NRAI cautions restaurants about risks of deep discounting for In-Dining Services

The National Restaurant Association of India (NRAI) has issued a stark warning to restaurants about the potential long-term adverse effects of in-dining deep discount programmes and aggregator payment platforms. Representing over 5 lakh restaurants, the NRAI has expressed concern that these programmes, while seemingly beneficial in the short term, could pose a significant threat to the economic stability and autonomy of restaurants, leading to a disruption in the restaurant ecosystem.

NRAI President Sagar Daryani has emphasized that the industry is at a critical juncture. The decisions made now will shape the future of dine-in operations. He cautioned that while deep discounting may seem appealing in the short term, it poses long-term risks to restaurants’ independence and viability, particularly when these discounts are mandatorily bundled with the aggregator’s payment gateway.

Deep discounting has already caused significant challenges in the food delivery market. The NRAI has warned that similar tactics are being employed to capture the dine-in market through aggressive aggregator payment gateway adoption. These gateways reward clients with aggressive discounts and cashback, often sponsored at the expense of the restaurants themselves. However, this comes at a cost to the restaurants, who must pay substantial commissions on transactions, ranging from 4-8 per cent, significantly higher than the 1-1.5 per cent charged by standard payment gateways.

The NRAI has emphasized that deep discounting presents substantial economic hurdles to the restaurant business. Unlimited and unsustainable discounts alter price structures, setting unreasonable expectations for customers and undervaluing the dining experience. These practices disproportionately affect small, independent enterprises, who lack the financial resources of larger, better-funded competitors, making it harder for them to compete and survive in the long run.

As customers become more reliant on these gateways, restaurants face a significant risk of losing direct ties with their customers. This transfers them into the aggregator’s ecosystem and compromises the restaurant’s autonomy. The NRAI has urged restaurants to be cautious and thoroughly consider the terms and conditions of aggregator payment systems before making decisions, taking into account the financial implications of deep discounting campaigns.

This warning from NRAI comes at a time when the global economy is grappling with the effects of the COVID-19 pandemic, which has disrupted supply chains and pushed energy prices higher, impacting both consumers and businesses. Small businesses have been particularly affected, with many struggling to survive amidst the economic downturn. However, despite these challenges, small businesses have stepped up, creating a remarkable 300,000 new jobs.