The fast-food business in India is booming and Jubilant FoodWorks, which operates Domino’s and Dunkin Donuts’ India business, is the most attractive franchise among fast-food joints. “The company has got stronger unit economics, better profitability and ability to invest for growth than its peers. Cost comparison indicates Jubilant’s margins have scope to expand further,” research and investment firm Emkay said in a report on Wednesday. The company has reported double-digit growth and a five-year sales CAGR of 15%, which is double the rate of other consumer staple companies. Jubilant has also expanded its network faster than peers Westlife Development Limited which operates McDonald’s restaurants in South and West India and Yum Brands which manages KFC, Pizza Hut and Taco Bells.
Other than the aforementioned reasons for Jubilant’s success in the QSR segment, Jubilant also enjoys larger penetration in tier 1 and tier 2 towns as compared to its peers. On the other hand, Westlife Development Limited and Burger King are more concentrated in metros. In smaller towns, profit margins may continue to be good due to lower costs, but revenue per store is likely to be lower. Moreover, other than India, Jubilant FoodWorks also has rights for Domino’s franchise in neighbouring countries such as Nepal, Sri Lanka and Bangladesh. On the other hand, rivals Burger King and Westlife Development Limited are confined only to India, with Westlife Development Limited operating only the South and West India business of McDonald’s.
In India, quick-service restaurants (QSRs) have shown faster growth trends as compared to other consumer categories. “The Indian QSRs provide a multi-decade growth opportunity, with global brands exhibiting strong scalable and profitable franchises,” Emkay report said. In fact, the total fast-food market is pegged to be around Rs 162 billion. Even amid a slowdown, while consumer companies have taken a toll in sales growth, growth across QSR players has moderated but appears to be steady, Emkay said.
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Source: Financial Express