Value meals, store traffic drive QSR chains' recovery

New Delhi: Large listed western-style restaurant chains, such as Burger King, McDonald's and Devyani International, which operates KFC and Pizza Hut, as well as Indian food services firms, staged a recovery in April-June after three quarters of flat or declining sales and profits, riding on value growth, traction from tier-2 and 3 cities, and younger consumers. Store expansion is back on track, company executives said, attributing it to higher in-store traffic, better average daily sales, a larger dine-in mix and operating leverage, cautioning though that the operating environment remains volatile despite stable demand.

Restaurant Brand Asia, which operates Burger King, said in a post-June quarter management commentary late Tuesday, "The broader QSR (quick service restaurant) industry has witnessed a meaningful recovery, with demand improving across the sector after several quarters of muted SSSG (same-store sales growth) or a decline." The chain reported a 24% year-on-year revenue growth in its India business, on the back of a 14% year-on-year increase in store count, and indicated that it expects to sustain traffic-led growth.

Chains are relying largely on a combination of value meals, with price hikes being selective and in the range of 3-5%, to bring back consumers. "The (June) quarter marks our strongest top-line, highest same-store sales growth and fastest guest count in the recent past," Akshay Jatia, president and chief executive, Westlife Foodworld, which operates McDonald's in the western and southern part of the country, told investors on an earnings call late last week. McDonald's reported a revenue increase of 12% for the June quarter, while same-store sales went up 4.3%. Jatia added that value meals remained a key driver of dine-in footfalls, adding that the numbers were being led by more people walking into McDonald's more often.

For the chains, this is a reversal from the past three quarters, when food inflation and liquefied petroleum gas (LPG) supply disruptions had forced many QSR and fine-dine chains to either shut down stores temporarily or stall expansion plans. Ever since, chains that relied on daily cylinder supplies have switched the majority of their outlets to induction cooking or piped natural gas (PNG).

Devyani International, which is in process of integrating its business with Sapphire Foods to consolidate KFC and Pizza Hut under it, reported an almost fourfold consolidated net-profit increase for the June quarter to ₹14.6 crore, up from ₹3.7 crore a year ago. Revenue went up 16.5% on-year to ₹1,581 crore from ₹1,357 crore in the year-ago period.

Cautioning about volatility on account of geopolitical factors, Ravi Jaipuria, non-executive chairman of Devyani International, said, "We begin new financial year on a strong note. The momentum we built through H2 of FY26, anchored by KFC's strong same-store sales, has continued into Q1 FY27."