The National Restaurant Association of India (NRAI) has warned its members regarding the potential long-term adverse effects of large-scale in-dining discounts programmes and aggregate payment platforms, which causes “irreversible transformation” resulting in “unsustainable business models” for the restaurant industry. In an advisory, the leading industry body has cautioned about disruption in the restaurant ecosystem due to these programme, that appear beneficial in the short term but could threaten the economic stability and autonomy of the restaurants in the long term.

Stating that “ deep discounting” has already cause significant disruption in the food delivery ecosystem, the industry body said that similar tactics are now being deployed to capture the dine-in market through aggressive aggregator payment gateway adoption.

It stressed that “unlimited” and “unsustainable discounts” can permanently alter price structures, setting unreasonable expectations for customers and undervaluing the dining experience. It said these practises are expected to have a more “disproportionate” impact on 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.

In a statement, Sagar Daryani, NRAI President said, “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.”

“As the voice of the industry we are committed to protecting the interests of the restaurant community and ensuring a fair and sustainable ecosystem. NRAI encourage the members and the broader restaurant community to engage with industry colleagues, consult their platform representatives about these programmes’ tangible benefits, and exercise thoughtful caution and sound judgment before deciding to participate,” he added.

Aggregator payment gateways reward consumers 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 industry body further pointed out.

“Data control and dependency are major challenges with aggregator platforms. These systems pick up crucial revenue and customer data from restaurants without offering any additional value in exchange. 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,” NRAI stated in its advisory.

Stating that “irreversible ecosystem transformations” are a major worry, as shown by the delivery market, where customer behaviours influenced by discounts have resulted in unsustainable business models. Aggregator platforms may replicate a similar model in dine-in by gradually increasing discount requirements and commission rates, leaving restaurants with little control over their operations and pricing tactics.

“The NRAI advocates 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. It is critical to examine cost-effective and independent payment options in order to eliminate unnecessary dependency on such platforms. It is critical restaurants should maintain control over customer involvement and data to ensure long-term viability and autonomy in their operations,” it added.