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May 13, 2011, 05.16 PM IST | Source: CNBC-TV18

100 Dunkin' Donuts stores in next 5-yrs: Jubilant Foodworks

Jubilant Foodworks' fourth quarter (January-March) net profit surged 86% year-on-year to Rs 19.3 crore, aided by strong sales at its Dominos Pizza outlets. Ravi S Gupta the CFO & President of Jubilant Foodworks tells CNBC-TV18 that in the next five years around 80 to 100 Dunkin Donuts stores will open for business.

Ravi S Gupta, CFO & President , Jubilant Foodworks

Jubilant Foodworks ’ fourth quarter (January-March) net profit surged 86% year-on-year to Rs 19.3 crore, aided by strong sales at its Dominos Pizza outlets.

The company’s net sales for the three-month period were up 56% from a year go to Rs 193.6 crore. Its same-store-sales, that are sales at outlets open for at least one year, rose 33.2%.

Jubilant Foodsworks’ fourth quarter EBITDA (earnings before interest, taxes, depreciation and amortization) rose 79.1% year-on-year to Rs 33.05 crore. EBITDA margin was up 220 bps to 17.1% in January-March

Jubilant Foodworks is a master franchisee in India for international quick serve restaurant chains Dominos Pizza International and Dunkin' Donuts.

Ravi S Gupta the CFO & President of Jubilant Foodworks tells CNBC-TV18 that even though food prices have sky rocketed, they have been leveraging their volume growth with their business associates. This in turn has helped them reduce the impact of inflation on food prices. “We definitely expect to maintain margins hereon,” he says.

Gupta adds that the growth in same store sales will be maintained at 18-20%. In FY11, the company opened 72 new stores. After signing a master franchisee agreement with coffee chain Dunkin' Donuts, Gupta says in the next five years around 80 to 100 Dunkin' Donuts stores will open for business.

Below is a verbatim transcript of his interview with CNBC-TV18’s Udayan Mukherjee and Mitali Mukherjee. For the complete interview watch the accompanying video.

Q: Do you think your margins will sustain around 17% even for FY12 or do you see any pressure there because of high material prices like you might have witnessed in Q4?

A: We have witnessed high food prices for the last couple of years now. We have been leveraging our growth in the volumes which is like 48% CAGR which we have been growing and leveraging those with our business partners. We go back to them saying, this is the growth we are offering you. Then they spread their overheads over the larger volume.

So based on this, they have been able to reduce the impact of inflation on the food prices to us. We believe that we can sustain these margins going forward having grown this margin by about 500 bps over the last two years. In FY10 we have grown about 300 bps and in FY11 we have grown at 220 bps.

Q: Same store sales growth for Q4 YoY has gone down a little bit. What kind of trends are you seeing on same store sales?

A: Same store growth in the last year specifically has been superlative. It is 37%. In the last quarter itself, we have grown at 33% which is on the top of 38% same store growth which was in Q4FY10.  We were expecting that the same store growth in Q4 may come down but we are surprised that it continues at 33%.

For the full year we had a great finish at 37% same store growth. We believe that going forward as well we should be able to maintain, not this level of sales but definitely about 18-20% same store growth sales, considering the consumer saliency we have seen, the consumer acceptance of the product which we have seen across all categories of food products which we are offering. So, we are fairly confident about that.

Q: With an 18-20% growth in same store sales, what would you expect to see by the way of pricing traction at this point in terms of increasing prices?

A: In the last three-four years, we have increased prices at about 5% per annum. We typically take price increases at about 2-2.5% every six months or so. If you look at food inflation in the market, it has touched 21% in April 2010, although in the last week it has come down to 7.7%.

Based on our huge growth of 48% CAGR we have been leveraging those volumes to reduce the impact of inflation to us. We have been passing on the lower increases to our consumers. We have created leverage right now for our consumers so that the consumers do not feel the same pinch as they are feeling in the market in terms of food inflation. Going forward, our price increase of the product will be lower than the food inflation to the consumer’s is.

Q: Can you take us through what you have in mind in FY12 in terms of new store openings both for Dominos and for Dunkin’ Donuts?

A: Last year we had given a guidance that we will open about 70 stores and we had opened 72 stores in FY11. Going forward, for Dominos we will open around 80 stores in the full year. For Dunkin’ Donuts, we are in the middle of making a plan right now but we will come out with a first Dunkin’ Donuts store in Q4FY12 and in the next five years we will open about 80 to 100 stores of Dunkin’ Donuts.

As per the agreement with Dunkin’ Donuts we need to open about 500 stores in the first 15 years of the agreement. That is the minimum number which we have committed to them and we are fairly confident that we can achieve these numbers.

Q: By which quarter of FY12 do you think we will be able to see a financial performance of the Dunkin’ Donuts stores?

A: Q4 is the first quarter where the financial performance will be visible because that is the quarter we will open the store but the real profitability of the Dunkin’ Donuts model will be visible in FY13 where the first full year will be for the Dunkin’ Donuts operation.

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