Domino’s surprises Momo with in-store deals as home deliveries gobble up customers

According to an August 29 report by BNP Paribas, growth is led by delivery, while in-restaurant sales are under pressure and the trend is likely to continue. Aggregators are connecting consumers to more restaurants and cuisines, the report said, citing figures to highlight the contrast: Zomato has 27,6000 restaurant partners versus just 5,000 total branded quick-service restaurant outlets.

“The growing scale of aggregators could continue to tilt bargaining power in their favour,” he said.

For India almost ₹The challenge posed by restaurant aggregators is not new in the Rs 58,000-crore quick-service restaurant industry. But the post-pandemic revenge meal boom has fizzled out, while the Covid-fueled surge in home deliveries continues. Consumers cutting back on spending to counter inflation have made it worse.

In the first quarter of fiscal 2025, total sales of publicly traded fast-food restaurant chains rose 8% year-over-year but lagged growth in outlet count, the report said. While fast-food chains rapidly expanded their store count after a strong post-pandemic recovery, the subsequent demand slowdown resulted in a 400-600 basis point erosion in post-rent Ebitda margin. (Ebitda is earnings before interest, taxes, depreciation and amortization; 100 basis points constitute one percentage point.)

“The last two quarters have seen several cricket events (IPL and T20 World Cup) and extreme summers and rainfall; as a result, dine-in has been severely affected,” said Sagar Daryani, CEO and co-founder, Wow! Momo Foods. “Also, we have not seen any Bollywood blockbuster release, and that is why there are no major footfalls that usually help attract consumers to malls and food courts. Bollywood could be the key.”

Tempting offers

Slow footfall has prompted Wow Momo to offer breakfast at its locations and launch deals. It is also renovating more locations, bringing its portfolio of restaurants under one roof to create an experiential environment for diners.

“The entire industry is taking several measures to bring people back,” Daryani said.

Domino’s pizza chain operator in India, Jubilant Foodworks, launched the ₹Last quarter, Domino’s India reported a comparable sales increase of 3.0% during the period, driven by growth in home deliveries.

In early June, Westlife Development, which operates McDonald’s outlets in southern and western India, launched its “McSavers 1 plus 1” model and an entry-level chicken burger.

For Restaurant Brands Asia (RBA), which operates Burger King in India, the leading dine-in marketing offer in the June quarter was “2 Crispy Veg a ₹79′ and ‘2 crispy chicken burgers in ₹99′.

What makes things difficult for QSR chains is that delivery discounts remain high, prompting value-seeking consumers to order in.

Chaayos founder Nitin Saluja is optimistic. “We have already gone through three-four tough quarters. It will take at least a couple of quarters for things to improve and this should be just a matter of time,” said Saluja, who is also a member of the management committee of the National Restaurant Association of India. “The long-term outlook for the sector looks good.”

Growth of fast food restaurants

The NRAI expects quick-service restaurants to grow faster than casual dining establishments. The QSR segment’s contribution to the economy is expected to increase from ₹57,500 crore in FY23 to approximately ₹1.29 trillion by FY28, growing by 123%, according to NRAI’s ‘India Foodservice Report 2024’. Casual dining revenue is estimated to grow by 56% during the period, from around ₹1.11 billion to almost ₹1.74 trillion.

However, many fast-food restaurants that don’t have the capacity to accommodate dine-in customers will have a tough time, Saluja said. “Since the pandemic, customers are more familiar with home delivery and feel much more comfortable with home delivery than going to the store. The more you do home delivery, the more your margins get squeezed.”

Inflation has also hit dining out. Middle-income consumers, a prime target for fast-food chains, have slowed discretionary spending amid rising costs.

“Fast food prices are not rising in line with inflation – it’s a value-based economy and there’s intense competition. Delivery companies have ensured it’s an absolute golden age for the consumer and have effectively destroyed the margins of many operators,” said Jasper Reid, chief executive of Dolomite Restaurants, the operator of Jamie’s Pizzeria and other chains where 88% of business is table service.

“Unless we see strong growth in consumer confidence or improved quality, this situation will continue and fast food restaurants will be in a death spiral,” he said. “Many are reducing the quantity and quality of food to regain their margins.”

But it’s not all doom and gloom, Reid said, referring to the growth of luxury catering. “The mid- and high-end market, where there is room, remains largely open and we see returns on investment here.”