For the past four quarters, Noida-based Jubilant FoodWorks, the franchisee of Domino’s and Dunkin’ Donuts in India, has seen its same-store-sales-growth (SSSG) fall from 26 per cent to 16 per cent. According to estimates, the SSSG number for Jubilant in the coming quarters is unlikely to improve as consumers cut back on discretionary spends. Yet, Jubilant, promoted by the Bhartia family, has retained its aggressive store count agenda.
It proposes to add a total of 120 stores — 110 of Domino’s and 10 of Dunkin’ Donuts — by the end of FY13. On Domino’s in particular, the company has upped its target by 20 stores. In the initial months of the current financial year, Jubilant had said it proposed to add 90 such stores. In the first nine months alone, Jubilant has added 87 Domino stores and eight outlets of Dunkin’ Donuts. It has also added eight stores of Dunkin’ Donuts so far. The Domino's store count, as a result of the additions, stands at 552 at the moment. This will touch the 567-mark by the end of the fourth quarter. While Ravi Gupta, president and chief financial officer of Jubilant FoodWorks, did not give an indication of the company’s store addition agenda in the next fiscal, he said the firm will continue to add stores. “Even at the height of the Lehman Crisis in 2008-09, we were adding stores despite a gloomy picture that existed then. We have been consistently adding stores in the last few years. We have no plans of ceding ground to others. If we don't do it, someone else will," he said. But the question is: Is the model sustainable when sales growth has been consistently falling? Analysts are of the view that Jubilant will have to scale down its store addition agenda if it wishes to improve SSSG performance.
"In an environment where consumers are cutting back on discretionary spends and with no signs of a respite soon, it does make sense to bring down store additions," said Nitin Mathur, analyst (retail and consumer), Espirito Santo Securities, a Mumbai-based brokerage.
For the December 2012 quarter, Jubilant reported a net profit of Rs 37.71 crore, a jump of 28 per cent in profit reported last year, which stood at Rs 29.47 crore. Total income rose 39.02 per cent to Rs 385.15 crore from Rs 277.04 crore last year.
Over half of Domino's stores have been launched in the top 10 cities of the country and Gupta has admitted that this has led to cannibalization of sales with the presence of more than one Domino outlet in a single area. Then there are additions happening by other food service majors such as McDonald's, Yum! (the owner of brands such as Pizza Hut and KFC) and Speciality Restaurants. Amit Jatia, vice-chairman of Westlife Development, whose subsidiary Hardcastle runs the McDonald's operations in the southern and western parts of the country, has said that the company proposed to increase the number of restaurants from 148 to 250 by 2014. This means that in the next two years, it will add over 100 stores in these regions. Yum!, on the other hand, has said that it would double its store count from 500 to 1,000 by 2015.
