A Policy That Sparked Controversy
Zomato, one of India’s leading foodtech giants, has hit the brakes on a newly introduced policy that required restaurants to shoulder 50% of customer refund costs. Rolled out quietly over the past few months, the policy was designed to align incentives between Zomato and its restaurant partners in addressing customer complaints swiftly. However, what followed was widespread resistance from restaurant owners, many of whom felt blindsided and burdened by what they perceived as a cost-cutting maneuver.
In emails sent to its partners, Zomato explained the rationale: unresolved customer issues lead to a slow but steady decline in customer retention, hurting both the restaurant’s and Zomato’s ability to generate demand. “Resolving a complaint is much less expensive than losing a customer,” the company said, emphasizing that the initiative was about more than just cost—it was about building trust and creating a sustainable food delivery ecosystem.
Restaurant Owners Push Back
But the logic didn’t sit well with everyone. Several restaurant owners voiced strong objections. One restaurateur pointed out a major flaw: if the food is cold due to traffic or delivery delays, why should the restaurant bear any part of the refund cost?
Previously, Zomato’s refund model allowed restaurants to accept or deny a claim. If denied, Zomato absorbed the full refund. Under the new model, however, partners had no say—raising questions about fairness and transparency.
Another restaurateur claimed that Zomato seemed to be “forcing” partners to pay up, transforming what was once an optional process into a mandate. The growing sentiment was clear: the policy shifted financial risk onto restaurants, especially in ambiguous situations where blame was hard to assign.
Policy Suspended—But Only Temporarily
Faced with mounting criticism, Zomato paused the policy just weeks after implementation. In a new round of emails to partners, the company announced the initiative was being put “on hold” and would be relaunched after incorporating feedback.
While this may appear to be a win for restaurants, it’s only a temporary reprieve. Zomato has made it clear that a revised version of the cost-sharing programme is in the works, suggesting that some form of shared accountability will return—perhaps with clearer guidelines and opt-in provisions.
Trouble in the Kitchen: Zomato’s Business Woes
The timing of this controversy isn’t coincidental. Zomato’s move to shift part of the refund burden to partners coincides with a significant slowdown in its core food delivery business.
According to its Q4 FY25 earnings, Zomato’s consolidated profit after tax (PAT) fell by a steep 77.8% year-over-year to ₹39 crore. While adjusted EBITDA saw a healthy 56% YoY rise to ₹428 crore, revenue actually dipped slightly quarter-over-quarter, signaling stagnation.
To rein in costs, Zomato recently discontinued its Quick and Everyday services, and delisted 19,000 restaurants during the quarter. In a letter to shareholders, CEO Deepinder Goyal acknowledged that food delivery growth has underperformed expectations.
Legal Tensions Simmer Beneath the Surface
This isn’t Zomato’s first clash with restaurant partners in recent times. The National Restaurant Association of India (NRAI) earlier this year hinted at legal action against both Zomato and Swiggy over their respective fast-food delivery verticals, Bistro and Snacc.
The associations argue that these quick commerce experiments not only distort delivery standards but also sideline restaurants in favor of cloud kitchen-style convenience.
What Lies Ahead?
Zomato is walking a tightrope—balancing profitability with partner satisfaction. While its intention to improve customer retention is valid, implementation missteps like the 50-50 refund policy risk alienating the very restaurants it relies on.
As the company prepares to revise and relaunch the programme, it faces a critical test: can it find a model that builds trust without offloading blame? With competition heating up and unit economics under pressure, how Zomato handles its partner relationships could well define its next chapter.
