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FHRAI calls upon FSAs to engage in dialogue on issues hurting industry
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Tuesday, 20 August, 2019, 15 : 00 PM [IST]
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Our Bureau, Mumbai
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The Federation of Hotel and Restaurant Associations of India (FHRAI) called upon FSAs to engage in a fruitful dialogue with the federation and its affiliated associations on various issues that are hurting the industry at the earliest to arrive at a win-win outcome for all.
Amidst the ongoing conflict between OTAs and hotels, this is a new but similar dispute which has been brewing between restaurants and food service aggregators (FSAs) across the country.
The federation’s decision was based on widespread complaints along with acute condemnation and agitation from its members, regional associations and affiliated associations.
In a letter to Zomato, Swiggy, Nearbuy, Dineout Prius Heights, EasyDiner and Magicpin, it pointed out the unethical business practices and called for a review of all their schemes.
FHRAI added that as a technology partner, by merely hosting its members inventory, FSAs cannot hold sway and arm twist the traditions and aspirations of millions of entrepreneurs in India.
Unfortunately this new way of impractical, unaffordable and unconscionable discounting has put the hospitality industry in a very awkward situation. The most common complaint with the FSAs is about the contracts being one-sided.
“These contracts arent even consistent across the industry and almost always unfair towards start-ups as against established brands. A model contract which is mutually agreed upon has to be accepted,” said Gurbaxish Singh Kohli, vice-president, FHRAI.
“As such a conduct is indicative of dominant behaviour and is indeed exploitative. Further, the agreement terms are not sacrosanct, as they are frequently and unilaterally changed from time to time, and always in favour of the FSAs. We are absolutely in favour of doing business, a business that is a win-win for everyone involved,” he added.
FHRAI has also pointed out to the unreasonably high commissions, payment terms and arbitrarily applied additional charges as well as unethical practices by the FSAs.
Penal commissions of 25 per cent are now standard. Such high charges merely for offering a platform are unjustified. Commissions are not standard, and customised to exploit the start-ups, which are indicative of an exploitative and dominant behaviour.
“Payment terms are not adhered to and are easily violated for the slightest excuse without recourse to any easy dispute resolution. It has also been brought to our notice that GST is being charged on the commission,” said Somaraju, treasurer, FHRAI.
“High commissions are being extracted from merchant establishments under the pretext that it is for both discovery and sales promotion. But then, they are also charging separately for delivery and yet billing customers an additional delivery charge, which is tantamount to double dipping,” he added.
“Furthermore, showing customers that a restaurant is closed just because delivery boys are not available is absolutely wrong, and translates to unfairly conducting business at the expense of partner restaurants,” Somaraju said.
“Further, unilateral penalties are imposed even for mistakes made by the FSAs’ staff to protect their own customers since the restaurant has no way to left to recognise customers and undertake service recovery,” he added.
Restaurants have voiced out about the imposition of FSAs absurd food acceptance, food preparation, food collection time with penalties and a negative grading system.
Trying to indirectly force outlets to get certified for hygiene through its own agents at high rates and rating a restaurant through self-decided hygiene standards like the FSAs did for customer review ratings.
All this effectively translates to arm-twisting our members to subscribe to such initiatives using their dominant position. Restaurants are constantly but subtly threatened to participate in deep discounting schemes without respite throughout the year, with one scheme getting replaced by another.
“Our members are neither given an option nor the opportunity to agree nor are they even consulted. Promises made while launching any new scheme is almost always broken by changing the rules itself,” said S K Jaiswal, vice-president, FHRAI.
“For instance, a scheme called Gold was launched by Zomato, with an assurance that only handful restaurants in each area would be enlisted. But later, Zomato approached every outlet to participate, which amounts to cheating our members, who have no recourse considering all the above stated positions,” he added.
FHRAI has stated that one of the most critical terms which the FSAs changed, and which has destroyed the restaurant business, is the number masking of customers. By doing so, FSAs have completely disconnected restaurants from their customers.
“It is the restaurant’s prerogative to know who its customer is and we insist on the FSAs to share the database. More recently, FSAs have tried to use new technology like free Wi-Fi without disclosing the real intent of surreptitiously collating customer data for their own use,” said Kohli.
“Food tech companies and aggregators do not and cannot represent the F&B industry, and as such cannot choke the entrepreneurial aspirations and enterprise of our members by unsuspecting maverick start-up founders to enter the industry and then stifle them to a point where they have very little choice but to shut shop or slowly bleed to death,” he added.
“The FSAs’ methods and practices are unbearable and require to be dealt with in the larger interest of the hotel and restaurant industry,” said Kohli.
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