35% restaurants willing to stop using food delivery platforms: Here's why

The average per-order commission increased from 9.6% in 2019 to 24.6% in 2023, with 30% restaurants seeking lower commissions

One in every three restaurants plans to opt out of the food delivery platform due to higher commissions, according to a report by the National Council of Applied Economic Research (NCAER) and Prosus. The development comes as India's food delivery platform sector has been expanding at a faster pace, generating ₹1.2 trillion in gross output in the financial year 2023-24.

 

According to the report, 35.4 per cent of restaurants were willing to stop using food delivery platforms, citing high commissions, poor customer service, and insufficient profits, orders, and customers.

 

At least 30 per cent of restaurants sought lower commissions. The average per order commission increased to 24.6 per cent in 2023 from 9.6 per cent in 2019, the report noted. It also highlighted that medium and large restaurants or food chains had relatively greater negotiating power than smaller eateries.

   

Additionally, 47.1 per cent of food joints perceived that delivery platforms' practices, including transparency about the commission structure and flexible commissions, were neither fair nor unfair. 35 per cent of restaurants said they were either fair or completely fair.

67% platforms shared customers' names

Another bone of contention is information sharing, with many restaurants arguing that food-delivery platforms don't share customers' data, making it difficult for eateries to expand their customer base. The report noted that 67 per cent of restaurants reported that platforms shared customer names with them.

 

"Platforms may provide more data analytics to restaurants, especially to micro and small restaurants. They may further enhance the value by standardising and increasing the clarity of the information that they share, thereby empowering all restaurants, especially those in Tier-3 cities," the report said.

 

Zomato and Swiggy have reportedly been in advanced talks with the National Restaurants Association of India (NRAI) to start sharing customer information with restaurants. Rapido’s new food delivery service, Ownly, has already signed an agreement with NRAI to share customer information with restaurants. Other platforms may soon adopt the same model.

Food delivery platforms boosting revenue

Even as problems remain, food delivery platforms are boosting the revenue streams for restaurants. According to the report, the average share of revenue from food delivery platforms has gone up from 22.1 per cent to 28.8 per cent.

 

However, restaurants located in Tier-3 cities show a reverse trend of falling share of revenues from these platforms, which peaked during the pandemic. In 2023, one-third of the revenue of small restaurants came from food delivery platforms.

44% Tier-3 eateries say offering discounts mandatory

Many eateries are also using these platforms for advertising and management. Almost 49 per cent of restaurants used a food delivery platform to advertise. When asked if it was mandatory to offer discounts on food delivery platforms during special campaigns, only a quarter agreed. In Tier-3 cities, 44.2 per cent of restaurants said it was necessary.

 

Meanwhile, 78.3 per cent reported using the food delivery apps for accounting and management. Only 12.6 per cent did not find it helpful, and 29.8 per cent found it either helpful or very helpful.