Thursday, October 17, 2019


FHRAI officials present concerns about food services aggregators to DPIIT
Saturday, 06 July, 2019, 08 : 00 AM [IST]
Our Bureau, Mumbai
At a recent meeting called by the Department for Promotion of Industry and Internal Trade (DPIIT), representatives of the Federation of Hotel and Restaurant Association of India (FHRAI) presented the issues and concerns of the restaurant industry caused by the deep discounting and predatory pricing practices of the food services aggregators (FSAs) on their trade.

The government has agreed to look into issues, including building of services, data marking, hybrid models, transparent algorithms of the FSA portal, and exclusivity among others.

The Federation has expressed reservations to DPIIT’s proposal of placing FSAs and restaurants together as part of the same industry and has proposed solutions to regularise the operations of the FSAs which presently are cannibalising the market by sheer strength of discounting model of business.

Officials of the ministry of road transport and the Food and Standards Authority of India (FSSAI) were also present in the meeting.

FHRAI submitted a representation highlighting the unfair and arbitrary business practices of the FSAs, including deep discounting leading to market distortion, exorbitant commissions, unfair trade practices by promoting the unorganised sector or illegal cloud kitchens and adopting inequitable deep discounting methods.

“We have proposed specific solutions to the DPIIT for regulating the business practices of FSAs to safeguard the interests of the restaurant industry. Our foremost appeal to the DPIIT is to advise FSAs to stop the deep discounting of products served or offered by restaurants,” said Gurbaxish Singh Kohli, vice-president, FHRAI.

“We have also brought it to the attention of the Ministry of Commerce and Industry, Government of India, about FSAs floating impractical, unaffordable and unconscionable discounts,” he added.

“Discounting a product by 50 per cent and similar other offers is causing loss of image to the individual restaurants and distortion of the market scenario,” Kohli said.

“At present FSAs demand commissions ranging between 20 and 30 per cent adversely affecting the revenues, business and livelihood of the owner of a restaurant. We would request the government to rationalise the commissions to be in the range of five to 10 per cent,” he added.

The Federation pointed out that a restaurant had to obtain multiple approvals and licenses and invest huge capital to commence operations, but FSAs were providing platforms to  illegally-operated cloud kitchens or dark kitchens.

It alleged that in most of the cases, such dark kitchens were either operating without valid licences from local or state authorities or have their operations at a non-commercial establishment.

“Such indiscriminate hosting primarily to populate the FSAs platform encourages illegal activities, non-compliance of statutory rules and regulations; and compromises product quality. This also translates to a huge loss to the exchequer,” said Pradeep Shetty, joint honorary secretary, FHRAI.

“Such mushrooming and encouragement of illegal dark kitchens are an affront to the organised sector, which creates an unhealthy business environment not conducive to the orderly growth of this sector,” he added.

“As standard practice, FSAs exhibit rosy food pictures to represent such illegal kitchens and misguide unsuspecting consumers into ordering their food from such places that may be operating without any hygiene standards,” said Shetty.

“Our last and most important appeal is for the FSAs to conduct operations based on quality of service and efficiency rather than by cannibalising the original stakeholders – the restaurants,” he added.

“We have also recommended that consumers be provided an option to have their parcels delivered directly by the restaurant. A restaurant must also  have the right to map delivery orders, and also that the FSA delivery person’s number be active throughout instead of making it available just for a few hours. Also if the FSA outsources this service, they should come up with a new, fool-proof model,” Shetty said.

FSAs are companies that provide platform with the help of technology to both consumer and restaurant for convenience. As such, FSAs are being promoted by international funds or equities directed at garnering market share and augmenting company valuations.

They have adopted deep discounting methods to increase their market share by offering discounts from their end at the cost of distorting the market, as well as the livelihoods of local restaurant owners.

“Because of the malpractices indulged into by the FSAs, the restaurant industry in the country is going through a very challenging phase. This is threatening the livelihood, business, investments and entrepreneurial initiatives, and spirit of the hospitality industry, thereby eroding the viability of the sector,” said Vinod Gulati, board member, FHRAI.

“It is only fair that FSAs cease to cannibalise the market on the back of funding received and instead position their operations based on quality of service and efficiency,” he added.
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