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The dinner rush is over at your neighborhood restaurant in Mumbai. The manager sighs as she tallies up the night’s receipts.
Despite the place being packed, the profit margins are razor-thin. Why? Because half the diners used some form of discount – a two-for-one coupon, a daily deal app, or a promotional code from Zomato or Swiggy.
The revenue is there, but the profits have vanished into the digital ether.
Sound familiar? Across India, from Delhi and Bangalore to Pune and Hyderabad, restaurant owners are caught in the same predicament.
The problem is bigger than it seems. Restaurant discounting in India has become a destructive codependent relationship, and like any toxic relationship, it’s time we had a frank conversation about breaking up.
Addicted to Discounting: A Psychological Dissection
The psychology of discounting works the same in Mumbai as it does in Manhattan. But in India, the competitive landscape makes it even more potent.
When a customer sees a discount on Zomato or Swiggy, several psychological triggers fire simultaneously.
There’s the dopamine hit from the perception of getting a deal, what behavioral economists call transaction utility. There’s the fear of missing out on a limited-time offer.
And perhaps most damaging, there’s the recalibration of what they think your food is actually worth.
For instance, when restaurants regularly discount their biryani from ₹350 to ₹200, guess what your customers now believe that biryani is actually worth? Spoiler alert: it’s not ₹350.
Indian customers have been especially conditioned to expect discounts. Food delivery platforms used massive venture capital funding to subsidize promotions.
As one Mumbai restaurant owner said,
“Initially, they came up with 40% discounts, of which 30% were borne by firms [Zomato and Swiggy] and 10% by us. Today, all discounts have to be borne by restaurants which have badly affected our business.”
The result? A price-sensitive market where loyalty to restaurants is replaced by loyalty to whoever offers the steepest discount that day.
The Race to the Bottom: No Winners in India’s Discount War
The Indian food delivery market was valued at over $5 billion in 2023, with Zomato and Swiggy dominating the space.
Their ongoing competition has fueled a race to the bottom. When one platform offers 30% off, the other counters with 40%.
Soon, everyone’s serving food at unsustainable prices, hoping volume will somehow save them.
This isn’t just hurting small restaurants. Even large chains are feeling the pinch.
In 2019, the National Restaurant Association of India (NRAI) launched a campaign against Zomato. They urged restaurants to “log out” of Zomato Gold, alleging that the loyalty program forced restaurants to provide heavy discounts.
The campaign began with 300 restaurants withdrawing and later spread to other cities.
The truth is: this collective race to slash prices is a battle with no victors, just increasingly thin margins and devalued dining experiences across India’s culinary landscape.
You must read: Sagar Daryani’s POV on Reclaiming Restaurant Customer Intelligence
The Discount Hangover: The Long-Term Effects on Indian Restaurants
The effects of discount dependency are particularly severe in India. Food costs are rising while customer expectations for discounts remain unchanged.
Industry experts point out that restaurant margins drop from 70% on dine-in orders to just 30% through delivery platforms.
What’s worse is how this discount cycle shifts customer focus from quality to price.
Restaurants, in turn, cut costs to maintain margins, often at the expense of ingredient quality.
And as platforms grow in dominance, many restaurants become dependent on them. With commission rates of 20–30%, margins shrink even further.
This creates an imbalanced ecosystem. The platforms hold more and more power over the restaurants they claim to serve.
A New Path Forward: Growing Without Discounting in India
So, if relentless discounting isn’t the answer—what is?
At Reelo, we’ve helped thousands of restaurants across India break the discount addiction. Here’s a roadmap we’ve developed, designed specifically for the Indian market.
1. Embrace Smart Data Analytics for the Indian Consumer
Indian consumers are incredibly diverse. Preferences vary drastically across regions, age groups, and cultures.
Generic discounting ignores this.
Smart data analytics allows restaurants to understand customers at a granular level—from the office worker who orders twice a week, to the family that visits for birthdays.
You can now track what customers order, when they visit, what items they pair, and what drives them to return.
This makes blind discounting unnecessary.
Instead of offering 25% off to everyone, imagine targeting your Punjabi regulars in Mumbai who haven’t visited in 30 days with a message about a new North Indian dish. That’s the power of smart data.
2. Create Authentically Indian Experiences Worth Paying Full Price For
Indian dining has always been about experience, vibrant flavors, warm hospitality, and the blend of tradition with innovation.
These are things worth paying full price for.
Fast-casual dining is growing at a CAGR of 11.28% from 2024 to 2029. The growth is driven by standardized menus and unique experiences.
Restaurants that focus on memorable experiences, like interactive dining or chef interactions, are seeing guests happily pay full price.
In fact, the Asian cuisine segment dominates Indian full-service restaurants, with a 72% market share in 2024. This is largely due to ambiance and experience.
The takeaway? Experience matters more than price.
3. Build a Community Around Regional Food Pride
India’s diverse culinary heritage offers a rich opportunity to build communities around food.
From Bengali curries to Chettinad spice, Gujarati thalis to Kashmiri wazwan, there’s deep pride in regional flavors.
Smart restaurants are tapping into this by creating spaces—physical and digital—for these communities.
Think: regional cooking classes, chef meet-and-greets, ingredient festivals. These emotional connections go far beyond what discounts offer.
With food influencers and social media booming in India, community-building is easier than ever. And restaurants that focus on storytelling, not discounts, are seeing better engagement and higher-value customers.
4. Own Your Audience, Don’t Rent Them from Zomato and Swiggy
One of the biggest downsides of the discount-dependency model? Outsourcing your customer relationships.
When you rely on Swiggy or Zomato to fill seats, you’re paying to access your own customers.
Smart restaurants are building direct relationships instead.
They’re collecting phone numbers for WhatsApp marketing, growing email lists, launching their own apps, and creating direct channels.
Players like DotPe, Petpooja, and Dunzo are helping restaurants take back control of delivery and customer data.
One restaurant shared:
“We offer extra discounts and provide coupons and loyalty programs if customers place a direct order… The customer can redeem the coupon by visiting the restaurant or via the next order placed on the app.”
5. Use Smart Loyalty Programs (Not Just Point Systems)
Simple point systems are outdated.
Modern loyalty programs are sophisticated. They use behavioral science to drive repeat visits—without discounts.
Zomato’s Gold program had 1.8 million members by August 2023. That’s 400,000 more than before the pandemic.
This shows the power of loyalty done right.
Restaurants don’t need to compete on price. Instead, offer members exclusive access, like chef’s table invites, seasonal previews, or menu tastings.
These perks create a sense of insider status and foster loyalty. They also align beautifully with Indian hospitality culture.
The Reelo Philosophy: Value Over Discounts for Indian Restaurants
At Reelo, we believe Indian restaurants shouldn’t have to discount to build loyalty.
Our data-driven platform helps restaurants identify top customers, understand their behavior, and market with precision, without compromising margins.
In cities like Mumbai, Delhi, and Bangalore, we’ve seen restaurants increase repeat visits by 40% without a single discount.
Some reduced discount spending by 60% while improving customer satisfaction.
In a market where platforms hold sway, direct relationships built on personalization and value give restaurants the edge they need. Schedule a demo today!
Conclusion: The End of the Discount Era in Indian Restaurants
The Indian restaurant industry is at a turning point.
We can either continue slashing prices—devaluing our offerings and shrinking margins—or we can choose a smarter path.
By embracing data, elevating experiences, building community, and owning our customer relationships, we create sustainable, independent growth.
Zomato and Swiggy will always have a place. But they should be a channel, not your whole strategy.
The choice is clear. And like any great meal, the true value isn’t in what you saved, it’s in what you savored.
It’s time for Indian restaurants to break up with discounting and start a healthier, more profitable relationship with their customers.
The table is set. Let’s eat.
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