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Updated February 26th, 2024 at 19:01 IST

Food delivery apps strain quick service restaurants, recovery uncertain: Report

The report notes that the increasing popularity of food aggregators has provided consumers with more options, leading to a fragmentation of sales.

Reported by: Business Desk
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Food delivery apps strain quick service restaurants, recovery uncertain: Report | Image:Shutterstock
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Strain on QSR: A report by BNP Paribas highlights the challenges faced by quick-service restaurant (QSR) operators due to the rapid growth of food delivery apps like Zomato and Swiggy. These apps have not only affected dine-in sales but also led to fragmented delivery sales, impacting the revenue and margins of QSRs.

According to the report, as food aggregators gain popularity, consumers have more alternatives, which has caused sales to become fragmented. This, coupled with the general weakness in demand due to elevated inflation, has contributed to the challenges faced by the QSR industry.

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Pizza, being the most delivery-friendly option, is facing intense competition as more cuisine options become available to consumers through these platforms.

While inflation may be a contributing factor, the report suggests that the road to recovery for QSRs could be longer than anticipated. Zomato and Swiggy have witnessed significant growth, onboarding over 7 lakh restaurants in FY22-23, up from 2.78 lakh in FY20-21.

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Despite a rise in store count, industry revenue growth has slowed to 7 per cent year-on-year in the third quarter of the current fiscal year from 20 per cent in the same period of FY23. Although gross margins have expanded due to lower raw material prices, operating margins have declined due to higher employee and store-related costs.

Overall, the scale of food delivery companies has significantly expanded, improving customer reach for smaller restaurants but posing challenges for traditional QSRs.

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(with PTI inputs)

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Published February 26th, 2024 at 18:52 IST

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