After all, why does 1 in every 3 Indian restaurants want to leave food delivery apps?

About 35 percent of the restaurant owners included in this NCAER study said that if they had the option, they would like to leave these food delivery apps immediately. This means that every third restaurant is not happy with the way these platforms work. However, almost two-thirds (66%) of restaurants believe that they will remain on these apps because now it has become difficult to run the business without them.

Commission burden is continuously increasing

The biggest reason for the dissatisfaction of restaurants is ‘commission’. The report shows that in the year 2019, delivery apps used to charge an average commission of 9.6 percent, which has increased to 24.6 percent by 2023. This means that approximately one-fourth of the earnings of every order goes into the app’s account. Big restaurants have bargaining power, but small outlets have to accept the terms and conditions of the app, due to which their earnings are greatly reduced.

Why do restaurants stay connected?

Despite huge commissions, most restaurants do not abandon these apps. There are three big reasons for this:

Profit is high but margin is low

An interesting aspect of the report is that for restaurants that use apps, their overall profits have increased, but their margins per order have decreased. Apart from this, due to these platforms, there has been transparency in work like digital payments, licensing and record keeping, due to which this sector has become more organized than before.

Digital tools and impact of the pandemic

Dependence on these apps had increased a lot during the Corona epidemic, which has now become stable. People in small cities are now preferring to go out to eat again, due to which a slight decline in online orders has been seen there. Many restaurants are now also using accounting and inventory management tools provided by apps, which are helping them manage their business.

The relationship between restaurants and delivery apps currently rests on ‘compulsion and agreement’. Apps are giving restaurants identity and reach, but also increasing their costs. In the coming times, it will be important to see whether these platforms will be able to win the trust of small restaurant owners by reducing commission and increasing transparency.

This survey was conducted on 640 restaurants of all types, big and small, in 28 cities of the country. The survey, conducted between April and September 2023, included both types of restaurants, those that use food delivery apps and those that do not. Apart from heavy commission, poor customer service also emerged as a major problem in the survey.