Food startup suspends services citing technical glitches; workers plan to approach labour court.Employees of online convenience store Localbanya have not received their salaries for two months, and they have said indications are that several of them will be dispensed with. Forty of the startup’s employees whose services were terminated on Friday will seek the labour court’s intervention after their efforts at lodging a police complaint against their ex employer proved futile.The retrenchment follows in the wake of similar cutbacks at food tech startups Tiny Owl and Zomato.Localbanya management informed its employees on Friday that “operations were being suspended”, the second such instance in the last two months – the service shut down for a short duration in the first week of October. The statement that appeared on their website then was repeated on Friday: “Your banya is upgrading his technology and services. We will be back shortly with more exciting features and a far better delivery experience. We can’t wait for you to experience the new and improved Localbanya.”Warehouse supervisor at their Kurla branch, A Pramod said employees had visited the MIDC police station to file a case against the Localbanya management. “We were advised to approach the labour court. Currently we are seeking legal advice on the matter,” he told Mumbai Mirror. According to employees, the company was facing funding problems which reflected in them not being paid salaries for at least two months.Two suppliers of Localbanya confirmed that they had been told there was a “shortage of funds” and told to discontinue services.Company officials rejected speculation that it was strapped for cash and maintained that staff attrition was not unique to Localbanya. “Our current team is well structured and the organisation continues to attract talent by virtue of the strong brand that we have built,” said founder Karan Mehrotra, who conceived of the service in 2012 with Rashi Choudhary and Amit Naik. Localbanya raised $5 million (about Rs 32 crore) in its Series A funding in January 2014.According to suppliers, the company was attempting to change its model of sourcing merchandise from large retailers or cash-andcarry players to consumer goods companies directly.As for Zomato, which offers restaurant and bar listings, and, after its acquisition of a similar online service in the US, Urbanspoon, signalled its global presence with operations in 22 countries, the largest quantum of layoffs were announced in October. The company’s founder Deepinder Goyal wrote in an email to its 3,000 employees that 10 per cent of the workforce would have to go.In a blog post on Friday Goyal wrote: “We have grown tremendously over the past few months, and our sales team has more than quadrupled in 2015. The hard reality of this growth is that our revenue hasn't kept up with the growth in our sales team.”Goyal went on to say that Zomato was far behind the numbers that it has promised investors for this financial year (ending March 2016). “Our investors have said that so far, we have always delivered what we have promised. We are close to not living up to that for the first time in the last 5 years. So we really need the sales team to achieve peak performance, and it needs to happen right now,” Goyal said.TinyOwl, which simplifies takeaway services by aggregating them, shut operations in four cities and let go of about 100 employees earlier this week. “After what happened in Pune, Gurgaon, Chennai and Hyderabad, we have heard that the members of the customer support team [it has 200 such workers] will also be let go to enable automation of the system,” said one of its Mumbai employees.While the official reason given by the company’s founders was “organisational restructuring” to establish a foothold in the market, the employees felt that this was being done to maintain the thin profit margin. “The company invests between Rs 200-Rs 300 on every customer. This kind of a business model has a profit margin between 10-12 per cent only which is why the company is making such drastic cuts in the number of employees,” said another employee.Harshvardhan Mandad, cofounder of TinyOwl did not offer comment. Sources close to him said the company had no intentions of obviating the need for a company support team yet. “There isn’t a problem with the business model that the company is operating on,” said an employee close to the management’s deliberations.Talent acquisition specialist Neha Asthana said that given the low margins in food and grocery retailing, online companies need a constant flow of funds. “This is more so in food tech startups where expectations are high and growing all the time, while margins are very less,” she said.Industry observers believe that logistics and consumer promotion alone would account for 20 per cent of the total cost for the online grocers. “With huge competition in online grocery retailing space, the companies should now look at how to make the business sustainable and generate profit,” one commentator said.