Westlife Foodworld Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Early-stage guest count recovery, not yet a revival: Management shifted strategy to drive guest counts via a ₹99 value meal and digital campaigns, seeing momentum from December into January, but explicitly refuses to call it a sustained revival until consistent momentum holds for a few more months.
• Value proposition strengthened without margin dilution: The ₹99 everyday value meal launched in the West and select South markets is accretive at the EBITDA level, supported by product mix optimization and supply chain efficiencies, with like-for-like gross margin broadly stable sequentially.
• Restaurant operating margin improved 150 bps YoY despite higher A&P spends and continued growth investment, driven by internal cost optimization; a new royalty agreement with McDonald's also contributed a benefit this quarter.
• South and delivery channels remain drags, with a playbook now in place: South continues to lead declines while West performs relatively better; one 3PO delivery platform saw a deep decline. Management believes it now has a clear playbook for both geographies and channels, with January showing improvement.
• What to watch next quarter: Whether the December-January guest count momentum sustains through Q4, whether the South and delivery recovery materializes as guided, and whether the 20-25 planned Q4 store openings land on track.

Guest Count Strategy & Value Proposition

• Five-pillar framework: Management anchored the turnaround on value, experience, relevance, profitability, and consistency, with early evidence that the strategy is working.
• ₹99 value meal launch: Rolled out across all West and select South markets in December, replacing the earlier 1+1 at ₹69 proposition; healthy momentum followed without the ₹69 offer being discontinued.
• Margin-neutral by design: The ₹99 offer is not margin dilutive at the EBITDA level due to product mix optimization and supply chain efficiencies, though if it became 100% of sales the percentage would decline. Management declined to share further cost-efficiency details.
• New customer acquisition restarted: The company had started to lose momentum in acquiring new customers at the required rate; December saw the kind of new guest count needed, and that momentum sustained and improved further in January.
• Record single-day guest count: Achieved on the McDonald's app during the quarter, supported by digital campaigns including the Merry Meal Christmas promotion, whose merchandising sold out in six days.
• Short-to-medium-term priority: Management wants to anchor back in serving more customers over the next 1-2 years, prioritizing guest counts over bill value while consumers are not walking into restaurants.

Saurabh Kalra: "But if you get overly focused on bill value when consumers are not walking in the restaurant, it doesn't yield good results. So for us, the short- to medium-term is to be able to get the momentum of guest counts in the restaurant." [23-24]

Channel & Geographic Performance

• On-premise grew 6% YoY: Supported by the value platform, digital engagement, and hyperlocal marketing.
• Off-premises declined slightly: Volatility in aggregator numbers drove the decline, while the McDelivery own channel continued to grow strongly.
• 3PO platform divergence: One delivery platform had a deep decline while the other was okay; the difference stemmed from disciplines in planning and partnerships shifting as people changed on either side. December and January saw significant progress on 3PO partnerships.
• South continues to underperform: Management experimented with the app, promotions including merchandise, and the value platform in South; trials are ongoing, and they now believe they have a clear playbook to grow guest counts in both dine-in and delivery across West and South.
• Delivery recovery expected from Q4: Correcting delivery issues started in November-December; the playbook is now right, January showed good progress, and management expects a return to normalcy from next quarter.
• Own app vs 3PO discipline: Management makes choices based on whether investment is profitable, reevaluating relationships without losing competitive advantage on any platform.

Saurabh Kalra: "Yes, while the growth might be muted versus what it could be possibly. a punch on our face on lower sales, etcetera, we do it. But we make sure that none of our disciplines get compromised because we are not here for the short term."

Margin & Cost Structure

• Restaurant operating margin improved 150 bps YoY: Operating EBITDA margin improved 70 bps YoY, driven by internal cost optimization despite higher A&P spends and continued growth investment.
• Like-for-like gross margin broadly stable sequentially: Supply chain efficiencies partly offset the menu price adjustment following the GST rate change. An optical impact of ~400-500 bps came from regrouping processing charges, with no actual difference in gross margin.
• GST benefit fully passed through: Management passed on all GST benefit to consumers and used the opportunity to simplify operations; no additional benefit accrued to the company.
• New royalty agreement benefit: A new royalty base was agreed with McDonald's, and this quarter reflects the benefit; the current year is the right base going forward, with year-on-year escalation available on the website.
• Royalty and other opex reduction: Royalty reduction came from annual December benefits/rewards from McDonald's for store openings; other operating expenses reduction was due to regrouping/reclassification of processing charges.
• One-time gratuity exceptional cost: Booked in Q3; no other known cost normalizations.
• Growth investments largely done: The two major growth investments called out previously are largely complete; some variable component might kick in, with results starting to show from January.

Saurabh Kalra: "I'm particularly pleased that we strengthened our value proposition without even diluting margins. I think we had talked about it even in the last call that we were trialling out our value platform, and that seems to be giving us good results without diluting any margins."

Product & Innovation Pipeline

• McCafé now at 100% penetration: All eligible restaurants feature McCafé; the focus has shifted from rollout to driving trial and habitual consumption. A digital subscription plan launched this quarter is receiving extremely positive customer feedback.
• Protein Slice launch: First of its kind globally, receiving positive feedback; management will continue building on such offerings, though it is too early to share conversion numbers. [21-22]
• Chicken Surprise repositioned: Originally launched two years back, now brought front and center as part of the value proposition.
• Innovation calendar "extremely strong": Management expressed confidence in the pipeline for the current year.
• Happy Meal toys still absent: Toys were discontinued due to BIS certification issues and Government of India regulations; books introduced as a short-term measure have not performed as well. Management is working on creating a domestic manufacturing facility or finding a BIS-certified supplier abroad.
• Beverage as a growth category: If overall beverage consumption rises and high-margin products sell more, it will benefit profitability; innovation at the beverage level will continue quarter-on-quarter.

Akshay Jatia: "It's a digital plan, and I encourage everyone on this call to try it because I know that most people would be coffee lovers. And I think it's fantastic value and people are commending the overall experience from purchase to redemption to constant usage."

Store Expansion & Network

• 10 new restaurants opened in Q3: Total count now 458 across 73 cities; all eligible restaurants feature McCafé and experience of the future formats.
• 20-25 openings planned for Q4: Intended to compensate for lower openings in October-December; the company remains on track to reach 580-630 restaurants by 2027.
• New store performance improving: Supported by better site selection and location intelligence tools, enabling a faster path to profitability.
• Geographic mix: Maximum stores have been opened in key cities; not more than 20% of total restaurant openings have been in smaller towns.

Market Environment & Demand

• IEO market remained flattish: At an informal eat-out level, the market did not uplift; October-November-December was flattish versus July-August-September. Management has not yet seen results for January-February-March. [17-18]
• Broad-based growth expected: With current momentum, management expects broad-based growth across the business.
• South-West gap expected to narrow: As the strategy continues to play out, the gap between West and South should narrow in quarters to come.

Akshay Jatia: "That said, these are still early days, and we would refrain from calling a sustained revival until we see a few more months of consistent momentum."

Guidance & Commitments

Key Metrics