Are Food Delivery Apps Squeezing the Very Restaurants They Depend On?

What began as a lifeline for restaurants during the pandemic has now become a double-edged sword. Food delivery platforms—once hailed as the great equalizer for the industry—are now being questioned for the very economics that made them popular. For every order delivered at the tap of a button, a growing number of restaurants are asking a harder question: at what cost? With industry bodies stepping in and emerging platforms experimenting with subscription-based or zero-commission models, the question is no longer whether restaurants need food delivery apps, but whether they can afford to stay on them.

- By Mandar Lande

For both new and established restaurants, being available on food delivery apps has become a top priority. These platforms offer visibility, convenience, and access to customers far beyond the Dine-in customers. But behind the appealing idea of “getting discovered online,” there’s a growing downside. As behind this digital convenience lies a growing concern: are these apps helping restaurants thrive, or slowly squeezing them out?

The Growing Discontent

This year on July 1st, 2025, 85 restaurants in Namakkal, Tamil Nadu opted out of big food delivery players. The move has surprised many, but their reasons are clear:

• High commissions ranging from 30% to 35%, plus GST.

• Discounts are announced without consulting or informing the restaurants, often reducing their share of profits and resulting in lower profit margins.

• Poor communication and constantly changing policies leave owners frustrated and confused.

And to make up for these high costs, if some restaurants try raising food prices, it backfires. Customers rapidly notice increased prices online than dine-in, resulting in fewer orders.

Additionally, the Cuddalore District Hotel Owners Association noted that some eateries were forced to close due to monthly expenditures exceeding Rs.2-3 lakh. For small businesses, this is unsustainable. Many feel sidelined and powerless, with little control over pricing and low profit margins.

A Deal Breaker for Smaller Cities

Ironically, food delivery technology was expected to empower smaller cities — Tier 2 and Tier 3 towns — by connecting them to the digital food economy. Instead, it's becoming a deal breaker.

In many areas, where margins are already thin, high commissions and discount-driven pricing schemes are pushing local restaurants to the brink.

Cash Crunch and Algorithms