Amid rising fees and deep discounts, NRAI urges restaurateurs to reassess reliance on food aggregators. The Pioneer speaks to Hyderabad Restaurant Association and Industry Stakeholders more in detail
In India’s booming dining and food delivery industry, a new conflict is brewing. The National Restaurant Association of India (NRAI) has issued a stark warning to its members, urging them to reconsider their reliance on food aggregators like Zomato and Swiggy. These platforms, once seen as enablers of growth, are now under fire for practices that restaurants say are undermining their sustainability and autonomy. Central to the debate are aggregator-controlled payment gateways and the allure of deep discounting.
For a restaurant industry still recovering from the pandemic, these practices could be the tipping point between survival and closure. What appears to be an efficient and profitable system for customers is, for many restaurateurs, a labyrinth of fees, dependency, and shrinking margins.
How discounts and delivery platforms are reshaping the restaurant industry
The restaurant industry stands at a crossroads, balancing the benefits of delivery platforms with the challenges they bring. For many, the online food delivery revolution offered a lifeline during the COVID-19 pandemic, providing an alternative revenue stream when dine-in operations were disrupted. However, as the dust settles, the true cost of this reliance on aggregators is becoming increasingly clear.
“Online food ordering was a revolution,” says Sampath Tummala, President of the National Restaurant Association of India (NRAI), Hyderabad Chapter and owner of The Spicy Venue. “During COVID and post-COVID times, it helped us build a parallel alternative to increase turnovers. But now, with commission percentages hiked, it’s becoming harder to sustain. Once started, it’s difficult to come out of the game.”
Rising costs and shrinking margins
For restaurants, operating costs have surged across the board. “All costs have gone up—real estate, food, remuneration. At the same time, our establishment costs have increased, and margins are becoming thinner,” explains Tummala. Delivery aggregators, which initially appeared as a partnership opportunity, are now being criticised for practices that cut into profitability. With commission rates as high as 30%, many restaurateurs find themselves struggling to maintain viable margins.
“Dine-in was always the strength of restaurants,” Tummala notes. “Legendary places still see huge rushes because their product is strong. But when you factor in discounts of 20-50% and additional gateway fees for payments processed through platforms, the economics simply don’t add up.”
Pitfalls of dine-in discounting
In recent years, some delivery platforms have extended their influence into the dine-in space, promoting steep discounts that many restaurateurs find unsustainable. Kavitha Mantha, Secretary of the NRAI National Committee and owner of Sage Farm Café, warns that this practice erodes the value of the dining experience. “Diners may start choosing restaurants based solely on discounts, pushing those that cannot afford price cuts to the margins,” she observes.
Tummala echoes these concerns, highlighting how such discounts can distort customer expectations and harm a restaurant’s reputation. “Every place has its own set of guests. But when discounts attract a different audience, their perceptions can backfire,” he explains. “For example, comparing biryani at an Irani café with biryani at a fine-dining restaurant doesn’t make sense. The former focuses on taste and quantity, while the latter offers ambience and presentation. A bad online review from someone who doesn’t understand the difference can impact a restaurant’s rating.”
Celebrity chef Rakesh Sethi, reflecting on these challenges, emphasises the delicate balance between maintaining profitability and delivering value. “As chefs, we pour our passion into every dish, striving to create a memorable experience for diners. However, deep discounting undermines this effort. While it might drive short-term footfall, it erodes the margins we need to innovate and sustain quality. More importantly, it devalues the artistry of dining, conditioning customers to expect cuts at the expense of authenticity. Hefty commissions from aggregator payment gateways only add to the strain, leaving restaurants vulnerable. Instead, the focus should shift to nurturing direct relationships with patrons, offering fair pricing, and emphasising the true value of the culinary experience.”
Walking away from aggregators
Recognising these challenges, the NRAI Hyderabad Chapter has taken a firm stance against aggregator-driven dine-in discounts. “As a body, we’ve decided to stay away from the dine-in vertical of aggregators,” says Tummala. “We don’t want to get into the game of giving more commissions and spoiling our organic customer growth. Our focus is on protecting our ongoing business and maintaining the integrity of our offerings.”
This decision reflects a broader concern about the long-term viability of over-reliance on delivery platforms. “Deep discounts are not just unsustainable; they also condition customers to expect lower prices,” adds Mantha. “It’s a race to the bottom that ultimately hurts the entire industry.”
Preserving soul of dining
Despite the challenges, industry leaders believe in the resilience of the dine-in experience. “The product should always be strong,” Tummala emphasizes. “Restaurants that focus on quality and service will continue to thrive, even without discounts or aggregator support.”
Mantha agrees, noting that the connection between food creators and their customers remains central to the hospitality industry. “We need to safeguard the soul of the dining experience,” she says. “That personal connection is what makes restaurants special—and we cannot afford to lose it.”
As restaurants navigate this evolving landscape, the focus is shifting back to fundamentals: quality, service, and direct customer engagement. It’s a strategy that may not promise overnight success, but it’s one that ensures long-term sustainability in an increasingly competitive market.
