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Same-store sales growth turns negative for fast food firms

Sunday, 16 February 2014 - 6:00am IST | Place: Mumbai | Agency: DNA

Consumers have been slowly cutting down on their discretionary spends with growth of the quick service restaurants (QSR) steadily declining following a drop in frequent visits to restaurants and hotels.

In fact, in the past few months, the condition has become worse, as same-store sales growth (SSSG), which refers to sales growth at stores that have been operational for at least one year, has been in the negative for the listed players in the space.

For instance, Westlife Development that owns Hardcastle Restaurant and operates the franchisee of McDonalds in South and West reported a 9.8% dip in SSSG for the October-December quarter.

Even Jubilant FoodWorks that runs and operates Dominos pizza chain reported a 2.6% fall in SSSG versus a growth of 6.6% in the second quarter of this financial year. Even the SSSG of Yum restaurants that operates KFC and Pizza Hut has dropped by 4% in the October-December quarter.

In order to woo consumers, companies have been increasing their marketing and promotion spends. In fact, Happy Hours a concept that has been mainly limited to liquor was introduced by fast food players in order to encourage consumers to open their purse strings. But clearly, persistently high inflation and the slowdown blues have managed to keep consumers away.

In fact, going ahead things are not expected to improve anytime soon. Ajay Kaul, CEO, Jubilant FoodWorks said that, "It will take two-three quarters for things to look up. But despite the slowdown we will keep investing and spending on promotions."

It is not just the fast food joints but even the fine dine restaurants have been struggling with low footfalls.

Samir Kukreja, president of the National Restaurant Association of India (NRAI), also agrees that consumer spending have been falling for a while now. "However, we expect things to improve going ahead."

The domestic quick service restaurant business, estimated to be Rs 3,400 crore in 2012-13, has been struggling with slowing growth for the past one year. However, experts see it only as a short-term blip and expect the QSR market to double up to Rs 7,000 crore by 2015-16.

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