Quick-service restaurants are counting on a recovery in the second half of the current financial year, as soft consumer demand continued to plague them in the April-June period, considered seasonally strong. Barring Jubilant FoodWorks, which reported same-store sales growth (SSG) of 11-12% for the third straight quarter, most players saw weak SSG in the first quarter of FY26.
Westlife FoodWorld, which runs McDonald’s in the west and south of India, for instance, saw flat SSG (0.5%) in the June quarter. Restaurant Brands Asia, which runs Burger King outlets, reported low single-digit SSG at 2.6%. And firms such as Sapphire Foods and Devyani International, both franchisees of KFC and Pizza Hut in India, reported negative SSG in the quarter.
Demand revival hopes on H2 and festive season
These firms now hope that the recovery in the second half of FY26 will be led by improved consumer sentiment, impact of monetary and fiscal policy measures initiated earlier this year, and lower food inflation. Though store expansion, coupled with higher operating costs, has kept margin expansion at bay, analysts say the trend may improve as volumes recover in the coming quarters.
‘While near-term macro factors have led to a phase of soft consumer demand, we see a better outlook for the industry in the coming times,’ Ravi Jaipuria, non-executive chairman, Devyani International, said.
At an aggregate level, revenue growth for listed QSR companies stood at 9.7% in the June quarter versus the 8.4% reported in the previous quarter. But Ebitda margins stayed flat at 17.2%.
Analysts at brokerage firm Nuvama say that QSR firms have been driving operational efficiencies and shutting down unprofitable stores to improve margins.
Value meals, store additions to drive long-term growth
However, Gautam Duggad, head of research, institutional equities, Motilal Oswal, believes there is limited upside to margins for now as firms remain bullish on store additions. Jubilant FoodWorks, for instance, has said that it wishes to add 1,000 stores in the next three years as it stays committed to the long-term growth story of organised food retail in India. The company closed the June quarter with a total network of 2,240 stores. Rival Westlife Development has said that it will add around 130-180 stores in the next two years to take its overall count to 580-630 restaurants by 2027. Firms such as Restaurant Brands Asia, Sapphire Foods and Devyani International will add at least 60-80 stores annually over the next few years, largely in small towns and cities, according to company officials.
Experts and top executives also point to a sustained focus on value meals and a strategy of not effecting price hikes that will likely aid sales growth in the quarters ahead.
‘We have not taken price increases for nearly 15 quarters in a row. In a retail market seeing a discretionary slowdown, driving value helps a retailer recruit more consumers which, in turn, helps sales growth and profitability,’ Sameer Khetarpal, MD & CEO, Jubilant FoodWorks, said.
Sapphire Foods Group CEO Sanjay Purohit said the firm was hoping to see a positive shift for KFC and Pizza Hut in the second half of FY26, following two years of same-store sales decline. While the growth would be aided by a favourable base, the company was intensifying its focus on value offerings such as KFC’s 9 chicken pieces for Rs 299, apart from pushing affordable price points such as Rs 69, Rs 79 and Rs 99 offerings in both pizzas and fried chicken.