Mumbai restaurateurs weigh in on capping fees charged by aggregators

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Authorities in San Francisco, in June, passed a permanent cap on the fees that food delivery or aggregator apps are allowed to charge eateries. The move spells relief for restaurants which have been forced to heavily rely on delivery platforms in the past year.

A Mag St Toppings delivery personnel on his way

Similar moves are being planned in New York and Texas, too. Amid the clarion call for direct orders, restaurateurs in Mumbai are looking to the authorities to recognise the crisis.

Food for thought

Anurag Katriar, ED & CEO, deGustibus Hospitality, and president, National Restaurant Association of India (NRAI), explains that of course, restaurants would appreciate a maximum cap on total charges levied by aggregator apps. "But you also need a variable structure wherein the commission depends on the average order value (AOV). This is something we've suggested to them a year ago," he adds. Recently, the NRAI moved the Competition Commission of India (CCI) about alleged malpractices of food aggregator platforms. "The issues raised by us include bundling of services, data-masking, exorbitant commissions, price parity agreement, deep discounting which is funded by restaurants, exclusivity, violation of platform neutrality and lack of transparency," Katriar reveals. The restaurateur shares that eateries which use these platforms would like to have access to the data of consumers who are ordering food from them via the apps - which is not shared with them. "Moreover, when you are in agreement with such platforms, they shouldn't start applying arbitrary charges. We can discuss the moves together and progress; otherwise, the sanctity of the agreement is lost," he points out.

Need intervention to save eateries

"The way things are going, aggregators are expecting most of the bottom line [expenses] from restaurants, making them unviable to a large extent," points out Abhayraj Singh Kohli, who runs several establishments including Grandmama's Cafe and Tori. He adds that most aggregators are now funded; they're spending money on advertisements that no restaurant can afford, and doling away discounts for customer acquisition. "If this course isn't corrected, most small F&B entrepreneurs won't exist. It's high time that such laws [cap on commissions] are put in place to protect restaurants and delivery kitchens from being exploited," he asserts.

A welcome move

Pankil Shah, director and co-founder, Neighbourhood Hospitality Pvt Ltd, which operates Woodside Inn and The Pantry Café, informs us that food aggregator apps levy different commissions based on a variety of factors - AOV, number of outlets, type of cuisine, brand recognition, etc. "For us, the range is between 18 and 23 per cent. These high commissions make it impossible for most brands to survive their delivery business. Even before the pandemic, the duopoly of Swiggy and Zomato - backed by a seemingly never-ending war chest - was able to dictate their commissions. Most restaurants had no other choice." The scenario worsened during the pandemic, when restaurants couldn't make up for the losses caused by these high commissions through dine-in. "With the dine-in restrictions, delivery remains a major part of our revenue. So, a decision to cap the charges would be welcome," he adds. While the importance of aggregators has increased, sharing guests' data, allowing restaurants to fulfil deliveries with in-house teams, and a commission structure that makes delivery profitable are some changes he'd like to see from their end.

Precedent for change

Restaurateur and delivery kitchen owner Gauri Devidayal, who's set up The Table, Mag St Kitchen, Miss T and Iktara, among other establishments, believes that the San Francisco decision sets a great precedent for the world. "In India, however, one has to recognise that it's not a level-playing field for restaurants. Aggregators levy different rates based on the volume they expect from your business. As far as government intervention is concerned, we're a little while away from that," she notes. However, the issue isn't restricted to capping; such moves can result in unbundling of the fees. "Right now, a listing fee, marketing fee, logistics and tech charges get bundled up into one big, fat commission for apps. This will hopefully get unbundled. For instance, restaurants might want to list themselves on the app, and not use their logistics, or vice versa," she elaborates. Amid a stand-off between restaurants and apps, the #orderdirect campaign has gained ground, and Swiggy has responded with a change, she informs us: "The higher the order value, the lower the commission; so it's not one flat percentage. These changes are a step in the right direction. I think how customers behave, aggregators respond, how the government gets involved, and what restaurants do will impact what happens in the industry amid this crisis."