In the last few months we have seen food-tech companies alluring customers with freebies and offers that are not even valid at many restaurants creating a ruckus in the industry. Restaurateurs felt that these food-tech companies are not only enticing customers by these deals but are also trying to wipe out small medium enterprises. But, as they say – all that shines is not glitter. Soon, the sector became overflowed with ‘me-too’ startups lacking both – differentiation and innovation. Here are 5 Key Reasons Restaurant owners are annoyed of food-tech players including the likes of Swiggy, Zomato and UberEats.
Unviable Discounts: This has become a new norm by these food-tech players to lure customers. They have been offering temporary discounts below the cost price to customers. This is not only creating a hindrance in the business of top restaurants but is also making small restaurants face losses and many even faces the shut down. “Unlike retail, FDI (foreign direct investment) restrictions are not applied on the restaurant sector or food service aggregators. As an association, we have a roundtable discussion next week with all four major food delivery aggregators to address deep discounting and the cloud kitchen issue, which is adversely affecting the restaurant industry,” shared Rahul Singh, President, National Restaurant Association of India (NRAI), which represents over 5,000 brands last week.
Creating in-house Kitchen: Players like Swiggy have started their own kitchen- The Bowl Company wherein they direct customers to order from their in-house kitchen. This is not only misuse of customer data but also for restaurants that pay hugely to get listed on such platforms.
Focusing on Self Promotion: No matter the restaurant owners are paying huge tariffs players like Swiggy is promoting their own kitchens rather than restaurant partners. Whenever, a customer login into the Swiggy website they will see the in-house advertisement first. This clearly is misusing customer database who visit such platforms to order food to their own kitchen.
In-house Suppliers: Players like Zomato has started in house company called Hyperpure. This company sells vegetables, chicken and other meat and forces restaurant listed on Zomato to raw materials from this company.
Hampering Margins: With such discounts available restaurants are facing low margins making loss of business and failing to achieve profit out of any food-tech companies.
Offering Freebies and Discounts: A few years ago, the biggest problem was “discovery” of restaurants. People faced problem in figuring out restaurants that were available nearby and how good they were? Companies like Zomato absorbed this pain by building a simple platform to address the problem of the Indian foodies. But as we witnessed more and more startups doing the same, we see these players offering freebies and discounts to attract customers to use their platform.
According to sources, restaurant owners in India have filed a petition asking Govt to help curb an unsustainable pricing by these tech-players, ban cross holding and appointing a food regulator food in each state by the food and civil supplies ministry to ensure that the rule is not breached to overcome cut throat competitions.