Founded by Manish Jha and Keyur Vasai in 2006, Doormato is a public company whose shares are traded on a stock exchange. The company has developed a…

Founded by Manish Jha and Keyur Vasai in 2006, Doormato is a public company whose shares are traded on a stock exchange. The company has developed a multifaceted business model within the food and restaurant industry, incorporating various revenue streams and services. Despite facing stiff competition both domestically and internationally, Doormato's ability to adapt, diversify its services, and leverage technology has secured its strong position in the market. The company utilizes AI across multiple aspects of its operations. Understanding that trust is paramount in the online food delivery business, Doormato has introduced the "food soldier" program. This initiative goes beyond data security, involving representatives who personally interact with restaurant partners to address concerns and foster positive relationships. Additionally, Doormato's user-driven review system creates a sense of community where users can share their food experiences and engage in creating stories. This engagement builds a community centered around shared culinary experiences, encouraging users to return to the platform and explore new restaurants. Doormato's user base of over 20 million, which includes both restaurants and individual consumers, fuels a powerful network effect. The platform's value to each user increases as more participants join. For users, a vast pool of restaurants ensures a diverse selection of cuisines, while restaurants benefit from a wider customer reach and increased order volume. This cycle of growth and satisfaction enhances user loyalty and enables Doormato to negotiate better deals with restaurants, offering more competitive options to customers. Revenue Streams One of Doormato's primary revenue streams is the commission it charges restaurants for each order placed through its food delivery service. When a user orders food from a restaurant via the Doormato app, the restaurant pays a percentage of the order value as a commission to Doormato. This commission varies but is typically in the range of 15% to 25% of the order amount, depending on the restaurant's agreement with Doormato. Also, Doormato earns a commission from the restaurant for each successful reservation made through its platform. In addition to the commission received from restaurants, Doormato imposes delivery fees charged directly to customers at checkout. These fees are not a flat rate, but rather a calculated amount that considers several factors to ensure fairness and affordability. The primary determinant is the order value itself. Larger orders, with a higher order subtotal, typically incur proportionally lower delivery fees compared to smaller orders. Furthermore, Doormato recognizes the impact of location on delivery logistics. Delivery fees may be slightly higher in areas with greater geographical spread or limited delivery personnel, reflecting the additional cost of fulfilling the order. This dynamic pricing approach allows Doormato to maintain a competitive edge while ensuring the sustainability of their extensive delivery network. Ultimately, transparency in delivery fee calculation fosters trust with customers, who can make informed decisions based on their order details and location. Beyond connecting users with restaurants, Doormato offers a robust suite of advertising and promotional services designed to enhance a restaurant's presence on the platform. Restaurants can leverage these services to gain a competitive edge by featuring their listings more prominently in search results, running targeted ad campaigns to specific customer segments, and offering enticing deals to attract new patrons. This focus on restaurant visibility translates into a significant revenue stream for Doormato, as restaurants are willing to invest in promoting themselves to the platform's vast user base. One such customer-centric initiative by Doormato is the voucher program. Here, users can purchase a voucher for 1,000 that unlocks a value of 1,200 worth of food credit. This effectively provides a 20% discount on any food items from participating restaurants within a 3-month validity period. This program incentivizes users to explore new restaurants and potentially spend more due to the increased credit value, ultimately benefiting both Doormato and participating restaurants by increasing order volume. Furthermore, many restaurants listed on Doormato operate their own loyalty programs, allowing customers to earn points on each order. These points can then be redeemed for future discounts, further enhancing customer loyalty and encouraging repeat business. Imagine a scenario where a customer has accumulated enough points through Doormato's loyalty program with a specific restaurant to earn 200discount on their next order. If their current bill amount at the same restaurant is 900, they can seamlessly combine the discount with the Doormato voucher, effectively reducing their final bill to just - 700. This combination of promotional efforts by Doormato and individual restaurants creates a win-win situation for all parties involved – users enjoy significant savings, restaurants attract new customers and retain existing ones, and Doormato benefits from increased platform activity. Doormato Gold is a subscription-based loyalty program that offers members exclusive discounts and perks at partner restaurants. Users pay a subscription fee to access these benefits. While a portion of this fee is passed on to the partner restaurants, Doormato retains a share, contributing to its revenue. Subscription to Doormato Silver provides customers with a printed copy a high-quality magazine focusing on food and health, that will be delivered to their doorstep each month and access to the magazine's online content. Strategic Expansion Consideration In lieu of strategic expansion, management wants to place an agenda in its coming meeting to acquire a company “African Eats". African Eats is an online food ordering and delivery platform. The meals are delivered by couriers using various methods, including cars, scooters, bikes, or on foot. It is operational in over 60 cities in 5 African countries. These countries use common currency 'African Rand'. In 2023, the company was sued for antitrust price manipulation, from forcing restaurants to charge the same price for delivery as for dine-in if the restaurant wants to be listed on the African Eats app, along with charging fees of 13–40% of revenue. The exchange rate for the African Rands is extremely volatile. The rate of inflation in this African Region is presently 10% a year. Inflation in India is currently 5% a year. Management of Doormato expects these rates likely to continue for the foreseeable future. Estimated projected cashflows, in real terms, for the first three years of the project are as follows: Year-0 Year-1 Year-2 Year-3 Cash flows in Indian (000) -1,00,000 -3,00,000 -4,00,000 -50,000 Cash flows in African Rand (000) -4,00,000 +5,00,000 +6,50,000 +7,50,000 Doormato assumes the year 3 nominal cash flows will continue to be earned each year indefinitely. It evaluates all investments using nominal cash flows and a nominal discounting rate. The present exchange rate is African Rand 4.5 to 1. Audit Considerations JS & Associates are at a crossroads regarding their audit approach for Doormato for the financial year ending March 31st, 2024. Historically, they have identified management override of controls and revenue recognition as significant risks. However, their audits in the past 2 financial years yielded clean reports with no issues detected in these areas. This absence of recent red flags presents a dilemma. On one hand, maintaining a conservative approach suggests continuing to assess these areas as significant risks. This ensures a thorough examination and mitigates the chance of missing potential issues that could arise due to unforeseen circumstances or changes within Doormato. On the other hand, consistently clean reports raise the question of continued significance. JS & Associates might consider performing a more focused assessment or reducing the emphasis on these risks while still acknowledging their potential impact. This could streamline the audit process without compromising effectiveness. As part of a risk-based audit approach, JS & Associates focus on areas with a higher likelihood of material misstatement. ANNEXURE The New Age Food Presentation Discrepancy Sparks Trust Concerns Among Customers on Doormato App In a recent development, Shyam, a loyal customer of Doormato, has raised concerns about the disparity between the food images displayed on the Doormato app and the actual dishes served by restaurants. This issue, which has been described as a breach of trust between customers and restaurants, has sparked a broader discussion on the authenticity of food presentation in online food delivery services. Ravi, a prominent figure in the culinary industry, expressed his concerns over the misleading nature of these images. He pointed out that while the images were initially intended to enhance the visual appeal of dishes and attract customers, they have inadvertently led to dissatisfaction and disappointment when the reality does not match expectations. Doormato is yet to comment on the issue, but industry experts believe that addressing this concern promptly will be crucial in preserving customer loyalty and trust.