15 , May , 2020
Online food delivery firm, Zomato has announced that its food delivery business has been hit to a great extent by Covid-19. Consequently, the firm is set to lay off 13% of its employees.
On the company’s blog, there is a note disseminated to employees on Friday. Deepinder Goyal, Founder and Chief Executive also sought temporary pay cuts as it tries to preserve cash in an uncertain business environment.
“Our business has been severely affected by the COVID lockdowns. A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg. I expect the number of restaurants to shrink by 25-40% over the next 6-12 months," Goyal stated.
This, said Goyal, has severely hit business at the aggregator that has also branched out into delivery of groceries. As a result, "We do not foresee having enough work for all our employees. We owe all our colleagues a challenging work environment, but we won’t be able to offer that to 13% of our workforce going forward”, he added.
Zomato had earlier sought voluntary pay cuts at the onset of the nationwide lockdown. However, the company is now moving to temporary reduction in pay for the entire organisation as it “continues to be short of our salary reduction target".
“Starting June, I am proposing a temporary reduction in pay for the entire organisation. Lower cuts are being proposed for people with lower salaries, and higher cuts (up to 50%) for people with higher salaries," he said.
“We expect these cuts to be discontinued as soon as the economy starts getting back on track. I foresee (and hope) this to be around six months from now."
Goyal also said the company will extend partial or full work from home for some employees—across multiple countries where it is present—as it seeks to save on rental expenses.
“Our highest recurring expense today (outside of payroll) is real estate. We have 150+ offices globally, most of which are spaces for our sales & logistics teams. Given how well we have been working from home, we have decided to make partial or full work from home a permanent feature of our lives”, quoted Goyal.
Calling covid-19 a “black swan" event, Goyal said the pandemic has prompted the company to “preserve as much cash as possible to weather the storm if the business environment gets worse, or continues to be the same for the rest of the year or more."
The company’s top management will initiate video calls with impacted employees to walk them through the next steps, according to Goyal’s blog.
“We are going to assure them that we stand by them, and will financially and emotionally support them to the fullest possible extent."
The company is expected to hold a global townhall to discuss details of these changes soon.
The layoffs at Zomato come as India’s restaurant industry is reeling from a prolonged slump in business after the country went in to a lockdown in March to contain the spread of covid-19. Several restaurants remained shut or worked on limited capacity to fulfil delivery-only orders. This has hit both volumes of orders for food aggregators and footfalls in restaurants.
On Thursday, CRISIL estimated that India’s lengthy lockdown will hurt the country’s organised restaurants business that could see a 40-50% cut in revenue in the current financial year. Moreover, even when the lockdown curbs are eased, CRISIL expects recovery to be “gradual". This could put thousands jobs at risks, prompt restaurants to shutter down unviable businesses, and even impact suppliers and vendors that work with eateries.