NRAI flags 'opaque ad spends' and 'algorithmic blind spots' on quick commerce platforms

A recent social media post by a restaurant owner alleging that food delivery platforms take away nearly 65 percent of an order’s value has once again pushed questions of transparency to the forefront. While platforms advertise a 25 percent commission, restaurant partners say the actual payout can swing far higher once fixed costs and ad spends are factored in.

According to Pranav M Rungta, Managing Committee Member, National Restaurant Association of India (NRAI), the incident that went viral is less about a systemic change in commissions and more about the absence of clarity on how ad spends and visibility budgets get consumed on major platforms.

“Your revenue from Zomato or Swiggy is variable, and your commission is variable. But your ad spend and your purchases are fixed,” he explained. “If a restaurant earns around 5000 rupees and the commission is 25 percent, the variable outgo is roughly 1250 rupees. But fixed ad spend can be 3000 or even 5000 rupees a month. In that particular case, the revenue simply was not enough to compensate for the fixed ad spend, which pushed the effective payout to 65 percent.”

He added that in most cases, restaurants typically end up giving away 40 to 45 percent of the order value once all costs are accounted for.

Opaque Ad Spends and Algorithmic Blind Spots

Rungta noted that the biggest structural issue is the lack of visibility into how platforms use restaurant ad budgets.

“There is no transparency in how ad spends are consumed or what the return on ad spend is. This is an algorithm issue,” he said. “If you budget one lakh rupees, there is no visibility into how that money was used.”

While Zomato has a more structured verification process — “Every ad spend generates a contract that has to be OTP verified before the amount is debited” — discrepancies can still occur occasionally. “Such a large company can have random mismatches, but it is not a system-level problem,” he said.

Swiggy, however, has seen multiple complaints in recent months. “With Swiggy there have been complaints of excessive charges above the decided commission and ad spend. We took it up with them, and they resolved it. But these are one-off incidents, not the rule.”

Order Concentration Deepens Ad Spend Dependence

Rungta pointed out that the pressure to spend on ads is rising because platform algorithms disproportionately benefit a small segment of restaurants.

“If there are 2,50,000 restaurants and 5,00,000 orders a day, 30 percent of restaurants get 75 to 80 percent of the orders,” he said. “The remaining 30 to 40 percent are always left struggling. So they end up spending heavily on visibility, which means ad spends and marketing.”

This creates a loop where low visibility leads to low revenue, which leads to more spending on ads, further deepening the burden. “Apart from commission, the additional cost of acquiring an order is very high,” he said.

Payment Timelines Remain Stable

Despite rising concerns from FMCG vendors about delayed payments and early settlement charges in quick commerce, restaurants have not faced similar issues.

“Our settlement terms are clear. It is either T plus 3 or weekly. Sometimes it gets delayed by a day or two, but nothing major,” Pranav said.

NRAI Flags Transparency Gaps to Regulators

The NRAI has raised the issue of ad spend opacity with policymakers.

“There is no transparency in whether the ad spend you budgeted was actually consumed or what returns it generated,” he said. “This is something platforms need to solve at an algorithm level, and we have taken it up.”

When asked if platforms had responded proactively, Rungta said, “Not proactively. This is their algorithm. This is how they make money.”