Zomato Logout: Why Are Restaurants Protesting Against Discounts?

Will consumers continue to get deals and offers through apps like Zomato, Swiggy, Dineout and others? We explain.

Zomato Gold Discounts and Offers

Photo: The Quint

Who doesn’t like happy hours or one-plus-one or two-plus-two offers on drinks and food? Well, that’s exactly what Zomato was offering with Zomato Gold for Rs 1,199 per year, a service it started in November 2017. It had signed up a list of 10,000 restaurant partners and had over 1 million active subscribers on Zomato Gold, as of March 2019.

In July 2019, Zomato launched another service, Infinity Dining, for Zomato Gold members, where one could order anything from the entire menu with unlimited servings at a fixed cost. And that’s when the penny dropped. For the price of a two-course meal, patrons were given an all-you-can-eat offer (and in some cases, all-you-can-drink too).

Other apps like Dineout also offers something similar with Gourmet Passport. It gives members a buy-one-get-one on buffets, food and drinks at over 800 restaurants. Sounds like a good deal, right?

Why then are restaurants logging out of Zomato, Dineout, Eazydiner and other apps? Here’s why.

Why Is There A Logout Campaign?

The point of such discounts and offers from Zomato and others was to get diners into restaurants more frequently. But some restaurants are having none of this “deep-discounting” anymore. It’s hurting their profits, they say.

The National Restaurant Association of India started the movement asking restaurateurs to #Logout from all discounting apps. Around 1,200 restaurants that were a part of the Zomato Gold program have logged out from it saying “deep-discounting” (one-plus-one offers are like a 50 percent discount) is hurting their profits.

The restaurants had signed up on Zomato Gold, being promised an “exclusive” service, but soon noticed that there was plenty of competition from other neighborhood restaurants also on the app, thereby failing to build customer loyalty as the program intended.

How Does Zomato Gold Operate?

Zomato started out as a food delivery service and restaurant rating. This was beneficial to customers who now could get a whole list of eating joints in an area on a single app. However, restaurants also needed “dine-in” customers, or patrons to visit the restaurant for a wholesome dining experience.

That’s where Zomato Gold came in. According to Zomato, the idea of Gold was not to get “all” the restaurants on board. It was to get only the best based on a threshold rating and popularity. It was to get only about 1-2 percent of its restaurant partners into this program and give users a sample of restaurants to consider of different occasions before eating out.

But does anyone pay for the discount the restaurant is offering? No. The idea was for the best restaurants to build a base of loyal customers. Zomato Gold would get them into the restaurant with the 1+1 offer, but it was up to the restaurant to keep users coming back (basis their quality).

What Is Zomato Saying about #Logout?

Zomato founder Deepinder Goyal is urging restaurants not to logout from food aggregators like Zomato. He admits “ Somewhere, we have made mistakes and things haven’t gone as planned. This is a wake up call that we need to do 100x more for our restaurant partners than we have done before.”

Goyal says Zomato is willing to make modifications to Zomato Gold which will result in a win-win situation for restaurants and consumers. However, he also points out that restaurants should reduce their operating costs, citing that the average order value in India is the same as China, where per capita income is about 4.5x that of India.

What Are Restaurants Saying?

Restaurateurs, however, disagree with Goyal’s view. Riyaaz Amlani, past president of NRAI and CEO and MD of over 48 restaurant chains, was quoted in a The News Minute report saying restaurants run on thin margins, as low as 10 percent. Giving discounts of 50 percent while running at this margin hurts their businesses badly.

Consumers already think restaurants hike up their prices and then offer discounts, so they shouldn’t be cribbing about margins being hurt. Restaurateurs disagree. They say they have to pay exorbitant fees to food aggregators for the service as it is.

According to Amlani, the situation on the ground is quite different. Food aggregators says if they don’t sign up, their ratings will go down. He says a restaurant has to pay Zomato a sign-up fee, which could be as high as Rs 75,000, and also pay regular commissions to the aggregator.

Even after the #Logout campaign, some restaurateurs claim Zomato is still penalising them with new fines and fees.

Will Consumers Not Get Anymore Discounts?

This stand off between restaurateurs and food aggregators has left consumers high and dry. Many have signed up for Zomato Gold and Infinity Dining, only to find that the number of discounts and offers have reduced.

However, that doesn’t mean they won’t get discounts anymore. Only 1,200 odd restaurants affiliated with the NRAI and FHRAI (Federation of Hotels and Restaurant Associations of India) have logged out so far.

Many restaurants continue to offer deals on food on Zomato Gold.(Photo: The Quint)

However, the FHRAI has asked food aggregators to review discounting schemes and engage in dialogue with restaurant owners. They say aggregators keep changing their policies and don’t allow restaurants to view consumers’ phone numbers, thereby preventing them from reaching out and creating loyalty.

The discussion is still ongoing. But in the end, it’s always the consumer that benefits – so just hold on for a bit. The discounts will likely continue, but with a few tweaks.