# 1. Financial Performance ## A. Key Figures * **Consolidated Revenue:** **₹660 Cr** (QoQ, +7% YoY) * Gross Margin: 71.6% (+160 bps sequentially) * Operating EBITDA: ₹855 Mn (+7% YoY) · Cash PAT: ₹474 Mn (7.2% of sales) * Interim Dividend: ₹0.75 per share approved ## B. Revenue Growth * **Resilient Top-Line Performance:** Revenue grew at 7% YoY despite a soft macro backdrop, reflecting pricing discipline and underlying demand stability. ## C. Gross Margin * **Structural Margin Expansion:** Gross margin reached a historic high of 6%, driven primarily by **supply chain efficiencies** and **commodity cost improvements**, with only marginal contribution from a March price hike. * **Sustainable Margin Trajectory:** The 150–160 bps margin expansion is deemed structural and sustainable, forming a stable base for future gains as volumes scale. * **Clean Margin Growth:** Margin improvement is not reliant on favorable product mix or chicken indexation, underscoring operational credibility. ## D. Operating Profit * **ROM-EBITDA Divergence Explained:** Restaurant Operating Margin (ROM) improved ~80 bps, but pre-IndAS EBITDA growth lagged at 5% due to higher G&A from **strategic investments and people costs**. * **Accounting Impact on EBITDA:** The gap between post-IndAS EBITDA (+9%) and pre-IndAS (+5%) is largely attributed to **rental adjustments**, not core operating trends. ## E. Cash Flow & Dividend * **Shareholder Returns Intact:** Board approved a significant interim dividend of ₹75 per share, signaling confidence in cash generation and capital allocation discipline. --- # 2. Sales & Volume Trends ## A. Key Figures * Same-Store Sales Growth: 0.5% (driven by stable guest count and check) ## B. Same-Store Sales * **Positive Momentum:** Achieved positive comparable sales for the third straight quarter, reinforcing confidence in underlying business trajectory. * **Growth Drivers:** Stable guest traffic and average check sustained growth despite pressure on discretionary spending. * **Forward Outlook:** Omni-channel model remains central to delivering sustained same-store sales growth in line with guidance. * **Performance Context:** Same-store sales growth is stable and flat versus prior quarter, indicating confidence is rooted in strategy execution rather than acceleration in recent trends. ## C. Average Unit Volume * **First Store Trends:** AUV declined QoQ but holds around **₹2 Cr**, supported by stable demand metrics amid ongoing value-focused initiatives. --- # 3. Channel & Digital Mix ## A. Key Figures * **Off-Premise Sales Mix:** **41%** of total sales (3-year average) * **Digital Penetration:** **~75%** of total sales * **Digital Engagement:** **>4 Cr** cumulative downloads · **>3 Cr** monthly active users ## B. On-Premise Sales * **Recovery Momentum:** On-premise business shows accelerating growth, reflecting stronger dine-in demand in urban centers and effective execution of value-led strategies. * **Relative Underperformance:** Despite recent improvement, on-premise growth lags behind broader off-premise trends and food delivery aggregators over the medium term. ## C. Off-Premise Sales * **Channel Stability:** Off-premise maintains a dominant and stable share of sales, underpinning the resilience of the omni-channel model. * **Structural Differentiation:** Company’s off-premise model—encompassing delivery, takeaway, and drive-thru—is distinct from aggregators, emphasizing organic growth and margin discipline despite sector-wide delivery pressures. * **Competitive Positioning:** Management asserts leadership in its core delivery segments, though direct comparisons with pure-play aggregators are limited by fundamental business model differences. ## D. Digital Penetration * **Digital as Growth Engine:** High digital penetration continues to drive sales and deepen customer engagement through integrated platforms. * **Scale in Digital Infrastructure:** The company operates one of the most advanced digital store networks in India, supporting personalized marketing and high-frequency usage via kiosks, apps, and loyalty programs. --- # 4. Store Network & Expansion ## A. Key Figures * **New Stores Opened:** **9** in the quarter · **Total Store Count:** **444** across 71 cities ## B. Store Count Growth * **Expansion Momentum:** Robust store rollout continues with pipeline on track, reinforcing commitment to nationwide market penetration. * **Format Innovation:** Active experimentation with metro station store formats to capture convenience-driven consumer trends and enhance drive-thru accessibility. ## C. Drive-Thru Expansion * **Strategic Channel Shift:** Drive-thru expansion is central to Vision 2027, forming a key pillar of the omni-channel strategy amid declining footfalls and rising demand for convenience. * **Capital & Performance Outlook:** Drive-thru stores entail **₹15–20 lakh** higher CapEx but are prioritized for long-term outperformance, with food court formats balancing capital efficiency. * **Scaled Rollout:** Nearly all restaurants now feature McCafé and Experience of the Future formats, with over **one in four** offering drive-thru services. ## D. Regional Performance * **South India Turnaround Focus:** Southern market identified as critical growth region despite lagging performance; dedicated leadership and localized strategy driving early green shoots of recovery. * **West-South Performance Divergence:** Western region demonstrates strong execution and brand momentum, while south continues to underperform system average, weighing on overall SSSG. * **Customer-Centric Reset:** Management treating southern underperformance as a strategic business challenge, not operational shortfall, with enhanced teams in **Bangalore, Hyderabad, and Chennai** to refine decision-making and execution. --- # 5. Product & Value Strategy ## A. Value & Brand Strategy * **Balanced Performance Approach:** Focus on sustainable performance across all customer segments and occasions, mitigating weakness in one area with strength in others. * **Value-Centric Differentiation:** Emphasis on **value for money** beyond pricing—spanning brand relatability and occasion-based relevance—applies uniformly across western and southern markets. * **Consumer-First Mindset:** Leadership highlights differentiation through understanding what matters to consumers beyond affordability, especially amid competitive and macro pressures. * **Market Share Ambition:** Maintains value brand positioning despite softness in IT sector demand, aiming to gain share during downturns via compelling value delivery. ## B. New Product & Competitive Positioning * **Near-Term Launch Pipeline:** New product rollouts planned over the next two quarters, focused on core offerings with innovative twists to reinforce value and relevance. * **Regional vs. National Rollouts:** McDonald’s recent meal offer in the north and east is under evaluation for pan-India expansion, contrasting with Yum! Brands’ typical national approach. * **Strategic Partnership Clarity:** Confirms no collaboration with Ranveer Singh for a meal launch, citing long-term strategic misalignment and differing business maturity stages. --- # 6. Cost & Margin Risks ## A. Input Cost Pressure * **Elevated G&A Due to Strategic Investments:** Higher G&A driven by upfront costs from new strategic initiatives and people-related expenses, with benefits anticipated in coming quarters. * **Margin Resilience Despite Inflation:** Cost management efforts are maintaining **restaurant operating margin (ROM)** and **operating EBITDA** stability despite inflationary pressures and flat same-store sales. ## B. Rental Cost Inflation * **Rising Lease Costs Amid Fierce Site Competition:** Rental inflation is increasing due to competitive pressures for prime real estate, alongside aggressive value-tier pricing and higher marketing outlays. ## C. Competitive Pricing * **Focus on Unit Economics to Navigate Volatility:** Prioritizing store productivity, cost governance, and unit-level profitability to sustain brand equity and support long-term revenue growth. --- # 7. Guidance & Outlook ## A. Key Figures * **Vision 2027 Restaurant Target:** **580–630** units * **Vision 2027 EBITDA Margin Target:** **18%–20%** * **Current EBITDA Margin:** **13%** (500 bps gap to target) * **Required SSSG for Margin Progress:** **6%–7%** sustained ## B. Strategic Direction & Long-Term Vision * **Unchanged 2027 Roadmap:** Long-term targets remain intact despite macro headwinds, with continued focus on core categories—**burger, chicken, and coffee**—and a new Horizon 2 vertical for post-2027 initiatives. * **Confidence in Execution:** Leadership reaffirms commitment to original timelines, with public reassessment only if conditions materially shift. ## C. Growth Momentum & Market Dynamics * **Cautious Optimism for FY26:** Steady start in a soft environment, with expected improvement in eating-out frequency linked to easing inflation and internal initiatives—not broad macro recovery. * **Growth Levers in Focus:** Strategic interventions underway, particularly in the south, including enhanced value propositions and product innovation to drive guest counts and accelerate momentum. * **Bottom-In View:** Management believes the trough has passed, with pipeline initiatives expected to drive progressive improvement through the year. ## D. Margin Trajectory & Profitability Outlook * **Margins Stabilized:** EBITDA margins are expected to hold at current levels or improve, barring external shocks, supported by cost control and break-even discipline. * **SSSG is Key to Margin Expansion:** Comparable sales growth in the **6%–7%** range is critical to close the 500 bps margin gap, with operating leverage being the primary bridge to the 18%–20% target. * **Competitive Context Acknowledged:** While competitor EBITDA margins are higher, management emphasizes differences in business models and remains focused on its own path to profitability.