Indian dining apps face backlash from restaurants over steep discounts (UPDATE)

Online restaurant aggregators now agree to curb steep discounts that the restaurants claiming are hurting their business.

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A bevy of Indian online restaurant reservation apps, including Zomato, Dineout, EazyDiner, and Gourmet Passport among others, recently got caught up in an escalating turmoil that would undermine the cornerstone of their businesses: the restaurants they aggregated are pulling themselves out of those platforms over grievance against steep discounts.

Last Thursday, 300 restaurants in Gurugram, a satellite city of India’s capital New Delhi, claimed they would pull out from restaurant aggregators like EazyDiner, Zomato Gold, Dineout, Nearbuy, and Magicpin, in a #Logout campaign led by National Restaurant Association of India (NRAI).

The movement has spilled over to several other cities including Bengaluru, Mumbai, Kolkata, Goa, Pune, and Vadodra, over the weekend to develop into a nationwide one, with more than 1,200 eateries reportedly removed themselves from those dining apps.

NRAI represents over 500,000 restaurants in India.

The discord between the restaurants and the dining apps has resulted from the various promotional schemes, ranging from “one-plus-one-free” promotions to “all-you-can-eat” fixed price meals, offered by these apps to attract consumers. The schemes, such as Zomato Gold and EazyDiner Prime, help the platforms reap revenues at the cost of restaurants.

“Unfortunately this new way of impractical, unaffordable and unconscionable discounting has put the hospitality industry in a very awkward situation,” Gurbaxish Singh Kohli, vice president, The Federation of Hotel & Restaurant Associations of India (FHRAI), told local media.

As of now, Zomato Gold membership program has over 1 million subscribers and 6,500 restaurants as its partners.  The loyalty program accounts for 10% of the company’s revenue. And the company expects Gold to help it garner USD 20-25 million in revenue.

In a bid to arrest further deterioration of the situation, Zomato founder Deepinder Goyal called upon the industry to work together for a solution in a series of tweets.

“What’s good for restaurants is good for Zomato. What’s good for consumers is good for Zomato. Finding the right balance and product market fit is the restaurant industry’s problem (and that includes us),” one of his tweets said.

The #Logout campaign is a culmination of a series of long-standing discord between Indian restaurants and online aggregators.

FHRAI in a statement cited unreasonably high commissions, payment terms and arbitrarily applied additional charges as the malpractice of dining apps that are hurting the restaurants’ business. FHRAI’s vice president S K Jaiswal told local media that Indian restaurants are subtly threatened by dining platforms to partake in their discounting schemes.

“Our members are neither given an option nor the opportunity to agree nor are they even consulted. Promises made while launching any new scheme is almost always broken by changing the rules itself,” he said.

EazyDiner and Dineout have both reached out to NRAI with the hope of having an open dialog.

As a result of the conversation, NRAI said on Tuesday that the restaurant aggregator apps, including Zomato, EazyDiner, Dineout, Magicpin, and Nearbuy, would make adjustments to their membership programs – such as Zomato Gold, EazyDiner Prime – to drop deep discounts.

“When we hear back from all the aggregators on the changes/tweaks they will do, we will review if the objective of curbing deep discounting has been achieved. You can’t resolve everything in one meeting,” Rahul Singh, NRAI’s president, told local media Financial Express Online.

UPDATE: IST 08:40, August 21, 2019, added the last two paragraphs to reflect the new development of the event, as restaurant aggregator apps agreed to curb steep discounts inflicted on the restaurants after a conversation with NRAI.