Restaurants vs food delivery companies: A face-off over commissions
Skip to main content
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
The Business Standard

Monday
January 30, 2023

Sign In
Subscribe
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
MONDAY, JANUARY 30, 2023
Restaurants vs food delivery companies: A face-off over commissions

Panorama

Masum Billah
15 December, 2021, 10:35 am
Last modified: 15 December, 2021, 02:15 pm

Related News

  • Pump owners postpone strike till 12 Sept
  • Sales at restaurants plummet on price hike
  • Barisal's crispy, spicy fast food boom
  • No Bangladeshi eatery makes it into 'Asia’s 50 Best Restaurants' list
  • 54 army, navy officers get honorary commission 

Restaurants vs food delivery companies: A face-off over commissions

There has been a constant global feud over commission between restaurants and food delivery companies. For the first time here in Bangladesh, things are heating up

Masum Billah
15 December, 2021, 10:35 am
Last modified: 15 December, 2021, 02:15 pm
Illustration: TBS
Illustration: TBS

Back in 2009 when Khana Hero started delivering food online, Bangladesh's campaign for digitalisation had just begun. Smartphone penetration was not that high, and yet, the idea was introduced here anyway.

The country soon embraced larger international food delivery players within a few years with the launch of Foodpanda in 2013. Gradually platforms such as Uber Eats, Pathao Food emerged in the online food delivery sector of Bangladesh.

However, a decade after the country's first online food delivery platform, as the delivery industry matures, restaurants and food delivery companies today are having a row over commissions.

In a press briefing a few weeks ago, the Bangladesh Restaurant Owners' Association (BROA) demanded a unified 10 percent commission ceiling for online food delivery companies.

The association said that online food delivery companies charge up to 35-40 percent commission. The commission charged varied from restaurant to restaurant.

"The companies are supposed to charge only for the delivery, but they are fixing the commission on their own. They should be brought under a unified 10 percent commission immediately," said Imran Hasan, the secretary-general of the restaurant owners' association.    

Urging the government to formulate a guideline for the food delivery businesses, Hasan said if the commission is not fixed at a reasonable rate, the association will call for suspending food supply to the companies.

If the BROA's warning surprises you, such standoffs between the food delivery companies and the restaurants are actually very common across the globe.

For example, in the United States, the Wall Street Journal reported in April that New York City restaurants complained about the fees that third-party ordering and delivery platforms, such as Grubhub and DoorDash, charged them.

The report mentioned that the restaurants' concerns have only escalated during the pandemic, "when dining spots have become more dependent on meals-to-go for their financial survival."

The Indian Express, in July this year, published a similar report that the National Restaurants Association of India (NRAI) approached the competition regulator alleging that food aggregators Swiggy and Zomato violated laws by charging exorbitant commissions from restaurants and masking customer data from them.

In a few rounds of conversation with the restaurant owners' association leaders and other restaurant owners, The Business Standard has found similar grievances in Bangladesh that only exacerbated during the pandemic.

Syed Mohammad Andalib, a restaurant owner and the BROA's Organising Secretary said that before the pandemic, the highest commission any of the food delivery companies would charge was 20 percent.

Then during the pandemic, when restaurants' dependence on delivery companies increased, the commissions went up as much as 30 percent with some platforms demanding up to 40 percent in some cases, Andalib said.

"It did not matter to us before because the percentage of online delivery was meagre. But now with online sales booming, as much as 50 percent of the sale in some cases began to go through food delivery companies," Andalib said. "We had to agree to whatever they asked for," he added.

Whether the order size is- Tk2,000 or Tk200, the delivery costs for the food delivery companies are the same. Your delivery men have a big case that can carry all sizes of orders. So, take a fixed charge from me. How can you charge 30-40% on each order?

By Syed Mohammad Andalib, Organising Secretary, Bangladesh Restaurant Owners' Association

Otherwise, Andalib said, the delivery companies warned of kicking the disagreeing restaurants off the platform.

"Even if you get me a sale worth Tk3,00,000 —which is a lot—if you take Tk90,000 of that as commission, I cannot profit," Andalib added. 

The restaurant owners that reached out to TBS alleged that not agreeing to the asking commission could result in the reduction of the restaurant's visibility radius/range. For example, if your restaurant was supposed to get orders within five kilometres around its location, after the reduction, people even three kilometres away may fail to find your restaurant on the app.

Ashfaq Rahman, another restaurateur and publicity secretary of BROA said that "the market shift (increasing online orders) is a good thing. But it is a problem when the advantage of the shifting market, instead of a balanced one, is leaning towards one player (delivery companies)."

 "The commission is often applied on VAT included price… not on Tk100 rather on Tk110, and then some add 4.5 percent service VAT on top of that," Rahman added.

We asked Ashfaq Rahman about the percentage of orders they receive online. He said that before the pandemic it was only 2-3 percent of the total. But during the pandemic, especially in lockdowns, it was even around 100 percent in some cases. However, the overall sale of the restaurants also reduced drastically.

Rahman said that "If I served 100 orders before the pandemic, it was now 15. So, the delivery apps' demand tripled, but mine reduced many times."

Now after the lockdown and new normal, online sales account for around 8 to 10 percent of all sales, Rahman added.

It means the online sale is growing, and hence the worries about the increasing commissions.

After Uber Eats' exit from Bangladesh last year, there are currently three main players- Foodpanda, Pathao, and HungryNaki, in the online food delivery sector in the country.

Since Foodpanda is the supposed market leader, during our conversation with the restaurateurs, its name came back repeatedly as one of the highest commission charging aggregators.

So we reached out to Foodpanda and asked them about the restaurant owners' association's demands and other allegations.

Foodpanda officials ruled out the allegations regarding restricting radius and lack of human interaction privileges.

About the commission, Zubair Siddiky, the managing director of Foodpanda said that "You can place a Tk100 or Tk200 orders on Foodpanda. But what do we earn from that order? I get Tk25 from your Tk100 order. It does not even cover our delivery costs let alone infrastructure, marketing and app-maintenance costs.

"In the majority of online orders, we cannot cover the delivery cost that we pay the riders. I have to pay the riders Tk40-Tk45. Suppose, it is a Tk200 order. I get Tk50 (with 25% in commission) that entirely goes for the riders. What about my other costs? A restaurant makes money on that Tk200 order even if it is a small profit. The overhead restaurant has for dining is similar for delivery. But my loss is massive," Siddiky responded.

You can place a Tk100 or Tk200 order on Foodpanda. But what do we earn from that order? I get Tk25 from your Tk100 order. It does not even fully cover our delivery costs let alone infrastructure, marketing and app-maintenance costs.

By Zubair Siddiky, Managing Director of Foodpanda

About the online food delivery sector's growth in the pandemic, Siddiky sounded different from restaurateurs. He said that Covid-19 actually didn't accelerate his growth. Foodpanda had a similar growth rate in 2019 and 2020. "In fact in 2019 we grew faster because the market was changing, and we were investing money."

According to the Foodpanda MD, in terms of the food delivery sector's overall growth, it didn't change much in the pre and post-pandemic timeframe. He admitted that there has been a growth, but it is not significant compared to our neighbouring countries, and right after the restaurants reopened dining it has become flat again.

The Business Standard couldn't immediately avail the necessary data to verify both sides' claims about the rise or fall of online orders before and after the pandemic-led lockdowns.

Foodpanda's Siddiky added that "the restaurant owners will raise their points but eventually we have to look at a sustainable model for both us and the restaurants. If the aggregators are not sustainable for the restaurants, they can leave the platform anytime."

"They only stick to the platform because it is sustainable. Maybe their margins have gone down. I agree. But the aggregators are running the business at a loss. Which aggregator is profitable in Bangladesh? We have been in business for ten years. I eventually have to break even. Else we will have to quit the business like Uber Eats. My investors will not give me money forever."

We also reached out to Fahim Ahmed, CEO of Pathao – another large aggregator in the country about the commission issue. In a short statement sent to TBS, Fahim said, "We ensure that the commission rates we charge are low, transparent and manageable for our restaurant partners. If restaurants are able to operate sustainably, we all win."

Foodpanda MD Zubair Siddiky said that they have been subsidising the growth of this industry. The restaurant owners should understand this. 

On the question of Foodpanda's profitability, and more specifically on restaurateur's commission demands, Siddky said that "Eventually at a point, perhaps when we will cover a million orders daily, we will break even or even earn some profit. But to make that happen, I will have to increase my margins slowly. When we entered the market, we started with only 10-12 percent commissions, I cannot sustain that rate now."

"Look, every global aggregator charges 30 percent, it is common news. You can check India, Pakistan, Singapore, Hongkong, Thailand for how much the aggregators like Uber Eats, Zomato, Swiggy charge, and why. If they do not charge something in between 25 to 35 percent range, they cannot build a sustainable business," he added.

Speaking of Zomato and Swiggy, the National Restaurants Association of India (NRAI)'s allegations against them are very identical to those of the Bangladesh Restaurants Owners' Association (BROA). And hence lack of trust among some restaurateurs about the aggregators here in Bangladesh is also palpable.

"They are not sharing enough data with us. Rather they are accumulating all the data. Suppose somebody goes to them and says he wants to sell Hyderabadi dum mutton Biryani. They (aggregators) would perhaps say give us 40% commission, and they would then target marketing the Hyderabadi dum Biryani for the new guy using artificial intelligence," one restaurateur told TBS. "It could destabilise Bangladesh's restaurant market," he added.

And just like the Wall Street Journal report says that now restaurants are increasingly finding a way around the issue by avoiding the platforms and assuming ownership of the process themselves, BROA organising secretary Andalib's proposal is what many spearheading as the alternative in the food delivery sector:

"Whether the order size is- Tk2,000 or Tk200, the delivery costs for the food delivery companies are the same. Your delivery men have a big case that can carry all sizes of orders. So, take a fixed charge from me. How can you charge 30-40 percent on each order?"

The feud over commissions – as the online food delivery sector grows in a robust restaurant market in Bangladesh – doesn't look like it is going to be over soon. Or perhaps it will only intensify in the future?

Features / Top News

restaurants / Food delivery sector / Food delivery service / Commission

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Photo: Collected
    Economic slump drags down growth in VAT collection from big cos
  • It's corruption that bites business harder: CPD
    It's corruption that bites business harder: CPD
  • Import slowdown to affect economic growth: ADB country head
    Import slowdown to affect economic growth: ADB country head

MOST VIEWED

  • Illustration: TBS
    'The silver lining is that the worst is sort of behind us': Hamid Rashid, UN economist
  • Photo: Bloomberg
    BuzzFeed and AI are a match made in fad city
  • Now is the time to focus on FDI composition
    Now is the time to focus on FDI composition
  • Snipe in flight. Photo: Enam Ul Haque
    Baikka Beel: 'A world where snipe work late'
  • Island hopping in Bangladesh?
    Island hopping in Bangladesh?
  • Illustration: TBS
    HC verdict moves the needle on recognising single motherhood

Related News

  • Pump owners postpone strike till 12 Sept
  • Sales at restaurants plummet on price hike
  • Barisal's crispy, spicy fast food boom
  • No Bangladeshi eatery makes it into 'Asia’s 50 Best Restaurants' list
  • 54 army, navy officers get honorary commission 

Features

Nandita Sharmin's journey to give organic skincare a new identity

Nandita Sharmin's journey to give organic skincare a new identity

12h | Mode
Illustration: TBS

'The silver lining is that the worst is sort of behind us': Hamid Rashid, UN economist

16h | Panorama
Photo: Bloomberg

BuzzFeed and AI are a match made in fad city

15h | Panorama
Snipe in flight. Photo: Enam Ul Haque

Baikka Beel: 'A world where snipe work late'

1d | Panorama

More Videos from TBS

Sarika Sabrin is waiting for a good film

Sarika Sabrin is waiting for a good film

6h | TBS Entertainment
Take your football game to the next level at Next Level academy

Take your football game to the next level at Next Level academy

7h | TBS SPORTS
“Investments risky without consistent policy, reliable data”- SK Bashir Uddin

“Investments risky without consistent policy, reliable data”- SK Bashir Uddin

9h | TBS Round Table
What does Shahrukh has in his 770 million dollar property?

What does Shahrukh has in his 770 million dollar property?

1d | TBS Entertainment

Most Read

1
Picture: Collected
Bangladesh

US Embassy condemns recent incidents of visa fraud

2
Illustration: TBS
Banking

16 banks at risk of capital shortfall if top 3 borrowers default

3
Photo: Collected
Splash

Hansal Mehta responds as Twitter user calls him 'shameless' for making Faraaz

4
A frozen Beyond Burger plant-based patty. Photographer: AKIRA for Bloomberg Businessweek
Bloomberg Special

Fake meat was supposed to save the world. It became just another fad

5
Bapex calls candidates for job test 9 years after advert!
Bangladesh

Bapex calls candidates for job test 9 years after advert!

6
Representational Image
Banking

Cash-strapped Islami, Al-Arafah and National turn to Sonali Bank for costly fund

EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2023
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net