Foodpanda begins clean-up drive following allegations

Following allegations of irregularities in its operations involving fake restaurants and orders, food ordering marketplace Foodpanda is revoking over 500 restaurants every month.

Quoting Foodpanda's CEO Saurabh Kochhar, The Economic Times reported that the company, which was incubated by Rocket Internet, has begun a clean-up drive after allegations were leveled against it in media reports. As part of its efforts to stablise operations, Kochhar said he deactivates 500 to 1,000 restaurants a month. The company now claims to have established systems which detect IP address and location of restaurants to track orders and stop restaurants from booking their own orders. He said the restaurants engaging in malpractices are first counselled and then warned before being banned.  In addition, the company has hired a consulting firm to do quarterly audits to check irregularities.

The report also claimed that Rocket Internet is looking out for potential buyers to divest its stake in Foodpanda.

In a report last week, Mint claimed that Foodpanda was plagued by suspect orders, lack of automation and over-dependence on Excel sheets. Quoting current and former employees, the report exposed multiple flaws in the culture and processes at Foodpanda. It alleged that the platform has been taking orders for fake and non-functioning restaurants. Between March and August, the company is said to have removed nearly 400 fake restaurants from the platform.

The firm has also been sewing supplier engagements with little-known entities related to an erstwhile company official, the report indicated.

There were also discrepancies in the number of restaurants (12,000) on it network; its ad campaign contract of about Rs 3 crore with a firm named Crazy Boyz Entertainment Pvt which apparently belonged co-founder and managing director Rohit Chadda who resigned from the company in August this year, his brother and another person; and its partnership with Capricorn eServe, a Gurgaon-based call centre that managed Foodpanda's back-end processes.

Top management executives have turned a blind eye to these issues given the company's focus on increasing transactions and hiking valuation, the report said.

An email sent to Foodpanda for details on its clean-up efforts did not immediately elicit a response.

Founded by Chadda, Amit Kohli and Akhilesh Bali in April 2012, Foodpanda features location-specific listing of restaurants on its site. Users can check out menus, along with special offers, post which they can order and get food delivered to their homes. One can also search for restaurants according to cuisine, and/or by other parameters such as vegetarian/non- vegetarian, healthy food, etc.

Foodpanda had raised $100 million in funding led by global financial services giant Goldman Sachs in May. That round took the total funding raised by Foodpanda to $310 million.

Rocket Internet's core model is to replicate successful global internet businesses in emerging markets outside China with rigorous marketing. It brings in industry executives, gives them stakes in its companies and designates them as co-founder/founder/CEO. Most of its portfolio companies have multi-geography operations.