SUMMARY
The NRAI alleged that Swiggy’s Dineout app will hit the dine-in business of restaurants due to steep discounts on offer and high commission charged by the company
The log out campaign could hit Swiggy’s ambitious foray into the dine-in business after it acquired Dineout in a $120 Mn all stock deal
The NRAI had launched Zomato Gold #logout campaign in 2019 alleging that deep discounting by Zomato was hitting the business of the restaurants
In what could turn out to be the next phase of the war between restaurants and food aggregators like Zomato and swiggy
, the National Restaurant Association of India (NRAI) has urged its members to start logging out of Swiggy’s Dineout app. The NRAI has over 500,000 restaurants across the country as its members.
In a townhall meeting held on Friday, the top executives of the NRAI said that Dineout will disrupt the dine-in business of the restaurants as Swiggy would be offering huge discounts to the customers doing bookings via the Dineout app.
The owners of popular restaurants on food delivery apps like Wow Momos, Chayoos, and Smoke House Deli were amongst the speakers during the NRAI townhall.
Swiggy announced the acquisition of Dineout from Times Internet in a $120 Mn all-stock deal in May this year.
“The acquisition will allow Swiggy to explore synergies and offer new experiences in a high-use category,” Swiggy cofounder and CEO Sriharsha Majety said while announcing the acquisition.
However, the opposition of the restaurants to the new offering of the food giant is likely to create a hurdle for Swiggy’s plans for Dineout.
Inc42 has reached out to Swiggy with queries on the issue. The story will be updated as and when the company responds.
The NRAI’s campaign against Dineout is in line with the NRAI’s stance on dine-in bookings. In 2019, the industry body’s restaurant partners started a #Logout campaign against Zomato Gold due to the high commissions charged from the restaurants for customer bookings and huge discounts being offered on food and beverages to Zomato Gold subscribers.
“We were successful with our campaign against Zomato Gold which forced the food aggregator to stop its Gold programme. A similar strategy is in the works by both Swiggy and Zomato through Dineout app and Zomato Pay gateway which will crush our dine-in business,” Anurag Katriar, founder of Indigo Hospitality Private Ltd and trustee of NRAI, said during the townhall.
He said that restaurants are able to earn profit from the dine-in business despite the impact of the pandemic, while the delivery business, which is dominated by food aggregators, is not profitable for them.
“However, with initiatives like Zomato Pay or Dineout, the platforms are foraying into our dine-in business with deep discounting, cashback being offered,” Katriar added.
Zomato Pay is a payment service offered by the listed foodtech company through which customers can make payments to restaurants from the Zomato platform.
According to its website, Zomato enters into a legally binding agreement with restaurants to let the customers pay via Zomato Pay and avail the discounts being offered via the service.
As per the NRAI, deliveries account for 15-20% of a restaurant’s business. However, since aggregators control the funnel of delivery from consumer data, commissions, discounts on delivery charges, among others, there is no margin left for the restaurants, the industry body claims.
Dine-in Business – The Next Big Opportunity For Zomato, Swiggy?
With the effect of the pandemic waning, the dine-in business has seen a sharp revival, which has prompted Zomato and Swiggy to foray into the vertical.
For instance, Zomato announced the return of its food carnival festival Zomaland. The physical event will be held across 7 cities and the company will partner with 400 restaurants. Zomato is also offering discounts/ cashback to consumers who pay via Zomato Pay.
In September, Swiggy announced the integration of Dineout with its main app on both Android and iOS and began offering discounts of up to 40% on food orders placed by users via the Dineout app.
The NRAI said that the dine-business is highly profitable right now, with the EBITDA margins in the range of 18-20%. The restaurants’ body claimed that the margins for restaurants will decline sharply to 4% if the food aggregators gain a foothold in the dine-in business as the cost of discounts and commissions charged by aggregators will increase up to 15%.
Riyaz Amlani, CEO and MD of Impresario Handmade Restaurants, which has a chain of 61 restaurants across the country, called Zomato and Swiggy “new digital landlords”. He said that the restaurants run by him have been able to show aggressive growth in sales despite logging out of Swiggy’s Dineout app.
“We have already made a huge mistake by letting them capture more than 90% of the delivery business. However, we cannot afford to do the same with the only profitable business the restaurants are left with now,” Amlani added.
Last month, the NRAI asked its restaurant partners to make an informed decision on joining Zomato Pay and Swiggy Dineout saying that the offerings could have an adverse impact on the restaurant industry in the long-run.
It must be noted that Zomato and Swiggy are also under the scanner for their alleged violation of competition laws.
In April 2022, the Competition Commission of India (CCI) ordered a probe into the alleged anti-competitive practices followed by the platforms based on a complaint by the NRAI.
“The Commission is of the view that there exists a prima facie case with respect to some of the conduct of Zomato and Swiggy, which requires an investigation by the director general (DG), to determine whether … (they have) resulted in contravention of the provisions of Section 3(1) of the Act read with Section 3(4) thereof,” the CCI order said.
