Quick Service Restaurants (QSRs), which are largely concentrated in metro cities, have been impacted by weak consumer demand, high competitive intensity, and certain political and regional issues in recent quarters. This weak demand persisted in the June quarter as well, with same-store sales growth (SSSG) remaining flat to negative across the board.
Amid these challenges, there is growing optimism that regulatory changes could provide some relief. Analysts believe the proposed GST overhaul could benefit these companies by potentially reducing the cost of some raw materials (RMs). These savings may then be passed on to consumers to make offerings more attractive, which could, in turn, help revive demand.
Major brands have already implemented various measures to increase footfalls, and if the proposed rate cuts were to be implemented, they could further accelerate recovery by enhancing value propositions, improving margins, and stimulating broader consumer spending in the QSR segment.
Domestic brokerage firm JM Financial stated that the proposed GST reforms would be positive for branded QSR players, as the recommended changes, shifting GST slabs from 28% to 18% and 12% to 5%, could reduce the cost of certain raw materials and lower capital expenditure.
It noted that the removal of the 12% and 28% slabs, and the shifting of items to lower slabs, would reduce RM costs for these companies, as they currently source 10–50% of their raw materials from categories taxed at higher rates. In addition, lower indirect taxes could lead to more disposable income for consumers, benefiting small-ticket discretionary items like QSRs.
According to the brokerage’s analysis and discussions with multiple QSR companies, 10–45% of their overall raw materials fall under the 12% GST bracket. A reduction in this rate is expected to result in a 20–90 basis point improvement in gross margins across QSR players, depending on the raw material mix.
On the capex front, the proposed GST changes are expected to reduce per-store capital expenditure (e.g., the GST rate on air conditioners would decline from 28% to 18%).
Boost in demand expected for branded QSRs
JM Financial expects companies to transfer a significant portion of the GST reduction benefit to consumers through value-oriented offerings, higher discounts on current SKUs, and similar strategies.
This is anticipated to boost consumer demand, especially for branded QSR players, as the price gap with unbranded players narrows, encouraging a shift toward hygienic and safe food options.
The brokerage expects Jubilant FoodWorks (Domino’s) and Restaurant Brands Asia (Burger King) to benefit the most, while Pizza Hut (under Devyani International and Sapphire Foods) is also expected to see gains.
Single-digit SSSG across most players in Q1
During the June quarter, most companies reported single-digit same-store sales growth (SSSG). Jubilant FoodWorks stood out with a strong like-for-like (LFL) growth of 12%, while Westlife and Restaurant Brands Asia (RBA) reported modest SSSG of 1% and 3%, respectively. Devyani’s KFC, Pizza Hut (PH), Sapphire PH, and Barbeque Nation (BBQ) saw negative SSSG of -1%, -4%, -8%, and -3%, respectively, with Sapphire KFC remaining flat year-on-year.
Systematic Institutional Equities noted that consumption trends during the quarter remained stable, with no material improvement or deterioration compared to previous quarters. Looking ahead, companies expect dine-in frequency to gradually recover in FY26, supported by easing inflationary pressures and the positive impact of government stimulus measures on consumer spending.
The brokerage highlighted that the revenue gap between dine-in and delivery channels has narrowed, largely due to a rise in dine-in footfalls—signaling improving consumer confidence in out-of-home consumption.
Despite this positive shift, the sector continues to face weak underlying demand, which has placed pressure on operating margins and weighed on both restaurant-level and EBITDA-level profitability.
In response, brands are placing increased emphasis on value-oriented menu innovations and dine-in promotions to attract incremental traffic and enhance customer engagement, which are aimed to strengthen competitiveness, support the recovery in footfalls, and drive a more balanced contribution between dine-in and delivery segments, the brokerage added.
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