Competition bites into QSR growth as weak demand shadows expansion

The quick-service restaurant (QSR) segment continued to be under pressure in the July–September quarter. Category leaders also pointed out that expansion within the segment is affecting demand.

 

Westlife FoodWorld, which runs McDonald’s in West and South India, and Sapphire Foods India, which operates a chunk of KFC and Pizza Hut outlets in the country, told investors after their earnings that the category is seeing increased competition.

 

“Private discretionary spending has been muted. That is the reason why the government, despite strong gross domestic product numbers, is still calling out very specifically that they need to do something to increase consumption spend. A combination of that plus increased competition within the entire food space, including QSR is weighing on growth,” Sanjay Purohit, whole-time director and group chief executive officer (CEO) at Sapphire Foods India, told investors after its results.

 

Akshay Jatia, president and CEO at Westlife FoodWorld, also told investors, “There has been a lot of expansion in the QSR and eating-out market over the last year. So that could be further impacting drag in terms of growth.” However, the outlier in the category has been Jubilant FoodWorks, which reported its seventh consecutive quarter of positive same-store sales growth.

 

Motilal Oswal said QSR players continued to report muted demand despite a supportive base, with dine-in average daily sales remaining soft and same-store sales largely flat to lower. The brokerage noted that Jubilant FoodWorks and Restaurant Brands Asia (which runs Burger King in India) were exceptions in the quarter.

 

“QSR companies expect eating-out frequency to gradually pick up in the second half of 2025-26. The sector benefited indirectly from goods and services tax-related advantages through lower raw material costs, particularly in cheese and sauces, which contributed about 50 basis points to margins. The benefit was passed on to consumers through price reductions in certain stock-keeping units,” Motilal Oswal said in its report.

 

The report added that weak underlying growth continued to impact operating margins, exerting pressure on restaurant and earnings before interest, tax, depreciation and amortisation margins for most brands. QSR companies continued to focus on value offerings.

 

“Competition from other players online has existed for some time due to the emergence of Cloud kitchens as customers are increasingly choosing to order in, but the existing players in the listed space also aggressively expanded their store count in the past few years, which has also increased competition in the category,” Sachin Bobade, director–consumer research at Dolat Capital, said.

 

Manish Dawar, executive director and chief financial officer at Devyani International, also told investors after its July–September results that overall consumer trends are moving in favour of home delivery and noted strong traction in delivery.

 

Devyani International runs a chunk of KFC and Pizza Hut outlets in the country and also operates Costa Coffee outlets.

 

Jatia also told investors that the sector is witnessing demand pressures. “The demand environment does remain challenging, and we want to see how this quarter pans out before sharing more. A lot of it also depends on the festival season in December, which is usually a very big month for our company as well as the category,” he said.

 

Dawar also told investors that the demand environment in the sector continues to be weak.