Despite clocking strong revenue growth in the last financial year, quick service restaurant (QSR) chain Wow! Momo is struggling to narrow its losses, as a growing share of revenue from food delivery, now at 45%, continues to squeeze its margins. The company’s losses have remained largely around Rs 114 crore since FY23, while revenue has risen nearly 50% between FY23 and FY25.
High commissions to food delivery platform, promotional spends and added operational costs tied to delivery are pressuring profitability even as the company aggressively expands its store footprint and product offerings.
“What has changed since Covid is that, today, delivery is 45% of the revenue, up from just 10% before the pandemic. There is a huge commission cost that is incurred,” CEO and co-founder Sagar Daryani told FE.
Commission fees on aggregator platforms can range from 20-25%, which, coupled with the need for higher app visibility through promotional spends and discounts, has dented unit economics.
Daryani added that, as per a study, users rarely scroll beyond 2.5 swipes on delivery apps, meaning that only about 40-50 restaurants get real visibility. While better-rated existing outlets may appear organically, new locations require significant spending on visibility or promotional offers to ensure they are noticed, something that aggregator algorithms are designed to encourage. “Habits have changed. The same customer who would earlier come to our store now wants to order from home. However, in the last 12-to-18 months, we have realised that delivery is going to grow bigger, so we have to learn to make money out of it,” he said.
Despite the pressure, Wow! Momo clocked a 35% year-on-year jump in revenue in FY25 to Rs 625 crore. In FY24, it had recorded a top-line growth of around 14% from Rs 413 crore in FY23. However, while revenue rose sharply, its Ebitda loss improved only marginally in FY25, by 2.5 percentage points — from (-)7% to around (-)4.5%. When the share of revenue from delivery was at 10%, the company had a positive Ebitda of 9-10%. As a result, the company’s bottom line remained flat in FY25 with a loss of Rs 114 crore. Its expansion into tier 2 and tier 3 markets is expected to shift some business back to in-store dining, where the unit economics are much stronger. Wow! Momo opened 150 new stores in FY25 and now operates 700 outlets.
The expansion push resulted in a same-store sales growth of 4% last year. The company plans to continue this pace of growth and open 20-25 new stores every month, totalling to around 240 stores this year.
For this expansion, the company has recently raised a bridge funding round of Rs 150 crore and plans to hit the market in July to raise $100 million in a pre-IPO round, as it eyes a public listing in 24-30 months. “We want to go public only when we’re delivering `70-100 crore in Ebitda,” Daryani said.
The company is also scaling up its FMCG business, which has grown from Rs 36 crore in FY24 to Rs 75 crore in the last fiscal. The vertical includes frozen momos and cup noodles, among others. While still loss-making, Daryani said, the FMCG division is expected to break even once it hits Rs 130-140 crore in revenue.
The company is also launching a new Horeca (hotels, restaurants, and catering) vertical, aiming to improve the utilisation of its manufacturing capacity of over 2 million momos per day. “Once we reach full capacity utilisation, profitability will improve by 5%,” Daryani noted.
To boost consumer demand, Wow! Momo is betting on new formats such as gluten-free and Korean-style momos that could attract health-conscious and experimental eaters.