Swiggy extends gross value service fee policy to non-metro restaurants

Previously, the service fee, also known as the commission, was calculated based on the net value for restaurants in smaller towns and cities

Food-tech giant Swiggy, which is gearing up for its IPO, has extended its service fee policy to include gross order value — which covers GST and packaging fees — for restaurants in non-metro areas, according to a report by The Economic Times. This adjustment will lead to an increased commission for its restaurant partners in these regions.

Previously, the service fee, also known as the commission, was calculated based on the net value of restaurants in smaller towns and cities, while those in larger urban areas were already subject to fees on the gross value.

Starting August 14, Swiggy will charge a service fee on the gross value of each order, as per the merchant terms. This change is being applied uniformly across the platform to all partners, leading to a slight increase in the service fee payable to Swiggy,” the company stated in a letter to its restaurant partners.

This policy change will affect approximately 1,000 restaurants, according to sources familiar with the situation. “Contracts are usually tailored individually, but this latest update will be implemented for around 1,000 partners at this stage,” the business-daily quoted a person with knowledge of the matter.

A Swiggy spokesperson said the recent communication was intended for a small group of partners based on discussions and is a standard procedure, as different partners have unique commercial agreements according to their needs. Swiggy typically charges commissions ranging from 17-25 per cent from restaurants, while competitor Zomato charges payment gateway fees separately.

Standardising commission sparks debate

“There have been no broad changes to Swiggy’s commission structure for restaurant partners. They will continue to operate under the existing terms of their agreements,” the Swiggy spokesperson was quoted in the report.

The move aims to standardise charges on gross value orders across the roughly 350,000 restaurants listed on Swiggy’s platform.

However, the change has sparked a debate since many restaurant partners will be affected. “It would be wise to consider sustainable strategies that benefit both restaurants and delivery platforms. Only increasing commissions or discounts to gain market share may not yield long-term results,” the business daily quoted an executive from a food services company.

Swiggy launches UPI for faster payments

Restaurant partners and food delivery platforms typically negotiate individual contracts based on brand value, order volumes, and other metrics. The commission charged by food delivery platforms, such as Swiggy and Zomato, significantly impacts a restaurant’s income, making it a point of ongoing discussion.

On Wednesday, Swiggy introduced its newly integrated Unified Payments Interface (UPI) Plug-in service, powered by the National Payments Corporation of India (NPCI) and Juspay. Branded as Swiggy UPI, this feature allows customers to make faster payments directly within the app, reducing transaction time from over 15 seconds to just five seconds.