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Quick-service restaurant (QSR) sector, which includes pizza and burger chains, remained under pressure in the March quarter due to lower dine-in footfalls amidst tepid demand trends, according to analysts. However, industry players have expressed optimism about gradual recovery in FY25.
As per a report released by BNP Paribas, the QSR revenue growth for listed companies was down year-on-year (y-o-y) 9 per cent in Q4 FY24 from 18 per cent year-on-year in Q4 FY23. It noted that while gross margins expanded y-o-y, but EBITDA margins declined for most QSR players due to store expansion costs as well as initiatives to revive demand such as free delivery. It noted that store opening remained robust growing 15 per cent y-o-y in the March quarter.
“The companies have not taken any material price hikes and will refrain from doing so in the near term due to demand weakness. However, the firms remain optimistic of a gradual recovery and have not curtailed their FY25 store guidance or capex plans despite a tepid demand scenario. We think with consumers now having more options, sales are getting fragmented and the resultant weak sales per outlet is impacting store level economics for branded QSR companies,” BNP Paribas’s QSR Tracker report noted.
SSSG in QSR sector
QSR chains witnessed strong growth in FY22 and the first half of FY23 but have been witnessing weaker demand trends since Q3 FY23. “In Q4FY24, aggregate sales of listed QSR companies grew 9 per cent y-o-y, largely driven by store additions,” the report added.
A report by Elara Securities noted that this trend of decline in same store sales growth (SSSG) in the QSR sector has been visible globally. “India counterparts of global QSR chains could focus on combining loyalty programmes with value-oriented offerings for customers to bolster order frequency and SSSG growth in the medium term, as they struggle with lower growth, due to high offtake by food aggregators on delivery, muted dine-in footfalls, increased competition in the QSR industry,” Karan Taurani, Senior Vice-President, Elara Securities stated in the report.
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