Westlife Foodworld Ltd Q3 FY2023 Concall Summary

Key Takeaways

• Record quarter, broad-based strength: Revenue hit ₹610 crore (28% YoY) with 20% same-store sales growth, driven overwhelmingly by guest counts rather than price.
• Profitability hit an all-time high: EBITDA margin reached 18%, helped by supply chain cost initiatives, better product mix, calibrated pricing, and operating leverage.
• The store modernization bet is paying off: Over 60 stores converted to EOTF this quarter, and management sees the format as a durable competitive moat that lifts both traffic and average check.
• Vision 2027 sets an aggressive expansion path: The company committed to adding 580–630 restaurants by 2027, nearly tripling the current base, while still targeting high single-digit same-store sales growth.
• What to watch next quarter: Whether the Chicken Big Mac limited-time offer sustains traffic momentum, the pace of EOTF conversions toward the 12–24 month target, and any sign that inflation or demand softness is creeping into the consumer environment.

Same-Store Sales: The Engine and Its Mechanics

• Guest counts did the heavy lifting: The vast majority of the 20% SSG came from footfall growth, not average ticket increases, though management declined to split the two quantitatively.
• Average check rose without pure pricing: Consumers are buying more items per visit (adding coffee, choosing meals over single items) and visiting for additional occasions, so the check increase is volume-driven rather than purely price-led.
• McCafe pulls the brand into new occasions: McCafe brings McDonald's into the consideration set for coffee, generating extra visits and lifting average check when customers attach a coffee to their order.
• EOTF stores attract bigger groups and better reviews: EOTF stores with McCafe see larger parties and more coffee buying, and their Google Reviews score 4.2–4.5 versus 3–3.3 for a typical QSR, a lead management believes customers will eventually insist on from all brands.
• The base was clean: Last year's Q3 was already a regular quarter with growth over pre-COVID, so the 20% SSG was delivered on a stable base with no low-base effect.
• Management rejects any notion of a peak: The ambition is to take average unit volume sales much higher, and the company sees same-store sales growth as part of its DNA even after 70 years of the brand's global existence.

Jatia: "We don't think that globally, when we look at the performance of the brand, even today after 70 years of existence, comparable sales growth is part of our DNA. So, the simple answer is absolutely not. Our DNA is to grow same-store sales quarter-on-quarter, year-on-year."

Store Expansion and Vision 2027

• FY23 on track: The company is confident of opening 35–40 new restaurants this fiscal year, with roughly 18–20 stores expected in Q4 alone.
• Vision 2027 commits to 580–630 more stores: That implies nearly tripling the current base of 341 restaurants over five years, and management says it is completely committed to delivering this year-on-year.
• Non-metro markets are growing faster: Non-metro towns grew at 1.5x the rate of metro markets on a pre-COVID basis, and the company is present in only 50 cities out of a potential 130, leaving a long runway.
• New stores are not expected to pressure comps: On a base of 350 stores, management believes it can absorb new openings without diluting same-store sales, and the intent remains to deliver high single-digit SSG.
• Closures are rare and involuntary: Only two stores closed during the year, both for reasons beyond the company's control (lease expiry, infrastructure changes, trade area shifts), and closures run below 1% of the store base.

Jatia: "We do not like closing stores unless and until it's reasons beyond our control."

EOTF Modernization and Competitive Positioning

• The format is becoming the standard: 205 of 341 stores are now EOTF, with over 60 converted this quarter alone, and the target is 100% EOTF within 12–24 months; all new stores already open in the format.
• Management frames EOTF as a structural moat: The company believes it has the largest portfolio of modern QSR stores in the country, redefining the experience in a way that customers will eventually insist on from all brands, creating a first-mover advantage.
• Product strategy is disciplined, not random: Very few new SKUs have been added in the last two to three years; growth has come from three strategic pillars (Burger Meals, Gourmet Burger Collection, Fried Chicken in the South) focused on the lunch and dinner meal occasion.
• Chicken Big Mac launched system-wide in January: It is a limited-time offer, priced broadly at ₹245 with minor location-level variation, and management will try to share an update next quarter.

Kalra: "In fact, you'll be surprised to know that we've got only a very-very few SKU additions when we have done all this work in the last two, three years."

Channel Mix and Digital Penetration

• On-premises is roaring back: Dine-in business grew 42% YoY and 23% over pre-COVID, making it the primary driver of same-store sales growth alongside EOTF and McCafe.
• Off-premises hit a record: Off-premises grew 12% YoY and 85% over pre-COVID, clocking its best quarter ever.
• Digital now commands over half of system sales: More than 57% of sales came through digital channels (mobile app, self-ordering kiosks, McDelivery), with the own McDelivery platform growing faster due to enhanced consumer affinity.
• Aggregators are larger, but the own app is gaining: Aggregator demand is higher than the own app, but the own app has crossed 2.2 crore downloads with increasing active users month-on-month.

Margins and Cost Structure

• EBITDA margin reached an all-time high of 18%: The expansion was driven by supply chain cost initiatives, better product mix, calibrated pricing actions, and enhanced operating leverage.
• Gross margin improved to 66.9%: Up 52 bps YoY and 141 bps sequentially, with the same drivers as EBITDA; management recommends looking at nine-month data for consistency rather than reading quarter-on-quarter seasonality.
• Restaurant operating margin rose to 23.8%: ROM reached ₹145 crore, up 35% YoY from a 22.6% margin last year.
• Staff costs reflect a one-time bonus bump: Staff cost as a percentage of sales was higher YoY in Q3 due to variable payouts (bonus and ESOP provisions), but on a nine-month basis it declined from 5.9% to 5.3% of sales; management declined to quantify the bonus component.
• Inflation is manageable for now: The company is not seeing very high pressure on commodity prices currently, and a 2% weighted-average price hike was taken in October without differentiating between metro and non-metro markets.

Demand Environment and Competitive Stance

• Management's philosophy is to stay focused on the long term: The company acknowledges hearing about a tougher environment but remains entrenched in its long-term strategy, confident it can navigate any challenging conditions while staying alert and adapting tactics.
• Competition is treated as validation: When competitors follow the company's moves, management sees it as a testament to the strength of its own strategy rather than a threat.

Jatia: "My philosophy is that all times are good times. I do hear about the environment getting tougher and so on all the time. But essentially, my philosophy is that we are very-very entrenched with our long-term strategy."

Guidance & Commitments

Key Metrics