Bengaluru’s hotel and restaurant associations have expressed their intention to potentially cease accepting orders through Swiggy and Zomato if the food delivery platforms do not address persistent concerns regarding high commission rates. The Bruhat Bengaluru Hotels Association (BBHA) has communicated that it will give these companies until August 15 to respond to their needs for reform before taking any further measures.

BBHA President S Subramanya Holla clarified that the restaurant bodies will submit a formal request for corrective actions and expect a written response. If satisfactory measures are not taken by the deadline, the association will implement a boycott of the platforms, a move they believe is necessary to protect their interests.

The ongoing issues have reached a point where restaurants feel that the current commission structures are unsustainable, significantly impacting their profitability and operations.

Concerns Over Commission Rates and Transparency

Restaurant owners have raised alarms about the commissions charged by delivery platforms, which they claim have seen increases that make it difficult to maintain reasonable profit margins. BBHA reports that commission rates can range from 8 to 10 per cent, reaching as high as 28 per cent, coupled with additional costs for advertising and app visibility.

These deductions are reportedly forcing many restaurants to adjust their menu prices upwards significantly. Holla indicated that to achieve a net profit of Rs 100 after commission deductions, restaurants may need to hike prices by as much as 43 per cent, ultimately passing these costs onto consumers.

In response to these challenges, restaurant bodies are urging for enhanced clarity in pricing and settlement processes. Their demands consist of abolishing automatic payment deductions related to customer complaints, fair compensation for cancelled orders post-preparation, and detailed settlement statements that outline all deductions clearly.

Demands for a Fairer Competitive Environment

In addition to transparency, the associations wish to eliminate one-sided contractual terms that favour the platforms and have called for dedicated account managers to support restaurant partnerships. They have also voiced strong objections to promotional campaigns initiated without their approval, which they argue infringe on their profitability.

PC Rao, honorary president of the BBHA, noted that the plethora of fees related to commissions and advertising complicates the reconciliation process for restaurants, leaving numerous small establishments at a notable disadvantage.

The timing of this boycott warning coincides with the increasing competitiveness in India’s food delivery sector. New market entrants such as Rapido’s Ownly and Flipkart’s forthcoming food service present potential alternatives to the established dominance of Swiggy and Zomato.

Managing Partner of Bengaluru’s Vidyarthi Bhavan, Arun Adiga, remarked that the success of these new players will hinge on their marketing strategies, execution, and last-mile delivery capabilities, suggesting that enhanced competition might ultimately favour restaurants.

Holla denied that the boycott is a direct response to the introduction of these newcomers, emphasising that the aim is to foster a fairer and more competitive market overall. He highlighted that Rapido’s Ownly currently operates on a zero-commission basis, while Flipkart is expected to charge around 11 per cent upon its launch. He considers those rates acceptable, although scaling may take time.

Despite indicating a potential withdrawal from Swiggy and Zomato, the associations have acknowledged that both platforms continue to dominate the customer base. They remain hopeful for a constructive engagement from these companies prior to the August 15 deadline to resolve their ongoing conflicts regarding commissions and pricing practices.

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