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Photo: Reuters
Photo: Reuters

Food tech firms face fee cut demand

Restaurants, on average, pay 20% of the order value as commission to the aggregators, apart from offering discounts

NEW DELHI : Restaurants, which are facing a sharp slump in their dine-in business, are initiating conversations with food delivery platforms to reduce commissions as online deliveries and takeaways are expected to drive business for the next six to eight months.

Restaurants, on an average, pay 20% of the order value as commission to the aggregators and offer discounts, which vary from restaurant to restaurant. The commission charged by aggregators also vary.

However, no headway has been made yet with the aggregators in this regard.

“Online food aggregators should reduce commissions for businesses to become viable for the long-term. Otherwise, nothing will happen and restaurants will shut down. They have become more important now. All our business is largely based on delivery, while previously, it was all about dine-in and the delivery component was small," said Rohit Aggarwal, director, Lite Bite Foods Pvt. Ltd.

The company, which manages a large portfolio of restaurants, has been negotiating commissions for months, and the covid-19 pandemic has prompted the conversations to become relevant again.

Several restaurants are in talks to lower commissions, said Thomas Fenn, who runs Mahabelly restaurant and is a member of the managing committee of National Restaurant Association of India (NRAI).

However, the industry body is expected to make a formal recommendation to online food ordering platforms as restaurants try and preserve cash in a scenario where the business is uncertain.

“On a multiple outlet level, it is something all restaurants are asking for right now. However, the needle hasn’t moved at all as the market was down," said Fenn.

Commissions are painful as businesses are facing a slump right now, Fenn said.

“We have had too many things on our plate to take this up. Now that markets have opened up, it is important to address it," Fenn added.

During the initial phase of the lockdown, the association had raised concerns over payment cycles and discounts.

While issues of payment cycles have been resolved and online food delivery platforms are reducing the time taken to transfer money to the account of the restaurant partners, discounts are again making a comeback, Fenn said.

A Zomato spokesperson said its commissions are in line with the value it delivers and the cost its incurs. It has been working closely with restaurant partners to implement initiatives such as Zomato Gold Support Fund that improve cash flows and help them in these difficult times, the spokesperson said.

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