Zomato’s aggressive discount schemes have made it an absolute favourite among consumers with 1 Mn paying subscribers joining its premium service Zomato Gold. But while diners love getting free food and drinks, restaurants are not happy as they claim “loyalty programmes dent profitability”.
Hundreds of restaurants in Mumbai, Delhi and Gurugram have pulled out of the partnership with Zomato, due to increasing discounts, rising rental prices, denial of input tax credits, says Rahul Singh of National Restaurant Association of India (NRAI).
To add to the grievances, Zomato also rolled out a ‘Infinity Dining’ plans for its Gold subscribers, to offer more than free drinks and food. Under Infinity Dining, diners can order unlimited food and drinks for a set price, which is essentially an all-you-can-eat model. ,
With the removal of input tax credit under the revised goods and services regime, steep discounts up to 50% are hurting restaurants. It also increases the operating cost for the restaurants since the discounts eat into their margins, which they are not compensated for. Many angry restaurants have started a #LogOut campaign on Twitter as a sign of protest, in the hopes of removing the dependency on discounts among consumers.
According to unconfirmed media reports, Zomato was also planning to extend its dine-in Gold services to online orders as well. With this upgrade, Gold users, who order food home, could get a menu item for INR 300 free. The feature was supposed to be launched yesterday, according to a report in the Business Standard.
The food discovery and delivery app, in an email, has asked the partner restaurants to comply with the contract, which requires required them to serve a 45-day notice period to ensure a smooth transition for the customers.
“With a view to make sure we protect the user experience, we would request you to let us know proactively in case you are thinking of going off the programme for a brief period, as we will not like your users to have a poor experience when they visit your restaurant,” the email says.
If the member wishes to join back, they’ll have to pay a signup fee, Zomato added.
On Thursday, 300 restaurants said that they would delist themselves from reservation-and membership-driven dining apps like EazyDiner, Dineout, nearby, magicpin and Zomato Gold. The move by the NRAI is meant to end steep discounting by such platforms which cut down on the profit of the service providers.
Update: August 17, 2019| 12: 20 PM
“We have still not received any invitation for a discussion on this topic, but we remain open to any conversations to resolve ongoing issues,” a Zomato spokesperson said. Zomato said it has constantly been in touch with the restaurant industry and discussed feedback regarding new products such as the Infinity Dining program it rolled out recently. “It was extremely surprising for us to see a campaign of this nature being launched without the restaurant committee even calling for any discussion regarding the same,” Zomato said.