Produced by: Aakanksha Chaturvedi Designed by: Mohsin Shaikh
Indian restaurateurs Riyaaz Amlani and Zorawar Kalra caught up with Zerodha’s Chief Investment Officer, Nikhil Kamath, on the WTF Podcast. They discussed challenges of opening and running a restaurant in India and how stakeholders like food aggregator platforms impact their business
Riyaaz Amlani is the founder of Social, Smoke House Deli, Boss Burger, etc. He is also the President of National Restaurant Association of India. Zorawar Kalra is the founder of Masala Library, Farzi Cafe, Louis Burger, etc
Amlani and Kalra explained that, over the past decade, food delivery platforms like Zomato and Swiggy have become important stakeholders in the industry as they have improved distribution and provided convenience to customers
Both the restaurateurs highlighted that although food aggregator platforms have increased convenience for end user, they have negatively impacted the margins of restaurant owners due to high commissions
Amlani explained that food aggregators pass on three types of costs to restaurant owners like cost of delivery, discovery, and visibility on the platform
The founder of Social explained that up to 55% of order values are taken by aggregators like Swiggy and Zomato. He points out that commissions beyond 12% are unsustainable for restaurants, while current aggregators charge anywhere between 24%-28%. The cumulative effect of delivery charges and required discounts amounts to a substantial 55% deduction from the margin
The founder of Farzi cafe echoed these concerns. He added that food aggregator platforms have been over-relying on discounts. He emphasised that the continuous offering of discounts as a marketing strategy might adversely affect the restaurants
Both restaurateurs appreciated the role of aggregators in building demand for their services but added that they've eroded restaurant owner’s profit margins. This has prompted a need for alternatives like ONDC
The restaurateurs expressed a preference for the Open Network for Digital Commerce (ONDC) due to its considerably lower commissions. They emphasised their intent to collaborate with ONDC, aiming to develop channels and expertise within the government-backed platform
Amlani and Kalra both noted that food aggregator platforms need to rethink their commissions to ensure the sustainability of the business. Furthermore, the restaurateurs added that they have been working with ONDC closely to build distribution on the platform