Sapphire Foods to pause Pizza Hut expansion amid weak growth

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Sapphire Foods, the company that operates Pizza Hut,  has effectively hit the pause button on the latter's expansion plans as weak same-store sales growth (SSSG) and poor unit-level returns weigh on performance, the management said in a post earnings call recently.

SSSG refers to the revenue growth of a retailer's existing stores over a year.

The company disclosed that while it added 20 new Pizza Hut stores last year, calendar year 2025 has seen a net decline of one store, marking a contraction in the brand’s footprint. Company executives flagged that new openings will remain on hold until the brand shows a clear revival in SSSG and overall profitability.

"There has been a struggle with Pizza Hut. Last year, we opened 20 stores. This year, we have, so far, negative one. Unless we see a revival in the brand, growth coming back in terms of SSSG, we don't see any meaningful additions to the count," said Sanjay Purohit, Whole Time Director & Group CEO, Sapphire Foods.

In Q2 of FY26, Pizza Hut's SSSG declined 8 percent  year on year (YoY), deepening from a 3 percent  fall in the corresponding quarter of the previous year. Average daily sales per store slipped to Rs 42,000 from Rs 47,000 a year ago, reflecting pressure on footfalls and average order values.

Despite adding a few outlets (restaurant count rising from 323 to 338), total restaurant sales fell 6 percent YoY to Rs 129.6 crore in Q2FY26. On a half-yearly basis too, revenue declined 6 percent, underlining persistent softness in demand.

The weakness reflects not just intensified competition from local rivals but also subdued consumer spending amid high living costs and sluggish wage growth. Dine-in demand, in particular, has been under strain as financially stretched consumers curb discretionary spending, such as eating out, a trend that has weighed on Pizza Hut’s sales over the past two years.

"In the case of Pizza Hut, as store performance has dipped due to lower consumer pull, we chose to invest incrementally in marketing, even beyond our contractual obligations to Yum," the company said in its 2025 annual report.

In contrast, rival Jubilant FoodWorks, which operates Dominos, is able to grow even amid slowdowns due to strategic actions such as  increased value through free delivery and more cheese, focusing on operational excellence with rapid delivery.

Sapphire Foods is one of the largest franchisees of Yum! Brands Inc. in the subcontinent, and operates close to 1,000 KFC, Pizza Hut, and Taco Bell restaurants  across India and Sri Lanka.