Jubilant Foodworks Ltd
NSE:JUBLFOOD
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Jubilant Foodworks Ltd
Earnings Call Analysis
Q1-2025 Analysis
Jubilant Foodworks Ltd
This quarter was remarkable for Jubilant FoodWorks Limited (JFL) as the company expanded its store network to 3,000 stores across five brands and six countries. Notably, the 2,000th Domino's store in India was opened, increasing India's share in the overall Domino's network to approximately 10%. The company now operates 2,029 stores in India, serving consumers in 427 cities. This growth is aligned with JFL's multi-brand, multi-country strategy, which saw brands like COFFY in Turkey and Popeyes in India expanding significantly.
JFL's system sales across all brands and markets reached INR 22.4 billion, up 13.5% on a constant currency basis. Consolidated revenue increased to INR 19.3 billion, marking a 44.8% year-on-year increase. The EBITDA margin stood at 19.8%, a slight dip of 85 basis points year-on-year but an improvement of 8 basis points quarter-on-quarter. The PAT margin showed significant improvement, reaching 3.1%, up 98 basis points year-on-year and 68 basis points quarter-on-quarter.
In India, JFL's revenue was INR 14.4 billion, up 9.9% year-on-year. The EBITDA margin was 19.3%, a decrease of 178 basis points year-on-year but an increase of 22 basis points sequentially. Domino's India saw 8.5% growth, driven by a record number of orders and 3% like-for-like (LFL) growth. In Turkey, the company operates under the brands Domino's and COFFY. Domino's Turkey reported system sales of INR 7 billion with 10.3% LFL growth, while COFFY achieved system sales of INR 656 million with 8.7% LFL growth. The revenue from DP Eurasia was INR 4.6 billion, 15.4% higher year-on-year at constant currency.
JFL's strategic initiatives to enhance customer value included the completion of a microservices-based architecture for their customer app, which resulted in a record monthly active user base of 12.1 million, a 17.5% year-on-year increase. Innovations such as the Domino's cheese volcano pizza and the introduction of a lunch thali priced at INR 99 drove in-store growth. Delivery orders grew 29.5% year-on-year, contributing to an overall delivery growth of 15.7%.
Noteworthy milestones were achieved by JFL's emerging brands. Popeyes crossed the 50-store mark in India, now operating in 21 cities. Dunkin' added 5 new stores and introduced bubble teas, improving the performance of its beverage list. Hong's Kitchen expanded by 5 stores, and COFFY in Turkey grew to 105 stores. These expansions underline JFL's aggressive multi-brand strategy aimed at capturing larger market shares across diverse segments.
JFL reaffirmed its network expansion guidance, indicating a ramp-up in the pace of new store openings in the coming quarters. Despite a challenging demand environment, the company remains focused on driving growth across brands and markets while enhancing margins. Importantly, JFL has not increased prices for Domino's products for eight consecutive quarters. Instead, it absorbed cost inflation through internal optimization and productivity enhancements.
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Ladies and gentlemen, good day, and welcome to the Jubilant FoodWorks Limited Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Jajodia. Thank you, and over to you, sir.
Good evening, everyone, and welcome to Jubilant FoodWorks Limited Q1 FY '25 Earnings Call for investors and analysts. We are joined today by senior members of the management team, including our Chairman, Mr. Shyam S. Bhartia; our Co-Chairman, Mr. Hari S. Bhartia; our CEO and MD, Mr. Sameer Khetarpal; our CFO, Ms. Suman Hegde; and Mr. Aslan Saranga, CEO for our Turkey business.
We will commence with key thoughts from Mr. Hari S. Bhartia, and then turn to our CEO and MD, to share his perspective. After the opening remarks from the management, the forum will be open for the question-and-answer session. A cautionary note, some of the statements made on today's webcast and call could be forward-looking in nature, and the actual results could vary from the statement. A detailed statement in this regard is available in Jubilant FoodWorks earnings document. We will share the replay of the call on the company's website under the Investor Relations section.
I would now like to invite Mr. Hari S. Bhartia to share his view with you. Thank you, and over to you, sir.
Thank you, Deepak, and good evening, everyone. Welcome to our earnings call. The quarter gone by was truly special as JFL has reached a significant milestone of 3,000 store networks across 5 brands and 6 countries. We also celebrated the opening of 2,000th Domino's store in India taking India's share to the overall Domino's network at around 10%.
With 2,029 stores in India, we are now serving consumers across 427 cities. We are humbled by the journey, travels together with the support of all the stakeholders. We are excited by the vast opportunity for our brands and have ambitious plans for all brands and markets in which we operate. And through commensurate investments in supply chain and technology, building on consumer love, we are confident that we will achieve newer records and milestones in the future.
We are very enthusiastic with the potential of brands like COFFY and Popeyes. Crossing 100 stores in COFFY in Turkey and 50 stores in Popeyes in India is a step to realize our multi-brand, multi-country growth strategy.
This quarter is particularly important in our growth journey as we are able to achieve 8.5% year-on-year growth in Domino's India, driven by 3% LFL growth. While there was no major improvement in the underlying demand situation our sharp focus on delivery value to the consumer helped us register this growth.
Product innovation, free delivery campaign operational excellence through decentralized leadership team, technology integration to aid operations and supply chain are some of the initiatives that aided in delivery value to our consumers.
Notably, while navigating through high inflation, we didn't take any price increase in the last 8 quarters and absorb cost inflation through internal cost optimization and productivity enhancement program. Delivery continues to scale new record even on a high base delivery LFL recorded a growth of 12.1%.
Through targeted initiatives, we are also able to grow the dining revenue by 4.6% quarter-on-quarter or almost 1.7% LFL quarter-on-quarter. This quarter also, for the first time, reflects consolidation of DP Eurasia account for all 3 months. We are pleased to report a solid start to FY '25 with elevated growth and profitability. We also stepped up the pace of menu innovation across all markets, which have been met with great enthusiasm from consumers. In terms of network expansion, we reaffirm our network guidance and you will see ramp-up in pace of network expansion in the coming quarters.
With that, I request Sameer to share the quarterly update and his own perspective.
Thank you, Mr. Bhartia, and a warm welcome to all our conference participants. As always, we appreciate your interest in our company. For context, this quarter, we are consolidating the books from DP Eurasia for the full 3 months. However, it is not in the base calculation for the same quarter last year.
Overall performance. It is indeed a milestone quarter. JFL delivered a strong quarter across all business lines, expansion in store network and improvement in margin trajectory. Personally, for me, quality of growth is the biggest news as the growth is order-led and new customer led as the company acquired new customers at the highest ever rate, beating the industry trend. Thus indicating the belief in our core strategy of being customer first and data and technology forward.
System sales for JFL Group across brands and markets, which you may be aware, includes end customer sales of corporate stores as well as franchisee stores came in at INR 22.4 billion, up by 13.5% on constant currency terms. Consolidated revenue came in at INR 19.3 billion, up 44.8% year-on-year.
EBITDA margin was at 19.8%, lower by 85 basis points year-on-year. However, it improved 8 basis points quarter-on-quarter. The PAT margin was at 3.1%, was higher by 98 basis points year-on-year and 68 basis points quarter-on-quarter. Group store network across all brands and countries is now at 3,057 stores, up 66 stores quarter-on-quarter.
Next, let me describe how this performance played out in India and Turkey as regions. Within India, the revenue was at $14.4 billion, up 9.9% year-on-year, EBITDA margin at 19.3%. While it was lower by 178 basis points year-on-year, it sequentially grew by 22 basis points. Domino's growth came in at 8.5%, led by record high orders, registering 16% growth year-on-year with like-for-like growth coming in at plus 3%.
Domino's mature store ADS roughly about 1,644 stores out of 2,000 stores is nearly at INR 80,000, was also the highest in the last 5 quarters. Network expanded by 34 stores and the brand entered 6 new cities. Clearly, this is a testimony of the underlying strategic initiatives, which are transitioning from 4 regions to 7 region structures and 35 circles below, with each region ready to scale INR 2,000 crores as a region, and circle, and each led by a circle led by a market maker.
We are witnessing strong uptick in underlying customer metrics and there is more to achieve there. This quarter, we fully completed the movement to microservices-based architecture for our customer app and we witnessed a record high monthly active users of 12.1 million customers, which was up 17.5% year-on-year. The brand refresh, it happens only with pizza, help us significantly improve our brand scores and is helping us win share of occasions.
In delivery, we saw a growth of 15.7% year-on-year. Orders grew 29.5% year-on-year, and the delivery LFL growth was at 12.1%. We witnessed -- we also increased the pace of new product introduction to drive in-store growth during lunch hours by introducing the renowned value or best value, as we call it, that the QSR chain offers, i.e., a lunch thali, a 4-course meal at INR 99, available in stores between 11 a.m. and 3:00 p.m.
To improve attachment of beverages, we launched a range called chillers. For customers looking for indulgence, we launched a globally acclaimed Domino's cheese volcano pizza, meant for cheese lovers, creating new excitement in the category.
Moving on to the business in Turkey. As you know, we operate with 2 brands in Turkey, Domino's and COFFY and store network of 707 and 105, respectively. We added 4 stores for Domino's and 8 for COFFY. 88% of the network in Turkey is franchise operated, which makes the model asset-light, hence it is important to look at both system sales and the revenue that the company earns by serving the franchisees.
Domino's Turkey system sales was at INR 7 billion, LFL was 10.3%. For COFFY, system sales came in at INR 656 million, and LFL was 8.7%. The revenue from DP Eurasia came in at INR 4.6 billion, higher by 15.4% year-on-year at constant currency rate. EBITDA margin came in at 25%, 871 basis points year-on-year improvement, but minus 150 basis points lower quarter-on-quarter. PAT margin was strong and accretive to Indian business at plus 9.2%, which is 666 basis point increase over year-on-year and 300 basis point increase quarter-on-quarter. This is in line with our core thesis of acquiring the business, which is asset light and PAT accretive business.
Key highlights from other emerging brands. In Popeyes, we crossed a significant milestone of 50 stores and now serving customers across 21 cities. We filled an important gap in our offering by launching Popeyes [indiscernible] baskets. We continue to remain bullish on store expansion, the customer feedback that we are getting, sales, and margin improvement for the business.
In Dunkin, we added 5 stores, launched bubble teas during the quarter, which helped us enhance the beverage list mix and dialing up occasions for donuts and also improving the performance of the brand and the stores, especially around restaurant profitability.
In Hong's Kitchen, we added 5 new stores, taking the store network to 33. The successful Hong's Kitchen wrap range was further bolstered with the introduction of 3 new wraps starting at INR 99. In COFFY, in Turkey, we surpassed a significant milestone of 100 stores and now are 105 store count. The franchise store count is now 80 spread across 19 cities in Turkey, with strong demand from franchisee partners to further expand.
Then let me share the business outlook. I had shared with you our business strategy in the prior call for FY '25 in the previous call. We are making progress on driving growth across brands and geographies and are equally focused on driving margin expansion in India.
It is important to emphasize that this is now the 8th straight quarter with no price increase in Domino's and we have waived off delivery fees, which has enhanced the value quotient of our customers materially. The consumers in turn are reciprocating their love for the brand and appreciating the outstanding value along with high quality of service.
Equally on margins, we are keeping a hawk-eye and pushing to get the leverage in the P&L. As indicated, we expect the margins to improve from the lows of last quarter, i.e. Q4, 2024. There is no change in our network guidance, as indicated earlier, even though we recognize the pace of expansion in Domino's was slower this quarter.
In closing, I would like to thank my team across all geographies for making progress and executing in a challenging demand environment. We will stay focused on our core strategy across 4 pillars outlined in the last call.
With that, I would request the moderator to initiate the Q&A session.
[Operator Instructions] We will take our first question from the line of Nihal Mahesh Jham from Ambit.
I have 3 questions. The first was what is, in your opinion, the reason of such a stark difference in the delivery and dine-in growth that we are seeing? And did the INR 99 lunch menu launch have any significant impact on the dine-in performance in terms of the project of performance impact?
Sorry, the first question is what is the...
Why is there such a divergence in the delivery and dine-in growth? And did the INR 99 menu launch have any positive impact on dine-in sales this quarter?
Yes, I think the first question, what's causing the divergence? #1, I think Domino's delivery is -- delivery and Domino's are synonymous in terms of customer memory structures. We have doubled down on delivery, as you know, that we have always pushing the boundary. Nearly 70% of our orders are now delivered in under 20 minutes.
And the free delivery campaign that we tried during the IPL only told us how much upside that is there on delivery. So a combination of brand proposition, excellence on operations, free delivery. And in general, as you would notice, world over and across all QSRs, delivery as a mix is growing. So there is also a consumer trend that we are riding on. So that's 1 reason.
And on the dine-in and takeaway, I actually see it as an opportunity versus a weakness. And we are beginning to capture a part of that consumer cohort by launching a INR 99 lunch fees, which to me actually is a breakthrough innovation from giving value to the consumers in store. So that has helped the quarter-on-quarter decline. And in fact, the Q4 was lower than Q1, and there is actually growth of plus 2%, just like-for-like quarter-on-quarter, if I just look at dine-in/take away. So very focused on both delivery and dine-in.
Sure, Sameer. The second question was when you speak of improvement, ideally Q4 to Q1, we do see an improvement if I look at historical seasonal terms. If I have to look at it on a Y-o-Y basis or the like-for-like trajectory, is that also seeing a decent improvement when you're looking at, say, the first month of Q2?
No. Actually, see, as an operator, I think of the world as improving week-on-week, month-on-month. That's how we run the business. See, for the last 4 quarters, there has been a decline in our dine-in weekly orders. Now from Q4, we have started going upwards. And my take is the trajectory, if we execute and give value to consumers for dine-in, continue to reiterate on the menu side, we should see the growth. And plus, we have refurbished quite a few stores. That is also playing out. Any store refurbish at least sees 10% to 12% growth in dine-in.
Got that. Just 1 final question from my side would be that ideally, for our margins, we've been looking at 21%, 22%. I just wanted to check if that is the range we are looking at for this year for the stand-alone business?
I think it's a good push. For the moment, I want to make sure we capture the growth, acquire new customers and serve them well. I do have that number in my mind, and we are focused on it, but I don't think it is going to be achieved in the coming quarters, for sure.
Next question is from the line of Shirish Pardeshi from Centrum Broking.
Congratulations for the good recovery. Starting from what we understand, most of the staple companies are trying and there is a challenge people have seen heat wave and other issues around. But that it since that past is behind, and we are now on a good wicket, so whatever strategic actions we have taken and started delivering a good fruit.
My bigger question is that when I look on Slide 20, you have said that the monthly active users has moved from 10.3 million to 12 million, which is almost 2 million customers we have added. Can you qualitatively speak something because when I see the delivery part, which has fueled the growth of 12.1%, but EDF has not grown to that level. So maybe if you can give some color how we should read this number?
This is how I read it. For context, there is, of course, a demand slowdown and consumers are conserving their pockets. And we saw this 4 or 5 quarters ago when we saw larger pizzas being downgraded to medium and medium downgraded to regular. We have called that out. Now in this environment, the most important piece is to provide value to consumers acquire new consumers and retain our existing consumers.
So therefore, it should show in our consumer -- the new customer acquisition and total customer base. So this nearly 15% increase in monthly active users is actually showing the result is in the sales of our mature store, which is at an all-time high. In the -- at least in the last 5 quarters, the mature stores have grown.
Now in terms of quality of consumers, I generally believe consumers will go where they see great pace and outstanding value. So of course, it is early how this will pan out. We don't know. But I'm very confident that these consumers are not just business seeking consumers and who will not value great service like 20-minute delivery or pizzas like Volcano Pizza. So I'm quite confident they will say it is not that we are attracting consumers who are very poor in kind of their life cycle qualities.
Okay. Just 1 follow-up. If Domino's India would have grown 8.2%. Is the value, which is coming down and volume is going up, that's the presumption, which I had. But anyway, I'll go with your...
That is correct. That is correct and that is by design, right? And because free delivery, we brought it -- like the threshold for free delivery is INR 150, right? So from that perspective, it is giving great value to consumers. And therefore somebody who once had INR 150, INR 155 in pocket, get like a couple of pizzas and get a free delivery versus like before COVID, when it was free delivery, it was the threshold used to be INR 350.
Okay. Okay. Got it. My second question on Domino's Cheesy Reward. Now cumulative membership has now reached almost 25 million. Would you have any numbers to say how many people have enrolled second time, third time, fourth time or maybe how many -- what was the redemption or conversion which people have reached to 6 pizzas?
Yes. So what we look at is cohorts of how many customers have redeemed 1 pizza, how many customers have 25, 35, 45 and the overall frequency. While the overall frequency has not materially changed, but the cohort of high-frequency customers who order almost 15x in a year, that base has materially grown.
So it has provided a lot of stickiness and the churn rates or customers, who would probably go to some other platform. It has definitely dented that. So at least -- and that was the core thesis of this launching this program was to give stickiness to consumers, and that is what it is doing.
To my long memory, I think somewhere I picked up the Cheesy Reward customers were contributing around 45% of the business. Is that number has changed significantly now?
It's more than 50%, right? So that number is obviously inching up, increasing and consumers are noticing. And once you get a free pizza, Shirish ji, then it becomes like a self-fulfilling kind of a cycle where they know that this works, I'm getting a pizza, and when you have to make a choice from ordering from outside, then this becomes top of the mind. And we are seeing that in our numbers.
Okay. That's wonderful. Just last question on the DP Eurasia. Though you have given that INR 451-odd crores you have delivered in this quarter, INR 461 crores, which has grown almost strong double digit. But if we need to model this number because, obviously, we'll take 4 quarters to build the numbers. But if you can directly say that what is the quality of growth, what is the number of stores you are expanding? And maybe some direction on the same-store sales growth or LFL growth in that country?
So the LFL growth rate is 10.3% for Domino's, and it is 8.7% for COFFY. So I'm talking in rupee terms. So therefore, it is very indicative and business -- is the quality of growth is very strong. And in fact, as a market, having now visiting every quarter, I see the strong consumer pool, young population and habit of eating out. So clearly, it is a very vibrant economy. If we were to take this was in the base, then this number, the growth would be 15.4%, right, 15.4% year-on-year.
So the true base to base comparison is 15.4% growth, which is very healthy.
But is there any seasonality quarter 1, quarter 3 is better or quarter 4 is going to be stronger? I mean, I would understand the seasonality is also going to be there.
So I think the H2 is typically higher again. But when you are looking at Q1 and Q2, there could be because there was Ramadan, which was in different quarters. But I will not read Shirishji on that. I will not read too much into it. And this 15.4% is a fairly representative number actually.
Next question is from the line of Percy Panthaki from IIFL.
For the stand-alone business, would you be able to tell us the adjusted EBITDA margin for political contributions, if any?
Percy, it's about 40 to 50 bps. So yes, if you look at our stand-alone business, result of 19.3% that we have declared. So it could have been total 19.7% to 19.8%.
Okay. Understood. Secondly, I wanted to understand for Popeyes, would you be able to give us some idea now in terms of what do you see the shape of financials for the stores which have been open for more than 2 years in terms of what is the ADS and what is the restaurant operating margin that they generate for the cohort as a whole? So that we get an idea as to, I mean, how the format is performing for stores more than 2 years old.
Percy, we definitely want to build it. We are bullish about it. We see customer traction. And for those reasons, Percy, we are refraining from not giving any guidance till we hit a store count of 100, and that's been kind of our stated position for the last couple of quarters. But in terms of quality, we are seeing very strong uptick in orders, in our delivery growth. The baskets, and the new flavor that we have launched on [indiscernible]. All of that is actually very positive.
We have worked materially hard to reduce the cost of goods sold. So in fact, our margins are now very healthy when we look versus competition. And we have brought down the store size and CapEx to suite, to fit into Indian kitchens. So very confident how this has been panning out. It's been just 2 years in the system, and we know it takes some time to build a strong brand. But from a team management bandwidth, capital, we are fully invested behind growing this brand.
Sure. But for us, as financial market participants and when we are giving SOTP or a separate value to the format, would we be right in assuming that in the medium term, this format would be able to do restaurant operating margins similar to that of Domino's?
It's a different business. I think we should compare this to more chicken and burgers as a category, right, because the input cost is different the cost in a pizza is more opaque versus let's say, bone-in chicken. So therefore it has different dynamics, right, from an industry structure standpoint or category structure standpoint, it should similar, it should mimic what it is adjusted for scale.
Understood. Understood. And finally, just wanted to understand if you can give some store guidance for Domino's India store openings for this year and next year?
So this year I think we have stated we are targeting 180 stores opening. And I think, at the moment, we feel confident we'll increase pace in Q2.
We have the next question from the line of Devanshu Bansal from Emkay Global.
Many congratulations on a good delivery performance in Domino's India and a strong sequential pickup in DP Eurasia. Sir, the Domino's India volume growth is about 16%, but value growth is about 8.5%, which is almost a 7.5% decline in bill size for us in Q1. So what is the reason for this since we introduced the packaging charge as well?
Yes. See, we obviously are giving customers or putting INR 40 per order back in customers' hands or wallets. Packing charges where we have introduced are limited and does not cover even 50% of what we were charging the customers. Second is we have reduced the threshold of free delivery to INR 150. So customers today can make a cart of INR 170, INR 180 and checkout, which is increasing the volume, which is increasing the new customer rates.
We believe that will also result in repeats, because we're now having different group sizes at different occasions, whether you're ordering for a family or yourself, you get free delivery. So that is where I think we are seeing the growth. And this cycle starts playing into repeat customers and starts compounding. So that is the thesis behind that. And that is why you are seeing a higher than ever INR 25, INR 30 drop in order ticket size. And it is by design, and we had experimented it for 6 months.
Right. So I mean, and they should continue at least for the next 2 quarters also, right? So because Q4, I guess, we experimented, but for next 2 quarters, this decline should continue in bill size?
Quarter-on-quarter, it should not, but I think year-on-year, it will.
Next question, I just wanted to understand the financials of DP Eurasia sort of better. There is a strong 40% kind of pickup sequentially, if we adjust for 3 month number that we gave in Q4. So is there a big seasonality between Q4 and Q1 there? What has driven the strong increase in DPU Eurasia?
In terms of top line, your question is, or in terms of bottom line? Can you just clarify?
Suman, it is for top line. So we reported about INR 217 crore in Q4 for 2 months. And if we adjust it for 3 months, it would be closer to, say, INR 300 crores, INR 320 crores. But this time around, we have almost reported INR 420 crores, INR 430 crores. So I'm talking about that 40% jump between Q4 and Q1.
Yes. You are right. It's a bit of seasonality that does kick in. And like you said, from Q1 into Q2 into Q3, H2 is higher than H1. There's a bit of that. And of course, there is also what I think from here relative on the movement between when Eid is and when the Ramzan period is on. So there is a factor of that also playing out between Q1 and Q2, which sees there uptick [indiscernible] to come?
Got it. And likewise, gross margins have actually fallen sequentially, and it's a big fall from about 75% to 62% if we look at only the subsidiary gross margin. So what explains that?
So there are 2 things here. I think it's good as we also understand DP Eurasia that have [ gross margins ] of the DP Eurasia business fund structurally, because of the franchisee-driven business will be lower than JFL stand-alone results. And that's also because a lot of their income comes from a cost markup or whatever they do with recovery from franchisees, which would be there in the cost, but the income wouldn't be [indiscernible] amount when you sell to normal customers.
So fundamentally, this business averaging a gross margin of 64% to 65% versus what you would see in at JFL at about 76%. Now coming to your question on why sequentially there is a drop. Sequentially, actually there is no drop in the business as intrinsic gross margin. In the first 2 months of integration, basis the way Turkey reports its number and how they conclude gross margin versus how the India requirement on how gross margin as reported, there were some mapping changes which had to be done, which we have done and corrected for. So it was more a mapping issue, which happened in the first quarter of our integration in more in terms of understanding their ways of accounting versus ours.
But if you look at an EBITDA level, it's kind of square off, right? So I wouldn't -- long story short, I wouldn't worry too much about the gross margin. There's no decline in the gross margin intrinsically of the Turkey business. It's more a correction that we have done versus what we reported in Q1 -- Q4 for the quarter. EBITDA being [indiscernible].
Understood. Suman, and then last, just a small follow-up on debt reduction, which is expected for DP Eurasia. Can you sort of highlight the time line for that?
I wouldn't give you a firm timeline on that. I don't think I should try to give any forward outlook. But yes, it's a big focus area. A lot of the debt also of DP Eurasia, within the Turkey DP Eurasia business per se is driven on short term and how they manage the economy on the ongoing way.
It's not long-term basis. It's work more on their working capital management, given the franchise model. And also given the higher inflation was we invest back into inventory to give the benefit as P&L.
In the long term, we do see and from the time from Q1, we have brought the debt down in Q2, and we see this trajectory going in as we exit this calendar year and into next year. The plan is that we should start getting dividends out of this business sometime maybe by mid or early next calendar year.
We have our next question from the line of Latika Chopra from JPMorgan.
Okay. My first question was on demand. Same-store sales growth trends at 3%. Could you share -- give us some flavor of how sequentially through the quarter, these really played out I heard you talking about the broader market remains challenging, and it's your own initiatives, which have kind of helping you outperform the category growth rates.
And I'm just trying to understand, did we see an improvement gradually through the quarter, how the exit SSG numbers were like? And in your view, would you require price increases to improve this SSG? Or you still feel that the initiatives that you've taken still have more to deliver assuming the broader market remains the way it is. So just trying to sense check whether this 3% SSG can it improve towards 5, 6, 7 as we progress through the year?
Yes, I think, these -- that is the endeavor over here, right? I mean you are aware of the competition set and therefore, indicating the macro demand environment. Equally, the delivery is growing for all in the aggregators. So it's kind of a 2-faced market as I see it, right? And delivery comes at a cost to consumers. So they are actually willing to pay the cost for convenience.
So we need to first recognize the trend, organize ourselves and our resources to go behind delivery, and that's what we've done. Now clearly, 3% is whatever 700, 800 basis points higher than where the rest of the industry is landing. I think there is more juice to it, but of course, will require execution. This is not a natural tailwind in the industry and demand that is there. One has to find ways to give value to consumers, and they can make sure you deliver on the promise that hot pizza delivered in 20 minutes at home. So I think definitely, I would agree there is more use, but it is more execution led and not necessarily macro led.
Sure. And then sequentially you have not seen any material trend changing through the quarter. Is that right to assume?
So like I said in my last earnings call, we have begun to see increase in delivery growth rate, and we continue to see delivery growth rates in the positive LFL territories. That we continue to see as we enter this quarter. And despite rains, despite heat, whatever the weather conditions we are seeing an uptick in delivery, and that's what we are banking on.
Then on the dine-in side, we have gotten our act together and I have been a big vocal proponent of it for the last 5 or 6 quarters that store refurbishment, dine-in experience improvement and value through lunch fees. So we are actually in several places, the engine is beginning to do more experiments and learning from there. Some will definitely land. But I cannot say that this 3% will go to 5% the next quarter.
Sure. And within the delivery piece, has the salient of your own app contribution versus the aggregator contribution. Has the savings changed in any material way over the last 4 quarters?
We don't give the exact share, but qualitatively, the Domino's app, like I said, you've seen the monthly active user growth rate I can very proudly say that we have delivered the best ever conversion in this quarter on the app, and we continue to acquire new customers mostly through our own app. So from that perspective, our digital strategy, our data and technology forward approach has played out in a free delivery context even more.
Understood. And the last bit, anything that you want to share on your operations in Bangladesh, any recent trends? That's the last question.
Yes. So I think the quarter 1 was the best ever quarter for us in terms of profitability, the Bangladesh business turned profitable, and we saw obviously material same-store growth. It is too early. In fact, the situation has been better in the last couple of days stores have started opening. Our few stores also got opened. We believe it should normalize because the police was on strike, and once that returns, so you'll have more normalcy on the road. So a little bit wait and watch. But I'm happy to say that our stores our store staff is safe and we have not incurred any material loss to our store and property. And it is less than 1% of our consolidated revenues.
We'll take the next question from the line of Aditya Soman from CLSA.
So first question is just on -- I mean, clearly, with free deliveries here, we seem to be incentivizing customers to shift from dine-in to delivery. Now would this lead to some level of margin impact? Because obviously, you're incurring a fixed cost at store and this delivery of this comes with delivery cost.
Yes, for the same food size or ticket size for food delivery is dilutive versus a customer coming and taking away the order from the store, right? So that is there, but that mix change leads to margin improvement that is showing in year-on-year EBITDA reduction, but it is also giving us positive same-store growth. So you are getting the leverage of that in the P&L. And that is what we are counting on. And as this compound and the customer, these new customers that we acquire, they start repeating, we get greater leverage in the stores.
So in the short term, yes, and if this were to compound, we will be able to negate it. Plus there are several initiatives, like I said, have been a big open end of project visit that will do to kind of, through internal efficiency, but price increase is definitely not on the table as I've always been saying. So this is a time to give more value, gain more share versus the competition.
That's very clear. And then this MAU increase, right? So to a certain extent, that would also -- I mean, the reduction in delivery threshold to 150 would also drive that conversion, right, from dine-in to delivery, because earlier people would walk into the store to get that delivery act of for a small ticket item. Now, maybe they are delivering. Would that explain some of the shift in MAU?
Absolutely. So that's a great question, Aditya. And we ran an experiment across 12 different cities for 6 months before we arrive scientifically what should be the delivery charge by type of a city and commensurating packaging charge -- so we did see when you do free delivery and a very low threshold of packaging delivery, the first business that goes away is actually your takeaway business or carryout business.
That's quite material -- because there is no incentive for the customer to go to the store and pick up the order. And the only friction that you have right now is packaging charge. So hopefully cognizant of it. And therefore, we have to work on the value like for how to get more customers who come into the store with a dine-in on take away.
So therefore, this lunch piece, as we call it, [indiscernible] was launched simultaneously when we launched the free delivery. So that's why it was a very thoughtful intervention, more of a flat, but very thoughtful in how we execute it.
Absolutely, very clear. And maybe just 1 last follow-up on this. I mean the LFL versus SSG, is there any meaningful difference now given that the proportion of new stores adds has been coming down?
Yes. I think SSG is positive. So annually, we disclose that. So it is SSG is now closer to 2%, I think 1.5%, somewhere in that range. So it is positive because, again, I have said that we are reducing the number of spread stores because if LFL was not there, then the need for split comes down. And I actually hope that cycle turns around, we have more LFL and therefore, there is greater need to split, and we expand further. But if you look at last 3 quarters, at least, our new city expansion has materially increased.
And because we are -- as part of our network expansion strategy, we are moving to more white and greener areas because the LFL was negative, and that is billing to pay out in terms of payoff, in terms of the differential between LFL and SSG has come down.
We'll take the next question from the line of Ashish Kanodia from Citi.
The first question was around the margins the delivery initiative, which you have taken. So there are a couple of for delivery fee favor? And then secondly, your ticket size are also reducing. So at what point do you think the margins kind of start to improve? Because at least for the next 2, 3 quarters, things will remain subdued from a ticket size perspective. So first, apart from the project with a cost initiative, is there like an LFL number, which will help you to improve the margin over the next 2, 3 quarters? That's the first question.
Yes, Ashish, from a margin perspective, so we've launched it's I think the way we are executing this as the following. In terms of our marketing campaigns, we are focused on indulgence and you'll see throughout this month, the world-renowned Volcano pizza that we've launched. And that obviously is more the higher in ticket size, and we are seeing very strong traction of that product.
Therefore, we have now followed it up with a TV campaign, which got recently launched. So our endeavor is to increase the ticket size by offering greater fees and more indulgence to consumers. At the same time, when the free delivery is there. So that's how we're tackling it.
I don't expect like a massive uptick in margin in the current quarter, but as this starts compounding, if [ 3 were to go to 4 to 4.5, 5 ] then I will get far more leverage in my P&L, and that is what we are gunning towards plus project [indiscernible].
Sure, Sameer. That's helpful. And second question on the Popeyes side, right, so if compare what has happened between, say, 2Q to 12%. There's almost 28 store addition, but at the same time, you have also entered into 16 new cities. So if you look at the next 1 to 2 years, are you looking at more in terms of getting into newer cities or the idea is to maybe double down on the existing cities because Popeyes is still scratching the surface. So I would like to get some sense on that.
Yes, I think it is typically can be a little bit of a misnomer because you will include Faridabad, [ Rahon ], Delhi right has 3 different and Ghaziabad and so far Noida has 5 different cities, right? So there is a bit of that over there. So I think we are looking at the right clusters, that's how internally we track it. So Delhi NCR is 1 cluster, right?
Chandigarh, Mohali, Panchkula is 1 cluster, but there will be 3 different cities. So we are focused on right locations and chicken eating markets. The number of cities are greater in South, and that's why whether it be it Mangalore or Mysore or Salem, in addition to Bangalore, Chennai and Hyderabad.
So that is why you see greater footprint of cities, but these are cities with very large chicken eating population, where the brand is doing very well.
Sure. Fair point. And just lastly, again on Popeyes, just maybe from a qualitative perspective, when you look at delivery versus dine-in performance for, say, more than 1, 1.5-year-old stores. Any sense on how both these things are performing?
Yes, I think we followed a bit of a Domino's playbook over here. We have stores in malls, which are 100% dine-in, right? We tend not to do delivery from there, and we use our high street locations to do deliveries. That is the approach we have taken. And we have a much larger mix of dine-in store. So therefore, our delivery share is lower and dine-in is higher at the moment.
We'll take our next question from the line of Sheela Rathi from Morgan Stanley.
I have 2 questions. Sameer, on the basis of all the interventions, which we have made, both on delivery and dine-in side, it seems that on the delivery side, things are starting to look up for us, but not necessarily on the dining side. So is it fair to say that next few quarters, we'll continue to see delivery growth ahead of dining growth -- or there are other thoughts around it?
Yes, I think the endeavor is to double down and capture the tailwind on our execution capabilities on the delivery side and flank dine-in and takeaway, right? So that it doesn't decline. So I would concur with the first statement that delivery should continue and will double down and there is more to do over there. But on the dine-in side, we have -- and delivery is about 70% of our -- 69% of our business. And on dine-in side, like I mentioned, we have at least from last quarter, we had arrested the decline, and we have more ideas to kind of bring consumers back into our stores.
So how many quarters we would be away from seeing a similar kind of growth in both the channels?
So I think growth will be different. I think the decline in dine-in will not be there. That is what I'm saying. So I think delivery will continue to grow. So I think that's a worldwide industry phenomenon. So I think for all QSRs in India and also outside and if you read the commentary of whatever international brands when they have declared the results, everybody is talking about higher proportion of business coming from delivery and carryout.
Right. Just to follow-up here, what would be differentials in the average bill value for dine-in versus delivery now, say, where it was, say, a couple of years ago?
Yes. So delivery has higher bigger sites, even now and before. It's just that the INR 40 has gone off from that. And customers have -- so differential has come down actually. I don't want to comment how much an order, I don't even have them what is the differential before versus now, but the differential qualitatively has definitely reduced.
This is like-for-like, right, not including the delivery fee.
The differential between delivery and dine-in right now in the current period versus what it was a year ago.
Understood. And my second and final question was you talked about Popeyes strategy. Also observed that in Hong's Kitchen, we have almost doubled the number of stores. Even for Dunkin', last 2 quarters, we have been expanding the store count. I just wanted to hear your thoughts on what the strategy here is?
That's I think the strategy is clear that we prioritized Domino's and Popeyes as our big growth factors. And we make sure that Hong's and Dunkin', they find the right customer value proposition and store economic model. And I can assure you, both are on track.
In fact, Dunkin is even like more on track to kind of achieving high store-level profitability. So that is the approach, expand rapidly the unconstrained Domino's, expand rapidly in Popeyes. Drive profitability in Hong's and Dunkin, and before we further expand. We'll continue to expand a little here and there.
Just 1 follow-up here, Sameer. Do we have a store count target on these 2 formats for this year?
We have shared a guidance. So about Hong's we'll add 20 to 25 stores. But again, these are not like a number that we are chasing as a goal. Rather we are chasing customer satisfaction scores, store throughput in terms of revenue and the restaurant level profitability. So these are the goals. Once we see it, then we'll figure out what formats are working those formats, we can always dial up and dial down. So it is not lack of team intent or capital. It is more finding the right economic model.
We'll take our last question from the line of Manoj Gori from Equirus Capital.
Yes. So we have seen some improvement based on the efforts that we have taken, especially on the LFL side. Just want to understand that the entire positive impact has been based on the efforts that we have taken out, probably we are seeing some improvement in demand environment as well.
Yes. So Manoj, maybe we've not connected and I am a bit proponent of Domino's through execution being ahead of the market, and I think that is now playing out. And I'm personally don't fully understand the demand, demand or macroeconomics, myself fully. So more focus on execution, what is in our control. I would like to believe, given how the other results have been that this is largely executing that.
Sir, secondly, on the other expenses side, we have seen roughly around 20% growth. Sorry, if I may have missed, but can you highlight like what are the key main line items where we have seen the increase or probably it is because of the waiver into delivery fees?
No. I think other expenses, if you look at the increase that we've seen coming through, it's not really waiver of delivery fees, because that really more than sits on your gross margin.
Correct.
Predominantly, I think with [ Faridabad ]. We have really invested ahead of the curve on a lot of areas. So 1 on our technology. Second, on when we decentralize from a 4 region to a 7 region structure. We have stepped up and called out in the previous quarter as well in the results that we heavily invested in advertising during the IPL and the World Cup season, which went in quarter 1.
So there has been advertising spends also which have been stepped up. So there are a couple of expenses that we have increased intentionally -- and our belief is and I'm just seeing that some of the growth coming through on that and as we go on, the levers should start coming through on these lines.
So these investments should continue in the coming quarters as well?
No, not so much. Like I said, some of the investors are so technology investments, the decentralization of structure, those investments, of course, are now baked into the numbers, right? So it's not that we're not going to keep increasing that exponent. Yes, is there expenses around marketing, and we have stepped up marketing and we keep calibrating that. There have been higher spend on that account.
Plus in quarter 1, we also had this time higher cost in some of the stores that we were running. We had very high peak summer season across most of the markets, and we did see some of our consumer electricity costs going up across the stores, which should moderate now as we move out of the peak summer season. So the reason for this, of course, if you see quarter-on-quarter from a leverage perspective or other expenses, we have seen that leverage benefits come through as growth has come through. But on a year-on-year basis, of course, it is higher. We've noticed that. But they're also on the back of investments that we've made.
Thank you, members of the management team. On behalf of Jubilant FoodWorks Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.