According to recent reports, food delivery service FoodPanda confirmed that it is removing restaurants from its listings as part of a “thorough clean-up”. The online food ordering startup is revoking registrations of over 500 restaurants every month as it aims to stabilize operations hit by frenetic growth and upheaval in top management.
Backed by German incubator Rocket Internet, the company has been under scrutiny for suspected fabrication of orders by restaurants on its network, even as its Berlin-based parent is actively looking to divest its stake.
Post the $210 million funding round this year from its parent, FoodPanda was under fire for irregularities in operations at some restaurants on its platform. The issues raised include misusing discount offers and creating fake orders.
The problem, according to people aware of the developments at FoodPanda, was caused when restaurants were listed without physical verification.
“It would be an anomaly to say our database is 100% clean now. We are 99% clean,” said Saurabh Kochhar, chief executive of FoodPanda, who took charge in January this year, following the acquisition of TastyKhana in November 2014. Since then, Kochhar claims the company has doubled the number of restaurants on its platform to 12,000. Every month the company is adding 2,000 additional restaurants.
“There is always 1% of vendors, sellers, restaurants and drivers in e-commerce industry who try and game the system,” he said.
Kochhar told The Economic Times that the “investors are solidly behind the company.”
“For e-commerce businesses in India it’s very important to verify a listed vendor in person,” said one of the sources quoted above.
Kochhar claims to have now installed systems that detect IP address and location of restaurants if they try to book their own orders. “We first counsel and warn them, if they repeat the behavior, we ban them,” he said.
In addition to this, FoodPanda has also set up a quarterly audit by a leading consulting firm to check anomalies. Kochhar said that he deactivates about 500 to 1,000 restaurants a month as part of the clean-up drive.
As part of its growth strategy FoodPanda had acquired food tech startups JustEat and TastyKhana, within a few months of each other.
Since January, the company has grown from 200 employees to over 2,000 despite a number of top managers quitting.
The growth pangs and operational issues faced by the company has put a question mark on the capability of smaller troupers in the sector, which have together raised an estimated $100 million in venture capital funding this year.
“In any listings business there is a certain amount of inactivity. It increases in cases where the listings are not monitored,” said Nasr Khan, CEO of hotel room aggregator Night Stay and former Vice President – Products at Info Edge, an investor in portals such as Naukri and Zomato.
Food For Thought
“The overall learning for us in the past few months has been that we should first chew before we take our next bite,” said Kochhar.