What is eating into Indian QSR’s lunch?

**Akshara** (0:04)
In today's episode, we'll do one deep dive and cover another story for the day. First, we'll talk about what's eating into Indian QSR's lunch, and then we'll talk about the bank where cheese is collateral. Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Wednesday, 2nd September. Coming to the first story.
So India's listed restaurant chains usually had a fairly simple way to keep growing, open more stores. An ICRA study of five large quick service restaurant operators found that industry revenue grew 10% in FY25 and 11% in the first half of FY26, largely because the companies kept adding outlets. But sales at existing stores remained weak while operating margins fell from around 20% in FY23 to 15.9% in the first half of FY26.
Q1 FY27 suggests that demand is beginning to improve. Domino's, KFC, and McDonald's all reported positive growth at existing stores. But the recovery looks very different inside each company. Domino's is getting much of its momentum from delivery and is now trying to repair Dynin. And the two large KFC and Pizza Hut operators are moving towards a merger while taking opposite decisions on weak Pizza Hut stores. McDonald's is seeing customers' return, but inflation has wiped out much of the benefit. So the interesting QSR story is now less about who opens the most outlets. It is now about what each company is doing with the stores, kitchens, delivery networks, and brands it already has. Let's start with Jubilant, which is the largest and by many metrics, the most successful QSR operator in India.
While Popeyes may be Jubilant Food Works' fastest-growing brand, Domino's remains the center of the business. So Jubilant's standalone revenue rose 9.2% year-on-year to Rs.1849 crore in Q1 FY27, and Domino's India alone generated approximately 95% of that revenue. It ended the quarter with 2,513 stores after adding 58 outlets across 19 new cities. So the core business is growing, although not at the pace last year's number may make you expect. Domino's like-for-like sales grew 2.5% compared with 0.2% in the previous quarter. So like-for-like sales tells us whether older restaurants are actually selling more, and not merely whether the company has grown by opening new ones.
In contrast, Q1 FY26 like-for-like growth stood at 11.6%.
Order volumes rose 6.5% year-on-year, which tells us that more orders were being packed, even though growth in sales per existing store was slower. Now, management still wants Dominos to produce 5-7% like-for-like growth over the next medium term, and expects Q2 to be better than Q1. But the favorable base will eventually disappear, and Dominos will have to show that order growth can translate into stronger sales at each store. For now, delivery is doing most of the work. Dominos' delivery revenue grew 12.1% during the quarter, which is faster than the brand's overall revenue, and delivery accounted for roughly 3-4ths of sales. Now, this is a strength built over years. Dominos has its own app, delivery staff, kitchen network, and customer data instead of depending entirely on Swiggy and Zomato. But delivery is not the most profitable channel. Jubilant reduced the minimum order value on its app to stay competitive and encourage repeat orders. And this is also why Jubilant has not abandoned the restaurant. It's upgrading about 400 Domino stores to improve service, throughput, and the customer experience. Value offers such as the 119 rupees, My Mail, and Best Deal Wednesdays are meant to bring people in without relying only on blanket discounts. So the two channels therefore solve very different problems. Delivery gives Dominoes frequency and reach, while dine-in gives it a chance to sell drinks and sites without bearing the full cost of the last mile. Now, a dense physical network still matters even in a delivery-led business, because a kitchen closer to the customer can improve speed and reduce the distance of each order.
So pricing is the difficult balance underneath all of this. During the slowdown, Dominoes tried to keep ordering affordable through entry-level pizzas, bundled lunch meals, and load delivery charges. This did help protect order volumes, but left the company with less room to pass rising costs onto customers.
Additionally, in Q1, Jubilant took a net price increase of about 1.4% to absorb part of the rise in LPG and employee costs. But that being said, Jubilant hopes that Popeyes becomes its new driver of growth. Now, revenue almost doubled. Like-for-like growth stayed above 40% for a third straight quarter, and average daily sales crossed roughly Rs 95,000. Jubilant ended the quarter with 88 Popeyes stores and wants to add 35 to 40 a year, with an ambition to build a Rs 1,000 crore brand over the next few years. Now, those numbers are promising, especially because like-for-like sales are improving alongside expansion. And Jubilant can also reuse parts of the supply chain, property capability, and digital system it built for Domino's. But Popeyes is still very far from being a strong second engine for Jubilant. At the same time, Jubilant is cutting fat elsewhere, and it will not renew the Dunkin franchise agreement after December 2026 because the brand contributed only about 0.6% of revenue and was loss-making in FY25. Now we move on to Devyani and Sapphire. If you would remember, it wasn't long ago that both brands announced a blockbuster merger, the largest in Indian QSR. The merger is still underway, and Devyani International and Sapphire Foods still report separately. But it makes more sense to read them together since they are very similar businesses, quite literally. After all, both operate KFC and Pizza Hut in different territories. Now, Devyani's consolidated revenue grew 16.5% to Rs.1581 crore, while Pat rose from Rs.2.4 crore in Q1 FY26 to Rs.17.1 crore in Q1 FY27. The nearly 7-fold jump looks dramatic because last year's profit base was unusually small compared to previous years. But it was still a genuine operating recovery, but this was more of a return to normal than expansion of new business. Sapphire's Pat stood at about Rs.14 crore compared with a loss in the same quarter last year, while restaurant sales grew 15% to Rs.888 crore. In both businesses, KFC did most of the heavy lifting. So at Devyani, KFC same-store sales grew 3.3% and average daily sales reached around Rs.98,000. And management believes brand contribution margins can cross 20% once average daily sales reach roughly Rs.1.05 to Rs.1.1 lakh. But that leaves a gap of Rs.7,000 to Rs.12,000 per restaurant per day.