Why Some Restaurants Have Declared War on Aggregators

Are the days of great deals and discounts done?

LF Team

“Do you have Zomato gold?” This is probably one of the first questions most diners with a gold membership ask the server, often, before even glancing at the menu. For the price-sensitive Indian diner, Gold privileges and several other dining apps such as EazyDiner, Nearbuy, Magicpin, Dineout and Gourmet Passport have provided great incentives—to eat out more, the satisfaction of having snagged a good deal and the nudge to explore different dining experiences.

Restaurants, on the other hand, are painting a different picture. Case in point, the #Logout campaign spearheaded by the National Restaurant Association of India (NRAI) that is gathering steam and has 1900 (and growing) list of restaurants that have decided to log out of such apps. The move may have come as a disappointment to consumers, but the fault lines in the food sector had begun to appear for some time now. 

Back in December 2018, members of the Kerala Hotel and Restaurant Association (KHRA) decided to boycott aggregators, their worry was that food delivery will do to them what “Ola and Uber did to drivers: initially help widen their reach but eventually kill their earnings”, especially through heavy discounting,” reported Quartz India. Recently, Gurugram-based restaurants followed suit, a movement that quickly spread to other cities. On August 14, 2019 a day before India’s 73rd Independence Day, NRAI made a clarion call to the 50,000 plus food businesses registered with it to unite for a cause—independence from the discount-culture.

Whoever said there are no free meals in life hasn’t subscribed to a dining app. Let’s be clear, we’re Indians, we love freebies, we are the purveyors of the one-by-two culture—a unique trait that reflects our prudent, circumspect attitude towards expenditure. So, when deals like one-plus-one on food and two-plus-two on drink were offered by dining apps, it was win-win all the way! Unbelievable one-plus-one Sunday brunch deals? Bring it on. Fifty-per cent off? We love it!

What we may not have given a thought to was whether these deals were sustainable for the restaurant business in an already price-sensitive market like India. Not that the consumer should worry about a restaurant’s P&L (profit and loss), but a tripartite arrangement of a restaurant-aggregator-consumer can only hold as long as it is equitable, and now the restaurant partners are protesting that they're left holding the short end of the stick.

That’s exactly what the logout campaign is saying—deep discounts are unsustainable, they adversely affect food businesses. As the NRAI statement says, they stepped in to initiate a “detox from discount addiction” among consumers.

Also Read: 

Meet 10 Indian Brands That are Helping Reduce Our Carbon Footprint

Danger of deep discounts

Riyaaz Amlani, past president of NRAI and CEO of Impresario Group which has close to 48 restaurants such as Social, Slink and Bardot and Salt Water Cafe under its umbrella believes that this “grassroot level movement” supported by NRAI was started for a reasonto get rid of unstainable discounts which are hurting food businesses in more ways than one. 

Explaining the damage done by these discounts, Amlani says that the price of the dish reflects the restaurant’s many direct and indirect costs—not just cost of the ingredients but also the expenditure on rental, labour, electricity, licensing, décor, and other operational costs. “While the restaurant and aggregator enter into a mutually-agreed commercial arrangement, when aggregators give deep discounts of 50 per cent, restaurants running on margins less than 10 per cent are likely to suffer,” he says adding that restaurants fall prey to these tie-ups because of the fear of missing out and losing customers.

Following the NRAI move, several prominent voices shared their concerns on social media. Olive Group’s AD Singh wrote on Instagram that “the #logout movement (is) to make a statement against aggregators whose actions are of concern to us in the long run. Some of them are resorting to very aggressive discounting and predatory pricing…” he said adding that the two partners need to protect each other’s interests.

Saransh Goila of Goila Butter Chicken posted on Instagram that “While the aggregators have been our growth partners…it is time that they realise…it cannot be a one-way traffic. Policies can't change over-night and unethical rules + practices will definitely not be entertained…Only good food and service should stand the test of time, nothing else.”

Over to apps

While the number of restaurants that have logged out only account for a small fraction of those listed on the apps, they have the backing of influential voices like Amlani and Singh. The Federation of Hotel & Restaurant Associations of India (FHRAI) has jumped in and called out the ‘unethical practices’ of the aggregators, reported Economic Times. Sixty-five restaurants have opted out of Zomato Gold, which is one per cent of the restaurant partner base of Gold. 

Also read:

Take a peek into the life of the army that delivers your food in 30 minutes 

No doubt food delivery and dining apps have played a huge role in transforming the Indian F&B sector. Crowd-sourced reviews, efficient search and reservation options for consumers, and the opportunity to reach out to new customers for restaurants. For the platforms, discounts drew greater volumes. 

It all began about three years ago. In November 2017 Zomato launched ‘Gold’, allowing subscribers 1+1 on food and 2+2 on drinks from partner restaurants. By March 31, 2019 Zomato Gold had nearly 10,000 partner restaurants and over 1 million active subscribers. In July the same year the platform launched ‘Infinity Dining’, allowing a diner to order unlimited servings at a fixed cost. 

Close on the heels was Dineout’s Gourmet Passport programme that offers buy-one-get-one on buffets, food and drinks at over 800+ restaurants in metros. Dineout also offers discount coupons for various restaurants for a fee as low as ₹ 5. And not to forget the ongoing Great Indian Restaurant Festival, an annual event that offers up to 50% off deals for a limited time in select restaurants across multiple cities. Nearbuy offers several discount coupons for various restaurants you can buy ahead. 

The #logout campaign has made dining apps take notice and Zomato’s founder and chief executive Deepinder Goyal tweeted a statement saying they are “willing to make modifications and rectify mistakes.” Urging restaurant owners to stop the logout campaign, Goyal tweeted, “In the interest of consumers, we request restaurant owners to stop the logout campaign, and have a collaborative discussion with internet aggregators for finding a sustainable way forward.” 

Rocky Mohan, founder of Dineout’s Gourmet Passport views the logout campaign as a churn in the food industry “one that brings the good stuff to the top, leaving the bad stuff at the bottom.” His company, along with Dineout, EasyDiner and Nearbuy has been in meetings with NRAI to help resolve the issue. “We want to build a more sustainable and viable ecosystem for both our restaurant partners and the users, and as a ‘gourmet’ and discovery platform, we don’t thrive on the discount culture. We favour quality and value over deep discounts,” concurs Mohan.

A game of volumes

There is no denying that dining apps bring in volume. “This is a wake-up call that we need to do 100x more for our restaurant partners than we have done before,” says Goyal in his tweet, adding that the end goal is to make eating out more affordable to consumers and the restaurant industry must proactively look for ways to reduce operating costs.

The volumes game is especially true for hybrid models of restaurants that use a combination of cloud kitchens with some physical outlets. Vishal Jindal, co-founder and director of Biryani by Kilo that largely follows a delivery-model agrees that while the mindless discounts hurt businesses, they will become profitable only when the orders run into high volumes.

Also Read: Check out LF's Series on Biryanis of India

What lies ahead?

Aggregators, dining apps and restaurants have a symbiotic relationship. Along with business, restaurants also gain insight into consumption, spending patterns and customer profile and preferences from apps. “The focus should not be on discounts but on values. The customer should get the right value,” said Prashant Gaur, CBO, Pizza Hut India Subcontinent at the recently concluded Restaurant Congress in Delhi. If an unsustainable trend continues, Gaur says a time will soon come when the discounting will be passed on to the consumer.”

Should a consumer be worried about losing those juicy deals? No, that is unlikely. Change is inevitable, but it might be sustainable and long term. As Amlani says, “This is not a permanent move and very soon discounting might come back to your favourite restaurants, but in a way that supports our businesses and consumer interests equally.” What we need now is for the math to add up for all the three stakeholders.

As a consumer, it’s time to look for value in deals, to be circumspect about rock-bottom discounts (quality of ingredients, hygiene and service matters!) and be willing to pay for the dining experience. For restaurateurs, it is time to be more transparent about costs and billing. And for the dining apps and aggregators—to strike that sustainable balance!

Reportage by Annabelle D'Costa
Illustration by Vartika Pahuja



Editor’s Pick

Recipes of the Day

Related Stories

To feed your hunger for more


Want more? Click on the tags below for more videos and stories