Zomato withdraws exclusivity rights for cloud kitchens

This will allow these cloud kitchens to now list on rival platforms such as Swiggy.
Zomato withdraws exclusivity rights for cloud kitchens
Zomato withdraws exclusivity rights for cloud kitchens
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In a change of its business strategy, online food order delivery major Zomato has allowed the cloud kitchens which were listed on its platform on exclusive basis to get listed on rival platforms as well.

The underlying reason for this move by Zomato is reportedly its recent decision to cut down on the high level of discounting and offering reasonable rates to the customers. That has not only reduced its revenue per order, but the number of orders have also come down. While the regular restaurants can bear the change and carryon, the cloud kitchens will suffer since they have been exclusively setup for servicing Zomato’s orders.

Zomato wanted to release them from this exclusivity with the condition that they pay Zomato a rental commission on every order that they receive from the other sources.

Zomato has sent a mail to the cloud kitchens making this announcement of withdrawing the exclusivity part. Another condition imposed by Zomato on them is that they cannot go about offering a better spread or pricing of their dishes on rival platforms than what they are offering on Zomato.

These cloud kitchens are typically restaurant brands but with no dine-in facility. They would develop special recipes and would be hosted on the Zomato platform. The products will be promoted by Zomato. Now that these restaurants, there are six of them, are free to offer their products on Swiggy, they can hope to receive more orders.

However, there could be a situation where Swiggy may not be interested in taking the restaurant brands on in their platform. One key reason could be its own arrangement with similar cloud kitchens and if the orders get divided, they will be the losers.

Swiggy has already invested up to Rs 250 crore on this delivery only vertical, Swiggy Access. It would not do anything to jeopardise that.

Meanwhile there are a number of restaurant brands/cloud kitchens which are platform agnostic and offer their dishes to the customers. These include SmartKitchen.Co, Ghost Kitchens, CloudKitch, KitchenCentre, FoodCoWorks, KloudKitchen, Smart Co Kitchens and City Storage Systems (floated/backed by ex Uber boss Travis Kalanick and Shadowfax (backed by Flipkart).

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