QSR recovery falters in Q3 as value-led demand dominates, says PL Capital

India’s quick service restaurant (QSR) space continues to struggle for a broad-based recovery in the December quarter (Q3FY26), with demand trends falling short of expectations despite the festive season and recent GST rationalisation, according to analysts at PL Capital. While some operators have seen sequential improvements, especially in urban pockets, overall consumption remains uneven and highly value-driven, underscoring the pressure on discretionary spending.

 

PL Capital’s channel checks indicate that industry footfalls in the third quarter have not matched initial projections, with limited evidence of incremental spending benefits from tax changes. Demand patterns vary sharply across players and geographies, with value offerings outperforming premium categories. Among listed QSR operators, Jubilant FoodWorks, Westlife Foodworld and Restaurant Brands Asia (RBA) continue to see divergent trends.

 

 

Jubilant FoodWorks (Buy, target: ₹700): Late-quarter momentum lifts outlook

 

Jubilant FoodWorks, which operates Domino’s Pizza in India, witnessed a slow start to the quarter but saw a notable improvement in demand as the quarter progressed. According to PL Capital, October was subdued, but footfall momentum strengthened meaningfully in November and December, supported by urban demand, college festivals and local events.

 

The brokerage notes that Domino’s has benefited from easing competitive pressure, alongside a strengthening perception among consumers that the brand offers better value-for-money relative to peers. Value pizzas continued to anchor volumes, keeping average order values largely stable for most of the quarter, although December saw some improvement driven by higher online and dine-in spending.

 

PL Capital expects Domino’s to deliver healthy year-on-year (Y-o-Y) growth in the December quarter, aided by rising delivery volumes and strong traction during the Christmas period. Faster delivery times and aggressive promotional strategies have allowed the brand to gain market share, particularly in large cities, where speed of service is increasingly influencing customer choice.

 

The report also flags limited operational disruption from recent protests by gig and last-mile delivery workers, noting that Jubilant’s in-house delivery network provides a structural advantage in the event of broader platform-level disruptions. PL Capital maintains a positive stance on the stock, citing improving demand momentum and execution strength.

 

Westlife Foodworld (Hold, target: ₹604): Regional divergence weighs on performance

 

Westlife Foodworld, which runs McDonald’s restaurants in western and southern India, continues to face a more challenging demand environment. PL Capital highlights that consumption trends during the quarter remained largely flat, with no visible uplift following GST rationalisation. While the western region delivered steady volumes, the southern markets remained a drag on overall performance.

 

Core products such as McVeggie and McChicken continued to see reasonable traction, but premium and gourmet burgers remained under pressure. Consumers are increasingly gravitating toward regional and local burger chains that offer comparable products at more competitive prices, limiting McDonald’s ability to drive premiumisation.

 

Channel checks suggest that customer behaviour is becoming increasingly value-conscious, with combo meals seeing higher preference over standalone premium items. The report also points to a shift in customer demographics, with traffic skewed towards teenagers and families, while the key 20-30-year working professional cohort remains relatively absent.

 

Although December showed some marginal improvement, driven by seasonal factors such as college festivals and holiday gatherings, PL Capital cautions that competitive intensity remains elevated. The brokerage expects modest revenue growth for Westlife in the December quarter but sees pressure on profitability, with margins impacted by muted demand and pricing constraints.

 

Restaurant Brands Asia (Accumulate, target: ₹87): Steady but competitive landscape

 

Restaurant Brands Asia, which operates Burger King in India, is witnessing a steadier demand recovery compared with peers, though growth remains restrained. PL Capital notes that the company recorded a reasonably strong start to the quarter, aided by festive demand in October, but momentum softened in November amid rising competition.

 

December, however, saw a rebound in footfalls, despite aggressive pricing by standalone outlets and regional QSR players. Burger King’s positioning in the value segment has helped stabilise volumes, even as average ticket sizes remain under pressure Y-o-Y.

 

The brokerage highlights that while several national chains are now sharpening their value propositions, Burger King retains a relative edge due to its early focus on attractively priced combos. PL Capital expects double-digit revenue growth for RBA in the December quarter, although profitability remains challenged, with losses narrowing only gradually.

 

Sector view: Value trumps premium

 

Overall, PL Capital remains cautious on the near-term outlook for the QSR sector. The report underscores that demand recovery is proving slower and more fragmented than anticipated, with consumers prioritising affordability over premium experiences. Urban markets and delivery-led formats are faring better, while tier-II and tier-III cities continue to lag.

 

The brokerage believes sustained recovery will depend on a combination of stable macro conditions, easing inflationary pressures and sharper value propositions. Until then, execution capabilities, delivery efficiency and pricing discipline are likely to remain key differentiators across the sector. 

  Disclaimer: The views and investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions