Last week, the National Restaurant Association of India (NRAI) launched a "Logout" movement against food service aggregators
After online travel agencies like MakeMyTrip.com and hotel chain OYO Hotels & Homes it's now the turn of food apps such as Zomato, Swiggy to face the ire of their business partners and representing associations.
The National Restaurant Association of India (NRAI) initiated a "Logout" movement last week, against "nonviable/ unethical" business practices adopted by Food Service Aggregators (FSAs). Now the Federation of Hotel & Restaurant Associations of India (FHRAI) has warned of a nationwide protest if the FSAs fail to sit across the table and sort out the issues/ dispute with their restaurant partners. The apex body called upon the FSAs to engage in a fruitful dialogue with the federation and its affiliated associations at the earliest to arrive at a win-win outcome for all.
In a letter to Zomato, Swiggy, Nearbuy, Dineout, Prius Heights, EasyDiner and Magicpin on Sunday, the federation pointed out the "unethical" business practices and called for a review of all their schemes. It stated that as a technology partner, by merely hosting its members' inventory, FSAs cannot hold sway and arm-twist the traditions and aspirations of millions of entrepreneurs in India.
According to Gurbaxish Singh Kohli, vice-president, FHRAI, the new way of impractical, unaffordable and unconscionable discounting has put the hospitality industry in a very awkward situation. "The most common complaint with the FSAs is about the contracts being one-sided. These contracts aren't even consistent across the industry and almost always unfair towards start-ups as against established brands.
"A model contract which is mutually agreed upon has to be accepted. As such conduct is indicative of dominant behaviour and is indeed exploitative. Further, the agreement terms are not sacrosanct as they are frequently and unilaterally changed from time to time and always in favour of the FSAs. We are absolutely in favour of doing business, a business that is a win-win for everyone involved," Kohli said.
The FHRAI also pointed out to the unreasonably high commissions, payment terms and arbitrarily applied additional charges as well as unethical practices by the FSAs. While penal commissions of 25% have become a standard. such high charges merely for offering a platform are unjustified, said the apex body. Also, while high commissions are being extracted from merchant establishments under the pretext of both discovery and sales promotion, the FSAs are also charging separately for delivery and yet billing customers an additional delivery charge, which is tantamount to double dipping.
"It has also been brought to our notice that GST is being charged on the commission. Furthermore, showing customers that a restaurant is closed just because delivery boys are not available is absolutely wrong and translates to unfairly conducting business at the expense of partner restaurants. Further, unilateral penalties are imposed even for mistakes made by the FSA's staff to protect their own customers since the restaurant has no way left to recognise customers and undertake service recovery," said FHRAI treasurer D V S Somaraju.
Restaurant operators have also voiced the FSAs imposing absurd food acceptance, preparation and collection time with penalties and a negative grading system. "This is being done to indirectly force outlets to get certified for hygiene through its own agents at high rates and rating a restaurant through self-decided hygiene standards like the FSAs did for customer review ratings," it said.
"All this effectively translates to arm-twisting our members to subscribe to such initiatives using their dominant position. Restaurants are constantly but subtly threatened to participate in deep discounting schemes without respite through the year with one scheme getting replaced by another. Our members are neither given an option nor the opportunity to agree nor are they even consulted.
"Promises made while launching any new scheme is almost always broken by changing the rules itself. For instance, a scheme called 'Gold' was launched by Zomato with an assurance that only handful of restaurants in each area would be enlisted. But later Zomato approached every outlet to participate which amounts to cheating our members who have no recourse considering all the above-stated positions," said S K Jaiswal, vice-president, FHRAI (North).
Another critical term that FSAs changed while also which destroy the business of restaurant operators is the masking the number of customers. By doing so, FSAs have completely disconnected restaurants from their customers. "More recently, the FSAs tried to use new technology like free Wi-Fi without disclosing the real intent of surreptitiously collating customer data for their own use. The methods and practices adopted by FSAs are unbearable and require to be dealt with in the larger interest of the hotel and restaurant industry," Kohli said.
FHRAI ALLEGATIONS
- Absurd food acceptance, preparation and collection time with penalties and a negative grading system
- Showing customers that a restaurant is closed when delivery boys are not available
- Unilateral penalties even for mistakes made by the FSA's staff
- Contracts being one-sided, not consistent across the industry, unfair towards start-ups
- The agreement terms frequently and unilaterally changed and always in favour of the FSAs
- Unreasonably high commissions, payment terms and arbitrarily applied additional charges
- Masking of customers' numbers
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 "Food Service Aggregators")
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