There are now a lot of food service apps in India. These apps have changed how restaurants reach people, run their businesses, and make money. Although these platforms make businesses more visible and give them access to more customers, they also put pressure on finances and operations.
Supported by Prosus, the National Council of Applied Economic Research (NCAER) has released a new national study that shines light on this changing and often contentious relationship. The study says that about 35% of restaurants that use food delivery apps say they would quit if they had the choice.
This is based on a detailed poll of restaurants in different cities and regions. On the other hand, almost two-thirds say they will keep going, which shows that platforms now play two roles: they help businesses grow and they cost a lot of money.
This result is important because it shows that food delivery apps are no longer just nice-to-haves; they are now an important part of how many restaurants work.
How and why some restaurants don’t want to use food delivery services
The fee charged on each sale is the main reason why people are unhappy. The study says that platform fees have slowly gone up over the years and now make up a big part of the bill value. For many restaurant owners, this means that they don’t make much money per order, even when they get a lot of them.
Study Notes-
“The average fee per order” has gone up from 9.6% in 2019 to 24.6% in 2023…. There is a range of data about how restaurants can negotiate fees and how well they understand how commissions work. On the other hand, “medium and large” businesses had more negotiating power.
On the other hand, smaller stores often don’t have much wiggle room and are more vulnerable to pressures on their profit margins. Aside from fees, businesses said that platforms’ bad customer service and lack of profit, even though orders were steady, were two other reasons they might leave food delivery apps.
Why most restaurants are still using these apps
Even though these things are worrying, most businesses are still on food service systems. The study shows that exposure and network access are the most powerful rewards. Having a business on a popular app lets them reach customers from far away and bring in new customers who might not have found them otherwise.
With platforms, restaurants can also stay open later, take orders during slow times, and serve more areas without having to spend money on their own transportation infrastructure.
This is what the study says:
“The majority of restaurants that said joining a platform had a good effect on their business for three main reasons: (1) 59% of platform restaurants said it helped them open more locations in more places; (2) 52.7% said it helped them add more food to their menus; and (3) 50.4% said it brought themselves more people.
For younger and smaller businesses, these pros often outweigh the cons, which makes it hard to leave platforms even when profits are low.
Some other important things the report found
The NCAER study points out a few larger trends that are affecting India’s food business. Even though their profit rates are lower than those of restaurants that don’t use delivery services, restaurants that do tend to make more money overall. Platforms also help with digital purchases, licenses, and keeping records, which leads to more formalization in an industry that has been more open in the past.
Many businesses use tools that come with the platform to keep track of their finances, merchandise, and ads, but the usefulness of these tools varies a lot. The study also says that during the COVID-19 pandemic, people became much more dependent on transport platforms, but that reliance has since leveled off. In some Tier 3 areas, platform-driven income has even gone down a little as eating out in real life gets better.
A relationship that is based on trade-offs
When you look at all of the results together, they show that the relationship is based on trade-offs rather than clear happiness or discontent. Some restaurants would rather not use food delivery services, but the majority still do because they help them reach more customers and keep their businesses stable.
As the environment for food service grows, it will be hard to find a balance between fairness and openness, as well as scale and speed. How platforms handle worries about fees, customer service, and making money could decide whether restaurants that count on them in the future will continue to work with them.
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