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FHRAI Meets DPIIT Officials, Present Issues & Challenges Faced By Restaurants Due To Unfair & Arbitrary Business Practices Of FSAs

Mumbai, July 05: In a meeting called by the Department for Promotion of Industry and Internal Trade (DPIIT) today, representatives of Federation of Hotel & 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. Government has agreed to look into issues including Building of Services, Data Marking, Hybrid Models, Transparent Algorithms of 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 regularize the operations of the FSAs which presently are cannibalizing the market by sheer strength of discounting model of business. Officials of the Ministry of Road Transport and Food and Standards Authority of India (FSSAI) were also present in the meeting.

The FHRAI submitted a representation highlighting the unfair and arbitrary business practices of the Food Service Aggregators FSAs including Deep Discounting leading to market distortion, Exorbitant Commissions, Unfair Trade Practices by promoting unorganized 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. We have also brought it to the attention of the Ministry of Commerce & Industry, Government of India about FSAs floating impractical, unaffordable and unconscionable discounts. 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. At present FSAs demand commissions ranging from 20 to 30 per cent adversely affecting the revenues, business and livelihood of the owner of a restaurant. We would request the Govt. to rationalize the commissions to be in the range of 5 to 10 per cent,” says Mr. Gurbaxish Singh Kohli, Vice President – FHRAI.

The Federation pointed out that a restaurant has to obtain multiple approvals and licenses and invest huge capital to commence operations but FSAs are providing platforms to illegally operated Cloud Kitchens or Dark Kitchens. The Federation has alleged that in most of the cases such Dark Kitchens are either operating without valid licenses from local or State authorities or have their operations at non-commercial establishment.

Mr. Pradeep Shetty Jt Hon Secy  FHRAI.

“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. Such mushrooming and encouragement of illegal “Dark Kitchens” are an affront to the organized sector, which creates an unhealthy business environment not conducive for the orderly growth of this sector. 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. Our last and most important appeal is for the FSAs to conduct operations based on quality of service and efficiency rather than by cannibalizing the original stake holders – the restaurants,” says Mr. Pradeep Shetty, Jt. Honorary Secretary, FHRAI. “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 couple of hours. Also if the FSA outsources this service, then they should come up with a new, fool-proof model,” he adds.

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. FSAs 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. It is only fair that FSAs cease to cannibalize the market on the back of funding received and instead position their operations based on quality of service and efficiency,” concludes Mr. Vinod Gulati, Board Member, FHRAI.

About Federation of Hotel & Restaurant Federations of India (FHRAI):

The Federation of Hotel & Restaurant Federations of India (FHRAI) is the apex body of the Indian Hospitality industry. Founded in 1955, the Federation has diligently built on its rich legacy and is today privileged to serve as the leading voice of our industry and plays a seminal role in supporting the growth trajectory of India's hospitality and tourism sector. FHRAI provides a vibrant interface between the industry, government, regulatory bodies, academia, international organizations, civil society and the media.