Are deep discounts on dine-in operations beneficial for restaurants? NRAI warns against it

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The National Restaurant Association of India (NRAI) on Monday cautioned restaurants regarding the potential long-term adverse effects of in-dining deep discount programmes and aggregator payment platforms.

According to the apex hotel industry body which represents more than 5 lakh restaurants, these programmes - while appearing beneficial in the short term - could threaten the economic stability and autonomy of restaurants and disrupt the restaurant ecosystem.

"Our industry is at a crossroads, and the decisions we make now will shape the future of dine-in operations. Deep discounting may appear appealing in the short term, but they also pose long-term risks to restaurants' independence and viability, especially when mandatorily bundled with the aggregator's payment gateway," said Sagar Daryani, NRAI President.

Deep discounting has caused significant challenges in the food delivery market, and NRAI warned that similar tactics are being employed to capture the dine-in market through aggressive aggregator payment gateway adoption.

Aggregator payment gateways provide various issues for eateries. These networks reward clients with aggressive discounts and cashback, which are sometimes sponsored at the expense of the restaurants themselves.

However, restaurants 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 emphasised 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, said the industry body.

As customers become more reliant on these gateways, restaurants face a significant risk of losing direct ties with their customers, thereby transferring them into the aggregator's ecosystem and compromising the restaurant's autonomy.

The NRAI asked 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.

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