Eateries disabling discounts see higher sales, says NRAI | The Financial Express

Eateries disabling discounts see higher sales, says NRAI

Deep discounts and high commissions have already ruined restaurants’ food delivery business, and the association does not want that repeating with its dine-in business, which accounts for about 70-85% of total revenue.

Eateries disabling discounts see higher sales, says NRAI
Currently, the delivery business accounts for about 15-30% of restaurants's total revenue

The National Restaurant Association of India (NRAI) on Friday said that restaurants discontinuing discounts on Swiggy and Zomato’s dine-in options have seen their sales and gross operating profits (GOPs) increase over months, after an initial dip.
The association said while it was not against the food aggregators, it opposed the deep discounting models that Zomato and Swiggy follow.

Deep discounts and high commissions have already ruined restaurants’ food delivery business, and the association does not want that repeating with its dine-in business, which accounts for about 70-85% of total revenue.

Impresario — which runs popular restaurants like Social, Smoke House Deli and others —offered 10-15% discounts on Dineout between April and June during which it saw its turnover rise by about 30%, but its GOPs declined. In July — when it stopped the discounts on Dineout — its turnover fell by around 15%, but GOP improved by about 10%. On September 18, after Impresario fully discontinued discounts, its sales have improved by 50% and GOPs have risen as well, from April’s levels, showing there was there was incremental business from logging out of the apps and had “zero impact from delisting from Dineout totally,” Riyaaz Amlani, CEO of Impresario, said in a webinar.

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NRAI also lashed out at the food aggregators by saying that the two new-age companies have killed restaurants’ incomes from deliveries and are now eyeing a share from the revenue that the dine in route brings.

Currently, the delivery business accounts for about 15-30% of restaurants’s total revenue but members of the NRAI — which also include the likes of Wow Momo, Chaayos and others — said their earnings before interest, taxes, depreciation and amortisation (Ebitda) stands at a negative 6% thanks to commissions of about 40% commissions that the likes of Zomato and Swiggy take away. The food cost, the cost of goods sold (COGS) was the next biggest at 32%, followed by salary (12%), rentals (10%), overheads (7%) and packing costs (5%).

The association added that the commission or take rates from Zomato and Swiggy have shot up from about 5-10% to around 40% over the years on the delivery business as the two companies strengthened their foothold and now command about 95% of the delivery business.

The Ebitda margins from dining in for restaurants currently stands at 18-20% and once Zomato and Swiggy establish a foothold in the space — like they have in the delivery business — those margins could fall to as low as 4% with chances that the profit after tax (PAT) slips into the negative territory, the NRAI showed.

Zomato and Swiggy did not immediately respond to FE’s queries.

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First published on: 08-10-2022 at 07:28 IST