Gupta, in the email, says ~80% of users discover a restaurant for the first time using Zomato Gold, giving them an edge over non-Gold restaurants.
What after purchasing the membership?
“Ever since I purchased the membership, I don’t go to places that I actually want to explore or to those I loved the first time, which isn’t Zomato gold partners. So it’s like you fall prey to their psychological trick and your choices get limited,” says one subscriber account on Quora.
And by no means is this an isolated response. Remember Mehta, Gajaria and Verma?
The impact of Zomato Gold, however, varies from one restaurant to another and depends on several factors such as the size and scale of the place, the product mix and the offers. It has been particularly good for New Delhi-based Lavaash by Saby, a Bengali-Armenian restaurant that offers 2+2 offer on drinks.
“Our weekday business has increased a lot because of Zomato Gold,” says head chef Megha Kohli. “The cost of our drinks is less, especially when it comes to cocktails, which are the best-sellers with the young crowd that we get on weekdays. So margins are better there even at discounted price.”
Recovering the price
So even with a 2+2 offer, Lavaash ends up more than recovering its cost price.
There are several variables at play here. It is easier to recover costs on drinks than food because drinks are usually priced such that even with a ‘happy hours’ offer, they will make money. Even better when it comes to cocktails because the base alcohol will be a cheaper cousin of the ones that are served straight. And chances of benefitting from Zomato Gold partnership increase if you own a chain of restaurants or have a restaurant with a larger capacity.
“If I talk about Monkey Bar, the drinks segment is at least five times stronger than the food sale. So it makes sense to do a Zomato Gold offer on food in a place like that,” says Chetan Rampal, partner at Olive Bar and Kitchen Pvt. Ltd, which runs Olive, Fatty Bao, and Monkey Bar. “So even if I have to give, say, three free dishes that might cost Rs 900 ($13) to a group of six diners, they also have the capacity to bring the liquor bill to, say Rs 2,500-3,000 ($35-42). So on the overall bill, I will still recover the cost of the free food.”
“Similarly, at Fatty Bao, we offer Gold unlocks on liquor because diners come there mostly to eat and with the offer on drinks, we might make some money on drinks too,” says Rampal.
Their other restaurant, Toast & Tonic, is not listed on Zomato Gold. “Toast [in Bengaluru] is in a different space completely. I know exactly how much business it will do and I am happy with that. It will have its customers even without the Gold partnership,” he says. “Monkey Bar, from that perspective, is a more massy offering which could benefit from Zomato Gold.”
But how many restaurateurs can boast of a Toast & Tonic? Not many, and that’s what Zomato is counting on.
Feeding the bargain-hungry
Where everyone agrees is that diners have been the biggest gainers in the current landscape. They have got the best of deals, and some may have come at the restaurant’s expense.
However, this has skewed the customer profile and has given rise to a section which the restaurant owners call bargain hunters. Zomato says 75% of Gold redemptions take place during non-peak hours but restaurateurs The Ken spoke with didn’t agree with the number.
“Gold has also given rise to a whole new section of consumers who wouldn’t come to the restaurant otherwise,” says Kohli. “There are sometimes customers who actually argue about the number of memberships they can unlock on a table. We never had such problems with Gourmet Passport and other such membership services.”
Fenn says there were two fundamental problems with the Gold program. “The barrier for entry was too low and there was an unlimited clause,” he says. “There has to be a restriction on how far a program like this can go. The moment you mention unlimited, you create grounds for abuse.”