Small restaurant owners, hoping to boost their business by listing on food delivery platform Zomato, are finding themselves caught in a cycle of diminishing returns.
They list for the enticing customer reach, but high commission rates, mounting advertisement expenses and the pressure to offer deep discounts in order to stay competitive on the platform significantly eat into their profits.
Restaurateurs NDTV Profit spoke to complain that instead of driving growth, these costs outweigh the benefits, leaving them struggling to sustain their margins and questioning the long-term viability of their presence on the food delivery platform.
Exhibit A is Revanth Dinesh, owner of an ice cream store Scoopful in Bengaluru. He runs one physical store and operates from six online locations, and has been listed on Zomato for a while now. In the month of April, Dinesh clocked sales of Rs 17,000, out of this, he paid 30% — around Rs 5,500 — commission, and Rs 10,000 on advertisements, leaving him with Rs 1500, which barely covers for his product costs, rents and salaries.
"I only realized the loop of expenses after getting listed on the platform, while I assumed listing will give me visibility, there is no way I could get that without spending constantly on Ads," Dinesh rued.
"If i stop spending on ads, the platform doesn't promote my shop and even if someone orders by searching for the restaurant, the platform does not assign delivery partners," he added. Dinesh now is pulling out of Zomato by the end of this month.
Soni Kumari from Noida, owner of a mid-sized restaurant Saffroma, has a similar story to tell. Seven months into listing on Zomato, she is losing more money than she is making. Much like Dinesh, she also pays 30% commission, Rs 14 per km delivery fees, and spends on ads and discounts for every order.
"In the beginning, the Zomato executives gave us a lot of hope that onboarding with them will increase my sales order, but once i got in, the expenses kept increasing. For some months, because we are a new restaurant, they even took control of ads and discounts provided, where i had no say," she says. Kumari has now pulled out of Zomato.
Vandit Mallik of Gurgaon complains that the system is not uniform and is unfair for small restaurants. "Big food chains like McDonald's, Dominos and others pay considerably less commission, don't often give big discounts, and get visibility without spending heavily on Ads," he said.
While most small businesses pay 22–30% commission, big food chains pay around 8–9% commission, he claims. Mallik is the owner of a brand called the Garlic Bread and has four cloud kitchens, where he sells a variety of food items under different brands.
Mallik also complains that Zomato's growth managers are of no help and only keep pushing businesses to spend more. "Growth manager has not given me any growth, they keep giving us insights of how much discount has to be given based on what competitors are doing, that has only drained more of my money," he said. Similar to others, Mallik also has incurred losses, and has already shut three of his cloud kitchens and plans to shut the last one too.
Recently, small restaurant owners across the country have taken to social media platforms like X and LinkedIn to voice their growing frustration with Zomato. These platforms are now filled with posts expressing ongoing grievances and deepening disappointment, with many restaurateurs ultimately choosing to leave the platform altogether.
Commenting on the development, a Zomato spokesperson said: "All marketing collaborations such as ads, promotions, and discounts etc., as well as commercials, are mutually discussed with our restaurant partners before being switched on, switched off or modified."
"We also maintain robust escalation mechanisms, allowing partners to raise concerns and receive prompt, satisfactory resolutions through the Restaurant Partner APP as well as centralised helpline numbers," the spokesperson said.
"For our smaller restaurant partners, we work extra hard to make it easier for them to grow with us. There are always opportunities to improve, and we are committed to working on them, on time," the spokesperson added.