Why Did Foodpanda Failed and What Entrepreneurs Can Learn From It?

Harshit Verma Harshit Verma
Apr 9, 2022 12 min read
Why Did Foodpanda Failed and What Entrepreneurs Can Learn From It?

Online delivery apps are doing really well. In a world where we all are constantly online and searching for a lot of information, it has become a normal activity to order online. Companies like Amazon, Flipkart and others are now going to the marketplace for every millennial. They are easy to use, convenient to scroll and a heaven for the shopaholics. They are so easy and convenient that people today are getting addicted to the technology of online delivery. This newfound business is doing really well as the whole economy is shifting to a digital place. Everything is online, choosing an item, its delivery tracking and the payments for the same.

Not just that, entrepreneurs from all over the world then thought of inventing further in the direction. Some geniuses thought to deliver food. It was not considered a good idea in the beginning, but as people gave feedback and the delivery services improved, the idea started to seem a viable option. Then it struck, and many companies emerged to deliver food to the public.

There was Zomato, Swiggy, Foodpanda and the likes. All of them competed for one single thing, the largest market share in the food delivery sector. As the competition for market share transformed into a war, it became necessary for some companies to vanish. This competition led to the death of many food delivery companies and led many companies to go bankrupt. One of the companies that vanished from the market was Foodpanda. This article talks about the company and what were the reasons for its failure. Let us see the story in words.

A Little Brief About FoodPanda
The timeline of FoodPanda
Why Did Foodpanda Fail in India?
Lessons Entrepreneurs Can Learn From Failure of Foodpanda

A Little Brief About FoodPanda

People love convenience and why won’t they? Everyone wants convenience at their doorstep and this is why it is a massive opportunity for companies to scale themselves. Food delivery is a massive convenience for people in our society.

Foodpanda is one of the startups that aimed to deliver food to people in a convenient manner. Not just that, Foodpanda also delivered all sorts of grocery items to its users. It is an online food and grocery startup that was owned by Delivery Hero. It has a good stronghold in Asia and the headquarters lies in Singapore. As of now, it is the largest food and grocery delivery platform in Asia. It operates in about 12 markets in the continent of Asia.

The Timeline of FoodPanda

Foodpanda’s business strategy is an interesting read. We can learn a lot of lessons from the business line of Foodpanda. Before we go into the details of how Foodpandafailed, it is important that we know something about the timeline of Foodpanda. Here we will be looking at the humble beginnings of the company and how it went through various acquisitions on the line.

In early 2015 the company bought full stakes in a company called, TastyKhana. Along with that, the food delivery platform Foodpandaalso gained control of Just Ear India, which was a food ordering portal.

These were some moves that the company pulled off to increase revenue and scale of the company. The efforts did not really affect the revenue and the company even had to lay off 300 employees by the end of 2015.

The time was tough for Foodpandaas the company even faced allegations of malpractices. There was news that mentioned Foodpandaas a non-paying restaurant service provider and there were also allegations of fake listings. At that time, the food delivery platform was based out of Gurugram and was spread across 200 cities in the country. That was a tough year, and the next year, that was 2016, Rocket India was looking for a buyer for the company. They set the price really low, at about 10 to 15 million dollars.

A year later, in 2017 the food delivery business was acquired by Ola for a 100 percent equity and that too at a valuation of around 40 to 50 million dollars. Ola further mentioned in public that the company will further invest 200 million dollars to revive the company and make it work sharply.

After this happened and the company started to work slowly but efficiently, they began offering discounts to lure customers to use Foodpanda. Efforts gained some momentum and people started to recognise this as a good platform to order food.

By the end of August 2008, Foodpanda had reached 2 lakh orders per day of operations. It was a huge feat for the company and the stakeholders of the food delivery platform. But soon enough, clouds of uncertainty covered the sky.

Next year, that was 2019, the magnitude of the orders dropped to 5000 per day, in the middle of the year. Reacting to this, Ola made a decision to stop the loss that they were expecting in the near future. Ola, the owner of Foodpanda suspended its operations in the middle of the same year. They also fired some 1500 delivery partners or delivery executives from their job to cut the expected loss in the food delivery venture.

After that time, it is said that Foodpanda existed in a form of a cloud kitchen. A cloud kitchen was a term coined when Foodpanda acquired a company called β€œHolaChef” in October 2018. A cloud kitchen refers to a kitchen that is cloud in nature, which means that they only make food and they outsource the delivery and other services out of the kitchen. As a cloud kitchen business, they had three private label brands under them. In 2019, Notable names of sub-brands included FLRT and The Great Khichdi experiment.

Why Did Foodpanda Fail in India?

At its inception, the company was doing well, making a name for itself and was also working towards building a good brand value. By now we discussed the starting and the ending of this company which delivered food to its consumers. By now you must be wondering how the company failed. After we have thoroughly discussed the timeline in which the company operated, it is now time to see some reasons why it failed. Here we will be listing some of the most common and seen ways or reasons that failed Foodpanda as a food delivery company. These pointers are not just mistakes of Foodpanda but checkpoints for every entrepreneur trying to set up his venture.

If you only look at the successful ventures, you will most probably be looking at fifty percent of the whole story or probably less. So, let us see why the company failed and then we will further discuss some precautions that could have saved the company.

Now, Foodpanda was a big company, not just looking at the capital invested but the number of employees and the scale of operations was huge. Small leaking can play a big role in sinking the ship of Foodpanda but there were mostly massive issues and blunders.

Before we discuss all the factors that lead to this downfall, let us list some of the factors that lead to this situation. There was no single factor that failed Foodpanda, in fact, there were multiple reasons. Those reasons include fake restaurants and orders, technological issues and disorganised business models, lack of leadership and massive miscommunications.

Miscommunications

There was a massive miscommunication issue that went on in the company. According to a report, the company's workers were saved from the fact that the owners have left the company. Key people like Rohit Chadda and Mohit Chadda left the food delivery business back in August 2016 and for a long time, employees were not informed about this development. It was later in time when the issue magnified itself and presented itself as a massive hindrance to profitable operations.

The company employees and workers had to face customers and calls from clients about bad operations. When they are unable to deliver food, they have to comprehend their service with free vouchers. Which was a hit to the profitability of the company. From all the instances above, we can notice that the company was suffering massive communication errors and blunders. Due to this, not only The operations were affected but the credibility and profitability were also affected.

Fake Orders and Lack of Proper Procedures

In another set of events, there was news that broke out. In May 2016, a fast-food chain, hailing from Mumbai ended its partnership with Foodpanda. The company complained that the food delivery partner owed the delivery service company payment of one and a half lakh.

It was also mentioned that Foodpanda was delaying the payment without properly explaining the reasons for such delays. After the investigation, it was found that there was no record of such a transaction in the books of Foodpanda. This was a massive blunder that was taken into notice.

To quote another instance of bad governance, we can look at the Tasty Khana case. Tasty Khana was a venture around food delivery, which was based out of Pune and was acquired by Foodpanda in 2014. The founder of TastyKhana, Shachin Bharadwaj mentioned that he was not satisfied with how the work and operations were done at Foodpanda.

He also mentioned some reasons why he disliked the operations at Foodpanda. Reasons include no check for fake orders, lack of proper procedures in place, and financial irregularities.

Documents with crucial data were accessible to everyone and there was mismanagement at almost every second step of operations. These points came right before the downfall started and was a surety factor of the failure of this company.

Failed to Technologically Upgrade

In the decade when every company moved to digital ways of doing business, Foodpanda’s shift was not strong and effective enough. Believe it or not, every company on the globe is shifting to become a technology company first and then the company which it intends to become.

In the case of Foodpanda, they did change for the better but couldn’t follow up with the demands of a digital-centric consumer. The app was not up to the mark, there were restaurants listed that did not even exist and the whole plan of retaining customers was flawed.

Poor Management

Another reason was poor management, which is also a repercussion of poor communication and predictions. Customers and restaurants who were connected with the delivery company would often argue about the bad service that they provide.

Customers had a rash experience talking to their delivery partners and delayed delivery reasons. Every enquiry that the customers made was a hit on the management team of the company. This was another reason for miscommunication which led to a vicious circle of ineffectiveness and blunders.

Foodpanda even failed to capture all the orders that were placed for them, they were also unable to communicate cancelled orders to their restaurant partners which created a ruckus for both the parties. Using the current latest technology available, the company could not figure out an optimum and smooth customer experience, for which they had to pay a price in the future.

Rohit Chadda, the co-founder and the MD of Foodpanda also founded another venture with the name, Ziner. In 2014 the website of Ziner showcased dates that were ditto the same as the Foodpanda servers and website. This action from the team was eyebrow-raising.

Later in a notice, Chaddha mentioned that no data has been taken from Foodpanda, and this is a totally different venture, not relating to the other venture that he had undertaken in the past. The company founded by Chaddha has made over 300 million dollars in sales from clients like Rocket Internet and Goldman Sachs since 2012.

More than a hundred employees from various cities left the business at Foodpanda. The resignations include those from Delhi, Mumbai, Pune and Gurgaon, when asked about the reasons for leaving the food delivery company, they stated poor management and lack of transparency of the company which posed a negative image for the company.

Lessons Entrepreneurs Can Learn From Failure of Foodpanda

There was no simple point according to the facts that prove efficiency and effectiveness in the culture of Foodpanda. Nothing worked properly up to the expected point. These loopholes can be used as a guiding light for people who are willing to amend problems and make solutions.

There was no authority figure when this food delivery company was operating but we can now take some valuable lessons. Here we are going to list some useful advice and tips that we can learn. Let us see what are these checkpoints.

A Proper Framework

As the founder of Tasty Khana mentioned that the company had no sense of operations, it was a lesson right there. A proper structure of things is important, that framework has to be well built and has to be made better through iteration.

This involves getting points on how to run a business and determining the best and most effective/efficient way of running it. The framework that we discussed just now should also essentially meet the business plan of the whole organisation. This is what good corporate governance looks like.

Strong and communicative management is crucial too. Marketing is important but if a company only focuses on pure advertising and does not look toward building a good user experience, it will cease to exist. In this segment of business, both customers and restaurants suffered from the inability of food panda and thus, the venture failed to produce desired results.

Communication for Structuring

At Foodpanda, this was the centre of all issues. Employees and the management did not communicate enough. Moreover, when repercussions happened and the company faced obstacles due to bad communication structure, even then no step was introduced to improve communication.

It was a clear sign that the company is not going to survive much. The customers, the listed restaurants and the people at Foodpanda were involved with a lack of communication which resulted in a bad working environment. No framework or strategy worked in the culture at food panda due to the lack of communication, which was the centre of the storm. This ruffled feathers of restaurants, and most consumers who shifted to other delivery apps.

Ownership Story

The founder of the company Foodpanda left their business and went out. Rahul Chadda and Mohit Chadda were the founders of the company which provided the company with their vision and started a venture. Their vision was worked upon as the company grew its scale but then this happened.

Both the founders left the company and as soon as they left, the vision of the company blurred. This blur in vision caused much trauma for the culture of food pandas. This effect was magnified with less or no communication at all. Adding to this, the founders did not even do anything to better the situation. They simply left with no scope for improvement. When Ola bought the company, they were unstable themselves and they also couldn’t figure out the work that needed to be done with Foodpanda. We all know the end and the story of the downfall of this venture.

The business world operates with a steering wheel of risk. There is volatility in every aspect of every business. There will be market conditions that you will not be able to handle but there are always options to edit the internal environment that suits the outside.

Good internal control and management will go a long way in making a venture successful. The future is uncertain but in the face of that uncertainty, there can be some certainty, which can be bought by sheer work and commitment to building a solid culture at work.

Foodpanda failed in many aspects in building a good inside culture. There were communication issues, there were ownership issues and much more. All these holes in the workings led to the downfall of such a big organisation and these little leaks sank the ship of the food delivery business. This massive failure can be one of the biggest learnings an entrepreneur can take and step forward in the direction of success.

We can learn that it is really important to frame the culture at your workplace. It is extremely crucial to document everything and do everything systematically. Even if these suggestions bring little certainty in the world of uncertainty, this is a really good deal.

Conclusion

Online delivery companies are really doing well. They are probably the backbone of the internet economy. In such a big market, every entrepreneur is trying to put their hands on to get some profits out of the flowing water. This delivery ecosystem has emerged as a new form of a sector that is food delivery. We discussed how there are many key players in the sector who are doing really good. Food panda was one of the popular names among the food delivery apps. The company was doing well until some blunders crept into working for the company.

We discussed that the company was incurring big mistakes in the department of communications and operations. There were issues on the behalf of the ownership of the company, key people, like the chief executive officers, left the company without properly framing the workings of the company. Many of the companies which were acquired by food panda disconnected from the board as the working was not efficient.

From all the blunders that the company did, we can learn a lot. Every entrepreneur who wishes to set up his own venture has to read this story of a food panda. The entrepreneur can then value the power of good communication and teamwork. It is really important to understand the value of culture at work. Culture is what sets the tone of efficiency. If the company and the entrepreneur do not work towards setting up a great culture, no other accomplishments can be achieved.

In the end, the story of the Foodpanda, from its arrival to its peak to its downfall is a really important case study for budding entrepreneurs. Failures happen so that we can learn from them and a smart person is a person who learns from other people’s mistakes.

FAQs

What happened to Foodpanda in India?

Foodpanda entered India in 2015 to capture the food delivery market but failed to do so, later in 2017 the company was acquired by Ola for a 100 percent equity at a valuation of around 40 to 50 million dollars.

Is Foodpanda working in India?

No, Ola suspended the operations of Foodpanda in 2019 as it was facing a huge loss.

Who bought Foodpanda in India?

Ola acquired Foodpanda in 2017 for 100 percent equity at a valuation of around 40 to 50 million dollars.

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