was followed while awarding the contract to ensure the best interest of Foodpanda.”
Crazy Boyz’s only claim to fame is the Foodpanda commercial. In the last year or so, a total of seven Foodpanda commercials have been shot. Plus one other commercial for Printvenue (a start-up that sells customized printed products such as visiting cards, key chains, among other products)—interestingly both Foodpanda and Printevenue share the same investor, Rocket Internet—and Chadda is also connected to Printvenue.
According to documents filed with the Registrar of Companies (RoC), Rohit Chadda resigned from Crazy Boyz in August 2014. In its three years of existence, Crazy Boyz has not once filed any balance sheet or profit-and-loss statements (then, to be fair, several small companies have not). In submissions made to the RoC, under the Companies Act, 2013, where directors have to list their interest or concern in any other entity, Chadda’s submission is strangely “NIL”, despite his directorship on the board of Pisces eServices Pvt. Ltd, the registered entity that carries out business under the name Foodpanda. Mint has a copy of the filings.
And that’s not all.
Sometime in November 2014, Chadda started a restaurant table reservation company called Ziner. At least three people who saw the website in its early days claim that the data on Ziner.co was eerily similar to the one on Foodpanda. “This was hush-hush at the time,” says an official at Foodpanda who asked not be identified. “And I remember seeing it and wondering, is this even allowed because this is clearly data theft?”
In his emailed reply, Chadda said: “I don’t own any such company. Additionally, Foodpanda India data has never been shared with any company.”
At the moment, Ziner.co looks inactive. But Mint looked into the antecedents of the website using Domain Tools, which uses a database of domain name, IP (Internet protocol) address, and Whois data. It is used by investigative agencies to look into cyber crime and domain monitoring. Both Ziner.co and Ziner.in are domain names owned by Rohit Chadda and he has made the changes in the last six months to effect a change in the ownership from his email address to email@example.com. The changes were made on 5 January, 26 March and 23 June.
“See, till this day, I didn’t know this,” says the top Foodpanda official mentioned above (let’s call him Official 1). “But now that you are telling me all this, I mean, what can I say?”
Well, he needn’t say much, because there are a lot of people with stories of their experience of working at Foodpanda.
This is that story.
The story of one of the world’s largest online food-ordering marketplaces, present across India, Brazil, Russia, South-East Asia and Eastern Europe, and a start-up that has raised almost $310 million since its launch in March 2012, from the Samwer Brothers of Rocket Internet and Goldman Sachs.
This is also the story of a start-up where the culture seems to be: screw processes, screw ethics and screw the company, too; let’s just have a party.
It is a story pieced together from multiple accounts of people who work at Foodpanda or used to. More than 100 people have quit the company, across three locations—Gurgaon, Pune and Bengaluru—in the last five months. And they have plenty to say.
Mint sent a detailed questionnaire, 18 questions in all, to Rocket Internet and Foodpanda on 1 September. Specifically to Marc Samwer, co-founder of Rocket Internet, and Ralf Wenzel, global chief executive officer (CEO) at Foodpanda. In an emailed response, on 3 September, the company said that, “Rocket Internet and Foodpanda will not comment.”
‘The past is the past’
It was an out-of-turn meeting in early January at the Foodpanda headquarters in Gurgaon. Four people were in the room. Rohit Chadda; Heavent Malhotra, managing director of Rocket Internet in India; Felix Plog, chief operating officer of Foodpanda (global); and Shachin Bharadwaj, founder of TastyKhana, a Pune-based start-up that Foodpanda acquired in November 2014. After spending two months inside the company, Bharadwaj was disturbed about the lack of processes and had uncovered several discrepancies—fake orders, fake restaurants, no automation, overdependence on open Excel sheets, which were prone to manipulation, and suspicion over contracts awarded to vendors.
“I know I am making allegations,” he told the people in the room. “All I am asking is that we do an independent audit.”
The others were not interested.
“The past is the past,” said Malhotra. “Let’s just resolve the differences and find a way forward for you and Rohit to work together.”
According to a former Foodpanda official (Official 2) who is aware of the meeting, what followed next was a mud-slinging match between Chadda and Bharadwaj. “It didn’t go down well,” he says. “It was like ‘You are trying to play politics and digging up bad things’. The whole thing of doing an audit was brushed aside. And just the next day, Rohit and Bharadwaj decided to steer clear of each other’s turf.” Bharadwaj quit the company in March. Chadda and Malhotra left in August.
Bharadwaj declined comment for this story. Chadda said: “All our board meetings are documented and filed with the RoC. No such meeting happened.” Malhotra did not respond to a detailed questionnaire emailed to him on 1 September.
But the issues raised by Bharadwaj remain—fake orders, fake restaurants on the platform, and suspicion over contracts awarded to vendors.
‘There is a lot of fraud. We plug one hole and another opens up’
The problem was with the cupcakes. Sometime in August, La Pizza Mill, a fast-food chain in Gurgaon, listed on Foodpanda, said it had delivered 250 cupcakes each day, over several days. It was now demanding that its dues be settled. To the tune of nearly Rs.1.25 lakh for the cupcakes and other deliveries. “See, this is a very common fraud and the problem is on our side,” says a person in the know at Foodpanda (Official 3). “We don’t track delivery of orders, so we don’t know. But 250 cupcakes is a lot. The restaurant’s logic was that it was a corporate order. But this is fraud. And then you have to confront the guy and say that we will discontinue the relationship.”
The payment has been made to the restaurant since Foodpanda didn’t know how to prove that it was not a genuine order, said Official 1.
Now, this is not the most technology-savvy way of doing business, but cupcakes aren’t the only problem. Nearly every week, such issues crop up at Foodpanda.
Despite repeated attempts, Mint could not reach La Pizza Mill. Calls were not going through on the contact numbers listed for the restaurant. An email sent to the restaurant did not elicit any reply.
Sometime in July, another restaurant in Karol Bagh, New Delhi, claimed dues to the tune of nearly Rs.8 lakh. “Their average order per day was about Rs.80,000,” says the third official. “The highest order was for Rs.1.25 lakh and then on some days Rs.25,000 and then Rs.11,000. We are still investigating this.”
Then again, in August, a lot of suspect orders were detected from Gulshan Dhaba in Murthal, Haryana. It was a case involving orders being placed on Foodpanda using fake credit card numbers and is still being investigated, said Official 1. This person adds that the dhaba isn’t at fault.
An oft-quoted example of fake orders inside the start-up is that of The Sanskriti restaurant in Greater Noida, which ran up massive bills, to the tune of Rs.4 lakh per month and has since been taken off on the platform.
Abhishek Singh, manager at The Sanskriti, said: “Some two months back, this restaurant was taken over and its ownership has changed. How they (the previous owners) ran this restaurant, I cannot comment. We don’t have a relationship with Foodpanda because we are into dine-in and not delivery.”
Spare a moment to understand the modus operandi and some simple math.
Let’s say you are a restaurant. Now, place 10 orders using 10 names or even the same name, each for Rs.300. Every order is a takeaway. Pay online using the BOGO voucher, a campaign (Buy One Get One) run by Foodpanda. So for Rs.300, get Rs.300 free. So for a Rs.600 order, you paid only Rs.300. How much does Foodpanda have to return to you, the restaurant? Rs.600. After deducting 12% as its cut, Rs.528. How much did you make in the process? Rs.228 . Did you have to deliver that order? Nope. So, a straight profit of Rs.228.
Now, let’s say you processed 100 such orders a day. For a month. Total investment: Rs.9 lakh. Reimbursed by Foodpanda: Rs.15.84 lakh. Your total gain, by just processing fake orders: Rs.6.84 lakh.
Now imagine you are not the only restaurant on the platform doing this.
And now, extrapolate this example for every voucher offered by Foodpanda and you can sense the real extent of the problem. There are vouchers that offer 50% off. There are those that do 30% off. It is a feast. The restaurant makes money hand over fist and Foodpanda gets transactions, though mostly fake.
“There are no checks. The whole operation is running on Excel sheets,” says Official 3, who has since left the company. “You know simple tools like one time password (OTP) for the order, a real-time system which alerts managers to spikes in orders, another real-time system to restrain a restaurant from processing more than a certain number of vouchers—there was nothing. And we fought a lot to build something, but the attitude was, just let it be. This was the attitude from the top.”
The result was a gold rush—a rash of restaurants that existed only on paper
It wasn’t just about fake orders, though.
There were entirely fake restaurants.
Sunny Goel is a popular man inside Foodpanda. His claim to fame? Of having set up 70 fake restaurants on the platform. His restaurants were spread across Gurgaon, Noida and Meerut, among several other locations. In its bid to chase growth, Foodpanda short-circuited the verification check of restaurants. “This Goel fellow is big,” says Official 1. “We used to verify restaurants on the phone, without actually visiting the location. That gave rise to guys like Goel. He used different mobile phone numbers to set up these restaurants and would use the vouchers and process orders.”
Mint tried to reach Goel through the people at Foodpanda. But they didn’t have his number because he keeps changing them, and were also not sure if Sunny Goel is his real name.
He isn’t alone.
According to three people in the know, Foodpanda found close to 400 fake restaurants on the platform between March and August 2015. And Shaunak Mewada, head of global expansion at Foodpanda, was leading the effort of culling them. But the problem continues. “So now we have said that we will not list any restaurant without pictures,” says Official 1. “We are also discouraging restaurants which do only takeaway because there is a lot of fraud there. We are trying, but there is a lot of fraud. We plug one hole and another opens up. This Goel fellow also keeps popping up.”
Foodpanda did make an effort to do something about these holes. Except, the initiative was botched. Right from day one.
‘This tablet episode is the biggest travesty’
In late March this year, Zomato, the global restaurant-listing company, entered the food-ordering space. As part of the initiative and to ensure a robust back-end, it decided that all its restaurants would be connected with an Apple iPad. That way, the moment an order is placed on Zomato, it will reflect on the iPad with the restaurant. Within weeks, Foodpanda decided to follow the example. But iPads are expensive, and to connect 12,000 restaurants (that’s the number Foodpanda claims it has) would be prohibitively expensive. So the company settled on Samsung tablets instead.
Only, there weren’t 12,000 restaurants.
“So it is an open secret that out of these 12,000 restaurants, there are not more than 2,000 which actually generate most of the business,” says another former Foodpanda official, who requested not be identified (Let’s call him Official 4). “So we zeroed in on 2,000 restaurants, and a guy called Abhishek Mandal was given the task to get quotations.” Who’s Mandal? Mandal was the head of operations at Just Eat India, a start-up Foodpanda acquired in January this year. Mandal quit Foodpanda in May.
According to three people who are familiar with this episode, Mandal came up with a quotation of around Rs.10,000 per tablet. But suddenly, he was moved out of the procurement process. “Nobody knows exactly why, but Shray Gulati took over,” says Official 4. Gulati is the vice-president of operations at Foodpanda India. “What we do know is that when the tablets arrived, they were neither of the ordered specification, nor in the ordered quantity. Also they had been bought at a huge mark-up, around Rs.20,000 per tablet, from a vendor in Nehru Place.”
Simply put: Only 500 Samsung tablets made it home; 200 were distributed in Delhi, and 150 each in Pune and Bangalore.
The goof-up sent shockwaves at the Foodpanda headquarters in Berlin, Germany. Luca Pignatelli, the global operations manager at Foodpanda, flew to Gurgaon to investigate the matter. That’s because the team there was banking on automation and culling fake orders and restaurants. “The team in Berlin was pushing this because operations were a major issue. But the tablet episode is the biggest travesty I have seen,” adds Official 3.
There is, after all, the matter of Capricorn eServe Pvt. Ltd.
‘This is again news to me’
Sometime late last year, as Foodpanda began aggressively offering BOGO vouchers, 50% off on all orders, and acquired TastyKhana, the number of transactions soared. People in the know claim that from around 60,000 transactions a month, the jump was nearly three times. To process those orders, Foodpanda needed more call centre employees. That’s how Capricorn eServe came into the picture. Capricorn is a small call centre firm in Gurgaon. Foodpanda outsourced its back end to the firm.
“This was a high transaction unit,” says Official 3. All the employees Mint spoke with confirmed the employment of Capricorn, sometime in early 2015.
Also Read »
“At any point in time, we were paying salaries to about 200 odd people and they were paid really well, about Rs.30,000 per month, per person. But I’ve been to their office and I have never seen more than 60-70 employees,” said Official 4, who has since left the company.
Mint independently checked the antecedents of Capricorn. It is a small call centre operation, whose biggest client is Foodpanda, and it also does some work for Indiamart. Throughout April, May, June and July, the firm was putting out recruitment notices for customer sales representatives on behalf of Foodpanda. In fact, on its website, Rohit Chadda endorses the firm as a “superb business partner”. Mint reached out to Gagan Vashistha, a director on the board of the company, and he confirmed his association with Foodpanda, “Yes, we provide 200 people to them and we have been working with them for the last five-six months.” Everything checks out fine.
Documents filed with the RoC paint a different picture. Capricorn eServe never existed before July 2015. The company officially came into existence only on 30 July. Its memorandum of association was filed on 21 July. How is it then that salary of 200 people was being paid by Foodpanda to Capricorn, before the company even came into existence? “This is again news to me,” said the top Foodpanda executive (Official 1).
The former Foodpanda official (No. 4) quoted before says it is clearly a case of fake employees on the payroll. “See, there was a lot of things going on and there were rumours about this too, but we could never get any documentation to support it. Not that we tried much anyway because this was done at the top.”
Vashistha denies any wrongdoing. “Whoever is giving you this information is misleading you,” he says. “We started as a partnership firm on 15 March and registered on 30 July. Yes, it is true we were one of the highest paid among vendors. But all processes and checks were followed.”
Both Rocket Internet and Foodpanda declined to comment.
Another matter altogether, that Capricorn has been served a termination notice, in the first week of September. “We are serving last two weeks of notice period,” said Vashistha. “They have said that they want to insource.”
‘You should have checked, sir. They only serve lunch’
On 31 August, I placed an order on Foodpanda to check if everything goes well. At around 7.50pm. Sitting in office, at Elphinstone Road (West), I ordered one steamed rice with red Thai curry. From a restaurant in Bandra West. Now, anyone who knows Mumbai even slightly well will know that chances of a restaurant in Bandra West delivering to Elphinstone Road are next to zero. Well, that was the point.
The order went through.
A minute later, in an email, Foodpanda informed me that something had gone wrong—the payment didn’t go through.
Just then, another email landed in my mailbox. “Hi Ashish, Thanks for ordering with Foodpanda. Noodle Play (Bandra West) is preparing your order now.”
About 10 minutes later, I got a call from the restaurant. The lady on the phone put it rather simply. “Sir, we cannot deliver to Elphinstone.” But my order had gone through. “Yes, sir, but we cannot deliver. Please call up the call centre and tell them that the restaurant has said that it can’t deliver.” Okay. I called up the call centre next.
“Sir, may I put you call on hold. I will need to speak with the vendor.” Sure. After three minutes of waiting.
“Sir, thanks for being on the line. The vendor has informed me that they deliver only lunch, not dinner.”
“Yes, sir. You can order from any other restaurant for the same amount. Should I help you with that?”
“No. I would like my money back. Thanks. But, did I make any mistake?”
“Yes. You should have checked, sir. They only serve lunch.”
Snigdha Sengupta contributed to this story.