NRAI warns restaurants about aggregator payment gateways, deep discounting

The National Restaurant Association of India has issued an advisory cautioning its members over deep discounting and payment gateway tools offered by aggregator platforms for dine-in operations.

The advisory comes when food delivery giants including Zomato and Swiggy are aggressively focusing on expanding their dine-in customer base.

NRAI urged restaurants to use aggregator payment platforms only if the payment gateway services are unbundled from the other services that it offers; and makes financial sense as a payment gateway independently compared to other payment gateways.

In its advisory, NRAI asserted that aggregators use deep discounting as a tool to attract customers, including the restaurant's regular customers, to their platforms. The customers are then incentivised to participate through aggressive cashback and discounts, which eventually move the restaurants' existing customers to their platforms.

"We are fine with aggregator platforms charging restaurants a reasonable fixed fee for securing reservations. However, we believe it is not ideal to pay a high commission or percentage of sales for dine-in reservations, nor should the use of their payment wallet be mandatory.

"Therefore, NRAI urges all restaurant owners to be vigilant about participating in deep discounting and aggregator's payment gateway tools," NRAI stated in the advisory.

NRAI cautioned restaurant owners to be vigilant and not be compelled to participate in the payment gateway tool offered by the aggregator, "which will inevitably lead to deep discounting programs, no matter how attractive they might seem".

"The benefits are short-term at best. Based on how this played out with the delivery market, what is perhaps most dangerous is the long-term, irreversible effects that this has on the in-dining market: unsustainable discounts coupled with a platform wedged firmly between you and your customer and reverse sharing of data that will inevitably be used against the restaurants," stated the restaurant association.