This is where things get interesting. Unlike retail businesses that offer discounts to clear out excess stock or outdated inventory, restaurants deal in perishable goods that must be prepared fresh every day. There’s no inventory to move or shelf space to free up. So how do they do it?

Here are a few ways restaurants manage to offer heavy discounts without always running at a loss:

1. Price Padding

Some restaurants adopt a pricing tactic where they slightly increase the base price of menu items and then apply a discount to create the illusion of a better deal. For instance, a dish that originally costs Rs. 300 may be marked up to Rs. 500 and then promoted with a 40% discount. This brings the final price back to Rs. 300—the original amount—yet it gives customers the impression that they’re saving money. While this strategy may attract attention and boost short-term sales, it raises ethical concerns and can impact long-term customer trust if discovered.

2. Menu Engineering

High-margin items like beverages or side dishes often help balance out the loss incurred from discounted main courses. These items typically have lower food costs and higher markup potential, making them ideal for boosting overall profitability. Additionally, restaurants may strategically implement portion control and ingredient substitutions—such as using seasonal or locally sourced alternatives—to reduce expenses while maintaining the perceived value of the dish. These subtle adjustments allow restaurants to preserve their profit margins without compromising too much on customer satisfaction.

3. Commission Partnerships

Many food delivery platforms run shared discount campaigns in which the cost of the discount is divided between the restaurant and the platform itself. This collaborative approach reduces the financial burden on individual businesses, making it more appealing for restaurants to participate. By sharing the expense, platforms encourage more establishments to join promotional offers, helping to boost visibility and order volume while maintaining a level of profitability for the restaurants involved.

4. Marketing ROI

Many restaurants view discounting as a strategic form of advertising. Rather than investing heavily in traditional marketing channels, they leverage the visibility that discounts provide on delivery apps and digital platforms to attract new customers. The idea is to use the discounted offer as a hook—once a customer orders, enjoys the experience, and returns multiple times, their lifetime value (LTV) begins to outweigh the initial loss from the discount. In this way, the short-term sacrifice is seen as a long-term investment in customer acquisition and brand loyalty.

5. Loss Leader Strategy

Offering select items at a loss—commonly known as a loss leader strategy—is a well-established retail tactic that has found its place in the food service industry as well. By pricing a popular dish or item below cost, restaurants can attract more customers and drive traffic to their listings. Once the customer is engaged and ready to place an order, they are more likely to add additional items such as beverages, appetizers, or desserts. This upselling opportunity helps increase the average order value, ultimately compensating for the initial loss and potentially leading to higher overall profitability.