In today’s digital age, food delivery apps have become an integral part of the restaurant industry, providing convenience and accessibility to customers. However, a recent survey conducted by JM Financial has shed light on the significant role that delivery aggregators like Zomato and Swiggy play in generating revenue for restaurants, accounting for approximately 30% of their total earnings.
While it may be assumed that restaurants can solely rely on their own ordering channels, such as apps, websites, social media connections, or direct telephone lines, the reality is quite different. Despite having these channels in place, a substantial portion of their revenue still comes from partnering with food delivery aggregators.
The survey, which included more than 135 restaurants across the top 10 cities, revealed some interesting insights. One striking finding was that over 85% of the surveyed restaurants had higher prices for their online menus compared to their dine-in menus. This pricing strategy is a direct result of the high commissions and discounts imposed by the aggregators, forcing restaurants to adjust their prices to maintain profitability.
The report highlights that while it is theoretically possible for the organized food services industry to survive without relying on aggregators, in practice, this scenario is highly unlikely. Even well-established chain restaurants mentioned in the survey admitted to having limited bargaining power when it comes to dealing with aggregators. The National Restaurant Association of India (NRAI) has been vocal about the challenges faced by restaurants, citing the high commission rates that eat into their profits.
Anurag Katriar, founder of Indigo Hospitality and NRAI Trustee, emphasized the need for reform in the current ecosystem of food aggregators. Katriar suggested that aggregators’ contribution to the restaurant business should not exceed an average of 15%. However, quick-service restaurants (QSRs) and cloud kitchens heavily rely on these aggregators for their survival. Presently, there is a strong duopoly in the food delivery space, making it challenging for smaller restaurants to compete, despite experiencing robust sales growth.
Katriar further expressed concern about the unhealthy nature of the ecosystem, where neither the aggregators nor the restaurants are making substantial profits. This highlights the urgent need to renegotiate the existing terms between restaurants and aggregators, ensuring a more balanced and mutually beneficial partnership.
As the food delivery industry continues to evolve, it is crucial for stakeholders, including aggregators, restaurants, and industry associations, to work together towards creating a sustainable and equitable ecosystem. This may involve revisiting commission structures, exploring alternative revenue-sharing models, and fostering a more collaborative environment that supports the growth and profitability of all parties involved.
