Quick-service restaurants are having a field day

The last one week has seen two key food service operators — Jubilant FoodWorks and Yum! Brands — report their highestever sales growth figures for the quarter ended March 2018.

Jubilant FoodWorks, the master franchisee of Domino’s and Dunkin Donuts in India, saw same-store sales growth (SSG) come in at 26.5 per cent, its highest in six years. Yum!, which owns the Pizza Hut and KFC restaurant brands, reported system sales growth of 21 per cent and 19 per cent, respectively, the highest in two years, since the company began reporting positive top line growth in India. System sales growth is industry parlance for top line growth. Yum! does not disclose SSG, which is basically sales growth for stores one year and above, in India. Westlife Development, which runs McDonald’s restaurants in the west and south India, is also likely to follow its peers on Friday, when it will report its Q4 numbers for FY17-18. Analysts expect Westlife to clock high double-digit SSG for the second time in a row — in Q3 the company reported SSG of 20.7 per cent, the highest in the industry — as consumers make a beeline for the quick-service restaurants (QSRs).

At the heart of this recovery is not only higher discretionary spending by consumers, said analysts, but also the ability of food service operators to take advantage of the uptick. “There are a number of things that QSRs are doing right,” said Dhanraj Bhagat, partner, Grant Thornton India LLP. “There has been an aggressive menu revamp by most players in the recent quarters, coming at a time when consumers are seeking healthier and more local food options. QSRs are also pushing new offers and innovations for sustained periods of time and making sure there is more choice in terms of food & beverages at their stores,” he said.

Analysts such as Abneesh Roy, senior vice-president, research, institutional equities, Edelweiss, said players had also gained from a favourable base the previous year. “If you see the last three to four quarters, QSRs in general have reported high single-digit to double-digit SSG. This is coming on account of a low base in the previous year. Having said that, QSRs are also driving affordability aggressively. Burgers, for instance, can come for as low as ~40 (a unit) and go up from there. Pizzas, too, depending on the size can vary between ~100 and ~150 a unit at the lower end. There are consumers out there for these products and they are ready to spend,” he said.

In recent years, most food service operators have also pushed their online sales hard, tying up with food aggregators (such as Swiggy) and also making it as convenient as possible for the consumers to order online - on their websites and apps.

In four quarters, Jubilant FoodWorks' average online ordering contribution to delivery sales jumped from 51 per cent to 63 per cent. If analysed, mobile ordering as a percentage of online ordering increased by 900 basis points, moving from 69 per cent to

78 per cent in the four quarters.

Arvind Singhal, chairman, Technopak, said QSRs were responding quickly to consumer behavior. “The QSR business is so dynamic that most of the times you have to understand where your consumer is and how quickly you need to reach them,” he said. “The faster you do it, the better is your strike rate (in terms of sales).”

Most analysts expect the trend to last a few years, tied in part to economic conditions and the propensity of people to continue spending.