Dine-in Culture Fading, Delivery Leading Sales Growth: Report

In line with the trend in recent quarters, the aggregate sales growth of the listed quick service restaurant (QSR) firms in the first quarter of the current financial year was 8 per cent on a year-on-year (YoY) basis, according to BNP Paribas India report. The earnings before interest, taxes, depreciation and amortisation (EBITDA) after paying rent witnessed a sharp decline by 400 to 600 basis points due to subsequent demand slowdown. 

The report states that the sales growth is being led by delivery, while the dine-in sales are under pressure.

As per the report, the gross margins have expanded as the cost of raw materials, such as milk, has moderated. However, the EBITDA margins have suffered due to the slowdown in same-store sales growth (SSSG). As a result, the FY25 consensus earnings estimates for the top four QSR firms have been lowered by 8 to 29 per cent since 1 July.

As far as store addition-led revenue growth is concerned, over the last two years, the industry’s revenue growth has been driven largely by store additions. However, the average revenue per store has seen a dip or not contributed much, as per the report. The report attributed the pressure on EBITDA margins to the fragmentation of the market due to the rise of the aggregators and the inability to raise prices due to fierce competition.

The dine-in trend is slowly fading away. The report stated that the delivery business is getting fragmented as the aggregators are connecting the consumers with more cuisines and restaurants. As per the report, Zomato now has 2.76 lakh restaurant partners as compared to branded QSRs having just around 5,000 total restaurants. The scale of food delivery has grown higher in recent years.