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June 29, 2022

Despite a spike in prices, the demand outlook for quick service restaurant (QSR) chains is positive, said India’s largest listed QSR companies

that operates Domino’s Pizza in a post March quarter earnings call. The outlook also comes amid robust recovery of demand for rival dine-ins.

“We have revised store addition guidance upwards, inflation is stable as of now, ad spends will continue to support aggressive expansion, and there seems to be no concern on lease rental costs at present,” JFL said in a management commentary on Monday. It reported 11.3% jump in quarterly standalone net profit from a year ago in the quarter ended March.

The food service industry is expected to clock 9% growth with QSRs likely to grow faster at 23% over FY20-25 as they operate on mass prices, brokerage

said in a recent report. The outlook forecasts come amid industry revival after two years of pandemic-induced downturn marked by lockdowns, curbs on operating hours, and consumer fears about stepping out. The 4₹.2 lakh crore food services industry witnessed permanent closure of over 25% restaurants.

McDonald’s south & west India operator Westlife Restaurants vice-chairman Amit Jatia said last fortnight that the company has seen a “full recovery in dine-in business” with same-store sales growth of 26% in the March quarter. The chain added 12 outlets and plans to add 200 stores in three-four years. Jatia said McD’s will not increase prices by more than 5% this year despite inflationary pressures.

Most QSR chains, which operate at entry-level prices, raised prices by 3-8%, but they have been lower compared to premium dining chains. “The management is confident of opening 250 Domino’s stores in FY23,” the JFL management added.

“Outlook on growth and margins for QSR sector remains attractive, unlike rest of the consumption space, where uncertainty prevails,”

wrote in a report this week.

Sapphire Foods, which operates Yum Restaurants-owned Pizza Hut and KFC Hut, has pruned store sizes in recent months and is expected to deliver strong double-digit sales growth at 29% CAGR over FY22-24, Motilal Oswal wrote in a report.

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