Your typical restaurant meal now costs Rs 149. Wonder why? Here's the QSR strategy

Despite the challenging demand scenario, QSR brands have maintained their plans for opening new stores, expressing optimism about a potential recovery in the near future.

Value offering has turned into the focus as quick service restaurants (QSR) race to lure customers with lower price for smaller quantities in an inflationary environment, a recent report by BNP Paribas shows. The restaurants are betting on higher volumes to make up for the shortfall in margins, according to analysts.

The third quarter of FY24 saw a flurry of products flaunting a Rs 149 price tag. This was part of the value-oriented price options that the QSRs introduced in the Rs 99 to Rs 179 range over the last one year.

Some of the best examples of last year's value offering included Restaurant Brands Asia's crispy chicken burger meal for Rs 149,  Hong's Kitchen's chili paneer/chili chicken wraps at Rs 149, and Westlife Foodworld's cheesy Italian burgers as a limited-time offer.

The report also highlights that from the second half of FY23, QSR brands have experienced a slowdown in revenue growth despite a strong show in FY22 and in the first half of FY23. Although inflation has begun easing, the demand trend continued to be challenging in the third quarter of FY24, with dine-in foot traffic remaining low and demand decreasing further after Diwali.

The headwinds, however, couldn't derail the QSR brands from their plans of opening stores. This showed optimism about a potential recovery in the near future. In 3QFY24, most QSR players suffered a sequential decline in sales growth, with many reporting negative year-on-year same-store sales growth (SSSG/LFL) and a decrease in average daily sales (ADS), compared to the previous year across various QSR categories.

The report also notes that in 3QFY24, the sales growth was driven by a year-on-year increase in store count, despite SSSG/LFL growth and ADS remaining under pressure across QSR categories.

The report highlights the significant growth of aggregators like Zomato, with a fourfold increase in restaurant partners. Zomato now has 254,000 partners, surpassing the number of stores of listed QSR firms. This expansion has broadened consumer choices and boosted delivery services over dine-in.

Pizza, which was once dominant in delivery, now faces a stiff competition from diverse cuisine options. Analysts suggest that while inflation may be impacting the demand, other factors are also at play, indicating that the road to recovery could be longer than initially estimated by the market.