Fast-food chains fast track growth

Pizza chain Domino’s will add around 200 stores annually in India over the next couple of years as well as pump more money into commissaries and upgrading technology as it capitalizes on low per capita consumption of fast food in the country and joins competitors in expanding its presence in India.

On Monday, the pizza chain opened its 2,000th outlet in the country making it the first country outside the US to reach the milestone. 

“This is the first time we have had a country reach 2,000 stores outside the USA. India is the largest market for Domino’s in terms of store count (outside the USA); in terms of sales it’s in the top five for Domino’s outside of the US,” Art D'Elia, executive vice president-International at Domino's Pizza, Inc said in an interview on Monday.

Fast-food players get into more opennings

The move comes as more organized fast-food players have stepped up store openings. “Despite the muted demand scenario and depressed same-store-sales growth, QSR companies have not altered their store opening plans or capex guidance,” analysts at BNP Paribas said in a note dated 24 May.

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India’s quick-service restaurant (QSR) market is expected to clock a compound annual growth rate of 23% between FY21 and fiscal year 2025. The food services market was estimated at ₹4,236 billion in FY20, Edelweiss said in its research note. 

As of FY20—organized QSRs had a market size of ₹348 billion. Future growth in the segment will be driven by chains in the QSR market, which accounted for 54% of the total QSR sub-segment in FY20 and are estimated to reach 64% of the QSR sales by FY25, it said.

McDonald's opened 41 stores in FY24

Westlife Foodworld that operates McDonald's outlets in south and west India opened 41 stores in FY24 with a target of 45-50 stores in FY25. In 2022, the company had outlined plans to add 250-300 stores, most of them in small towns, over the next five years and double sales to more than ₹4,000 crore; it planned an investment of ₹1,400 crore then. The management of Devyani International that operates KFC, Costa Coffee, and Pizza Hut restaurants in India has also guided for 275-300 net new store additions in FY25, with 120-130 KFC stores, 70-80 Pizza Hut stores and 60-70 Costa Coffee stores. 

Sapphire Foods India that, too, operates KFC and Pizza Hut outlets in India has retained its three-to-four year guidance of doubling the count of its outlets on the base of December 2021, according to the BNP Paribas.

Pact with PVR Inox

Last month, Devyani International Ltd partnered cinema exhibitor PVR Inox Ltd, to jointly establish a company to develop and operate food courts within shopping malls in India.

Domino’s Pizza India opened its first store in New Delhi in 1996; today it operates 2,000 pizza stores across 421 cities here. To be sure, Jubilant FoodWorks Ltd (JFL) operates the master franchise rights from Domino’s Pizza in India and a few global markets.

Last month the company said it could potentially open over 5,500 Domino’s Pizza stores in the six global markets it operates in the medium term up from the current 2,793 outlets in these markets.

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JFL has franchise rights for three global brands including Domino’s Pizza, Popeyes and Dunkin’; apart from operating two own brands—Hong’s Kitchen in India, and COFFY in Turkey. Overall, the food services company has a store network of 2,990 outlets.

In fact, the company also raised its guidance for Domino’s in India taking up its mid-term guidance from 3,000 to 4,000 stores.

The company will add 200 stores annually in the near term and pick up the pace of expansion as demand trends improve.

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“Head-room to grow in India is massive—we are present in about 421 cities. We will add 200 stores annually and try to increase it if there is a pick up in like-for-like growth. India’s economy is still growing at 7-8%. There could be near-term demand headwinds also driven by some of the capacity put out by other QSR players, but to me it is very short term. However, you will start seeing things changing in a few quarters for the industry as a whole,” said Sameer Khetarpal, CEO and MD, Jubilant FoodWorks.

The company retained its previous guidance of putting ₹250 crore in capex annually for the next few years. “One component is going into store expansion mostly for Domino’s. Second is commissaries—we launched the Bangalore factory similarly, now we are opening the Mumbai factory. Lastly, there’s investment in technology,” he added.

The promoters of HT Media Ltd, which publishes Mint, and Jubilant Foodworks are closely related. There are, however, no promoter cross-holdings.

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