Barbeque-Nation Hospitality Ltd

NSE:BARBEQUE

Earnings Call Analysis

Company Reports Margin Improvement and Growth

The company reported a modest year-on-year revenue growth of 1%, totaling INR 331 crores for Q3 FY '24, despite a similar store count as the previous year. Sequentially, it marked a 10% increase. The dining business remained constant, whereas the delivery business saw a 5% year-on-year increase. Significant focus on cost-effectiveness has positively impacted the bottom line, with an EBITDA margin of 20.5% and an adjusted EBITDA margin of 11.4%. Notably, the restaurant operating margin sharply increased from 4.3% to 10.6%, attributed to a 120 basis points gross margin improvement and cost-saving initiatives. This margin expansion is expected to be sustainable, with potential for additional growth: a hypothetical 10% sales improvement could translate into an additional 4% to 5% bottom-line growth.

Navigating Choppy Waters with Steady Growth

Barbeque Nation Hospitality Limited, a renowned name in the hospitality sector, presented a pleasing performance amidst a complicated demand environment in the third quarter of fiscal year 2024. The company foresees a gradual recovery in the near term, propelled by its strategic focus on portfolio rationalization and strong execution coupled with cost-saving initiatives. In this quarter, Barbeque Nation showcased a 1% year-on-year revenue increase to INR 331 crores, and a notable 10% sequential growth, maintaining a consistent store count compared to the past year. A fine balance between their dining and delivery businesses laid the groundwork for this steady ascent.

Operational Resilience Yields Margin Expansion

Despite the flat year-on-year revenue, Barbeque Nation's particular attention to cost-efficiency and margin expansion paid off, as reflected in the six-quarter peak of reported EBITDA margins at 20.5%, and an adjusted EBITDA margin of 11.4%. These impressive figures underscore the company's ability to navigate market uncertainties while reinforcing its operational resilience. Expansion has been strategic and calculated, with the opening of new restaurants and the integration of the Salt brand enhancing the network without bloating costs.

Smart Portfolio Management and Growth Prospects

Barbeque Nation's delivery business displayed a year-on-year growth of 5%, contributing INR 47 crores to the total revenue. The sequential growth of 8% in deliveries epitomizes the brand's ability to adapt to evolving consumer preferences. Anticipating the tread of improvement in same-store sales growth (SSSG) and operating margins to carry on, there is a goal in sight to uplift 25 to 30 new restaurants into the fold in FY '25, indicative of a strategic network broadening across diversified brands.

Robust Footholds in Dining and Delivery Performance

While the dining revenues remained stable at INR 283 crores, the sequential growth of 10% reaffirmed the brand's stronghold in its primary business. Furthermore, the delivery segment prospered by harnessing increased market penetration. The matured restaurant portfolio maintained healthy operating margins of 18.5% despite a marginal SSSG decline, which is a testament to the company's efficient management practices.

Comprehensive Margin Improvement and Future Outlook

Detailing the financial prowess, the quarter witnessed an overall improvement of 117 basis points in gross margins year-on-year and 192 basis points sequentially. With a calculated reclassification among food costs and personnel expenditures, the gross margins benefitted, primarily through lowered food costs per cover and augmented beverage realization. This fiscal diligence cascaded into Barbeque Nation reporting a consolidated EBITDA of INR 68 crores, marking a 7.6% rise compared to the same quarter last year, and a striking 40% sequential increment. Earmarking a 7.8% year-on-year increase in their pre-Ind AS adjusted EBITDA to INR 38 crores, the gastronomic giant retains its positive trajectory and cash conversion efficacy, setting a tone of cautious optimism for its operational endeavors and expansion targets.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to Q3 FY '24 Earnings Conference Call of Barbeque-Nation Hospitality Limited hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Viraj Sanghvi from AMBIT Capital. Thank you, and over to you.

[Viraj Sanghvi, analyst]

Thank you. Good evening, everyone. Welcome to the Q3 FY '24 Earnings Conference Call of Barbeque-Nation Hospitality Limited. From the management, we have with us Mr. Kayum Dhanani, Managing Director; Mr. Rahul Agrawal, CEO and Whole Time Director; Mr. Amit Betala, CFO; and Mr. Bijay Sharma, Head of Investor Relations.

Before we begin our presentation, I would like to remind you that some of the statements made in today's conference call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to the earnings presentation for a detailed disclaimer.

I will now hand over the conference to Mr. Kayum Dhanani. Thank you, and over to you, sir.

[Kayum Razak Dhanani, executive]

A very good evening, ladies and gentlemen. I take the pleasure in welcoming you to Q3 FY '24 conference call of Barbeque Nation. The demand environment continues to be challenging, and we expect a slow and gradual recovery in the near term. However, our strategic focus on portfolio rationalization, strong execution and multiple cost initiatives have helped us in delivering strong operating performance during the quarter.

During Q3 FY '24, we recorded a revenue of INR 331 crores, which is 1% growth on a year-on-year basis and a 10% growth in sequential basis. It should be noted that the performance was achieved with relatively similar store count as last year. Our dining business with revenue of INR 283 crores remained flat compared to the same period last year and grew by 10% sequentially. Delivery business accounted for revenues of INR 47 crores with a year-on-year growth of 5% and sequential growth of 8%.

Our focused efforts and margin expansion has delivered good results. During the quarter, our reported EBITDA margins were 20.5%, and adjusted EBITDA margin was 11.4%. The margins were at 6 quarter high. During the quarter, we opened 2 new Barbeque Nation Indian restaurant and consolidate 6 Salt restaurants into our network and closed 4 restaurants. As a result, our total network stood at 216 restaurants with 186 Barbeque Nation, India 16 Toscano, 8 Barbeque Nations in International, and 6 Salt.

We have already started building pipeline to drive network expansion. We target to open 25 to 30 new restaurants in FY '25. The network growth would be broad-based across brands. Our Toscana International business recorded strong revenue growth and both the businesses continue to report very strong operating margins.

During the quarter, we also completed the consolidation of Salt, which is consolidated in our results from FY -- from November 23 onwards. This business also performed well and recorded year-on-year revenue growth. The integration of the business is on track, and we are focusing on strengthening teams for the business.

We continue to focus on enhancing guest experience initiatives such as culinary festivals, special menu activities, get engagement initiatives and restaurant upgrades. These initiatives are anticipated to enhance overall guest experience and drive footfalls.

While the overall demand scenario continues to be weak, the trend of improvement in SSSG and operating margins in our business is very encouraging.

We remain committed to further drive growth through SSSG and store expansions and maintain our operating margins. Our medium- to long-term growth forecast remains intact. Any [indiscernible] in the demand trend will further support our journey. Thank you.

[Operator]

Should we open the questions...

[Kayum Razak Dhanani, executive]

Over to you, Rahul.

[Rahul Agrawal, executive]

Thank you, Kayum. Good evening, everyone. During the quarter, we delivered a revenue of INR 331 crores, a growth of 0.8% on Y-o-Y basis and 9.7% sequentially. On Y-o-Y basis, the revenue growth was relatively flattish due to slower new store expansion, network rationalization and negative same-store sales growth.

Our dining revenues for the quarter were flat at INR 283 crores and grew sequentially by 10%. Due to seasonal shift this year, October month was impacted with higher share of vegetarian days. Our dining revenue growth was about 3% year-on-year for November and December '23. Our delivery business grew by 5.2% on a year-on-year basis and 8.4% sequentially. The growth in delivery segment was predominantly led by increased penetration of our [indiscernible]. Our SSSG for the quarter was negative 4.9%, of which the majority of decline was attributable to October month due to higher vegetarian days. Excluding October, the SSSG was negative 2.2% in November and December 2023. We have been observing a gradual improvement in SSSG on a month-on-month basis. We anticipate that trend to continue and SSSG numbers to be relatively further by that next quarter.

During the quarter, matured restaurant portfolio delivered annualized revenue per outlet of INR 6.6 crores with restaurant operating margin of 18.5%. While the matured portfolio has experienced from SSSG decline, we have been able to maintain the restaurant operating margins.

New restaurant portfolio reported annualized revenue per outlet of INR 5.1 crores, with restaurant operating margins of 10.6%. This improvement is on account of increase in average aging of the portfolio.

Gross margins for the quarter improved by 117 basis points on year-on-year basis and 192 basis points sequentially. Around 80 basis point improvement in gross margin during the quarter is due to reclassification adjustments and balance improvement is coming and led by lower food cost per cover and better realization in beverages. Just to clarify, the reclassification adjustment is between gross margin, food cost and employee costs. There is no impact on EBITDA because of this reclassification.

Consolidated reported EBITDA for the quarter was INR 68 crores, an increase of 7.6% on year-on-year basis and over 40% on a sequential basis. The reported EBITDA margin for the quarter was 20.5%. Our pre-Ind AS adjusted EBITDA for the quarter was INR 38 crores with a margin of 11.4%. Pre-Ind AS adjusted EBITDA also increased by 7.8% on a year-on-year basis and nearly doubled compared to previous quarter.

The improvement in margins was largely led by improvement in gross margin, impact of portfolio rationalization, cost initiatives and operating leverage that we registered in this quarter. During the quarter, we generated operating cash flow of INR 37 crores, which is around 11% of operating revenues, and we continue to have strong operating profit to cash conversion.

International business also continued strong performance with year-on-year revenue growth of 24% and strong operating margins. During the quarter, we have added 2 new -- during the year, we have added 2 new restaurants in the portfolio. Our focus will be to enhance capacity utilization of the newly opened restaurants and ensure they reach at their optimal levels faster.

The performance of Toscano remained strong with year-on-year revenue growth of 23% in quarter 3 FY '24 and strong operating margins. During the year, we have already added 2 new stores in the portfolio. In our Toscana business, the focus will be expansion, coupled with maintaining same-store sales growth. Salt was consolidated for 2 months during the quarter, indication of Salt with Barbeque Nation and Toscano is progressing well. Our restaurant network as of December 31, 2023 stood at 216 restaurants. During the quarter, we opened 2 new Barbeque Nation restaurants in India, consolidated 2 all Salt restaurants and closed 4 restaurants. Our network expansion as far as, they are also well on track. Currently, we have 5 restaurants under construction and have an advanced pipeline of 10 under discussion sites. These restaurants are expected to come into operations in H1 of FY '25.

We plan to add 25, 30 new restaurants in FY '25 and expect this expansion to be broad-based across Barbeque Nation, Toscano, and Salt. Going ahead, we remain cautiously optimistic that various initiatives undertaken by us, coupled with renewed focus on network expansion will further enhance our operating performance. Thank you.

With this, we can open the session for Q&A.

[Operator]

[Operator Instructions] We have our first question from the line of Vishal Gutka from PhillipCapital.

[Vishal Gutka, analyst]

Congrats on a nice growth despite muted SSSG growth. I have 2 questions. First thing is on the gross margin front. Could you highlight how sustainable these gains are? What led to this kind of gains of around approximately 120 basis points on Y-o-Y. I think something you told on reclassification apart from that reclassification, any other thing is that to driving this again. Second thing is on the restaurant operating margin related to new stores. When I see 1Q FY '24 number, and for new store, you had done a revenue of around 52 million. At that point of time, we reported restaurant operating margin of 4.3% for new stores. This time around, you're on similar kind of revenue, but restaurant operating margin is short up to 10.6%. Can you please explain what is driving this kind of improvement despite sales remaining the same?

[Rahul Agrawal, executive]

Sure. Thanks, Vishal. So first, on the gross margin. As you said, we have 120 basis points improvement on Y-o-Y basis. out of which 80 basis points has come from reclassification and 40 basis points has been the structural improvement in the business. Let me explain the 80 basis points first.

As per our new auditors who have joined us, we've spent food cost for our employee means in the outlet. And that amount was earlier part bearing of food costs for the overall business. And now that amount is classified into employee cost. So that 80 basis a onetime improvement. Or are they just in improvement, which will continue.

On the 40 basis points, the improvement has been driven by lower food cost per cover, which again also is sustainable, and there's been better realization on our beverages. There are some offers that are usually on beverages, which once we remove those offers, we haven't seen any impact on those businesses and has positively contributed to our gross margin. I think both of these efforts will continue, and the lower levels of gross margin that you saw in quarter 1 and quarter 2, I would expect that to dedicated in say, quarter 4 and going forward. That's one.

The other question on restaurant operating margin. Yes, in quarter 1, there was a 5.2 -- or INR 2 crores of average revenue from new stores. Just similar in quarter 3, but the margin profile is different. There are 2 reasons for that. One is a clear improvement in the gross margin. If you look at our gross margin is the lowest in quarter 1 of this financial year, wherein in quarter 3, these are among the highest. So barring the reclassification adjustment, there is approximately 2%, 2.5% improvement in gross margin between quarter 1 and quarter 3.

Secondly, in quarter 1, whatever restaurants have closed and some of the losses that we incurred during the time of closure, they are all categorized under the new restaurant portfolio. So matured restaurants are the one which has margins of more than -- which have been operating for more than 2 years and everything else was classified under new restaurants. As we have been -- have done through our reclassification -- portfolio readjustment, most of these costs related to the close office had gone and led to improvement in our overall numbers.

[Operator]

[Operator Instructions] The next question is from the line of Harshil Shethia from Ladderup Wealth.

[Harshil Shethia, analyst]

Sir, what kind of cost initiatives are we taking to not allow such kind of gross and EBITDA margins?

[Rahul Agrawal, executive]

So like I said, on the gross margin side, the food cost per cover has reduced. There has been many [indiscernible]. There has been packaging cost reductions that has happened, which has led to improvement in the gross margin. Further, on the other cost initiatives that [indiscernible] on employee costs, in some places, rents have been really bad. And other small, small initiatives have been taken to guide this profitability.

[Harshil Shethia, analyst]

If you can just give us some examples to understand the same?

[Rahul Agrawal, executive]

So like I said, on the beverage side, we were operating at an overall company level gross margins of around 55%, that number has itself gone up to around 65%. And this contribution in the business is approximately 7%. So 0.7% margin expansion has also come from that side. So -- and this is -- these 2 numbers are comparing between sequential quarters. So it is best example. Like that, there are many others that have been undertaken.

[Operator]

[Operator Instructions] The next question is from the line of Percy Panthaki from IIFL.

[Percy Panthaki, analyst]

I just wanted to understand the math of your SSSG versus margins going ahead. So see, what has happened is that over the last couple of years, the revenue per restaurant has fallen. And at the same time, there is normal inflation and all the costs below EBITDA. So what is the interplay of this like if you have -- going forward, if you have a 5% SSSG, does that bring you back to a normalized annual margin of, let's say, 13%, 14% on the full company level new and old stores put together? Or do you think that, that is not possible because the equation of revenue per store decline and cost per store increased over 2 years compounded will mean that you need 2, 3 years of SSSG to be strong to come back to that kind of 13%, 14% margin at a overall company level. What are your thoughts on this?

[Rahul Agrawal, executive]

So overall, if you look at the current quarter's added portfolio level, including the new and old restaurant, where in average annualized revenue of INR 6.2 crores and delivered around 16.7% restaurant credit margin, right, with a negative SSSG of 5%. I think without this negative SSSG of 5%, the operating leverage story is fully intact. Just to say the revenue numbers were higher by 5%, out of this 5%, at least 2.5% will flow down to your bottom line, right? And we have seen that.

So if you look at the current quarter, the month of December generally is one of the best months for us. And especially in the month of December, we have seen restaurant operating margin upwards of 22%, right? And October month was one of the bad ones because of high vegetarian days, and we have seen operating leverage playing a little big lower. Overall, on the entire quarter basis, we are at around 10%, 11.5%. And I think it's just about higher sales. A 10% higher sales from this, at least 4% to 5% will further flow down to our margins.

Just to also mention on the margin improvement. Like I said, there are 4 attributes of margin improvement. First one is improvement in gross margin. Second is the impact of particular [indiscernible] which means that some of the closed store margins are obviously dragging. And due to new stores that now added to the mature portfolio, they are performing better than other closed stores are performing. So overall percentages have improved.

Third is obviously cost initiative. There are multiple initiatives taken, some of the examples that I gave recently. And fourth is operating leverage. I think the first 3 are structural changes. And in my view, the mid-single-digit margin that you saw in the previous 3 quarters, is something that that's not happened now. And the fourth factor, which is operating leverage is clearly a function of market. Once that comes in, we expect our margin to get back to 13%, 14% that used to be historically.

[Percy Panthaki, analyst]

So 2 follow-ups on this Rahul. One is that Q3 is your seasonally strongest quarter. And therefore, if you have done 11.5% in Q3, all other things being equal, just the seasonality would mean that this would translate to an annualized margin of somewhere in the region of 9% to 9.5%. So if we have to go on a full year basis, this journey from 9%, 9.5% to, let's say, 13.5%, 14%, do you think that just the SSSG coming back to 5% is enough? Or would you need to do something more also in addition to this?

[Rahul Agrawal, executive]

No, I think it's enough because if you look at this quarter 3 and you match on the annualized number of, say, 9.5%, 10%. This also bakes in around -- overall for the first 9 months around 8% of a decline, right? So just that a reversal of that 8% decline will lead to margin improvement by 3 to 4 percentage points.

[Percy Panthaki, analyst]

Okay. So basically, if I were to just say it in a nutshell, supposing if you deliver, let's say 4% to 5% positive SSSG in FY '25, then the full year margin would be possible in that 13.5% to 14% region, would that be a correct interpretation?

[Rahul Agrawal, executive]

Yes.

[Percy Panthaki, analyst]

Okay, okay. Understood. Secondly, I just wanted to understand what are your plans in terms of new store openings for FY '25? And if you can break it up by segment? And also, do you have any closure plans for FY '25? Or it's now more or less going to be done by the end of FY '24?

[Rahul Agrawal, executive]

So on '25, we expect to do around 25 to 30 sites and broadly 50% of this will be for Barbeque Nation brand. And the balance 50% would be for both Toscano and Salt. So this is a broad breakup.

In terms of closures, I think they're largely done in this financial year in '24. In '25, I don't expect any closures to be there. But the focus on overall profitability is very high. So at max for the next year, full year, I don't expect to go beyond 3 to 4 closures, which is, I think, a usual closure rate, which the company will maintain going forward.

[Percy Panthaki, analyst]

Okay. Understood. And there's no plan for any international store opening next year?

[Rahul Agrawal, executive]

No, there are. So when I say Barbeque Nation brand, I mean also international, we can do 2 to 3 international stores. International business is delivering around 20% EBITDA margin. So there is cash accumulation there. And we may, based on the ability of good sites, we'll utilize the same cash to expand.

[Operator]

[Operator Instructions] The next question is from the line of Rajesh [indiscernible].

[Unknown Analyst]

I just wanted to understand what goes into the decision making of opening in new restaurants and then what goes to the decision of closing the old restaurants? Because we have been seeing like we are adding 8, closing 4. This has been repeating for the last 3, 4 quarters. So in the first place, what are the drivers of opening that restaurants and then why are we closing them now? This has been happening for a long time now, right? So that's why I just wanted to understand what are the parameters that are used in open or closed.

[Rahul Agrawal, executive]

Thank you, Rajesh. I think we have to look at the history of last 3 years after stepping out of COVID, we have delivered good resurgence of business. And based on the success of those existing restaurants, we started to map the market and went ahead and opened up a few more, both in Tier 2 markets and Tier 3 markets. And over the period of last 4 to 5 quarters, in general, there has been a demand issue in the market, which has been impacting a lot of our restaurants.

So it is a hard call of halting the store expansion for some time. And we're looking at our entire portfolio to rebalance in the right manner. And that is why for the entire year, we have closed few restaurants and very selectively looking at opening up the new ones. I think by end of this year, we are done with that, and we are at the right stage of resuming our growth.

One other change that you'll see between our expansion last year versus this year is that -- when I say last year FY '23, is that FY '23 was largely led by Barbeque Nation. But today, given that we have 3 to 4 strong brands in our portfolio, we want this to be more broad-based, so that the impact of any possible cannibalization or impact of a maturing of these new restaurants and the impact on our own financials is managed well. So this is probably our strategy. We have to react to the -- to our strategy based on market conditions, and that's what we have done.

[Unknown Analyst]

So when do you revisit your decision to open. Okay. Now that we have opened some new restaurants. So when do you come back and tell you, okay, is this the right decision or not? And what goes into it?

[Rahul Agrawal, executive]

Last quarter also, we had mentioned that we believe that our expansion of the strong rationalization program is 3 months done. Last quarter when we spoke in November, we clearly knew what needs to be done in terms of more closures. And we had already started to build our pipeline from January on -- December, January onwards. And obviously, the lag in terms of building pipeline and then there is construction and then the restaurant starts trading. So I think as a normalization, we are already 2 to 3 months into building our pipelines and then some of these getting under construction. So I think as in -- we are already going to that phase now.

[Unknown Analyst]

Okay. So one other question I have is like, see the -- you have made the statement at least twice already, but this quarter's margins are like sort of the base. So we will not be seeing lower margins like in the last 3 quarters going forward, right? .

So if you see this SSSG, same-store sales growth rate, it's still in the negative zone and then our margins have moved up. Can you please explain that difference because those things are clearly not matching here. And then your confidence that going forward, it will not go down, the margins will not go down. So I just wanted to understand how these things work out actually.

[Rahul Agrawal, executive]

So When we compare our -- this quarter's margins with the previous 3 quarters, obviously, like I said, there's delta because of gross margin. There's delta because of portfolio rationalization, right, which has -- which was not built into last 3 quarters, but it did build into here because all the closing costs, onetime costs have all been factored into. There is an impact of cost initiatives, not the initiatives, even if you may start something, it didn't start selling from day 1, you make a decision, you implement that and there's a lag of anywhere between 1 to 2 quarters, depending on the initiative you have taken.

So all of these things have come into play in quarter 3. So the only comment that I'm making is with some of the efforts taken are more structure and permanent. And the margin improvement this quarter, which is a seasonally good quarter for us, driving from the operating leverage is something that is always at play. So if the revenue dip in quarter 4, then to some extent, margins will dip only from a factor of operating leverage. But the other 3 initial factors will continue to play.

[Operator]

We have our next question from the line of Vicky Punjabi from UTI Mutual Fund.

[Vicky Punjabi, analyst]

Just a quick one. I mean, what surprised me in the results was that -- I mean if I look at the peer sets, the dining revenue has somewhere been under pressure. Sequentially, I think on a personal basis they have declined. It's not something which you have seen. I mean what has driven this? I mean -- and as I understand, I mean, if I read the comments properly, it's actually a led by higher footfall. And this is on a sequential level. And so what's actually driving this change in behavior of Barbeque [indiscernible]?

[Rahul Agrawal, executive]

So on the sequential basis, obviously, quarter 2 is on the weakest with higher numbers of vegetarian days. If you look at quarter 2, pretty much 70% of the month was impacted because of various vegetarian days, whereas it continued in October because of factors like [indiscernible] but that consumption pattern came back in November, December. And frankly, the sequential improvement between quarter 2 and quarter 3, if you look at our historical numbers 6, 7 years back history, these are similar. December month, like I said, was very good and the month itself was very positive for us, right? So it is all led by footfalls.

[Vicky Punjabi, analyst]

It would actually [indiscernible] companies, 3Q used to be better than 4Q versus -- sorry, 3Q used to be better than 2Q. Here I thought was an exception. You guided [indiscernible] that ensure there was a decline in consumer sentiment numbers. But I mean your results kind of didn't take the opposite side, especially on -- given that you are high on timing. But I mean, as continuous demand environment improves the question. Is that true? Or has the store closure somewhere right here?

[Rahul Agrawal, executive]

I mean both have had -- look, no doubt portfolio rationalization has held. Portfolio rationalization also had stringed our overall top line, but has expanded our margins, right? And in some cases, if the demand was moving into splitting between 2 restaurants and now moving to 1 big restaurants. And when I talk about portfolio rationalization, this is done across only 15 markets out of, say, 80 markets that we operate in and that has delivered some results. But also on a sequential basis, quarter 3 dining business have been better. Corporate business, for example, between 10th of December to around 24th, 25th of December was very good. Even during the last week of December, the business was very good. And my peer check with a lot of peers, dining players or casual dining players, they have pretty much seen similar improvement in the month of December.

[Vicky Punjabi, analyst]

Okay. And just to understand the commentary, I think you expect that at least on the SSSG basis, sequentially, the trends are improving. Can I take the fact that demand environment continues to improve? Is that what's being in...

[Rahul Agrawal, executive]

So I can't say that clearly, that demand has improved completely. One of the other empirical study that I believe also is the overall supply in the restaurant industry has gone up a lot. So there's also been distribution of the customers across more number of players. So to that extent, the entire industry environment remains challenging. And that is why in this Chinese environment, your own in-house or internal execution becomes very important. And you have to have a very tight control on your cost so that these -- the operating performance is delivered. Obviously, in our own business, some of these things take time, which is what we have gone through over the period of last 3 quarters. But I won't sort of stand up and say that no demand has completely improved. To some extent, the base impact will also kick in, in the next financial year. But I still don't see the same level of demand that maybe we have seen, for example, pre-COVID days, right?

[Vicky Punjabi, analyst]

And just last one on the store expansion side. So I mean, there were certain decisions that led to higher accelerated pace of store expansion early and now you have ended up rationalizing those stores. So -- and we review my expansion now, but how confident are we that the same [indiscernible] expansion, we won't be in the same position of possibly rationalizing stores 2 years, 3 years down the line. I mean how well have you rectified the reasons because of this rationalization?

[Rahul Agrawal, executive]

Yes, I think FY '24, the period of new store expansion has been very, I think, slow and cautious. FY '23 store expansion. One, it was focused on only 1 brand, which is Barbeque Nation, right? And that has put a lot of pressure. And the store expansion was also done in an environment of declining industry trends. I think next year, given the base impact, given that there has been nationalization done and is also being done across the industry, there would be some improvement, and I see wallets will be slow and store expansion done in that environment versus '23. And secondly, store expansion being done across a few focused brands will put less pressure on the operating performance of one brand. So to that extent, I think it's different. Plus our internal evaluation cater also have been strengthened. Some I can speak about some I can't speak about openly. But overall, I feel confident that the drag that happened from expansion in FY '23 should not be there.

[Vicky Punjabi, analyst]

Sure. And just last one. I think I missed this, what's the guidance for expansion?

[Rahul Agrawal, executive]

We're looking at 25 to 30 for new stores in FY '25.

[Operator]

We have our next question from the line of Resha Mehta from GreenEdge Wealth.

[Resha Mehta, analyst]

Yes. This is Resha. Most of my questions have been answered. Just 2 more. So the first one is on the Salt, can you share what is the revenue number for the 2 months, November and December, as it was consolidated. And also, would the similar consumer demand trends reflect in Salt's revenue growth profile as well. If you could just comment on that? That's the first question.

[Rahul Agrawal, executive]

Yes. So Salt for 2 months did approximately INR 6.2 crores across their 6 restaurants, and they did an operating margin of around INR 1-odd crores from that. So the impact is not drastic on the overall numbers.

Yes, Salt also was -- has reflected similar demand trends. Just one comment on Salt. Salt number of restaurants are very small, and they have one restaurant in Chennai, which got impacted a lot in the month of December because of floods. So we have just 1 restaurant there. But Barbeque Nation also has a restaurant in Chennai but in the entire scheme of things, it balances out. That was Salt, it mattered. Yes. So that's it on Salt. I think this is your question basically, right?

[Resha Mehta, analyst]

Yes, yes. Right. And the second one is on the cloud kitchen. So if I recall correctly, we also did get into this format post COVID. So it does not get mentioned in the presentation, I'm not sure if whether we are still continuing or not, but how has it -- how has been your experience for us and what's the unit economics there if you can just elaborate on that?

[Rahul Agrawal, executive]

No, we were not -- we're not continuing with this. So we have consolidated this from our existing operation itself. We experimented with this during a period when average revenue per store from our delivery business was higher. But as this stabilize at around INR 24,000, INR 25,000 per day, which is an average only of say INR 8 lakh, INR 9 lakh per store. It was not making sense to incrementally spend on -- run by power supply chain, and therefore, we sticked to only doing with from our own outlets.

[Operator]

We have our next question from the line of [ Manav Vijay from Deep Financial Consultants ].

[Unknown Analyst]

Sir, first of all, if you can tell us regarding the Salt restaurants, so they have been classified as mature ones or as new restaurants?

[Rahul Agrawal, executive]

So out of 6 restaurants that they have, 5 are more than 2 years old and classified as a mature and 1, which is new is classified as new.

[Unknown Analyst]

Okay. My second question is, sir, so if you look at the sales breakup last year, roughly 75% of your sales came from metro and Tier 1 towns, which in 9 months has roughly moved to 77 to 78. Now -- so going forward, should we assume that the proportion of sales coming from metro and Tier 1 towns, where I believe the focus as well for the new restaurants opening as well. So this number will continue to move up?

[Rahul Agrawal, executive]

No. So we don't give numbers on share of business, we give numbers on store counts. And I think that will remain at 75-25. So the plus/minus delta is based on the opportunity that you might build in that quarter. But strategically that percentage will remain at 75-25.

[Unknown Analyst]

Okay, okay. Fair enough. sir, my last question is, so let's assume for a second that, let's say, demand ramp doesn't improve, so SSSG doesn't improve. So from the current cost base that we are setting ourselves we have taken a lot of steps or efforts in last, I believe, 9 months, 15 months to correct the base that we had. So are there further levers available if, let's say, demand were not to revive even in next 6 months, 9 months.

[Rahul Agrawal, executive]

So look, there are efforts being taken and there are ongoing efforts also which is there, right? I think, on the demand scenario, I don't believe that this should not improve. And obviously, there's a lot of work being also done at the store level for disengagement. You must have seen a lot of food activation work that we are doing in the outlet, which is also giving us good results. So I think eating out will not completely go away. Some of the supply also will correct because at these levels, I don't think people can continue. While this business throws out a lot of cash, but if not managed well, this can also lead to losses, right? So I think it's a matter of time. We have to stay put and keep giving our efforts towards that. In a scenario wherein this continues in the same fashion, we obviously will -- obviously, margin will not be at the same level that we used to do earlier, but we'll continue to drive efforts and see how we can optimize our business.

[Unknown Analyst]

Okay. My last question to you, sir. So you intend to open roughly 25 to 30 next year. What will be the CapEx for the same? And whether the operations will generate enough cash for you to open them?

[Rahul Agrawal, executive]

Yes. So the overall CapEx, including maintenance CapEx and other onetime CapEx should be in the range of INR 80 crores to INR 90 crores. And our operations are good enough to generate that. Even this financial year for the first 9 months, we have generated around similar numbers. And despite a weak year for us because of H1, I think there's an mode in this. So this is how the company has been built. We grow largely from our internal ways.

[Unknown Analyst]

So what has been the cash generation in the first 9 months of this year compared to last 9 months -- last year of 9 months?

[Rahul Agrawal, executive]

So this quarter has been INR 38 crores, which is higher by around INR 16 crores. For the full 9 months, we would be approximately INR 80-odd crores. Last year, 9 months would be INR 115-odd crores. Sorry, Vijay or Amit, if you can help me with those numbers.

[Unknown Executive]

It's INR 105-odd crores last 9 months.

[Rahul Agrawal, executive]

INR 105-odd crore last 9 months.

[Operator]

We have our next question from the line of Resha Mehta from GreenEdge Wealth.

[Resha Mehta, analyst]

So you spoke about the increase in supply or increased competition in the eating out space, right? So when -- so do you think this is structurally increase and is here to stay? And when was the last cycle when we saw such an increase in supply and then how things panned out in that cycle.

[Rahul Agrawal, executive]

Well, very difficult for me to do the numbers in the past. But if you look at our [ cade ] area, [ cade ] market, we see a lot of casual dining restaurants opening up, new concept opening up. And normally, when some of these things open up, consumers do go and try. And in most of these cases, the real trick is whether that excitement is maintained buyback restaurant over a period of time. And if it is -- normally my experience, if it is a side, if it is something which is new and doesn't catch the fancy of the consumer for a longer period of time, this normally some dies off and auto correct and consumers go back to their usual projects. I think this is where we are. Unfortunately, we don't have any formalized investor report to quote those numbers. But based on our internal study of all those areas, we do see supply has gone up?

[Resha Mehta, analyst]

And would you say that it's also not only because of the subdued demand but also because of this increased competition that you are seeing a dip in your -- the number of your repeat customers or your loyal customers, I mean, have you seen that in your numbers?

[Rahul Agrawal, executive]

I think it's both. I think it's one, obviously, to one that the entire consumer space is, I think has been struggling with this. So it is a mix of both, which is a decline in consumer demand discretionary spend and also increase supply at least for restaurants.

[Operator]

[Operator Instructions] Ladies and gentlemen, this concludes today's conference call. On behalf of AMBIT Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.