Foodpanda cooks up offline strategy with quick service restaurants

Foodpanda is said to be trying to use the Freshmenu playbook of setting up brands online and then setting up stores offline to gain traction

Patanjali Pahwa Karan Choudhury Mumbai/ Delhi

4 min read Last Updated : May 23 2019 | 1:42 AM IST

Foodpanda is planning to launch quick service restaurants (QSRs) soon at technology parks, airports and railway stations. This comes amid reports that the Ola-backed company has pivoted away from being only an online food delivery platform.

While Foodpanda (and Ola) transitions into running pop-up restaurants/QSRs, the company’s immediate focus is on its cloud kitchen business. A detailed email sent to Ola went unanswered.

The transition to QSRs has been in the making for a while. It started with a heavy churn in the company, which Business Standard reported earlier this month. A fair few senior executives were moved back to Ola, while others were encouraged to resign.

While this was in process, Foodpanda, according to multiple senior executives, slashed incentives to its delivery staffers, which forced them to terminate their contracts and move to the likes of Swiggy and Zomato.

The third part of this puzzle was Foodpanda delisting restaurants from its platform, which meant traffic is being consistently directed towards the company’s cloud kitchens.

Foodpanda currently run over two dozen cloud kitchens in India under four brands. The company plans to launch another five brands to start populating the app. This fits in with the acquisition of Mumbai-based cloud kitchen company HolaChef.

“Holachef, before it shut down, briefly had pivoted to restaurants and even opened a small outlet in a popular mall. That didn’t work; the money ran out and the company shut down. Ola is doing that once again,” said a former Foodpanda employee.

Foodpanda, according to a senior executive at one of the big food tech companies, is trying to use the Freshmenu playbook of setting up brands online and then setting up stores offline (QSRs) to gain traction. “There is probably a feeling in Ola that if people see the restaurant physically, they are more likely to order from it,” the senior executive says. And that’s why it has taken this step of pivoting away to cloud kitchens. Executives at Foodpanda claim that the company has already started to drive a lot of orders from its cloud kitchens. “But will those people who order translate to going to the restaurant? I don’t think so” the senior executive said.

Foodpanda was driven to this point by trying to outburn its rival Uber Eats.

Ola, headquartered in Bengaluru, has been locked in a battle with Uber, an NYSE-listed company, for over five years. The company had promised to burn $200 million and managed to do that in over a year.

Foodpanda gave steep minimum guarantees to restaurants and high incentives to delivery personnel so neither would leave the company for its food tech rivals, but despite all of that, its popularity hinged on the steep discounts that the company gave and once those discounts faded, the customers left as well.

Not only did Foodpanda face competition from Swiggy and Zomato but also Uber Eats and Dunzo. All four eroded away whatever momentum that Foodpanda had gathered with its discounts. Its parent company Ola has also been trying to raise almost $2 billion and has been hamstrung by the fact that the company has been resisting raising money from its biggest shareholder--Softbank.

Unable to sustain either discounts or minimum guarantees or incentives, Foodpanda was forced rollback the delivery business again — repeating history when Ola was forced to shut Ola Cafe three years ago.