Cloud kitchens and deep discounts by Zomato, Swiggy, Foodpanda, and Uber Eats under govt scanner

Federation of Hotel & Restaurant Association of India has expressed concerns of the restaurant industry caused by the deep discounting and exorbitant commissions etc offered by foodtech startups.

4th Jul 2019
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The government will look into the issue of deep discounting, exorbitant commissions, and operation of cloud kitchens by foodtech startups like Swiggy, Zomato, Uber Eats, and Foodpanda, following a complaint by the Federation of Hotel & Restaurant Association of India (FHRAI).


FHRAI said in a statement that the government has agreed to look into issues, including building of services, data marking, hybrid models, transparent algorithms of Food Services Aggregators (FSA) portals (Zomato, Swiggy, Foodpanda, and Uber Eats etc), and exclusivity among others.


The agreement is a outcome of the FHRAI meeting with Department for Promotion of Industry and Internal Trade (DPIIT), where the FHRAI representatives presented the issues and concerns of the restaurant industry caused by the deep discounting, exorbitant commissions, unfair trade practices by promoting unorganised sector or illegal cloud kitchens etc by the FSAs.


Food delivery business


In a statement, FHRAI said that it has expressed reservations to DPIIT’s proposal of placing FSAs and restaurants together as part of the same industry and has proposed solutions to regularise the operations of the FSAs, which are presently cannibalising the market by sheer strength of discounting model of business.


Officials of the Ministry of Road Transport and Food and Standards Authority of India (FSSAI) were also present in the meeting, according to the FHRAI statement.


Gurbaxish Singh Kohli, Vice President of FHRAI, said in the statement,


"We have proposed specific solutions to the DPIIT for regulating the business practices of FSAs to safeguard the interests of the restaurant industry. Our foremost appeal to the DPIIT is to advise FSAs to stop the deep discounting of products served or offered by restaurants."


He added, "We have also brought it to the attention of the Ministry of Commerce & Industry about FSAs floating impractical, unaffordable, and unconscionable discounts. Discounting a product by 50 percent and similar other offers is causing loss of image to the individual restaurants and distortion of the market scenario. At present, FSAs demand commissions ranging from 20 to 30 percent, adversely affecting the revenues, business, and livelihood of the owner of a restaurant. We would request the government to rationalise the commissions to be in the range of five to 10 per cent.”

 

The FHRAI pointed out that a restaurant has to obtain multiple approvals and licenses and invest huge capital to begin operations, but FSAs are providing platforms to illegally operated cloud kitchens or 'dark kitchens'.


The FHRAI has alleged that in most of the cases such 'dark kitchens' are either operating without valid licenses from local or State authorities or have their operations at non-commercial establishment.


(Edited by Dipti Nair)



 

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