“Dineout has never imposed any discount conditions on our partner restaurants,” Dineout co-founder and CEO Ankit Mehrotra tells Forbes India via email. “Even right now, restaurants have switched off the discounts on our platform, but are accepting reservations from us. Our only request to NRAI is to clarify the stand on discounts and to make it uniform for all aggregators. The main challenge is with deep discounts, which we already do not partake in.”

At its peak, ZG had 12,000 partner restaurants on board across the world, of which 6,500 are in India. As of March 31, 2019, it had more than 1.4 million active subscribers globally—compared to just 170,000 in March 2018, as per a blog post on its website. This is part of the problem. When it began, ZG was meant to be an exclusive, ‘invite-only’ programme, and sold to partner restaurants as such. ZG discounts would be available to the chosen few, numbering about 10,000. However, that number soon touched 20,000; after a point, ZG was available for anyone to purchase (for a slightly higher price, at about ₹1,800, up from about ₹1,200).

“These apps will keep popping up with coupons worth 40 or 50 percent, or giving you 1+1 or 2+2,” says Rahul Singh, founder of The Beer Café and president, NRAI. “The bottom line is, customers never asked for these discounts. If you book a hotel through Airbnb or Booking.com, you pay a small transaction fee. But here, it’s a grand theft, because while an aggregator will promise you the discount, it is the restaurant that is losing that money.”For instance, Singh explains, if Zomato charges members about ₹1,000 for a Gold subscription, and claims to have a million subscribers, that is about ₹100 crore. Moreover, they charge restaurants a fee upwards of ₹40,000 to sign up as a Gold partner, claiming to bring them more traffic and more transactions. “That’s a lot of money,” he adds. “So naturally, the customer assumes that Zomato is subsidising costs, but that’s not the case. A restaurant is burning a large amount of money for Zomato to offer this programme. So if people say we are fools to have signed up for this, they are right. Yes, we are fools who got into this trap. But it is time to set this right.”

For users such as Chintan Joshi, 30, a cyber security consultant who orders in food five times a week and uses ZG only once a month, the convenience matters more than the discount. “My choice of restaurant does not depend on Gold. That’s just an added benefit. Honestly, I use these platforms for the convenience of getting food more easily. Prices and discounts do not really matter that much.”

ZG announced an addition to its business in July, the Zomato Infinity Dining programme, which allowed Gold members all-you-can-eat access, along with an open bar at partner restaurants, at a fixed per-person price. More than 350 restaurants had apparently signed up to be on it. Rumours were rife that ZG would be extended to food delivery, and restaurants were worried they would be losing more and more money.

“There were no fundamental marketing principles at play here,” says Munaf Kapadia, founder of The Bohri Kitchen and member of the NRAI. “The basics say that when you want to acquire a new customer, you offer a discount, and once you have that customer, you rub off the discount, so your customer lifetime value grows. But none of that applies here. Everyone gets a discount, and continues to do so.”





The aggregator, he adds, has become the shepherd, and restaurants become the sheep, for fear of losing out. “So Zomato first went out and got 50 restaurants on board that thought they were part of an elite, niche club. Soon, that club became 1,000 restaurants, then 10,000—and before we knew it, there were billboards asking people to join ZG,” he says. “It turned into a behavioural pattern in the ecosystem.”After a few days of tussle, the NRAI managed to put together meetings with the food tech aggregators mentioned above; at the end of two days, it was suggested that discounts should be capped at about 15 percent. Last fortnight, Zomato founder and CEO Deepinder Goyal had written to restaurants with a modified Zomato Gold programme. According to the letter, which Forbes India had access to, effective September 15, trial packs for Gold would be discontinued, customers abusing the privileges would be removed, and users would be allowed to unlock the Gold offers only once a day, and use only two Gold accounts per table. However, restaurants hit back, saying it was ‘old wine in a new bottle’. “It’s a tweak in the drug that doesn’t solve the addiction,” says Singh of NRAI. “We don’t have a tech aversion but our fight is against deep discounting, which undervalues the restaurant experience and its offerings.”

In an interview days before the #Logout campaign, Zomato co-founder and COO Gaurav Gupta told Forbes India, “Our take on discounting is different. When we talk about discounts, we should say what is the best price we can offer that ensures that restaurants also make good margins. It should be a fine balance, and whether you call it the right price or discount, that’s the thing. Zomato is looking to shape the ecosystem in both eating out and at home.”

The same principle the NRAI is fighting when it comes to dine-out discounts, say restauranteurs, also applies to food delivery, where similar offers are doled out by the likes of Zomato, Swiggy and Uber Eats. “You have these guys with crazy funding, amazing creativity and innovation and energy, and the best marketing innovation they can come up with is a 50 percent off? It blows the mind. Why haven’t they come up with innovative ways to generate additional business that is beyond a big discount? It’s incredible short-sightedness,” adds Kapadia.

“Discounts are lucrative,” agrees Swiggy COO Vivek Sunder. “That’s true for any industry. But while we believe there’s a role for discounting, our business doesn’t need to run on it. I want to emphasise that we discount far less than our competitors, as a consumer’s choice depends on all kinds of environmental factors.”