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Fast food players see healthy growth

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Operators in the quick service restaurant segment — such as the franchisees for Domino’s, Pizza Hut and McDonald’s — are expecting double digit same store sales growth (SSSG) to continue in the second half of the fiscal year.

A combination of factors are playing out in the favour of quick service restaurants (QSRs): demand revival, attractive promotional schemes and robust sales from the mobile and internet platforms.

Companies such as Westlife Development (the McDonald’s franchisee for the western and southern India) and Jubilant Foodworks (Domino’s franchisee) have in the past three quarters posted elevated growth.

According to a report from Edelweiss Securities, the franchisees will also benefit from a government ban on online sales by unlicensed operators.

The Food Safety and Standards Authority (FSSAI) of India in July has directed 10 leading online food service platforms to delist the unlicensed players.

The directive came after the FSSAI received a high number of complaints regarding the poor quality of food supplied by various outlets listed on popular online food ordering platforms.

During the first quarter, while McDonald’s reported SSSG of 24.2 per cent over the same period last year (261 stores), the growth at Domino’s stood at 25.9 per cent (1,117 stores) and Coffee Day Global Ltd (Cafe Coffee Day) at around 10 per cent across 1,694 stores.

The report pointed out that in terms of overall sales growth over last year, McDonald’s reported a jump of 30.2 per cent, Domino’s 26 per cent, Yum! Brands India (Pizza Hut) at 20 per cent and Cafe Coffee Day at 14.4 per cent.

“Value menus via affordable pricing have worked very well for QSRs. All of the aforementioned brands have dished out similar propositions — McDonald’s launched the McSaver menu, CCD Totally Worth It, Domino’s Everyday Value and Pizza Hut Everyday Wow Takeaway — focusing on providing value to customers at affordable prices.

“With recovery in consumption, growing brand awareness and QSRs venturing to Tier-II and Tier-III (smaller) cities, such campaigns are more likely to drive demand and attract price-conscious customers in our view,” analysts at the brokerage said.

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