LPG Crisis: QSRs shut outlets, fine-dine chains halt plans

LPG supply disruptions amid the West Asia war are forcing large restaurant chains, including McDonald’s and Pizza Hut, to shut some stores, while dozens of premium fine-dine chains have stalled expansion plans.

So far, shutdowns were largely limited to mid-sized and smaller restaurants that rely on daily cylinder supplies. Most larger chains tweaked menus to focus on low-gas dishes and switched to alternatives such as induction cooking and piped natural gas (PNG) where possible to deal with the crisis.

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Now, their LPG inventories too are running out.

“We are having to shut down 10-15 outlets of Pizza Hut daily, wherever LPG is in short supply,” said Ravi Jaipuria, non-executive chairman of Devyani International, which operates 2,279 stores of Pizza Hut, KFC, Costa Coffee and Vaango.

“Despite the continued shortage of LPG, we are managing operations in a way that disruptions are minimised,” he added.

Devyani is the largest franchise for Yum! Brands in India.

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Sanjeev Agrawal, chairman of McDonald’s India - North & East, said 15-35 restaurants are impacted on a daily basis, adding that the outlets are re-opened for a short period if they can manage LPG supplies. McDonald’s operates 320 restaurants in the North and East.

Speciality Restaurants, which owns brands such as Mainland China and Oh! Calcutta, meanwhile, has put on hold all expansion discussions. “We need to keep a check on our finances and can't have the treasury depleting,” founder Anjan Chatterjee said. “Our Dubai outlets have shown a drop of 15-20%.”

Likewise, First Fiddle Restaurants that operates Thanks & Beyond, Lord of the Drinks and Diablo among others, was not able to launch its new restaurant Kesar Bagh in Goa, for a month. “We have opened now but with a much smaller menu,” chief executive Priyank Sukhija said.

“The LPG shortage is a big issue in some markets such as Goa and Bengaluru; cost prices have gone up and we have had to reduce menus in markets such as Connaught Place in Delhi,” he said.

If the issue persists for too long, more brands will have to look at pivoting to electric means besides shifting to other food formats that don't require extensive cooking, Sukhija said.

The government has been prioritising LPG cylinders for households and essential sectors such as hospitals, and restricting supplies to non-essential commercial enterprises, including restaurants.

On Saturday, Jubilant FoodWorks Ltd (JFL), which runs Domino’s Pizza and Popeyes, said in an exchange filing that the supply of LPG cylinders to certain parts of the company’s store network has been constrained.

JFL, which has a total store count of over 3,500, said “it is in constant engagement with oil marketing companies to remain apprised of the latest developments and plan operational responses accordingly.”

Goldman Sachs noted in a report on Monday that there are “near-term operational concerns for India's QSR sector” amid LPG supply tightness, and cited it as a key risk for JFL, which relies on LPG for over 90% of its energy needs with current inventories at just 3-5 days.

Smaller cities in particular are facing an acute shortage of gas cylinders, executives said.

Aseem Grover, owner of Big Chill Café chain, said he has made significant investments—both financial and systematic—in saving PNG and LPG.

“The issue with bigger chains is also that some of their outlets in tier-2 and 3 towns may be facing a bigger crisis which is resulting in the need to shut outlets,” he said.

Varun Khera, who runs three restaurant brands--Desi Vibes, Kaffiiaa and Chakra Café--in Noida, besides The Imperial Spice restaurant in Delhi’s Connaught Place, said constraints are there and outlets are pitching for piped gas.

Khera is also the Noida chapter head of the National Restaurant Association of India (NRAI). “We will be meeting the Noida DM on Wednesday to request for more prompt work on the ground and swifter arrangements,” he said.

On March 10, NRAI had told its 500,000 members to consider shorter operating hours, and suspend or reduce items that require long simmering and deep frying, in addition to using lids while cooking to conserve cooking gas.