Jubilant Foodworks Ltd
NSE:JUBLFOOD
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Jubilant Foodworks Ltd
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Ladies and gentlemen, good day, and welcome to the Jubilant FoodWorks' Q3 and 9 Months FY '19 Earning Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Nishid Solanki from CDR, India. Thank you. And over to you, sir.
Thank you. Thank you and welcome to Jubilant FoodWorks' Q3 and 9 Months FY '19 Earnings Conference Call for analysts and investors. We will be joined today by Mr. Hari Bhartia, Co-Chairman of Jubilant FoodWorks; Mr. Pratik Pota, CEO; and Mr. Prakash Bisht, CFO. We propose to commence with perspectives from Mr. Bhartia. Thereafter, we will have Mr. Pratik Pota sharing his views on the progress that we have made operation-wise, the strategic imperatives that lie ahead and the outlook for JFL. After the opening remarks from the management, the forum will be opened for question-and-answer session. A cautionary note, certain statements that may be made on today's conference call could be forward-looking statements, and the actual results may vary significantly from these statements. A detailed statement in this regard is available in Jubilant FoodWorks' Q3 and 9 months results release and earnings presentation, which are both available on the company website under the Investors section. I would now like to invite Mr. Bhartia to share his perspectives with you. Thank you. And over to you, sir.
Thank you. Good afternoon, everyone. And welcome to the quarter 3 and 9-month FY '19 earnings conference call. I'm pleased to share that we have again delivered strong performance during the quarter led by our efforts on executing the growth strategy that we have outlined last year. As all of you know, the Indian food services industry continues to evolve, and there is a clear positive momentum in the category. The reduction of GST has also played a role in driving affordability, and now the convenience in ordering outside food is changing the demand landscape. We are aware of the changing consumer behaviors, and we keep adapting our business in response. My last focus remains on implementing the 5-pillar growth strategy that we have outlined before. We keep on shaping new programs and initiatives around these. On product -- on new product and innovation, we have enhanced our portfolio by adding choice of multigrain crust to our menu and 4 new side items. On digital and technology, we have added key features to our app and have fully revamped PWA. That is our mobile site. We remain committed to technology involving use of analytics, AI and machine learning to give all new experience to our customers. On the cost side, especially the manpower cost, we continue to maintain sharp focus and drive operating efficiencies. Coming to Dunkin', I'm happy to share that we have attained breakeven in Dunkin' Donuts during the quarter, and this stands ahead of our strategic guidance of quarter 4 FY '19. We had accelerated our store openings at the start of this year, and I'm happy to state that we have opened 35 stores in quarter 3. More than 50% of our new stores have been opened in the existing areas where we have split the existing stores. We believe this will improve customer service to our customers in the existing markets, improve efficiency in the long run but also, we believe in the short run, will still put pressure on the same-store sales growth. Overall, we are pleased that with the quarter 3 performance, we remain confident about driving profitable growth in the future. With that, I would now like to call upon our CEO, Mr. Pratik Pota, to cover the operational highlights during the quarter.
Thank you, Mr. Bhartia. And good afternoon to all of you on the call today. Let me cover the highlights of the Q3 performance. Operating revenues during Q3 were at INR 9,291 million, an increase of 16.8% over last year. This was driven by strong same-store sales growth of 14.6% in Domino's, lapping the strong quarter from last year. EBITDA during the quarter was INR 1,706 million at 18.4% of revenue, up by 24.6% over last year. A combination of strong SSG, focus on cost management and operating leverage has been driving the EBITDA growth in margins. Profit after tax stood at INR 965 million at 10.4% of revenue, a growth of 46.2% over the last year and with a margin expansion of 210 basis points. During the third quarter, we opened 35 new restaurants for Domino's Pizza and closed 2. Thus, taking our restaurant count to 1,200 stores across 271 cities. The new store addition was the highest in 11 quarters. We entered 2 new cities during the quarter. In Dunkin' Donuts, the total store count is 32 restaurants across 10 cities, which remains unchanged from the previous quarter. In Domino's, we carried forward the growth momentum from earlier. And our order growth and delivery segment remained strong. All New Domino's and Every Day Value continue to be important levers for driving growth. In line with our strategy of driving innovation, we introduced a new multigrain crust last quarter. In addition, we also launched 4 new sides: Potato Cheese Shot, Crunchy Strips, Crinkle Fries and Brownie Fantasy. During the quarter, we announced PepsiCo as the new beverage partner for Domino's Pizza. The partnership, we believe, will bring in fresh focus on our beverage portfolio and also enhance the experience for our customers. A significant initiative during the quarter was the implementation of GPS driver tracking across all our stores and all our riders. This allowed us to use the data generated to improve our delivery efficiency during the quarter, and this will be area of focus in the future as well.Our digital strategy is working well and we strengthened the Domino's app in the quarter through the introduction of pizza purchase Advance Ordering, order tracking, Train Ordering and an improved payments interface. We optimized the size of the app, which now stands at already lean 5.6 MB. We also upgraded and rolled out a new progressive web app. Online sales grew strongly and stood at 73% of delivery sales in quarter 3. Dunkin' Donuts reported strong top line growth driven by our focus on doughnuts, beverages and profitable food. This, along with a sharp focus on cost and driving efficiencies, resulted in the business reaching breakeven a quarter ahead of target. Overall, we are satisfied with our Q3 performance and remain confident about driving profitable growth in the future. With that, I will request the moderator to open the forum for questions and answers.
[Operator Instructions] We take the first question from the line of Aditya Soman from Goldman Sachs.
A couple of questions from my end. Firstly, can you elaborate on the reasons for the expansion in the gross margins, especially when you had some promotional activity towards the end of the quarter? And the second question is, we also saw depreciation being down sequentially despite the significant increase in the number of stores. What's the reason for that?
So let me first take the depreciation question. So when we closed the stores at the current, we accelerate the depreciation. So when you'll see the last year's number and the previous quarters' number during those quarters. But clearly, we had opened 10 stores in the same period. So there, the -- that included the accelerated depreciation, same was the case in the last quarter. And this quarter, [as you can see], we did not close the stores. Therefore, you have [indiscernible]. So that was the part one. The second, you were asking about the overall gross margin improvement. So our raw material cost has shown an improvement over the last 2 quarter -- last quarter as well as the previous year. This was possible mainly due to 2, 3 reasons. One was that the commodity cycles were soft. So we had [indiscernible] level dairy products. In addition to that, as Pratik explained, we had done a beverage contract. That has also contributed to the lower raw material costs. Then we had a better product mix return also contributed to the lower raw material costs. So these were the major levers, which has the [indiscernible] toward better gross margin.
Understand. Just following up there, in terms of the new contract with Pepsi, so was -- is this -- does this mean that the per-unit cost is lower? Or was there a sort of onetime inflow that we saw in the quarter?
So Aditya, the beverage partnership that we have with PepsiCo is for 5 years. It includes the sparkling drinks, juice drinks and iced tea. The margins that we have as part of the contract, we also see a favorable margin at the gross level. And also, we've seen improved marketing support.
Next question is from the line of Abneesh Roy from Edelweiss.
My question is on Dunkin' Donuts. So what has led to the 1 quarter ahead breakeven? Does this change your store expansion plan in any way? And because of the festive and because of the overall food takeups being very aggressive, does this lend support to your own -- the -- both Dunkin' business and Domino's business from a -- food delivery because culture gets more ingrained?
So Abneesh, let me respond to the first part of your question as to what drove the Dunkin' breakeven in quarter 3. I think the first point, which I reported in my opening remarks, we had a strong same-store growth in Dunkin's from top line growth, driven by the core portfolio of doughnuts and of beverages. We drove a fair amount of innovation in the quarter. Two innovational [ award columns ] have been doing well for us. One of them is the launch of tea, which is doing well for us. And we had some simple food launched in stores, which, again, drove good growth for us. Premiumization is something we drove, both in the doughnut portfolio and also on the food side. That has let us drive a revenue realization. Accompanied by a very, very healthy increase in delivery in Dunkin', we realized that the brand strength that we have wasn't being fully leveraged given our footprint. And we used, therefore, delivery to drive growth. So that delivery channel also has helped us. And I think the point we made about getting very, very sharp focus on cost in Dunkin', operating cost in terms of manpower, in terms of energy and then optimizing G&A as well. So all of this has led to Dunkin' breaking even in quarter 3. To your second part of your question, I think it will be fair to say that, this was only the first milestone. We'll be -- we were in the loss-making, and this was the first quarter for us to break even, which we have achieved now. We intend to watch the business closely before we take a call on expansion or the figures thereof.
But from 77 stores, you are down to 32. And now stable at 32 for 2 quarters. When do you start thinking on expansion? Second is, when do you start thinking of sharing numbers? Because now at least you have positive margins, but your numbers [ stalls at ] half. So that means, again, in terms of revenue, it's not a great number. So do you ever see, in the foreseeable future, numbers being shared on Dunkin'?
So Abneesh, the first part, I mean, the answer that we are saying is that it isn't -- we intend to take some more time, and give us more time to decide how to recalibrate the Dunkin' expansion and the paper piece of only -- or sharing up out the numbers, there is no plan as of now to provide more visibility on the Dunkin' numbers.
But you are sharing your margin impact. So [ is that ] positive? Is it just breakeven? Or there is more to it?
So Abneesh, we broke even in the quarter.
Okay.
[ Every time we release, you're going to have to look it ].
Yes. One follow-up on Dunkin' was in terms of the -- on delivery. Is it double digits as a percentage of revenue? At least that, can you share?
I'm afraid I won't share numbers, Abneesh. It was a significant investment and growth driver for us. I wouldn't want to share numbers because we don't do that. But it was one of the growth drivers for us in Dunkin'.
Perfect. And then last question is on the EBITDA margin. 7-year high is a good thing, but now store expansion is again coming back at a very strong number. In the past, you have seen when store expansion picks up, margins could be lower because of obviously lower margins in new stores. Second, of course, what's your comment on price hike? Last time, you said that you want to delay it because of the food takeups intensity, plus inflation is happening in wheat and milk going ahead. So in all this context, will gross -- will EBITDA margins come under pressure?
So Abneesh, two, three questions turned into one. Let me talk about the first part of the question on store expansion. As Mr. Bhartia said in his opening remarks, a significant part of the stores that we opened in the last quarter was split from existing stores. However, the good news in that is that we are seeing strong momentum in both the stores that we split. I mean, given the new stores. So you've seen in the stores [we have done] recently that the mother store, the split store returned to its original revenue trajectory in about 12 months or a little less than that. And the both -- and both the stores, together, of course, give a significant incrementality. That's number one. Number two, we see a significant jump in operations' KPIs in terms of delivery time taken to customer at a customer service level, which translates into improved customer satisfaction scores. So that's the entire piece about store expansion and how that's impacting our margins.
[Operator Instructions] Next question is from the line of Amit Sachdeva from HSBC.
So Pratik, my question is that when we talk about 35 new stores, 50 being in existing locations, as Mr. Bhartia has pointed out, that potentially, it may put pressure on SSG as you pursue the same strategy in the coming quarters as well. But my question is that whether this quarter, when you opened 35 new stores and closed 2, does this cause the quarter has that pressure on SSG, some of it already built in? And if yes, how much is the sort of -- I would say, in reported SSG basis, how much would that number be? If you say reported is 14.6%, then maybe it could have been 17%, but it's 14.6%, because of that. Some indication on that would be very helpful.
So let me share the first and the most important to recognize is that the pressure on same-store growth is in the short term. The point I made a little earlier in the -- my earlier response, with the mother store, we see it recovering fairly quickly. So we don't see the pressure on same-store growth being sustained for long. That's number one. Number two, during the quarter gone by, our store opening was fairly well dispersed across the quarter. And you see the impact of that translating into our system growth, into our same-store growth. Beyond that, it would be difficult to dissect and say how the numbers would pan out without that. But I think the momentum is strong, and we have seen incrementality emerge in the stores put together.
And more than that, what I'd like to just add what Pratik said, we only split the store when we realize the store volumes are reaching at the peak level and the service level starts going down. Because what happens, the volume increases so much that we -- it could lead to delay in delivering pizza or lower service levels. So then when we split the stores, we -- as Pratik said, the existing store comes back to the same level within 1 year. And then we add another productive store and also improve customer service. So that is why we prioritize wherever we have to split the store in the existing market because it is very important to keep our service levels at a very high, high level. So that is why I said at the short term, it definitely puts pressure on the same-store growth, but we achieve overall store growth and improve customer service and improve efficiency.
Sure. That's very, very helpful, Mr. Bhartia. But I sense from Pratik's answer as well that it has very little effect on your margins overall, if I can safely conclude that?
Yes. Yes.
Yes. That will be a...
Yes, you can conclude that. Yes.
Okay. my second question very quickly is that if you look at the last 8, 10 quarters, Pratik, last 4 quarters, we have seen other expenses, if I may take as a per-store basis, it has actually been growing at more than 20% almost the last 3 quarters. Now it's 17%, and the previous 4 quarters were actually flattish. What is really going on in the other expenses line, which is growing so rapidly while employee cost has risen for obvious reasons? But what is that driving that strong double-digit revenue? Or do you have a strong cost-cutting program? And what [ head ] is actually driving that large numbers Y-o-Y expansion?
So there are 3 or 4 drivers that we see impacting our manufacturing under expenses cost line. The first one, as you can imagine, is the increase on account of just the volume growth and the volume expansion. I mentioned in my remarks that we've had a lot of the growth coming through order. And that, obviously, has a certain impact on volume and then cost increase. That's the first point. The second point is that we are seeing some -- yes, inflation in some of these cost lines. The third part is loss on account of -- and this is more vis-à-vis same time last year and earlier, loss on account of -- loss of input credits, which, again, has put some pressure on these costs. And the fourth point is a very specific investment we are making in brand marketing and in advertising and new-store layout through this year. For example, in quarter 1, when we invested behind IPL, and we drove investments behind that. So this was a very, very specific investment we are making to strengthen the brand as we grow.
We're requesting Ms. Amit Sachdeva to please rejoin the question queue for your follow-up. We take the next question from the line of Vishal Gutka from PhillipCapital.
So I have two questions. First question is on railway platform. So overall, [ however ], can you -- if you just can comment qualitatively what are you seeing on that trend? And what are the challenges you are facing with regards to scaling up the growth for railway platform? And second question on the Pepsi.[Audio Gap] fountain or vending machines [ they're ] dining in restaurant of Domino's?
So Vishal, thank you. To answer the first part of the question, we are very, very encouraged by the response that we see to our railway ordering functionality. As you can imagine, it is a logistically a complex exercise to provide the pizza to our customers in the trains, given sometimes, particularly, nature of [ current train ] timing. But in that -- the operations team has done a really good job in ensuring that we deliver the pizza to the customer. The response has been very, very positive, I would say, unambiguously positive. And that has led to a significant increase in both the railway orders and, therefore, the revenue. Our customer satisfaction scores in train ordering are very strong. And this is something that we intend to invest behind and to grow. Part of it is as awareness growth, part of it is as habit build. But this, we see as continuing to grow in the future. To this point, your second part of the question, portfolio putting in fountain machines is very much an integral part of our beverage transition plan. And you'll see the leading stores, the large stores in the metro, which have the sufficient scale, deploying fountain machines pretty much starting this quarter.
Next question is from the line of Amit Sinha from Macquarie.
My first question is on your gross margin expansion which has happened in this quarter. But going forward, do you see commodity inflation kind of impacting the gross margin on a sequential basis?
So Amit, we answered at the beginning of the call about the gross margin. So we actually explained that the reasons why raw material cost was lower and where numbering was obviously -- is after commodity value. But having said that, we have various programs that I think which would ensure that we would get the best of raw material prices. Because we do always -- our price is spent over the supplier base. We are also trying to go near to the -- to an Indian -- geographically also expanding this. It improves our logistics costs. So all those initiatives are there in place to take care of the future cost increases which may come into [indiscernible]. At the same time, we also drive efficiencies by reduction of wastage, whether it is in our stores, whether it is in our commissaries. So all those cost efficiency parameters are there. At the same time, we are also doing finally our efforts because of that. So these are our own efforts, which will -- through which, we hope that we have achieved this [indiscernible].
And so can I...
Just to add to that, Amit, we talked about 3 things as the bases for gross margin expansion. One was the benign environment of -- in dairy cost. Number two was mix improvement. The third one was beverage impact. Even in a -- even if there's some cost pressure on the commodity line going forward, the other variables are available to us to make sure we contain the impact of that inflation.
Very helpful. And secondly, on the new store addition, are you giving any new target for FY '19 and any run rate for the next year?
So Amit, we don't have a target number on that. I think we are encouraged by the performance of the stores that we've opened so far this year. We are excited at the prospects that we -- and the potential that we see ahead, both in existing market and in green areas where we don't have presence right now. So we will be investing in store expansion. I'm not going to give you a number right now. It will be an area of focus for us going forward.
Sure but this -- this quarter, run rate is clearly on the higher side, that is all I wanted to know.
It is the highest that we've had in 11 quarters, yes.
Next question is from the line of Avi Mehta from IIFL.
I just wanted to understand your comment on the demand environment. Has there been any change in the -- has there been any increase in competitive pressures, which has forced us to consider offers again to customers? Or is this more -- what has driven this change? That was the only thing from my end.
Avi, I'm not clear what change you are referring to...
Well, you've started giving -- Mr., earlier, you had said that like BOGO was off, and we said that we would not have these one-off offers of -- giving discount quotes to customers, and EDV would be the key platform. But I see that we've now kind of started offering some of these discounts back to customers on selected dates, whether it's a weekly or so. So I just wanted to understand the reason for the same. Was it competition? Was it -- what was that? That is all.
Okay. Thanks for clarifying. So let me see if I step back and reaffirm what we have been saying in the last few calls. Our strategy remains to focus on delivering fundamental, every day, consistent value to our consumer. And therefore, EDV will remain the focus of all our investment and other efforts as far as value for money is concerned. Discounts that you may have seen in the last quarter would have been tactical choices made by the team, either for specific customer cohorts. Maybe last customer, customer frequencies have dropped, so very targeted, the discount being given to customers, or indeed, to drive up sales on specific big days. But very, very tactical objectives. That may come and go. But the strategic team will remain on driving everyday value. And I think Mr. Bhartia also called out the fact that we see the market environment being robust. So -- and that's reflecting in our same-store growth that we delivered last quarter. So it wasn't a sales or a number pressure that led to discounting here because these are the things you do once in while. The strategic pillar, or value for money, as delivered through EDV will remain relevant and will remain in play going forward.
Next question is from the line of Manish Poddar from Reliance.
Could you probably elaborate, let's say -- the SSG numbers, let's say, how was it for October, November and December? Could you give -- this is [indiscernible]. I'm just trying to understand how are the numbers, let's say, in the month of December, which are normalized numbers?
Yes, Manish. Thank you for the question. Unfortunately, as you're aware, we do not give up month-wise dissection of same-store sales growth or indeed of any of our numbers intra-quarter. The number that you see is the number that we delivered through the quarter of 14.6% SSG was delivered on the back of strong growth in orders, strong performance of delivery channel, strong performance of online ordering channel, our focus on cost. These are basically the 5-pillar strategies that we unveiled last year. Those pillars remain the growth drivers for us. Beyond that, we won't be able to dissect the numbers and give you a disaggregated number of growth by month.
Okay. And just one more. But, let say, if I look at Domino's in those FY '09 or FY '11 period that -- them -- you were [indiscernible] adding the 60 to 80 stores which you're adding this year and going at, I believe, for the next 12 to 18 months at least. So back then, your margins in EBITDA was somewhere in that 17% to 18.5% range, which you are currently clocking. And there is not material difference between your gross margins and it's -- finally, the other expense in employee costs which are generally offsetting. Are there any other levers which you believe are there to aid margins going right? Or should we believe those margins in the 17%, 18% are those which never reached going right?
Okay. Okay. Yes. Your question -- okay. So I think I got the question. If I may respond to that in 2 levels. First of all, as you're aware, we do not give a guidance on margin. So it won't be important for us to have a guess on what the margin could be in the future. But equally, I think it's important for us to state and underline that we have a lot of focus on driving operating efficiencies, managing the costs, containing inflation, extracting productivity. So those work streams are very much in play right now. Even as we expand and we get operating leverage where the balance will lie in the future between cost pressure or into inflation, et cetera, of operating leverage [ going too broad ] and productivity that we drive in the business, I cannot tell, but we are focused on driving profitable growth.
Next question is from the line of Anuj Gupta from Perfect Research.
Sir, some newspapers have long suggested that Domino's is trying to [ outpace ], like climb now the Chinese multiple lanes. So could you please both enlighten this news? And also if you could share your long-term vision to bring other global QSR brands to India or start a new QSR branding now? And my second question would be what is the current market share of Domino's in pizza category? And [ listen ], how many further cities can you expand it to? And what will be the revenue percentage from in-dining and online delivery orders from our own app?
Okay. So there are four questions. Let me try and take them all. The first one, you were referring to media articles that emerged about a Chinese story. Without reporting to end this point-to-market speculation, I think a couple of things that I think I want to state, that Chinese is the second largest cuisine in the Indian market after North Indian. So for us, as a food business, it's an exciting area for us to evaluate. Number two, we have experiments going on to look at different kinds of cuisines. Chinese certainly is one of them. And we've got test kitchens going there. They are looking at different kinds of Chinese food. We do not have a specific plan yet of getting into the market, but we will come back to you as soon as we have something specific on this to share. So that's the first question. Your second part of the question -- second question was about Domino's market share. As you're aware, there is no syndicated study available that gives market share across channels. But we believe our market share in the pizza category remains at a robust 17%. Number three, on which, it can be explained to, that -- we believe that Domino's, as a brand and as a business, has relevance across many, many more cities. We don't have a number to that, but the number is very large, be able to many, many more cities and many, many more locations because we see that the demand for us of being far more widespread than where we are right now. As a strong -- that we, as an indicator or to do just -- validate that, our small town growth is very, very robust across -- through all the quarters of this year. It remains very strong. So we believe that continued expansion remains very compelling and very strong. And we're excited by it. Your fourth part of the question was about our contribution -- what is in order of our own platform. We do not divulge that number, as you're aware. But you can be sure that our platforms and our own organic efforts, our own assets are very big drivers of growth for us and will be an investment area for us going forward.
So like, basically, this, I wanted to understand, what is the percentage of revenue that you are getting from your own application orders and food aggregators?
So right -- you know -- I understood the question. And as I've said, we do not share those numbers. But our assets and our own channels contribute to the majority of dominant share of our total business.
Okay. And sir, one last question that I ask was about any global brands that you're planning to bring into India or opening up a new brand itself in India?
Anuj, can you repeat the question, please? It wasn't very clear.
Sir, the last question was, are you planning to bring any global QSR brand to India or start a new QSR branding now?
So Anuj, we keep looking at growth opportunities of different types -- different kinds and different types. You asked me the same question in the context of Chinese a little while back. So yes, we keep looking at ongoing opportunities, whether it's looking at brands from outside or building our own brand. There's nothing specific on the answers right now, but we shall settle back to you as soon as we have something concrete.
Next question is from the line of Ashit Desai from Emkay Global.
My question is again on the expansion since you're not giving any guidance on the expansion rate. But looking at this quarter, the expansion -- and it seems that it has -- the pace has gone up quite a lot. So I just wanted to know, I mean, historically, when we've had very large expansion rate, you were riding around 150 stores on a base of 700, 800, it did impact our SSG and profitability. So as for you, what is the comfortable level of expansion rate that you would look at?
So Ashit, I think it's important to understand and, of course, to reiterate the context for the store expansion, and Mr. Bhartia called it out in his remarks as well, we are opening stores in 2 kinds of context. The first one is an existing store area where on account of the significant order growth that we had in the last couple of years, we see a pressure on existing stores in delivering to customers with consistent service levels. That allowed us to start a new store of at least having strong base and, therefore, improve customer service to both -- both in the old store and the mother store as also in the new store area. So that's one kind of area where you see stores opening. The other area is new suburb area, that suburban markets in towns where, because of the growth of these other markets in this front, we have a vacuum and we have an opportunity. So that's the other area where we see opportunity. And the third one, of course, new markets. And as I mentioned, we opened 2 new cities in the quarter just gone by. And then many more cities where we can expand. So in all of this context, the encouraging part that we have seen is that as we are opening stores in response to these stimuli and this context, we are seeing both the mother store and the new store do significantly well. We have not seen any material impact on margins of a store expansion. And going back to your question of the pace of comfort, the -- I mean, we have delivered -- the pace last quarter, we are very comfortable with that. So this pace is what we are comfortable with, and I don't have a number for you for the future. But our store expansion efforts that we are seeing right now and the performance is very, very encouraging.
Okay. Okay. So if you -- if I look at current expansion, it's around 6%, 7%. And broadly, at that expansion, your SSG should not be affected by more than 2%, 3%.
Yes.
Yes. And this time, my second question is on the cost inflation. You had a favorable impact of commodity prices. But does this quarter also have an impact of higher crude prices and -- which have come off now?
Okay. Sorry, I missed that question. Sorry, sorry, Ashit. No, so -- yes, we've had a benign commodity environment, like we talked about earlier. There have been some impact on account of commodities, but that's very marginal impact. It's not a material impact in the larger scheme of things.
Next question is from the line of Nishit Rathi from CWC Advisors.
Just wanted a couple of questions. One was, is it fair to say that Dunkin' model is finally being fixed to some extent? And with the data that you possess with respect to Domino's and other learnings that you've had over -- about Dunkin' over the last couple of years, we could expect at least an -- we can expect Dunkin' to scale up significantly. The first question. Second is, with respect to your cash deployment, right, the amount of cash that you're generating every year, every quarter. If, for some reason, we decide not to expand stores very aggressively, then we will be sitting with a significant pile of cash, right, and would love to get that cash number at the end of this quarter. [indiscernible] this question. And just one follow-up would be the e-commerce policy, which just recently got announced. Does it also apply to the food aggregators with respect to discounting? Would love your thoughts on that.
All right. So I'll answer the first and the third question and refer to Prakash to add the -- and fill-in the second part of the question. I think in response to your question about Dunkin' and as a -- is it fixed, like you said? I think what really encourages us about Dunkin' Donuts' performance is that it came on the back of a very strong growth as also very disciplined cost management. And therefore -- and the growth was delivered by the core portfolio of doughnuts and beverages as also -- or the company of -- in growth on the food platform. So it was a very strong growth rate performance apart from, of course, disciplined cost management. So that gives us confidence about Dunkin'. However, it is only a breakeven right now. And we obviously need to drive a profitable portfolio out of Dunkin'. As I said in response to a question earlier, we will watch Dunkin' for some more time, and then take a call on the pace of expansion and how we scale it up. That's the first question. Your third question was about our e-commerce policy and the recent press note that was issued. I think it is fairly clear and straightforward and unambiguous that the press note applies to e-commerce entities engaged in the business of selling goods and services. And therefore, we believe that the food aggregators are covered under the ambit of this policy. Prakash?
Yes.
Maybe just one follow-up on that. All kind of discounting that's going on where they're using their own funds, it will be much harder for them to do that from [ third base ] going forward, right?
I guess they'll have to figure out and understand the implications of the step north on their own actions on discounting effect and other practices. But yes, if you look at the press note, it does call some very clear guidelines and guardrails for e-commerce entities, and they'll have to comply with that.
And the Dunkin' breakeven. When you say breakeven, it is after dissolving the overheads, right? The corporate overheads?
That's right, Nishit. It's an EBITDA [ placement-forced ] corporate overhead.
Okay. And the cash?
Yes.
Yes. So your other question was on the cash. So it's a happy situation to be in a situation where we are generating cash. So obviously, we have published the balance sheet so you can roughly calculate. So last quarter, we had given the balance sheet. So the exact number keeps on fluctuating, but it would be in the range of INR 550 to INR 600. We keep on evaluating the expansion plans amount. So based on that, we derived that output that I discussed most efficiently.
And going back to the point that we -- I think we've seen -- and that's the recurring theme, that this market is growing and is growing rapidly. And as India's largest QSR player, we have strong expansion plans. And therefore, this cash focus will help us drive better expansion [at the next -- that's] the growth as well.
So I think that's the only -- actually, that's the only point and -- we, as shareholders, are actually really looking forward to a plan to that effect. With INR 600 crores of cash in the balance sheet and you generating close to INR 150 to INR 200, because you all see if it's almost close 100% EBITDA, right? So with -- kind -- that kind of cash generation, that will come and go. But we are really excited to see if you are confident enough to kind of see that we can deploy this cash to get further growth and capture a lot more of this QSR pie. That's what we're trying to understand, actually.
We just saw in the last 4 year -- 3 or 4 years, your operating cash flow as almost being twice profit, probably because of negative working capital and depreciation being added back. So we've just seen that the cash generation was started significantly higher.
Right. And I just wanted to repeat what I said, that I think we are excited about the prospects and the growth potential of this category. And we are looking at ways of driving faster and profitable growth.
Next question is from the line of Mayur Gathani from OHM Portfolio.
Just two questions. What will be your dine-in and delivery percentage?
So Mayur, the delivery dine-in contribution and the breakup is roughly equal. And that's why revenues, we said earlier, was very -- just roughly equal.
Okay. And would you look up at setting up a cloud-cuisine kind of concept to manage it because so much of this is coming online? So would you have that kind of thought in mind?
So Mayur, the exciting part of our business is a model that we have where we have a combination of dine-in and delivery in equal measure. It allowed us to acquire new customer in both channels. It allowed us to deliver customers from connected experience in both channels essentially. And we see, therefore, dine-in and takeaway as an integral part of our model going forward. We have seen the revenue impact to open very small stores, the dine-in business ends up being significant as well. So we do not see dine-in being divorced from our business model going forward. We have varied the store sizes depending on the context and the continuance of growth. But we believe that dine-in is actually a source of terrific or tremendous strength for our business model, and we don't intend to disaggregate that significantly.
Okay. Great. And I think on the commercial expansion, I mean, you did one last year in Greater Noida. So with the growth now coming back and new stores coming up, would you look at any other expansion on the commercial side in the next 1 year or so?
So Mayur, what we -- I think when we last said and when we did our commissary last time, we mentioned that we were invested for driving significantly higher store expansion. As of now, our capacities are adequate for driving of both same-store growth and store expansion. But this is an area, as you can imagine, we keep looking at real time. And as soon as we feel the needs to trigger a capacity expansion, we will settle back and we'll make sure we invest in that.
Mr. Mayur Gathani, requesting you to please rejoin the question queue for your follow-up. Next question is from the line of [ Rakeen Khapani ] from [indiscernible] Finance.
I just want to understand, firstly, you elaborated for the gross margin expansion, there was contribution from a richer mix of sales as well. If you could elaborate more -- and certain trends that you are witnessing that is helping and improve mix in the portfolio for you?
Yes. So [ Naveesh ], yes, as we mentioned, improvement in mix was one driver -- one of the drivers of GM expansion. And specifically, in this quarter, we -- there are 2 obvious things that helped us drive mix improvement. One was the promotion that we ran on cheese burst crust, the choco lava cake. That helped us drive up cheese burst and choco lava as well. We also introduced the new sides. And the growth of that also has helped us deliver a better -- a beneficial mix. So those were the 2 big drivers of mix impact.
Understood. So these are more initiatives that you should continue to drive. What's your longer-term thought process on the improvement in mix? Also, you've launched 4 new sides and the new crust options. Broadly, if you could highlight the thought process on how these things should evolve for your gross margins in the slightly medium term.
So I will not be able to speculate on what the gross margin impact will be. But the larger point being that we will continue to drive mix improvement, driving premiumization, driving attachment offsite, through the communal growth drivers for us, and we will keep doing that. It may happen through innovations, like it did in the last quarter partly. It can happen through promotions, tactical promotions like it happened partly last quarter that -- it happened through data mining, consumer insighting and using the power of data for driving intelligent upselling and cross-selling. So we do all of those things that help us drive a beneficial mix going forward.
Understood. Understood. And sir, just the -- second question is with regards to the comment on growth outlook. So while there is some pressure which may come because of the splitting of stores, but given that -- so that's maybe a small proportion, otherwise, do you still -- outlining that the end consumer demand trend continues to be robust with that category? Would that be a correct assumption?
That will be an absolutely correct statement. [ Naveesh ], I think we are seeing our growth being driven by orders. We are seeing growth being driven by delivery. We are seeing that growth's being driven by online channels, by all postpaid accounts, but especially small accounts. We have seen growth come on the back of core pizzas. And we are not -- we have seen therefore, the demand momentum [of] continuing.
And sir, just one last thing I wanted to -- or put it, with regards to attrition and how are you seeing the -- and which you called out last quarter regarding the employee cost. How are these 2 elements panning out for you now? And where do you see those?
[Naveesh] we are happy with the way we manage our manpower and the manpower cost in quarter 3. There were broadly 3 big theme that we drove. The first one was, we used technology to drive an improvement in our delivery efficiencies. I refer to my opening remarks of deploying rider GPS functionality across all our riders, all our stores. And that helps us drive an improvement in delivery efficiencies. So that was the first one. The second one was, we had a very focused and a very concerted and a broad-based hiring effort that we expanded our prospective talent pool that we went to, and it improved and strengthened our hiring efforts. We also had the third point, better retention of our existing manpower through highlighting of the Domino's EVP, underscoring that and making sure that our employees knew our team members, knew their -- that they had a future at Domino's beyond just being delivery boys. So all of these 3 put together helped us manage and contain the manpower cost last quarter. We believe that the worst in terms of challenge from manpower cost is behind us. And we do not expect to see any major challenges on manpower cost going forward.
Next question is from the line [ Sanchin Candilvas ] from Birla Mutual Fund.
My question was on the employee cost, which you have answered mostly. But just to understand the cost of a delivery [ boys ] today, you have the entire delivery [ boy ], which you have in this -- in your [ payroll ], how do you manage that? And with the food like digital paying them high and even the [commerce website] looking to hire and get more employees, this cost item you believe will not grow, I heard that, but I'm just trying to understand how much you pay them and what's the annual inflation we can project here.
Yes. So [ Sanchin ], going back to the first part of your question, all our delivery staff and all indeed our store staff, they are employed on the [ payroll ]. They are employees. They have access to all the benefits that a normal employee has. And while we saw some pressure in which you pointed out in the last quarter, this quarter's performance that you've just seen and what I just talked about should tell you that between driving efficiencies, between increasing our talent acquisition efforts and hiring efforts and with a broader talent base and ensuring that we contain attrition, we believe that we've got the right [ advertent ] now put together to manage our manpower, to boost -- support our growth and to manage that within the cost of our [ base ].
And the second part, how much of an annual inflation would you -- can you project here?
The inflation will happen to the extent of -- among these inflations happening from state to state to state. And we had some inflation during this quarter shoot up. And as you've seen in the numbers, we're able to contain that and manage that by driving productivity and driving efficiencies.
Next question is from the line of Sandeep Somani from Nomura.
I just want to ask one question on promoter pledging. It is almost like 18.4%. I want to check what your thought process around that. Do we expect it to go up? Or probably go down in the future?
No. There is no -- we only expect it to go down. There is no reason for it to go up in the future.
Next question is from the line [ Sunil Vora ] from BNP Paribas.
This is Kunal Vora. Wanted to get your thoughts on region-specific -- like menu as well as regional pricing. And how has the response been to going pure veg in Gujarat?
Your first part of the question, can you repeat that, please?
[indiscernible]. I wanted to -- hear your thoughts on region-specific menu as well as regional pricing, like say in different cities, different menus, some changes in the menu, as well as different pricing in different cities. What are your thoughts on that?
As of now, Kunal, as you're aware, we have for the small towns a super value menu that has been in place for the last 1.5 years. And that has been -- has [ drived ] growth. We are open to looking at innovations and adapting to regional palates' differences and preferences and using that as a lever for innovation, [ we -- absolutely ] something specifically you'll see. But that remains, as I point out, as one of the first -- the one -- the first of the 5 pillars was innovation and products. So this would be part of that team. India is a very complex and a very diverse market from a palate and taste point of view. And we keep looking at these opportunities and see if we can customize the menu by region, et cetera. Going back to the second part of your question about Gujarat, we went live with 100% veg in Gujarat in the week 1 of October. And the context for that, just to recap, was that nonveg was a very small part of the mix in Gujarat. And also all the consumer data showed that having nonveg was a barrier to growth for prospective and new customers and also for driving frequency. It's now been in the market for over 3 months and pretty much the whole quarter last quarter. What we saw was a significant increase in new customers acquisition and [ newhires addition ] in Gujarat compared to the pace before this. We also have seen existing customer numbers increasing and the frequency increasing. I think that what -- it only encourages what this [indiscernible] Gujarat being one of the faster-growing markets in quarter 3 last quarter basically. In addition, and we keep hearing and talking to customers both in the stores and through our customer sat measurement systems, the [indiscernible] feedback and the feedback from customers in the stores have been very, very positive.
Sure. The second one, sir, on -- can you share your thoughts on the growth of food delivery market? Like we have seen strong growth both for food aggregators as well as your own online ordering. Are you seeing some changes in customer behavior? Is it discounting? What's really driving this massive expansion in the food delivery market?
I think if I can dissect the growth of food delivery into 2 parts. The first part is demographics, sustainable growth that's happening on account of larger factors which are driving the growth: the need for enhanced convenience; the increase in the number of working women that we see now in the workforce; number three, greater traffic and more congestion in the open market; working couples, going back to my second point. So all of these are very, very fundamental and long-term drivers of the growth of delivery and the need thereof. These have been superimposed with deep discounting that is acting as a growth accelerator. But we believe that deep discounting can never be a sustainable way of building a market. It can drive short-term growth, but what will drive long-term growth will be the fundamental enablers of that behavior. So we are excited because we see the fundamental markets being enabled in delivery on account of these larger macro factors.
Sure, sure, sure. My only question was the fundamental factor that always existed. Many of the earlier factors which you mentioned have only -- have been around. But like externally, in the last 2 years, the market has really exploded. So what -- like is it -- like the mobile phone? Like data penetration? Is it discounting? What do you think are the drivers in the last 2 years?
I think by more deep discounting or like going back to the point about sustainable growth drivers. I think the fact that technology is becoming much more ubiquitous. There are smartphones with people having access to apps. And the convenience being given by the food ordering, food tech players and the variety of cuisine, all of that is encouraging customer experimentation and customer ordering. So that certainly is one of the fundamental growth drivers, apart from discounting, which I -- we believe is not sustainable, but that is a force adding to short-term growth.
Mr. Vora, requesting you to please rejoin the question queue for your follow-up. Next question is from the line of Sanjay Singh from PineBridge Investment.
On the dine-in, you mentioned that 50-50 dine-in to delivery. Will it be by value? Or will it be number of orders?
I think that's by value contribution on delivery and dine-in.
And would it be fair to say that delivery order value would be more than dine-in?
We have not -- I mean, I -- we haven't shared those numbers. I think what we actually...
Could it be a little bit more? Hello?
The order, I think, the value contribution, so the contribution, 50-50. And the ticket size in the week tends to be, yes, larger because we have groups and their families ordering. Beyond that, we won't be able to share any more numbers.
No issues, no issues. And how would it have changed in the last maybe 2, 3 years? Would it be -- the same or it would have increased in favor of delivery?
I think what we've been saying, Sanjay, in the last few calls that our growth has been more delivery biased. So the mix has moved a little bit in favor of delivery for the last few quarters.
Okay. And will you be able to share what's the average delivery time currently?
No, afraid we don't do that, Sanjay. You're aware of the delivery promise of 30 minutes. And we -- I think we are doing a reasonably good job of delivering to that promise, in fact, faster than that. We have not shared specific numbers in operations KPI, and we won't be starting doing that now. But I think we are doing very well on delivering to our customers' satisfaction levels and within the time lines that we promise.
And delivery time would be more or less constant in the last few years? Or you would have changed in either ways? If you give it directionally, not the time, but -- would it be sustained?
I think improving our operations KPI is an ongoing effort. And we called out earlier in this call, one of the reasons for doing the store split is to make sure we sustain the KPIs and the KPI improvement. So this is an area of constant focus for us. And it becomes very important to deliver to our customers' expectations within the time line, even as the load in -- on the stores increase and even as we have more stores. So that remains an ongoing effort, and that has been in our focus for the last many years. It's not just now.
And lastly on the delivery [boy thing] or delivery payment. Is it now -- some of it shifting to -- a per delivery payment? Or is it still a salary-based model? Are you experimenting with the per-delivery payments?
We've tried a variety of models, Sanjay. We have a combination of full-timers in the stores, part-timers in the stores. And we also extend [ the ability ] to our delivery. We -- and this is a dynamic balance that we keep trying depending on delivery efficiencies and the cost of delivery. But we believe we've done our learnings in the last quarter, that we are at a good place in the mix that we have between various kinds of manpower.
Okay. And lastly on the delivery thing, is the utilization of a delivery, let's say full-time delivery employee for you would be significantly different from that of a food aggregator? Or would it be more or less similar?
Oh, I think the advantage that we have, Sanjay, also is that our delivery staff that tends to be -- and increasing look at multi-skilling them, so we also have -- end up having them deployed from site to store. Then the pressure on orders, some of it are -- is less [when the orders aren't there]. So that's advantage in full-timers, they're, of course, appropriately trained, they are -- they have the right skill sets, but that said, driving delivery efficiency, both amongst our full-timers, our part-timers and our pay-for-delivery staff is a very, very important priority for us. And as I mentioned earlier in the call, the fact that all riders now have GPS on their smartphones, will allow us to have a -- very specific information on efficiencies and thereby improve them further.
Next question is from the line of Trupti Agrawal from White Oak Capital.
A lot has been spoken about the delivery and the dine-in model. I just have one small question. I would like to know what other chains in the nonmetro, or let's say the smaller cities with respect to dine-in versus delivery preferences, how are -- how's the growth in the delivery being in, let's say, outside the metros?
Yes. So Trupti, historically and I'm talking of 2, 3 years back, we are seeing the smaller towns being led a lot more by dine-in and not as much by delivery. I think the very encouraging part of the growth contours this time is that even the small towns are seeing a strong growth in delivery and also in dine-in. But delivery is growing very, very strongly in small towns as well. And that points to the indicators we talked about earlier, the macro is also impacting these small towns and their [indiscernible] need for convenience. So what we are seeing is delivery here is a market growing in small towns as well.
Next question is from the line of Manoj Gori from Equirus Securities.
First of all, a follow-up, one would be on the employee cost. So if you look at during week, an important year, where they have approximately [ 35 ] stores and also being it's one of the strongest quarter. So we do hire more part-timers also during the December month. So despite doing this, our employee cost on [Q-on-Q business] has increased only by 7 crores. So just want to understand, especially when we do it broadly, that the worst is over. So just want to understand behind this.
There are 4 themes as far as the personnel cost and manpower cost are concerned. The first one Q-on-Q, of course, as you can imagine, was impact of volume increase. That led to cost pressure as we hired more people to service the enhanced volumes. The important inflation impact on account of minimum wages being rolled out in a few states, especially in the northeast, that impacted our cost, of course. This was mitigated by two things. One was improvement in employee productivity, which we called out a couple of times in the call earlier. I think optimization of fixed assets -- fixed costs as well in manpower and of course, operating leverage. So those are the 3 [ contributing ] factors which also mitigates the impact of volume increase and inflation.
Okay. And can you help me on the revenue front? So if you look at 14.6% SSG for Domino's with strong performance coming from the Dunkin' Donuts as well. So if we do somewhere in [ the network calculation ], what I understand that the revenue is like from the newer stores, which are not considered under your same-store sales stores, what relatively were impacted during the quarter? Was it something to do with the timing of the store opening? Can you throw some more light on this?
So yes -- no, I mean, they're different between what you see as same-store growth and what you see as overall system growth is a function of largely store expansion and the timing thereof. There's also some noise on account of Dunkin' where we have higher stores same time last year. We have fewer stores now. But yes, it is largely driven by the timing of store expansion. So we have...
During the moments -- in the -- during the last 30 days or 45 days so that the full impact has not been captured, which would come in from the Q4 onwards?
As I mentioned, Manoj, earlier that the store opening was distributed through the quarter. So we had some stores opening in October, some in November and some in December as well. So yes, to the extent that some store opening were end of the quarter, you haven't seen yet the full impact of those stores to be out in the quarter. The [indiscernible]...
[indiscernible] -- yes, sorry, sir.
Thank you. Thank you, Manoj.
Yes. So sir, just one more thing, can you give some indication like if you...[Technical Difficulty]
Hello? Hi, is the call on?
Yes, sir. Sir, we've just lost the line for the participant. We've moved on to the next caller from the line of [ Raj Mohan ], individual investor.
Congratulations on the copious numbers and the exciting store additions. On expansions, Domino's U.S. in their Investor Day 10 days back, indicated [ incremental ] store growth in the BRIC nations would be 3,500 plus stores by 2025. Based on our dynamics where we are miles ahead of other 3 BRIC nations with Domino's platform, would it be realistic to expect an excess of 1,000 store additions from India by 2025, also being validated and accelerated store additions in the recent past? And in this context, could we expect the new store additions to contribute materially to sales growth from FY '20?
Thank you, [ Raj Mohan ]. As we've said earlier, we are excited about the momentum that we have in the Domino's business. We're excited about the way the growth has been delivered. Its growth is order-based. It's growth that is demographic across towns, across [ both strata ]. It is both in delivery and dine-in, but a lot more in delivery. So we've remained very excited about the prospects for expanding the store network in Domino's. We see 3 trends or opportunities. One is given the growth in the large towns and especially in metros, we see -- we've seen that there's opportunity for us to open more stores, both to relieve the pressure in existing stores and also to tap into new micro markets as they're emerging in these towns. That's number one. Number two, we see the need clearly to go to new towns. And we opened 2 last quarter, but many, many more that we can go to. We also see them [indiscernible] opening up stores in new channels, whether it's corporate parks or it's college campuses, [ the value of ] our core channels. So yes, there is an opportunity for expanding our footprint across all of these areas. We won't be able to put out a number in terms of what that count would be. But we believe that market has got tremendous potential and tremendous depth, and we're excited by it.
Okay. And as I asked, could you expect the new store additions to contribute materially to sales growth by, say, FY '20 or later?
It would be fair to say that as we expand our store network, and as the full impact of the stores we've added this year plays out, you will see an increase or a delta between same-store growth and the total system growth expand. So yes, the new stores will contribute more to overall top line expansion going forward.
Okay. Any breakeven assessments you would objectively give on the new stores in the form of period fall in generating, say, unit-level positive cash flows in split stores as well as new stores, other than further room for driving operation efficiencies in the existing stores?
So that one is -- there will always be room for driving operational efficiencies, and that's a goal that we never tell ourselves is finished, it's WIP. It has to remain so going forward, number one. Number two, the new stores that we opened, opened profitably, opened strong. And to build from that, our payback we said in the past are in the region of 3 years. We have seen in the recent past, the better stores are having a faster payback than that as well. So -- and of course, there is hugely, I think, vertical impact on customer satisfaction and improved operational KPI. So it is a win-win in that sense. As we open more stores, we get more revenue, we get more customers and we get happier customers.
[Operator Instructions] We take the next question from the line of Pulkit Singhal from Motilal Oswal Asset Management.
Firstly is -- the first one is on the registration kind of proximity. If you could just share in terms of the sales per store that you are currently observing on those [indiscernible], is it much higher than what you have overall? Or is it still a long way to go to reach there? And to that extent, what could -- how many stations could you kind of expand this opportunity to?
So Pulkit, we have seen a very encouraging response to our railway ordering proposition. As I mentioned earlier, we are seeing a significant increase in our orders and in revenues over the last quarter. As you're aware, we rolled out a TV ad toward the end of quarter 2, early quarter 3 talking about the railway ordering functionality. That has also driven awareness and drive. We also are seeing very good customer satisfaction levels on railway ordering. We are seeing a very positive social media impact whenever we deliver in the trains and make customers happy. Typically, this leads to repeat orders. We have seen repeat orders come faster because customers are happier. So that said, we believe that this is still the start. We have a long, long way to go. This -- the railway market is very large, and we barely scratched the surface of it. So we see this being an engine of growth for us in the future as well.
Right. So how many stations would you be currently serving?
We serve close to 160 stations right now.
Okay. And this would be like your stores at each of those stations? You would need to have a store at each of the stations to service?
Yes. We have a store approximate to the station. Not necessarily in it, mostly, in fact, not in it, but close to the station. And we have people who are runners from the store to the station depending on the order flow.
Right. Second question, clearly when you dissect the growth in terms of new customers versus higher frequency from existing customers, particularly in the last 1 year, are you seeing a high growth in new customers?
Pulkit, I think I talked about what encourages us when we see the growth profile. One thing that encourages us also is that we are attracting more new customers and also growing frequency of existing customers. During the last quarter, we saw an increase in the growth, in addition of new customers to our franchise. We also saw an increase in the frequency of our core customers, telling us that the proposition that we have between the product and the value and the customer experience we provide is looking good for new customers and to attract them, as also for existing customers.
I'm sure growth is coming on both aspects, sir. It's just that in the last, I think, 6, 8 months, the number of mobile ad downloads a lot higher. And also I'm just trying to evaluate whether this food aggregator market is bringing new customers to you. So is there a reason to believe that this new customer growth could be much faster -- would have been much faster than what you've witnessed previously?
So there is certainly the impact of technology and data and access driving new customer acquisition. But what you see in our [indiscernible] the moment the channel migration from voice to online. That is also sitting in the numbers that you see there. But both our own efforts, our own organic platforms, our assets and our marketing [ trend and ] support initiatives are helping drive new customer acquisition, as also is access to more smartphones, more technology, et cetera.
Okay. So lastly -- I mean, when you evaluate all these new opportunities for -- I mean, in terms of Chinese or other cuisines, I mean, will you be able to use your existing network of Domino's? Or do you have to do this completely separately, if at all, under a new umbrella?
I think right now, that question is a little hypothetical, Pulkit. The one -- certainly as we see it, the one strength that we can leverage in our expansion, as we are indeed doing in Dunkin' right now, is the network of commissaries that we have across the country. There will be common and shared assets. Beyond that, we'll have to see how that plays out, but the commissary will be a source of strength for us.
Next question is from the line Nillai Shah from MS.
My first question is on the SSG. I know you've -- you highlighted that more that 50% of the stores are in existing cities, and hence expect some pressure on the same-store sales growth. But the question really is that you're talking about a very tiny fraction of the stores on a base of what is 1,200-plus stores, so why was there a need to call this out? I'm not quite certain about whether mathematically it can have a very tiny impact on the same-store sales growth.
I think, Nillai, it's important for us to call it out because the stores that we opened, those 50%-plus stores that we did, are in -- are for reasons of the store loading high. So these are a high revenue, high order growth stores. And that is what will have some impact, mostly marginal. What's important for you as a [vertical] to know that, that what's driving store expansion is not just opening up in new market, but also the need for us to split existing markets to service customers better.
Okay. Clear. Pratik, a second question is on the press note clarification that you gave on the e-commerce press note. Have you sought any clarifications from the government or got a legal opinion on this, to suggest that this would be included -- the food aggregator will be included in this particular clarification that has come through?
Nillai, I think the assessment that we have internally of the press note is very clear. I think there is no ambiguity in that. And if you read the press note, the clauses that are listed down there are very straightforward. So we have absolutely no doubt that food aggregators would be covered under the purview of the press note.
Okay, clear. And the final question is on the OLO numbers which you gave in your presentation and the mobile ordering and the percentage of OLO. Would that be for the Domino's app per se or for every -- all the online ordering orders which you get?
Nillai, this is for Domino's.
It's only for Domino's. Okay, very clear.
We take the next question from the line of Bhavesh from CLSA.
This is Vivek. I mean, a lot has been asked about the store splitting. I also have -- [ sort of following up ] from the earlier question. If store splitting has a small impact on SSG mathematically speaking, it should also have an impact on margins because the existing store revenues [ go on there ], it's a very fixed costs-intensive model. Why do you say that there is no impact on margins? Something I'm not very clear about.
So Vivek, we are talking based on our experience from the third quarter and the performance and what we see as the impact of new stores, both on top line and on margins. Our new stores have opened strong, a store that we opened both last quarter and earlier in the year. The new stores have opened strong. The old stores have gone back in under 12 months in the original trajectory and growth and on sales. And therefore, the combined stores are seeing -- are showing a healthy increase in both sales and overall profits. And we don't expect the same store -- the store opening in the future to impact materially the margins adversely.
Okay. And one more thing on store splitting. When your own store or let's say competition, when your own store kind of cannibalizes an existing one, with so much -- let's say a billion dollar raised by [indiscernible] and talks of the [indiscernible] also raising $1 billion. When your own store can create a bit of a competitive pressure or let's say cannibalization, why does that bother you when food aggregators are raising let's say a $1 billion number when you come across these things? I mean -- and my question is only from a short-term perspective. Long-term, I concur with your view that monthly [indiscernible] expenditure, sir, but from a short-term perspective.
Vivek, on that, there is no ambiguity, whether it's the long term or the short term. Our primary focus as Domino's is to ensure we delight and satisfy our customers. If we see and very well receive that the pressure of an existing store is coming in the way of delivering a superior customer experience, it is incumbent upon us to make sure we split the store and go back to giving customers the experience that we give them normally. So that is an absolute area of focus, regardless of what the static in the environment is, regardless of what the other food tech players do, what capital they raise or not. Our focus is to all our customers and in delighting them. And that will remain an area of concern and focus for us, regardless.
Next question is from the line of Aniket Sethi from Kotak Securities.
This is Rohit, the same from Kotak. I have a couple of questions please. Pratik, you are [indiscernible] a company of such a [indiscernible], it comes across in a lot of your comments. Now my question is on revenue measures that internally, do you do some external and peer studies? And if so, what are the trends therein? Not so much the absolute numbers, but have you seen them improving?
Thank you, Rohit. Yes, we absolutely have NPS, Net Promoter Score as a measurement system that we use. And we track it very closely, in fact, even at the store level. We track it at the aggregated level [at various costs]. We track it whether it's weekdays or weekends. So we have a lot of plans, a lot of rigor which goes into tracking the customer satisfaction scores. I think it's -- what encourages us is that we have seen progressively over the last few quarters, the customer sat score improved across both delivery and dine-in.
Excellent. My second question is a little more micro in nature. If you're talking about these stores, which are [indiscernible] in terms of your ability to deliver from a volume standpoint, how should we think about per-store capacity? What does the model suggest? Are you able to expand your [ talents ]? Are you -- is it lack of space? Is it just inability to expand the delivery nonstop? I mean, what is the bottleneck? And how many -- I mean, over time, does this put pressure on your ability to deliver SSG, just the physical constraints of this in the store?
So Rohit, variable things. We see the pressure in the store given the order growth. The first attempt, of course, is to debottleneck the existing store by putting in more infrastructure, by putting in more riders, putting in more manpower, to make sure we're able to deliver to the increased order load from the same store. So that is, of course, the first attempt that we do. Only when we realize that after adding more riders outside the store, after debottlenecking the kitchen itself, we are not able to serve the load, it is only then do we split the store. So a lot of the stores that we see in the smaller towns are not getting split despite having a very high delivery growth and order growth because there is enough room for us to extract growth from the same stores, partly by adding infrastructure, partly by improving the kitchen flow, partly by improving training, partly by adding more [indiscernible], more riders outside the store. It's only when that becomes difficult, then we move to splitting the store.
Next question is from the line of Krishnan Sambamoorthy from Motilal Oswal Securities.
Most of my questions have been answered, just one query on the payback period. I know you've not added a lot of scores on the payback period.
Yes, yes. Please go ahead.
Yes. So I know you've not added a lot of stores over the last 1.5 years. But even with the stores that you added, given the momentum that's continuing in terms of QSR, your own initiatives as well as delivery, have we seen a reduction in the payback period compared to the past?
Krishnan, yes. The answer is very clearly yes. We have seen an improvement in the payback period on the stores opened more recently.
Okay. And how significant is that? Can you quantify that number? The -- earlier, we used to get data on the payback period. I mean, has there been a material increase?
We're able to quantify that. Earlier, we used to say that our breakeven was, payback period was 3 years. It's has split, too, a little later than that even when we had challenged SSG. Now our payback period has improved, to a little under 3 years, faster than 3 years.
Okay. And any color, what's the escalation in terms of store lease rentals that you are witnessing now?
You have seen the impact of a variety of these factors into the range cost lines. There is, of course, some inflation that we are seeing play out. There's also impact of volume growth and revenue growth, whenever we have ventures tied to revenue. And then there's, of course, some impact on productivity that we have and closed stores whenever we shut them. This would be the same time last year for the loss of impact of input cost credit loss [we're putting out there].
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.
Thank you, everyone, for joining us on the call today. I'm hopeful that we were able to answer and address all your queries. Should you feel the need for any clarifications, any further questions, please feel free to reach out to us or to CDR India.Before concluding, let me once again reiterate that we are happy with the performance in quarter 3. We are confident of sustaining the momentum and delivering profitable store growth going forward. Thank you once again, and have a good evening.
Thank you. Ladies and gentlemen, on behalf of Jubilant FoodWorks, we conclude today's conference. Thank you for joining us. You may disconnect your lines now.