The report notes that the second quarter (Q2) was marked by continued softness in discretionary spend and eating out frequency
As the market was characterised by value-seeking consumers, quick-service restaurants (QSRs) delivered another muted quarterly performance, with the same-store sales growth (SSSG) remaining weak in the second quarter of the current financial year (Q2FY26), barring Jubilant FoodWorks (JFL).
A report by Nuvama Institutional Equities highlighted that margins remain strained even as companies took cost efficiency initiatives across operations. The delivery channel continued to be the key engine of growth and store additions across the portfolio stayed on schedule.
Most QSRs posted negative SSSG. However, strong performances of JFL (+9.1 per cent) and Restaurant Brands Asia (RBA) (+2.8 per cent) stand out. JFL, in particular, achieved its seventh straight quarter of positive SSSG, as per the report.
“Store expansion picked up largely across the board. The stance on Pizza Hut’s expansion remains cautious, particularly with both the franchisors, viz. Devyani and Sapphire, waiting for brand metrics to improve before mulling further expansion,” as stated in the report.
Devyani and Sapphire faced gross margin pressure versus Q2FY25 as value offerings introduced from Q1FY26 diluted mix. Westlife FoodWorld reported a record-high gross margin driven by sustained supply chain efficiencies. GST rate cuts provided a modest relief on select inputs, with most players passing on the benefit to consumers.
The report added that Q2 was marked by continued softness in discretionary spend and eating out frequency, which was compounded by seasonality such as Shravan and Navaratri falling in the same quarter. This impacted non-vegetarian sales and led to a prolonged dip in SSSG for some brands. South India, led by Bangalore, exerted the strongest drag on the McDonald’s system’s performance as both delivery and dine-in segments in the region faced significant stress.
To counter muted demand and drive transactions, companies intensified marketing efforts focused on value offerings and targeted promotions, often accepting temporary pressure on margins, as per the report.
