Eateries will protest Zomato’s decision to hike commissions

As it strives to enhance take-rates and improve profitability in a low-growth environment, the meal delivery firm has lately begun to renegotiate its contracts with several eateries across cities.

Restaurants are planning a huge backlash against Zomato after the meal delivery firm raised its commissions by a few percentage points.

According to sources close to the situation, the meal delivery firm has lately begun to renegotiate its agreements with several eateries throughout cities in order to enhance take rates and improve profitability in a low-growth market.

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According to sources, Zomato’s basis for approaching the eateries was that commissions had been kept low to this point to enable them to get through the epidemic and help new-to-online establishments make the transition to meal delivery. For these reasons, it frequently offered rates that were 4-6 percentage points lower than competitor Swiggy.

Restaurant proprietors, on the other hand, are not willing to purchase such items.

“Any contract is exclusively between two parties.” “If Zomato wants to revise its rates upwards for some restaurants where it is lower than Swiggy, is it also open to revising them downwards in cases where it is higher than Swiggy?” said the owner of a Mumbai-based restaurant.

“If they are not ready to do it both ways, then this move smacks of cartelization.” “We may have to take legal recourse once again,” he added.

To be clear, Zomato and Swiggy do not charge eateries the same cost. The commission structure can range between 15% and 30%, depending on the number of orders, average order prices, the strength of a restaurant brand in its category, and the services it provides, among other factors.

“It is not as if restaurants are earning a lot of money, and many are still trying to make up for the hardships suffered during the pandemic,” said a Bengaluru-based restaurateur.

“It is certainly not feasible if aggregators suddenly raise rates now, and there will definitely be a major pushback against it.” “Some have also been given subtle warnings that if the new rates are not accepted, it might hurt their discovery on the platform,” he added.

According to a person close to the situation, Zomato intends to renegotiate arrangements over the next month. It hopes to persuade more restaurants to use its B2B grocery service, Hyperpure, and marketing service, which will reduce the effective commission rate from the eateries’ perspective.

Zomato had 209,000 active restaurants listed on its platform at the end of the December quarter, up from 191,000 a year earlier.

“We keep reconsidering our commissions to make sure they are competitive and sustainable for restaurant partners as well as Zomato,” said a Zomato spokeswoman in response to queries on the matter.