National Restaurants Association of India (NRAI) has cautioned restaurants against participating in Zomato and Swiggy’s dine-in discount programs (Zomato Pay and Swiggy Diner respectively).

Zomato Pay and Swiggy Diner are new programs launched by food aggregator companies, enabling customers to pay dine-in bills on their apps and access flat discounts. The industry body urged restaurants to question food aggregators on the tangible benefits of such programs. The fundamental question posed by NRAI is why should restaurants pay a mediator (like Zomato, Swiggy) to offer discounts to their own customers.

“This brings no tangible value to restaurants. It does not solve any pressing problems of the industry either. The fundamental question here is why should a restaurant pay a commission to a middle man to offer a discount to its own customer? The NRAI urges its members as well as the wider restaurant fraternity to exercise caution as well as good judgement before choosing to be part of these programs,” the industry body said in its advisory note sent this week.  

False narrative

NRAI added that such a program will bring false narrative of discounts, being the only way to grow business to dine-in business as well. The industry body believes that once such a narrative around discounts is built, Zomato and Swiggy can also increase their discount requirements and commissions. 

Under these programs, restaurants will have to offer discounts in the range of 15-40 per cent to every customer who chooses to settle their bills through these payment gateways. This discount is borne entirely by the restaurant. On top of this, restaurants already pay a commission of 4-12 per cent for enabling Zomato/Swiggy’s payment gateways at their restaurants.

 “As more and more people change their payment habits to the lure of discounts and cashbacks, their terms of engagement with restaurant will change unilaterally and irreversibly just as their behaviour in the delivery market will testify. “Your” customers will eventually firmly become “their” customers,” said the industry body. 

Irreversible effects

“Based on how this played out with the delivery market, what is perhaps most dangerous is the long term, irreversible effects that this has on the dine-in market: unsustainable discounts coupled with a platform wedged firmly between you and your customer,” the industry body noted. 

Zomato used to run a dine-in only program called Zomato Gold, which was started in November 2017. Under this program, restaurants used to bear the cost of the discount ( 1+1 on Food or 2+2 on Alcohol).  This led to a #Logout movement on August 15, 2019,  during which thousands of restaurants all over the country delisted from Zomato Gold to protest deep discounting. This eventually led to Zomato Gold being discontinued.