International Journal of Scientific Research in Engineering and Management (IJSREM)

Volume: 05 Issue: 07 | July - 2021 ISSN: 2582-3930

A study of negative effects of Online Food Delivery Platforms on

Restaurants Revenue and Customer Relations in Pune City
Prof. Ajim Shaikh

Abstract: The online food delivery is undoubtedly is the unique and one of the convenient mode for the
customers to order food online. Food service outlets are also pleased with this concept, as it is boost for the
business and revenue. Online food delivery has given wide choices for customers and opened huge market
for the outlets. But this revolution is creating many negative impacts on the various parameters concerned
with the food service outlets. It is very common to count good impacts of the online food delivery system, but
the dark side must also be focused to create awareness and to make readers think in a more logical way.
This research mainly focuses on the negative impacts of the online food delivery system on restaurants
revenue and customers relationship. How the online food delivery system is penetrating the market and
creating dominance over. Main objective of this research is to justify the fact that online food delivery
system may ruin the future of the food service industry by creating their dominance, which will surely have
negative impact of customer relations and projected revenue/profit.
Keywords
Online Delivery, Business, Profit, Revenue

 Introduction:
In the 21st Century everyone is running for the better lifestyle, but we all forget that the basic
need of every human is “Do Waqt Ki Roti”. So for this two times satisfactory meal, everyone is capable to
earn easily; but many people miss their meals. It has been said earlier that, though technology is extremely
advanced, one cannot download food from the internet. This argument is no doubt very true but technology
has made it possible by creating food ordering platform. Online food delivery system has created a
revolution in the food industry as it’s been very convenient for everyone and it’s extremely time-saving.
Slowly online food delivery system has penetrated the food industry and became the major role player in
the revenue generation of hotels and restaurants business.
Later with the compliment to the online food delivery system, the concept of cloud emerged in
the city. These cloud kitchens targets the customers on online food delivery platforms. For these Cloud
Kitchens, Online food sale is the only revenue generating tool for the cloud kitchens. The cloud kitchen
concept reduces the overhead cost, operational cost and labor cost. Specifically the cost of Food &
Beverage serving staff is eliminated by 90% in this format of food service. This way considerable
reduction in the related costs directly leads to generation of the revenue for the outlet/organization. While
the things were in favor of cloud kitchens. The major concern noticed that even if there is considerable
increase in the revenue generation by the use of online food delivery platforms, it’s not actually what it
looks like. It is observed in the balance sheets of the outlet or organization shows higher revenue but there
is considerable decrease in the percentage of profit. It has become very important to study the effect of

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 International Journal of Scientific Research in Engineering and Management (IJSREM)

Volume: 05 Issue: 07 | July - 2021 ISSN: 2582-3930

online food delivery platforms in order to understand the relation between revenue and the profit margin.
Through the discussion, experience and being part of the food industry it has been observed that percentage
profit with the increase in revenue has not been increased. The revenue and profit are generally in directly
proportion to each other in case of traditional food serving organizations, but in online food delivery
business revenue and percentage of profit are not in the directly proportion to each other. Rather than with
the increase in the revenue, profit is lowered; and this is the core area where writer wants to focus.
The fact that amount of discount offered by the restaurants and hotels are different for each online delivery
platform. Drawback of the discount factor is that the total percentage of discount when calculated in terms
of rupees, is limited to certain amount for the customer; while total discount offered by the restaurant is
totally deducted from the amount received in return of food. There are number of tricks those are applied
by the online delivery partners which are mostly in favors of these platforms and are sophisticatedly
diverting restaurant’s revenue towards the parent companies of online delivery platforms. The focus of this
research is based on this area to understand these tricks.

 Objectives:
 To understand how total revenue and profit generation of the restaurants/Hotels have reduced.
 To identify the negative impact of online platform with respect to customer relationship with the
restaurants/ food serving organization.

Literature Review
Rajeshree S Pol (2019): It has been observed that there is tremendous increase in online food ordering,
which complements the needs of the busy schedule of the people. With the large varieties of the restaurants
and menu available, it’s considerably easy and convenient to locate and find most suitable options to
choose from.

Mitali Gupta (2019): Writer strongly agreed to the fact that, online food delivery 11system has occupied
large amount of food business, also it has bypassed the typical and traditional restaurant culture. The
technology contributes a lot towards the online ordering of food.

Ahmed Tausif Saad (2019): Doorstep food delivery has become one of the most convenient modes to
reach daily food needs of the professionals during their busy routine. But the writer has focused on the fact
that restaurant and customer relations and bonding is reduced due to lack of direct interaction.

Girish Deore (2016):

Online food delivery system has reduced efforts to cook food, also has given much convenient ways to
order food as per preferences of the consumers. The competition in order to meet customers’ expectations
have made restaurants to enhance the quality of food and other related parameters like fast delivery,
hygiene etc. thus providing best possible food.

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 International Journal of Scientific Research in Engineering and Management (IJSREM)

Volume: 05 Issue: 07 | July - 2021 ISSN: 2582-3930

 Research Methodology
The content of the research is the explorative as the subject demands lots of informative data to
explore the relation among restaurants, online delivery partners and the customers. Intention of the research
is that to focus the malpractices done by online food delivery partners to earn money. The feedbacks of the
various professionals and entrepreneurs were gathered in order to justify the title of the research. Author
designed the questionnaire to collect relative data and the questions were too relative to focus on negative
impacts on the profit and customer relations. The dark side of the so called business development module
of the online food industry is being revealed through this research so that the awareness could be spread
among new entrepreneurs and they could be preplanned for the obstacle ahead.

 Discussion:

 Negative impact on customer Relationship:

The restaurants/ food serving organizations have been taking extreme efforts in order to build a good
relation with customers. Restaurants business traditionally was truly dependent on the customer relations
and the attachment during food service to the customers. Good customer relations have been integral part
of the restaurant business other than good food and the menu. There were many customers who had
dedicated outlets for their palette, and their choices were been fulfilled by the restaurants even if out of
their scope. This type of services offered by the restaurants was tool to attract new customers as well as to
retain old customers. The online food delivery system though has given more exposure for the restaurants
in the business area, but with this exposure there is increase in the competition as the business territory for
many outlets is overlapped in the penetrated area of the restaurants. The online deliver partners/apps are
creating many options for the customers who are generally dedicated to their favorite restaurants.
Since customers are habitual for one outlet/ restaurant are in their comfort zone for the dining
experience. Online dining bookings are also at the advantage for the restaurants and are at support in order
to increase the customer footfall and are giving good business to the restaurants. But online dining booking
works on discount as unique selling point and this discount factor is diverting regular customers to dine in
through the booking; thus customers are under the impression that restaurants to which they were regularly
opting for dining experience were costly earlier and now are offering discount only through online
bookings. This real life scenario has made negative impact on customers about restaurants.
When online food delivery system started penetrating the market it was taken very positively by the
food service industry and especially it was dream come true for the customers who were looking for
regular home delivery or were unable to visit for dining. These were people who were busy in their busy
schedule, bachelors, differently abled, Senior citizens who lived isolated from families. Slowly the online
food delivery started showing real colors to the restaurants and consumers after they penetrated the market
conducting strong survey of the market.

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 International Journal of Scientific Research in Engineering and Management (IJSREM)

Volume: 05 Issue: 07 | July - 2021 ISSN: 2582-3930

 Impact on revenue:
Business works for the profit. All the operations be it food service or any other service are meant to earn
profit for the organization. Online delivery platforms when launched were totally dependent on the food
service outlets which were well established and were well known in the city. The delivery partners
approached these outlets to tie up for the online delivery. The restaurants were too blessed with the online
food delivery concept, considering boom in the business and the revenue. This was the trap for restaurants
as well as for the customers. Online partners now have penetrated the market and few of them have created
oligopoly in the market.
Most of the food delivery apps/partners charge as much as 30% of total food bill, this is nothing
but narrowing restaurant’s profit and increasing self-profit by such act. Discounts which are offered in
percentage later were made limited up to certain amount. For example Customer orders food online, he/she
get 50% discount up to Rs. 100.This means even if customer order food worth Rs.1000, they get maximum
discount of Rs.100. At the same time food service provider will get only 50% of total billing, at the same
time customer is charged for delivery charges and restaurant is charged as commission. In this case
customer is getting very negligible benefit at the same time restaurant is working on very narrow profit.
This is slowly crushing the small businesses and resulting in food serving giants to grab the market.

 Marketing Trap:
Marketing of the restaurant on specific delivery platform is another scam run by these delivery partners.
Restaurants are purposely listed in such a way that they would not be easily visible to customers, or most of
the time rarely visible to customers. This is a trap for the restaurants/food serving outlets. The outlets are
put in such categories so that they cannot fulfill “FILTER” criteria and are out of the visibility. The food
delivery partners have very fixed and sophisticated answer that the system algorithm does this task and no
human interference is applied. Every outlet wants to be visible on online platform, for this reason the
delivery apps charge huge amount for the marketing of the outlet. After huge marketing expenses it’s not
sure that the high visibility on online platform will increases the number of online orders or there is no such
parameter which can count on marketing expenses. Even if the number of orders is on higher side, the
percentage commissions charged by these apps are swallowing the revenue of the restaurants. So it’s one
sided business that ruins small scale restaurants and specially startups.

 Competition and Ratings:

The unwanted and unknown competitions are created by the food delivery apps among outlets in
specific localities. The similar businesses are by default in competition with each other’s, but the online
presence has made this competition ugly and has expanded the area of the competition. Though , most of
the outlets when used to operate on offline platform were focusing on their own improvement rather than
unwanted competition. The online platforms have put these restaurants in the competition with each other
which is nothing but like online war. The app/ online partner keep reducing rating of others restaurants if
rating of any one goes high. For example: If there are 100 restaurants in the Zomato market then there will

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 International Journal of Scientific Research in Engineering and Management (IJSREM)

Volume: 05 Issue: 07 | July - 2021 ISSN: 2582-3930

be only one restaurant having rating 5 and others will be below that. This means even if many outlets are
performing extremely well as per customer ratings, there cannot be more than one topper in the specified
Zomato market. This is simply formula of divide and rule. Thus restaurants in the race of high rating, not
only spending money but also are struggling to get into the many filters in the app. This competition is
generating revenue of the delivery partners and restaurants are at loss.
Conclusion:
Earn more profit and create monopoly is the aim of online delivery apps/partners. The food delivery
partners are portraying themselves as supporting pillars for the restaurant/ food service organizations, but
this scenario is possibly not exactly as same as it looks like. In future food service outlets will have to
depend totally on food delivery partners not only for food delivery but also for dining bookings. The
control will totally be in the hands of the food delivery partners and there are maximum chances that they
will take advantage of the well planned situation to earn more commission from the restaurants. The food
delivery partners have no doubt created platform for the small food businesses, but on the other hand they
are also earning more revenue than actual food service firms; without any ground operation. Author’s
future predictions are truly based on the current situation and are most likely to be true. The regulatory
authorities must have control over the operation of online food delivery system, so that all the stakeholders
will have considerable revenue and profit share.

Bibliography & References

Rajeshree S. Pol (2019): A study on awareness and customer preference about online food ordering
services in Pune.
Mitali Gupta (2019): A Study on Impact of Online Food delivery app on Restaurant Business special reference to
Zomato and swiggy.
Ahmed Tausif Saad (2019): Factors affecting online food delivery service in Bangladesh: an empirical
study.

Girish Deore (2016): To Study the Inclination of Consumers in Baner Area in Relation to the Online Food
Ordering.

Webliography:

https://www.entrepreneur.com/article/342921/

https://kr-asia.com/indian-dining-apps-facing-backlash-from-restaurants-over-steep-discounts/

https://www.foodappsco.com/why-food-delivery-companies-are-killing-the-restaurant-businesses/

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