Rapid expansion of food delivery platforms such as Zomato and Swiggy will hurt quick service restaurant (QSR) sales, a BNP Paribas’ report has said, as the segment is already struggling with sluggish demand.
Zomato's average monthly active restaurant partners skyrocketed from 61,000 in FY19 to 270,000 by FY24, significantly surpassing the 5,300 stores of listed quick service restaurant (QSR) brands in the same period. This growth highlights the rapid expansion of food delivery platforms, with Swiggy also boasting 272,000 active restaurants by the end of FY23, the BNP Paribas QSR report said.
This expansion offers consumers more options but is fragmenting sales, adding to the already weak daily sales figures in the QSR industry amid general demand sluggishness, it said.
The proliferation of delivery partners has dramatically increased customer reach, particularly benefiting smaller restaurants. Consequently, Zomato's restaurant base is now 51 times the total branded QSR stores, up from 22 times in FY19.
Analysts at BNP Paribas said that QSR players faced another weak quarter in March quarter due to demand softness. Companies cited a challenging macro environment with inflation and subdued consumer spending. Management believes this weak consumer sentiment is temporary and expects improvement after the elections. They anticipate a sequential uptick in the first quarter, which is typically stronger than the fourth.
Despite the muted demand and low same-store sales growth (SSSG) or like-for-like (LFL) growth, QSR companies have not changed their store opening plans or capital expenditure (capex) guidance, the report added.
In the third quarter, Jubilant FoodWorks launched Jubilant Food Park in Bengaluru with an investment of Rs 2.5 billion, its largest food processing unit. The facility will support 750 Domino's stores and approximately 300 Popeyes and Hong's Kitchen stores. Jubilant opened 179 stores in FY24 and plans to open 180 Domino's, 50 Popeyes, and 25 Hong's Kitchen stores in India.
Similarly, Devyani International plans to add 275-300 net new store in FY25, including 120-130 KFC, 70-80 Pizza Hut, and 60-70 Costa Coffee outlets.
Restaurant Brands Asia, which operates Burger King, is expected to open approximately 70-80 stores in FY25, targeting a total of 700 outlets by December 2027.
At 9.47 am, Zomato was trading at Rs 183.05 on the National Stock Exchange, down 0.33 percent from the previous close.
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