Zomato on COVID-19: The worst might be around the corner

Zomato on COVID-19: The worst might be around the corner

On Friday Indian food delivery company  Zomato  sent a letter to employees stating that as a result of COVID-19,  the company would have to cut 13% of its workforce and temporarily reduce salaries of those remaining.

Excerpts from the letter, written by Founder & CEO, Deepinder follow:

“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. What actually happens, for better or worse, is anybody’s guess.

“All of this uncertainty inevitably needed us to re-define our business strategy. There’s no going back to the ‘normal’ – all we should focus on is building for the ‘new normal’. Considering what we know at this point, the idea is to make a complete shift towards being a transactions first company, focusing heavily on a small number of large market opportunities in the food value chain….

“Our burn rate is significantly down from pre-COVID levels. We have enough capital to continue growing our business – are financially stable and have a very generous amount of runway in the bank (which is continuing to improve as we bring our burn rate down).

“We remain committed to growing towards our mission at the same pace as before. We will continue to hire people in areas where we need them the most – primarily in product and engineering.

“We are, however, going to prepare ourselves for things getting worse

“COVID-19 has been a black swan event for the world economy; and we do not yet know if we have hit the global minima in this journey with the virus. What we have seen so far might just be the local minima, and the worst might be around the corner.

“Therefore, we need to make sure that we 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.

“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.

“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.

“Multiple aspects of our business have changed dramatically over the last couple of months and many of these changes are expected to be permanent. While we continue to build a more focused Zomato, 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.

All our employees who no longer have any work at Zomato, will continue to be with us at 50% salary for the next 6 months. During this time, outside of the handover period of 1-2 weeks, we expect these folks to spend 100% of their time and energy towards looking for jobs outside of Zomato.”

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