NRAI cautions restaurants on Zomato’s Gold scheme

The tussle between National Restaurant Association of India (NRAI) and Zomato got escalated last week when the online food service delivery aggregator chose to extend its disputed Zomato Gold (ZG) programme to food delivery business. Following this move, the apex body has advised restaurants and cloud kitchens to not fall for ZG's discount gimmicks and offer the right quality of food at the right price instead.

Anurag Katriar, president, NRAI, said the restaurant body is firm on its stance that Zomato Gold in its current form is an unacceptable proposition and that it had categorically pointed the issues unequivocally to the Zomato team in its recent meetings. "However, in utter disregard to the viability of restaurant fraternity, they have chosen to extend the programme further to the delivery vertical as well. This will be calamitous to the business in the delivery segment and we appeal to all restaurants and cloud kitchens entrepreneurs to stay away from Zomato Gold on delivery. Offer right quality at the right price, rather than falling for such discount gimmicks," he said in a statement.

NRAI and Zomato have already locked horns over the gold programme for dine-in. As a result, a large number of the association's member restaurants have disassociated themselves from ZG. While Zomato has tweaked the gold offering for dine-in, the NRAI committee said the changes were not addressing its key concern of deep discounting.

Since no consensus was reached the restaurants continue to stay logged out from the Gold programme. And Zomato's decision to extend ZG to food delivery as well is set to make matters worse between the two.

Launch of Zomato Gold on delivery, according to Katriar, is a desperate attempt to shore up the sinking fortunes of their flagship programme. "It is also another instance of Zomato changing the goalpost - Gold was originally launched as a tool to promote the culture of 'dining out' but now it is being extended on deliveries too! Essentially, it is now a programme that merely promotes deep discounts on both dine-in and delivery verticals, the cost of which is borne solely by the restaurant partners," said Katriar, who is also executive director and chief executive officer, deGustibus Hospitality Pvt Ltd.

To ascertain the impact of Zomato Gold programme when the restaurants participated in the #logout campaign, independent research firm RedSeer conducted a study in September 2019. As per results, shared in a report titled 'Zomato Gold Effectiveness Assessment' on Saturday, RedSeer said that Gold members dined out more frequently, visited newer restaurants and ordered more per visit.

It also stated that Gold restaurant partners witnessed improved profits with business growth driven by better infrastructure utilisations. "Approximately 95% of ZG members order more because of discounts. Gold partners have witnessed around 35% growth in bill volumes after partnering with ZG," RedSeer noted in the report.

Surprisingly, the report doesn't say anything about the value growth as far as increase in billings is concerned. The report also doesn't delve into the impact of deep discounting on the overall health of the restaurant industry's business.

As for Zomato's revised terms of use of Zomato Gold on dine-in, NRAI said the food service and delivery aggregator chose to ignore the core issue of deep discounts.

"They instead chose to curtail the usage by the customer, which is very much against the original thesis of promoting eating out of the home. This is yet another example of unilateral change of goalpost by Zomato that collects money from both; the Gold subscribers and restaurant partners; and yet keeps making unilateral changes on terms of engagement for both," said Katriar.