COIMBATORE: Food delivery is now set to become a costlier affair as major online food delivery platforms have hiked the commission rate charged for restaurant owners by 2%.
Currently, the commission rate ranges from 15% to 30% based on the restaurant's business volume, which will now increase further. Eventually, the price will reflect as marked-up menu prices on the application by restaurant owners to offset the commission.
Speaking to TNIE, KA Ramasamy, president of Coimbatore District Hoteliers Association, said, "At present, 240 members in the association are paying an average of 22% in commission to aggregators. Meanwhile, they are now demanding we pay 2% more. The aggregators have arbitrarily increased the commission by 2% on some hotels without their consent. In this context, a negotiation is now under way as all members are unanimously opposing the decision as it will impact business."
Stating that they have no option but to continue business with aggregators, he said, "Over 35% of sales are done through online food delivery apps. It is tough even for restaurant chains to leave apps. The condition of small eateries would be much worse as aggregators are charging higher commission and levying hidden charges. Unless all hoteliers come together to question the aggregators' decision, we cannot do much. As a small step, we have started campaigning among customers, asking them to visit the shops directly instead of ordering food through the applications."
Explaining the difference in menu prices in hotels for online food delivery, a hotelier, who refrained from being named, said, "In our hotel, for instance, a food item worth Rs 100 has been marked up to Rs 140 in the application. Only if we do this, would we be able to recover the actual menu cost of Rs 100 after paying the aggregator charge of 28% including tax. Apart from commission, we often bear the brunt of hidden charges if a hotel owner fails to notify the apps properly. Sometimes, the aggregators put up offers on food items we sell without consulting us. It has become a challenging task for us to keep track of the apps."
Customers pointed out that there are differences in cost when the customer visits a shop directly as opposed to ordering through the app. Sharing receipts of a Coimbatore-based hotel's menu price on his X handle, Sundar, a customer, pointed out there was an increase in the bill by 81% (Rs 1,473) while ordering four non-vegetarian food items, when the same items came to a total of Rs 810 when he ordered takeaway from the shop.
In Namakkal, hoteliers had left the major online food delivery platforms behind in protest against the commission recently. They started their own delivery app called Zarooz for food delivery. They said this app is a boon to both customers and restaurants, with the platform now handling nearly 400 orders a day.
N Arulmurugan of the Namakkal City and Taluk Hotel Owners' Association, "Unlike other food delivery platforms such as Swiggy and Zomato, Zarooz does not run advertisements, offers or discounts, which means restaurants are not burdened with additional charges, and food is sold at the hotel's actual rate - a food item sold at Rs 150 in the restaurant will be charged Rs 150 on Zarooz as well, with only 5% GST and a delivery charge of Rs 25 for the first 3 km, and Rs 5 for each additional km.
He said the biggest difference is in the business model. "While Swiggy and Zomato follow a commission-based system where restaurants pay up to 30% per order, along with other hidden costs like listing fees and offer charges, Zarooz operates on a subscription model. The cost difference is nearly 90%. A restaurant earning Rs 2 lakh a month online would pay about Rs 60,000 as commission on other platforms but only Rs 3,000 on Zarooz," he added.
(With inputs from Sneha Sivashanmugam @ Namakkal)