See huge potential to expand QSR biz in India: Westlife Dev

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26 Aug, 2025 12:21

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Amit Jatia, Vice Chairman, Westlife Development, that operates a chain of McDonald’s restaurants that doubling the number of outlets in the next five years is just the beginning because the quick service restaurant (QSR) business is still very under penetrated in India.Westlife Development Limited focuses on putting up and operating Quick Service Restaurants (QSR) in India through its subsidiary Hardcastle Restaurants Pvt. Ltd. (HRPL). The Company operates a chain of McDonald's restaurants in west and south India, having a master franchisee relationship with McDonald's Corporation USA, through the latter's Indian subsidiary.The company’s has committed massive capex plans which will be funded via cash, debt and internal accruals, said Jatia.Below is the transcript of Westlife Developers’ interview with Mangalam Maloo & Reema Tendulkar on CNBC-TV18.Reema: You all have a fairly aggressive expansion plans. You all want to double the numbers of outlets over the next five years. You have committed Rs 750 crore for this expansion but if you look at your same stores sales growth that has actually been in the negative territory. What is the trajectory on that you expect?A: When you think about the quick service restaurant (QSR) business in India, we believe that the opportunity for the overall growth is substantial. Currently, we in a very nascent stage of development, so while the current economic environment has been challenging due to consumer sentiment and confidence we do believe that there is huge under penetrated market which we need to serve and make ourselves accessible. Therefore we believe that even doubling is probably just the beginning. Managalam: Could you give us the sense of when can we see some amelioration or betterment coming in as far as the same store sales growth is concerned. Because even if you do double the number of stores the same store sales hasn’t being happening for Westlife over the last five to six quarters. Also this, while competitors are improving their same store sales growth if you look at Jubilant FoodWorks they had posted anywhere between six to seven percent in same store sales growth?A: First and foremost, you see QSR is an impulse category and what happens is if footfalls are impacted on the high street or in malls QSR immediately takes a beating. If you look at our delivery business we have grown our delivery business last year by 30 percent with more than double digit comparable sales. So, I think there is a differentiation between the in-store business and the delivery business. Additionally, if you look at the last eight years we have almost doubled the same store sales that we have had. Given all of that you cannot compare the two because on one side there is under penetrated market. Like if you take Mumbai there are so many parts of Mumbai where there is not even a McDonlad accessible. So, that job is about taking McDonlad to places where we are not accessible.While on another side as the footfalls in retail outlets increase we are very certain that we are going to see the comeback of comparable change. Also, if you look at other QSRs there are other brands there as well.We are quite happy that in the last two to three quarters our numbers have been looking quite decent compared to some of our competitors.Reema: Why were your margins under pressure in Q1 despite higher revenues and lower margins, is that going to be new normal for the company given its investment plans? A: As we have said before that we are in the development phase of our development in the country in India. What happens is that when we open new restaurants, it typically takes two to three years before the restaurant starts breaking even and starts generating a return. McDonald’s is normally put in a prime location with 2,000-3,000 square foot and therefore the rentals are of course at the market level as well. What we see is that as sales grow as the location becomes relevant to our consumers margins start coming back at that point in time. If you look at our last 20 years of history just before this slowdown we were able to move our margins up to almost 12.5 percent at earnings before interest, tax, depreciation and amortization (EBITDA) level. We have not stopped opening new restaurants and 50 percent of our current portfolio is towards that are three years and younger. It is the impact of or the drag from the new stores that generally hurt margins as well so that is where we stand at this point. Reema: Considering that you will continue to add a lot of new store it would imply that your margins will be under pressure for the next few years, given your investment plans? A: That is not true because we are not just sitting and watching things happen. So, what had happened is in the recent past inflation had been very challenging. However, particularly last 12 months inflation has been a bit more under control and we have been able to move our gross margins up by almost 200 basis points. Additionally, we have been able to reduce our development cost that is the cost to open a new restaurant by 10 percent and that also has a bearing on the final numbers. We worked very hard on productive gains as well and actually in the last quarter we already started seeing some benefits of all of this coming in to our profit and loss (P&L). So, we believe that in next two to three quarters things should start looking up a bit for us. Managalam: You also have committed Rs 750 crore in terms of investment to double the number of stores but then with the bottom-line being in a loss for the last couple of years where do you plan to get this money from? Could it be internal accruals because the bottom-line is under pressure or will it be further infusion of funds from promoters or some debt perhaps? A: What happens in retail, has you open new restaurants the bottom-line where you are talking about profit after tax (PAT) the PAT sometimes take a beating. However, our cash flow has been in the range of Rs 30-70 crore year-on-year (Y-o-Y) and we do expect the cash flow to continue to grow in the next two to three years. Additionally, we have about Rs 1.5 billion or about Rs 150-160 crore of cash reserves that are lying in the balance sheet as well. Therefore between debt between accruals and between the cash that we already have on the balance sheet the next two to three years look pretty good for us. I don’t think we need to go to the market to raise any more equity. So we are quite confident about where we are heading. We do believe that as consumer sentiment comes back in the next two to three quarters there should be further improvement in our margins.