Tension brewing for months between restaurants and food aggregators reached a flashpoint with the former exiting Swiggy’s Dineout platform.
The list of exits includes Impresario Handmade Restaurants, which houses brands like SOCIAL, Mocha, Smoke House Deli, and Salt Water Café, Simmering Foods and Restaurants, and Indigo Hospitality, which runs restaurants such as Indigo, Indigo Delicatessen and Neel.
According to the founders of these restaurants, some of whom are also office bearers of the National Restaurant Association of India (NRAI), 3,000-3,500 restaurants have logged out of Swiggy’s restaurant discovery platform Dineout and Zomato’s payment gateway Zomato Pay.
“Initially, 900 restaurants had logged out of these programmes, now our estimate is that the number has reached 3,000-3,500. We have been creating awareness about these platforms based on the NRAI advisory issued in September,” said Pranav Rungta, Director, Simmering Foods And Restaurants, which runs restaurants like Tamak, Zao Cha House, Sforno.
The bone of contention is the demand for “heavy discounts” by aggregators, which restaurants say hurts their business and profitability.
Here’s an explainer on the development of this tussle between restaurants and food aggregators:
How it all started
The conflict between the two parties started in 2019 when restaurants launched a logout movement against Zomato Gold.
Zomato Gold was started as a dine-in-only program in 2017. The subscription-based programme offered discounts to consumers when dining in, in lieu of a fee. The restaurants had to bear the cost of these discounts, however, the aggregator was not charging them any signing fee.
Over the years, restaurants grew disgruntled with the programme, claiming that it was hurting their dine-in business and that their brand value was being diluted, and launched a log-out movement against it. Eventually, the food aggregator phased out Zomato Gold.
Restaurateurs, however, claim Zomato Pay is Zomato Gold in a new avatar and after its acquisition by Swiggy, restaurant discovery platform Dineout had also taken on a similar form.
What are Zomato Pay and Swiggy Dineout?
According to restaurateurs, though a payment gateway, Zomato Pay is a rehashed version of Zomato Gold. "The food aggregator is migrating Zomato Gold members to Zomato Pay,’’ said Rungta.
Zomato Pay also offers a restaurant discovery service, and hence competes with Swiggy’s Dineout.
Though Zomato has always offered a restaurant discovery service on its platform, Swiggy had stayed away from it. But with the acquisition of Dineout and its integration within its app, Swiggy, too, has ventured into this territory.
Swiggy acquired the restaurant discovery platform Dineout from its former owner Times Internet in a $200-million deal in May this year. According to sources, Swiggy had been working on its discovery platform for quite some time, but finally decided to acquire Dineout. It plans to phase out Dineout as the company subsumes it within the Swiggy app.
Zomato had done a trial run of the new feature in Hyderabad earlier this year and is now rolling it out nationwide. Similarly, Swiggy had done a trial run of Diner in the same city, which was the name of its earlier restaurant discovery project, prior to the acquisition of Dineout. These trial runs disgruntled the restaurant industry, who claim they offer the same features as Zomato Gold.
What’s the restaurant industry’s issue with Zomato Pay, Swiggy Dineout?
Both programmes offer a restaurant discovery service to consumers, along with a payment gateway. The restaurant industry claims that aggregators are asking them to incentivise the usage of these payment gateways by consumers, over usual payment methods like credit cards, debit cards, or UPI, by offering discounts in the range of 15-40 percent. The restaurants, say the owners, are also being asked to pay commissions in the range of 4-12 percent.
In September, when NRAI issued an advisory against Zomato Pay and Swiggy Diner, the issue with Zomato Gold found a mention in it.
According to the association, their experience with the Zomato Gold had imparted some key learnings. First, the advisory said, Zomato simply did not have the data to back up the value that it claimed to be bringing to the table (through Zomato Gold.)
Furthermore, it added that while Zomato assumed that Gold customers were racking up top-notch bills at partner restaurants, the partner restaurants had a wealth of information that showed just the opposite. “Their (restaurants’) profit and loss statements clearly showed that,” it said.
The restaurateurs are afraid of going through a similar experience with these new platforms.
“Food aggregators are the only ones benefiting from these programmes and that was clearly stated in the NRAI advisory issued in September,” said Riyaaz Amlani, CEO of Impresario Entertainment & Hospitality.
Restaurateurs say that as Swiggy and Zomato enter a discounting game to draw more and more customers into their fold, they will hurt the “only profitable part of the food services business, which is dine-in.”
“Delivery, which was a profitable venture for restaurants, has already been made unprofitable by these aggregators,” said Rungta.
The owners also ask: “What’s in it for us?” According to the restaurant industry, while Zomato and Swiggy will gain customers while also making money through these programmes, the restaurants won’t gain anything. Hence, they demand that commissions be waived off and discounts should be up to the restaurant owner’s discretion.
What is the stance of Swiggy and Zomato on the issue?
Since the advisory, the aggregators have been involved in a dialogue with the restaurants and the association. Zomato, said the restaurant owners, acceded to some of their demands and waived the commissions, but discussions are still going on about discounts. The restaurants claim their discussions with Swiggy have not made any headway.
Swiggy, however, claims that it continues to engage with restaurant partners and NRAI representatives on the matter.
According to a Swiggy spokesperson, restaurant partners on Swiggy Dineout are at complete liberty to decide what discount they wish to offer to customers on the app.
“Furthermore, thousands of partners continue to join us each month and list on Swiggy Dineout — only a handful of restaurant partners have expressed their desire to delist from the platform,” said the spokesperson.
As per the company, Swiggy Dineout works with over 15,000 restaurant partners in more than 20 cities.
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