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Food delivery applications have become an integral part of India's food industry, influencing how restaurants connect with customers, run their businesses, and earn money. While these services provide greater visibility and access to more potential customers, they also impose financial and operational challenges. A recent nationwide study conducted by the National Council of Applied Economic Research, supported by Prosus, highlights this changing and often complicated relationship. Through a comprehensive survey of restaurants in different cities and areas, the report reveals that about 35 percent of restaurants currently using food delivery apps would opt to stop using them if possible. At the same time, almost two-thirds of the respondents express they would keep using the services, showing that these platforms play a dual role as both facilitators of growth and sources of costs. This finding is important as it demonstrates that food delivery apps have transformed from being optional to becoming essential for many restaurants.
The primary factor causing dissatisfaction is the commission fees taken from each order. The report indicates that commissions from these platforms have consistently increased over the years, now representing a significant portion of the total cost. For many restaurant proprietors, this implies that, even with a high volume of orders, their earnings per order are minimal. The average commission charged per order rose from 9.6 percent in 2019 to 24.6 percent in 2023. Evidence regarding restaurants’ ability to negotiate commissions and their understanding of the commission structure varies. However, medium and large restaurants generally have more leverage in negotiations. In contrast, smaller establishments often find it difficult to negotiate and face more financial pressure. Besides commissions, restaurants also mentioned inadequate customer support from these platforms and low profitability despite consistent order flow as additional reasons that could lead them to leave food delivery services.
Despite the worries expressed, most eateries persist in using food delivery services. Research indicates that being visible and having network access are significant motivators. Being featured on a well-known app enables restaurants to connect with customers beyond their local area and draw in new patrons who might not have found them otherwise. These platforms also allow restaurants to operate for longer periods, gain orders during quieter times, and widen their delivery area without having to invest in their own delivery systems. There were three main reasons that most restaurants indicated they felt positively impacted by joining such a platform: (1) 59 percent said it broadened their service area; (2) 52.7 percent noted it increased their menu options; and (3) 50.4 percent mentioned it raised their customer numbers.
For newer and smaller dining establishments, these benefits often surpass the downsides, making it tough to leave platforms even when profits are tight. The NCAER research outlines several wider patterns influencing the restaurant industry in India. Restaurants that use delivery platforms usually earn more overall profits, even though their profit margins are smaller compared to those not on platforms. These platforms are also associated with more formal practices in an industry that has been mostly informal, helping with online payments, licensing, and keeping records. Many restaurants utilize tools provided by the platforms for managing finances, stock, and marketing, although the success of these tools can vary a lot. The report also mentions that reliance on delivery platforms spiked during the Covid-19 pandemic but has since balanced out. In certain Tier 3 cities, revenue generated by these platforms has shown a slight decrease as in-person dining picks up again.
When looking at all the findings together, it suggests a relationship based on compromise rather than clear happiness or unhappiness. While a notable number of restaurants would rather not be on food delivery platforms, most still depend on them for outreach, visibility, and stability in business. As the food delivery market grows, the challenge moving forward will be to strike a balance between size and effectiveness with fairness and clarity. How these platforms respond to issues concerning fees, support, and profitability may decide if they can continue to be reliable partners for restaurants that increasingly rely on their services.
