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Zomato and Swiggy Started Renegotiating Exclusivity Contracts With Some Restaurants

Zomato and Swiggy have started renegotiating the contracts with some of the restaurants after seeing the negative impact on business due to the ongoing pandemic. This could definitely affect the relations between the food delivery platforms and restaurants. Since the whole country being closed for more than two months, which leads to multiple operational challenges and volumes touching an all-time low, honouring these agreements is unavailable.

Mohit Sardana, COO-Food Delivery, Zomato, confirmed the development. “Yes, we are revisiting our exclusivity contracts with a few restaurants. These are unprecedented times for the industry, and we are more than willing to support our partners’ evolution and adjustments to the new realities’’.

Stung by the move, several of the country’s top restaurant chains including Olive Group’s Fatty Bao, SodaBottleopenerWala, MonkeyBar. Fit and regional chains like A2B, Truffles, Pista House, Gupta Teas have decided to either walk out of negotiations or not renew contracts with the food delivery apps, the people said.

Typically for Anti Financial backed Zomato and Swiggy, which counts South Africa’s Naspers as its biggest investor, these exclusive tie-ups with restaurants accounted for about 30% of overall sales last year. But these deals also sharply drove up costs, secondly only to direct discounts, top executives told.

Direct orders

The National Restaurant Association of India has been urging the members to adopt technology solutions and accept orders directly from consumers. Restaurants are now looking to use WhatsApp, Instagram or take direct calls instead of relying on food delivery platforms that mask customer details and charge a commission for the transaction.

ET reported that, four out of every 10 restaurants will likely be permanently shuttered in the absence of a government bailout. Current circumstances have made it imperative for restaurants to have visibility across as many platforms as possible to get maximum orders.

Recovering from the situation

In the last two weeks, food delivery apps have seen their order volumes recover by about 35% compared to pre-COVID 19, since more restaurants resume their delivery.

“Swiggy onboarded hundreds of new restaurants that were heavily focused on dine-in and previously not available for online delivery, said COO, Swiggy. Zomato said more than 50% of its restaurant partners are back on the platform.

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