Zomato cracks down on cloud kitchens running more than 10 brands from a single location

 

Foodtech major Zomato is taking a tough stance on cloud kitchens after a recent viral Substack post exposed a dingy cloud kitchen in Bengaluru that was operating 200+ different brands from the same location. The food brands had little to no differentiation in its menus, and raised several questions over food safety and hygiene standards. 

To combat the problem, Zomato will now “manually check any physical location” which runs more than 10 brands out of a single unit. “While there is no exact science to the right number of brands, we believe that even the most organised outlets in the industry don’t see operational benefits and customer trust in operating too many brands from a single kitchen,” the company stated. 

Zomato further shared that it was in talks with the National Restaurant Association of India (NRAI) and its restaurant partners to arrive at the right approach to curb these practices that could end up tarnishing the reputation of the food industry. 

Even though regulatory body Food Safety and Standards Authority of India (FSSAI) allows cloud kitchens to operate more than one brand — as long as they comply with all other standards — several fly-by-night operators have been found to be misusing the license.

According to Zomato, “Some fly-by-night operators, who account for less than ~0.2 per cent of registered kitchens, misuse the flexibility in law by creating innumerable brands from the same kitchen. These brands have little to no differentiation in the product offering; instead, they confuse/cheat customers by creating a false perception of choice, while none of it actually exists.”

Additionally, most of these brands have poor reviews and ratings on the food aggregator’s platform. “Customers’ average delivery rating for these operators goes down as the number of brands from a single kitchen goes up. Similarly, the percentage of customers who raise complaints goes up as the number of brands from a kitchen increases,” Zomato explained.

While the crackdown on faulty operators may have been a long time coming, Zomato will also “whitelist” restaurants that provide a great customer experience. The company has urged its restaurant partners to write to its ‘multiple listings’ team if they have 10 substantially differentiated brands to run from a single location.

 “Our teams will review your proposed offering, kitchen space (is it large enough to host and do justice to multiple cuisines), historic customer experience on Zomato for your existing listings amongst other things,” Zomato said. “We will also collaborate with FSSAI at their request so that it helps our authorities,” it added.

Zomato stock was down 3.48 per cent to Rs 60.85 in afternoon trade on the BSE on Friday. 

Also read: Is quick commerce for real? Investors question Zomato’s foray into it with Blinkit

Also read: Not so easy! Zomato's real world problems with 10-minute delivery, intercity service