Zomato, a widely-used food delivery app in Dubai’s bustling culinary industry, is renowned for its extensive restaurant listings and user-friendly interface.
But when it comes to business decisions concerning Zomato charges, many restaurateurs are left scratching their heads.
In this article, we will cover the costs associated with using Zomato from both the customer’s and restaurant owners’ perspectives and some tips on how restaurants can reduce them.
Zomato’s Commission Structure for Restaurants in Dubai
In Dubai, Zomato earns revenue by charging restaurants a 20-25% commission on orders placed through the platform.
This is higher than other food delivery services like Uber Eats, which usually charge 15-20%.
The exact amount charged may vary depending on various factors such as:
1. Location
Zomato charges higher commission rates for restaurants in prominent areas due to the possibility of receiving more orders and, thus, generating more revenue.
Conversely, Zomato may offer a lower rate to those in less affluent regions to incentivize them to join the platform since they are likely to receive fewer orders.
2. Menu Prices
The commission rate charged by Zomato to restaurants can vary depending on the menu prices.
Restaurants with higher-priced menus are more likely to generate increased revenue per order, so they may be able to pay a higher commission rate.
Conversely, restaurants that offer lower-priced menus could only work if asked for high commissions.
As such, Zomato might charge them a reduced fee to keep them listed on their platform.
3. Order Volumes
Zomato charges higher commission rates to restaurants that receive high volumes of orders to offset the platform’s increased costs.
Conversely, restaurants that generate fewer orders may be charged lower commission rates to incentivize them to list on the platform.
4. Type of Cuisine
Zomato may charge different commission rates for restaurants that offer unique or niche cuisines than those with more mainstream dishes.
This is because the platform could have to allocate additional resources toward marketing and advertising to make these cuisines recognizable, thus justifying higher commissions.
On the other hand, lower commission rates are charged on establishments providing regular cuisine as they require less investment in terms of promotion due to their popularity.
5. Seasonal Demand
The commission rates charged by Zomato may differ depending on the season.
Restaurants that experience a surge in demand during peak periods, such as holidays or festivals, could be subject to higher fees to make up for the increased utilization of their services.
On the other hand, restaurants with less traffic during off-peak times may receive lower commissions, so they stay part of Zomato’s platform.
Gaining insight into the elements that influence Zomato’s commission fees for restaurants in Dubai is crucial when making well-advised business decisions.
By being aware of these factors, eateries can bargain with Zomato to get more suitable commission rates, thereby cutting costs and boosting their income.
Additional Charges of Zomato
A 2020 survey of over 500 restaurant owners in Dubai revealed that 62% of them reported paying commissions ranging from 20-30% to food delivery platforms like Zomato.
This rate may seem steep, but it is on par with industry standards.
Even so, restaurants with smaller profit margins or lower order volumes might find these charges hard to bear.
Apart from commission fees, restaurants in Dubai may be subjected to extra charges by Zomato.
These establishments need to comprehend how much this could amount to and find ways of controlling their costs accordingly.
The following are some additional expenses that they might encounter on the platform:
1. Payment Gateway Fees
When ordering through Zomato, restaurants may be charged a fee for each transaction by the payment gateway, typically a percentage of the total order value.
This fee covers processing payments on the platform and ensures secure transactions.
2. Marketing Fees
Restaurants can take advantage of marketing services offered by Zomato to promote their listings on the platform.
These may include sponsored listings, banner ads, and email campaigns.
However, there might be associated fees for these services.
3. Order Cancellation Fees
If a restaurant accepts an order but decides to cancel it, Zomato may charge them a fee.
The fee is usually calculated as a percentage of the total price for that order.
It can be quite high if frequent cancellations occur from that same establishment.
4. Packaging Fees
They may ask restaurants using Zomato to use specific packaging materials, such as branded boxes, bags, or containers.
This could come at an extra cost for the restaurants that need to pay for these items.
5. Delivery Partner Fees
When calculating the cost of delivering orders through Zomato, restaurants should consider any delivery partner fees that may be applicable.
These fees can differ depending on the delivery distance, order size, and other considerations.
6. Taxation
Dubai Restaurants must pay Value-Added Tax (VAT) on their sales.
When utilizing Zomato’s services, like commission fees and other charges, restaurants should bear in mind that VAT may be added by the company, which can impact pricing and cost calculations.
Factoring in the charges associated with Zomato, restaurants can effectively manage their expenses to ensure this platform remains a profitable part of their business.
How Restaurants Can Reduce the Impact of Zomato Fees
As Zomato’s commission rates for restaurants in Dubai are aligned with industry norms, the fees can still be quite costly for many businesses.
To maximize profits and reduce costs, it is vital that restaurants put into practice various techniques to lower their Zomato charges.
Some of these strategies include:
1. Negotiate Commission Rates
Depending on their sales volumes or order frequencies, restaurants can work out a better commission rate with Zomato.
For instance, those with higher sales figures may secure lower commissions than others who generate less revenue.
Similarly, restaurants that receive more orders can request a reduced fee compared to those receiving fewer orders.
By negotiating the rates with Zomato, restaurants can simultaneously reduce costs and increase profits.
2. Optimize Menu Prices
To help offset the cost of Zomato’s commissions, restaurants can optimize their menu prices.
This could involve increasing menu prices to generate more revenue per order or offering special deals and discounts to encourage customers to place larger orders.
Both strategies will increase overall revenue, which can then be used to cover commission costs.
3. Increase Order Volumes
Restaurants can boost their sales by advertising their Zomato listings on social media, emailing customers, and incentivizing them to order through the platform.
Doing so will bring in more revenue, covering the commission that Zomato charges.
4. Optimize Delivery Logistics
Restaurants can minimize their delivery costs through Zomato by utilizing third-party logistics providers and optimizing their delivery routes.
This will help reduce both the time it takes to deliver orders, and the cost incurred, leading to increased profits that could offset any commissions charged by Zomato.
5. Offer Unique Menu Items
Restaurants can differentiate themselves from their competitors and attract more customers to their Zomato listings by offering unique menu items.
Furthermore, this could allow them to increase menu prices, which would result in increased revenue and help cover commission fees.
To sum up, understanding Zomato’s commission rates in Dubai is vital to making wise business choices.
Even though Zomato’s fees may seem high, they are consistent with industry norms and can be adjusted based on some conditions.
Restaurants can negotiate their commissions, provide delivery services themselves or use other food delivery platforms as alternatives, which will help reduce costs and increase earnings.
Restaurants could choose alternative food delivery platforms offering lower charges or different payment systems.
Reference:
- Illuminati | How Zomato Business Model Works – https://www.elluminatiinc.com/how-zomato-works-business-model-revenue-insights/
- The National News | Delivery Apps Huge Charges in Dubai – https://www.thenationalnews.com/lifestyle/food/too-big-a-bite-dubai-restaurants-say-delivery-apps-must-reduce-their-charges-1.1009417
