I now hand the conference over to Mr. Lakshya Sharma. Thank you, and over to you, sir.
Thank you, Darwin. Good evening, everyone, and welcome to Jubilant FoodWorks Limited's Q2 and H1 FY25 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 CEO of Turkey Business, Mr. Aslan Saranga, our CFO, Ms. Suman Hegde. We will commence with three thoughts from Mr. Hari Bhartia and turn to our CEO and MD to share his perspectives. After the opening remarks from the management, the forum will be open to question-and-answer sessions. A cautionary note: some of the statements made on today's call could be forward-looking in nature, and the actual results could vary from the statement. We will also share the replay and transcript 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. Over to you, sir. Thank you.
Thank you, Lakshya. Good evening, everyone, and thank you for joining us. We are excited to build on the momentum from quarter one of FY25 as we move into quarter two. Despite facing a challenging demand environment in food service and broader consumer space, our commitment to convenience, innovation, and delivering unmatched value to customers has positioned Jubilant FoodWorks to gain market share and drive category growth. The results from both quarter two and H1 reflect the success of our strategy. Our investments in direct-to-consumer apps, cutting-edge technology, and our unique commissary-based sourcing model have allowed us to excel in operational excellence. Additionally, our move to a 20-minute delivery is not only enhancing customer experience but also reinforcing our commitment to quality service. The dedicated team at JFL remains focused on delivering exceptional value to consumers and driving growth.
We have maintained price stability over the last nine quarters, absorbing inflation through cost optimization and productivity initiatives. On top of this, we have waived delivery fees. We have also accelerated new product launches, including popular cheese, Volcano Range, and Cheese 'n' Corn, each crafted to meet evolving consumer preferences and to drive order growth. The shift from dining to delivery continues in India and abroad. With our own end-to-end delivery ecosystem covering fleet, riders, and advanced delivery management systems, we are well-positioned to embrace this trend. We are doubling down on reducing delivery times from 30 minutes to 20 minutes and accelerating new store openings, expanding into new cities to capture growing demand. Simultaneously, we are committed to delivering value to our dining customers. Through new dining-only menus, we are seeing order growth during lunch hours, a promising shift that signals consumer preference for dining with us.
In Turkey, our business is continuing to grow with margin improvement and store expansion, all while navigating macroeconomic headwinds. Across all markets and brands, JFL Group's system sales for H1 reached INR 45.1 billion. We have added 139 net new stores, bringing our network to 3,130 stores. Overall, we are very pleased with our growth and increased profitability of JFL Group, which benefits from corporate-owned setup in India and largely franchise network in Turkey. With that, I request Sameer to share his quarterly update and his perspectives.
Thank you, Mr. Bhartia. Warm welcome to all in our earnings call today. Our strategy of doubling down on Domino's is working. To recap, we increased investment in brand building, stepped up pace of product innovation, for example, Volcano Pizza, Cheese 'n' Corn, reduced span of control by adding three regions, increased density of stores to enable 20-minute delivery, and relentless investments in customer-facing technology. This has resulted in momentum build-up from Q1 into Q2, with August as our highest month in sales. We are seeing this carry forward into Q3, driven by new customer growth and greater than 20% order growth year-on-year. Domino's India scaled new records with highest orders, highest app traffic, highest conversion, and highest volume metric throughput per store. Let me now share our performance summary for the quarter and help you with growth composition along with updates on India and Turkey segments.
Performance summary: Consolidated revenues total INR 19.6 billion, up 42.8% year-on-year. The growth composition is as intended. DP Eurasia revenue contributed 33.7% to overall growth, with 9.1% being the organic growth from the existing business. EBITDA margin came in at 20.4%, up by 14 basis points year-on-year and 57 basis points quarter-on-quarter. As a group, the network stands at 3,130 stores, strong with 73 net new additions in this quarter. In Domino's, we added 61 stores, with 50 stores in India, 6 in Turkey, and 5 in Bangladesh. In coffee and Popeyes, we added 11 and 4 stores, respectively. Specifically, coming to India segment, in India, revenue was at INR 14.7 billion, up by 9.1% year-on-year. Domino's growth came in at 8.1%. LFL came in at 2.8%, led by delivery growth in Domino's at 11.4%. At channel level, delivery grew by 15.9%, led by record order growth of 32.3%.
This is highest delivery volume per store. We have 36,400 riders on our rolls who deliver for Domino's. Led by menu innovation, we also saw a sequential growth in dining orders. ADS for mature stores is at INR 80.2 thousand, which is the highest in the last six quarters. Gross margin and EBITDA margins are at 76.1% and 19.4%, largely flat quarter-on-quarter. App traffic grew by 18.5% year-on-year, with 12.8 million monthly active users and material improvement in app conversion, with a total of 27.8 million loyal members. Domino's network is now 2,079 stores, strong, serving customers across 447 cities. You will notice that we have increased the pace of store expansion quarter-on-quarter, 50 versus 34 last quarter, and we have entered 26 new cities in H1. As guided earlier, we continue to tap on white spaces with new stores and formats at university campuses, highways, and airports.
In the last quarter, we introduced Volcano Pizza, Cheesy Wings in South India, and a special INR 77 menu during Independence Day in August. All three interventions exceeded internal plans. In Turkey, last year, same quarter, on account of minimum wage hike mandated by the government, consumption saw a huge surge. Hence, the business is lapping a very strong base. Also, the central bank focused on bringing down inflation. There will be a transient impact, as anticipated, on demand in the near term. Overall, system sales came in at INR 7.7 billion.
sWithin it, Domino's Turkey system sales was at INR 6.9 billion. Domino's Turkey like-for-like growth came in at -6% on a base of 52.6 LFLs in the last year of Quarter Two, which is Q2 FY24. I'm pleased to share that Domino's was awarded the recognition of being Turkey's Lovemark for the second consecutive year and third time overall.
For context, Lovemark award is a survey conducted by Ipsos to find out brand consumers are absolutely in love within the category. We are humbled with this recognition, which reflects deeply the brand love and support that we receive from our customers. The coffee brand COFFY system sales came in at INR 651 million. COFFY like-for-like growth was at -3.9% on a base of 35.3% LFL last year of Q2 FY24. All new stores opened in the quarter were franchisee-owned, and the franchisee mix now for coffee stands at 78.4%. The revenue from DPEU came in at INR 4.6 billion, flat quarter-on-quarter. Margin expanded with EBITDA at 26.1%, plus 110 basis points quarter-on-quarter, and PAT margins are also strong and equated to Indian business at 10.5%, plus 130 basis points quarter-on-quarter.
In closing, as we are into almost six weeks past big days of Diwali, Domino's India will continue to carry forward the growth momentum, which is accelerated. On network, we have crossed 2,100 stores milestone. However, we are maniacally focused on operational excellence, making big days bigger. Even Q3 is a lot about big days and festivals, increasing our investments in marketing, launching new products, and making our technology assets and app work harder while continuing to partner with aggregators. Thank you so much. With that, I request the moderator to initiate the Q&A session.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. We have the first question from the line of Nihal Mahesh Jham from Ambit Capital. Please go ahead.
Yes, good evening to the management. So my first question was, on the dining side, you look at the growth, it's still negative similar to what was in Q1. I just wanted to get your thoughts that the INR 99 menu launch has not seen an activation in some traffic and maybe you would have expected a sequential improvement there on back of that intervention.
Yeah. So I think, see, what is, let's step back and view how is INR 99 dining menu looking. So firstly, it is an investment to draw customers into the stores during lunch hours, i.e., 11:00 A.M. to 3:00 P.M. When I look at that window, it has obviously increased our orders for sure. In the last quarter, it also increased the sales in that period. So it was a specific intervention when our store sales are low. Our fixed costs, manpower, electricity, everything is running. So we believe it is the right thing. Having said that, see, the movement towards delivery is far higher in the market in terms of consumers, and therefore that continues to grow faster. But what we are focused on is driving growth during lunch hours. That piece is working at INR 99.
We are seeing order growth in our stores during 11:00 A.M. to 3:00 P.M.
Understood. But maybe the time post 3:00 P.M. is where the drop is higher, and it's in a way not compensating for the increase in traffic from 11:00 A.M. to 3:00 P.M.
See, the dining is available. See, we want to specifically focus on 11:00 A.M. to 3:00 P.M. and also a bit of post that. But post that, anyway, in our business, we start seeing traffic increase in 3:00 P.M. So that's not an intervention we have at the moment. But right now, we are focused on 11:00 to 3:00 P.M., and we are doing more initiatives to increase that.
Got that. Second question is, in terms of the store addition, this quarter, we see a lot of new format stores seen as technology like the university campuses. Is it fair to believe that in the future, the ADS profile of the incremental set of stores would be similar, lower, or higher? Just that these are some new formats that are coming along as we are seeing?
Yeah. In fact, our throughput per new stores have also increased, and we keep a track on it. I think what I have gone on record in saying that the opportunity to expand in India is very large. So for example, there are 1,000 campuses with more than 5,000 students. There are about 40 airport terminals that matter where we are present. For the first time, we opened three airport terminals. So these stores are all in terms of ADS, either similar or equated. So we are not going to pockets with dilutive ADS. So we are very focused on getting the right ROI and payback period, and we are seeing that. So no reason to believe these are dilutive. In fact, some of these stores in campuses, we become the captive or the only place to go to for dining for students. So very happy with the progress.
It is not dilutive at all.
Got that. Quickly on clarification, you said that the India growth momentum had accelerated in Q3 for the first 50 days, if we heard that right. 40 days, I'm sorry.
That's correct. So I think we are seeing the momentum carry through from Q1 to Q2 to Q3, led by delivery. That is correct.
Sure. Thank you so much.
Thank you. We have the next question from the line of Jay Doshi from Kotak. Please go ahead.
Yes. Hi. Thanks for the opportunity. I have a question on the order growth. Clearly, in the last six months since you waived the delivery, it has picked up very strongly, and it's spiking at two times your revenue growth, especially for the delivery channel. So when you look at the numbers internally, are these new orders and new business, or are these numbers also influenced by some shift from takeaway to delivery? And second question is that there's a delivery fee, delivery waiver. How has it shaped up for you versus your own expectations on SSSG front, on order growth front, and on profitability front? That's it from my side. Thank you.
Yeah. Jay first, great question, both of them. Of course, let me say that when you do free delivery, the incentive to go to a store, takeaway goes away. And with our focus on 20-minute delivery, the incentive is even lesser. So we do see a decline in takeaway. So in fact, and if you were to take on-premise sale in some ways, right, like it's a dining plus takeaway, with our new store design, dining is actually growing. It's the takeaway business which is moving to delivery. So you are right. There is a share shift, but overall delivery is growing far, far bigger than or greater than the loss in takeaway. Now, how does it pan out? I think we are very positively surprised on two dimensions.
The amount of order growth that we are seeing in our, like I told you two quarters ago, that we had experimented in a few stores for almost six months before we came to this conclusion. So when I look at that experiment, the order growth is much higher than we anticipated. Also, the new customer growth is much higher than we anticipated. And both these counts are actually very positive stories for us because new customers we know ultimately repeat at almost three for the compounding will happen or we are beginning to see in a few areas. Our network is poised to deliver to customers in 20 minutes, and therefore this doubling down on order growth only increases productivity inside the store, our rider productivity, and customers get a better experience. So it allows us to expand more number of stores. So very positive on this account.
Yes, are we paying in form of margins? Yes, you can see we are paying in form of margins. But to me, it is a matter of time as growth momentum picks up, we will get that margin. Also, we know that I will give credit to the team that we almost had this would have dragged almost 150-170 basis points, but you don't see that drag on the P&L because we have worked on internal efficiencies to recover almost two-thirds of it. So I would say very positive on new customer order growth, and on margin dilution, through internal efficiencies, we've been able to save off almost two-thirds of the margin dilution.
That is very helpful. Just one more question, please. 1 Q to 2 Q, the trend, SSSG trend was broadly similar. Are you expecting some uptick going into 3 Q, 4 Q? What's the outlook based on the last 40 days of the current quarter?
Yeah. See, again, we always refrain from giving a guidance, but given that we have five weeks of fast and the big days of Diwali are behind us, we are seeing actually momentum accelerate from Q2 to Q3.
Thank you so much. And good luck for the quarter.
Thank you.
Thank you. The next question is from the line of Tejas Shah from Avendus Spark Institutional Equities. Please go ahead.
Hi, sir. Thanks for the opportunity. So first question is, on most operational parameters or even in our commentary, we seemed relatively positive versus the larger basket of consumption, not even only QSR that we would have heard this quarter. So would you say this optimism is primarily driven by the positive response that we are seeing to our interventions, or our read on the demand sentiment itself is different from what the broader street has?
Yeah. Tejas, thanks for asking that question. I think it is, and I'm no economist to correlate to that. I will definitely firstly give credit to my team who have worked on five different elements to bring it together. Number one is our investment in technology. So like I had said in my last few earnings calls, that we have doubled down on our app, microservices-based architecture, removing defects. So that was one piece on our app. Second was we moved from four regions to seven regions. Therefore, we have tighter control over stores. The service quality has improved. Number three was three quarters ago, we launched a new campaign. It happens only with pizza. So we have increased our investments in marketing. Through sharp data analysis, we learned that delivery is a big barrier. Delivery fees is a big barrier.
And therefore, we very carefully waived off delivery fees, but recovered partially in packaging charges. So that gave in a set of new customers. And lastly, I would say that the sheer execution on big days and getting these riders onboarded through technology and sheer will of the team, I think this is what is playing out. And then, yeah, of course, someone is correcting me that we have increased the pace of product innovation as seen in Chees 'n' Corn in South India and Volcano Pizza. So all of this is coming together. When I hear the commentary of QSR players or broader FMCG space, I think my guess is as good as yours. The sentiment is obviously quite different. So therefore, I'm calibrated, but we are seeing positive momentum continue in Q3.
Perfect. Very encouraging. Sir, second question, the way all the food delivery companies have built up capacity and capability, both led by their quick commerce exposure in terms of faster delivery. And then we are seeing one of the quick commerce players is now kind of cross-pollinating that in one of the food delivery offering also as a 10-minute ready snack kind of delivery. How do you perceive this threat? And the 20-minute promise that we had started as a very discretionary fact, do you think that it will become necessity to be competitive in the market?
I think, sir, see, customers love speed, and they love free speed. So I'm always a very big believer of that. And so firstly, we have the network to push the limits of speed on a very large menu. Our philosophy on technology has been that we have to ride on all sorts of technology, whether it's aggregators, ONDC, our own apps. We are present. So any technological asset or a wave that we are in, we will, as Jubilant, we are fully prepared to go to participate in it. I genuinely believe if somebody can actually deliver faster speed with a 2,200-store network in about 500-odd cities, it is Domino's. So I worry less about it. I love that challenge, Tejas. And we are evaluating it. There is no reason why we will not participate in it.
Sure. And sir, last one, if I may. In our store addition, Dunkin' seems to be subdued versus the rest of our portfolios. Any insight there?
Yeah. I think, again, firstly, there is tremendous opportunity in Domino's, and we double down, triple down, however you may want to put it. Then I have said Popeyes is one area where we will accelerate, and we are opening stores, very encouraged by the results. All our stores open at a new high, and we are very satisfied with that. For Hong's and Dunkin', I want to drive store economics and profitability. And once that model is proven, we will definitely expand. So there is no reason why we will not do it. But at the moment, the teams are focused on getting the margins, ADS is right. And again, no cause for alarm over there. All on track, but no expansion story there either.
Perfect. Very clear. Thanks, and all the best for coming quarter.
Thank you.
Thank you. The next question comes from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Hi, Sameer. Thanks for the opportunity. Good evening. Just one observation. Over the last one year, we have entered into 50 new cities, and I'm just trying to look at the slide which says that delivery channel revenue has grown up almost 15.9%. So I have this question specifically to these 50 new cities. Are we now getting into less than 1 lakh population? That's the growth area we have found out, and maybe if you can give how these new cities, the SSGs or LFL can happen over the next two to three quarters.
Yeah. So firstly, Shirish Ji, I think these new cities are still very large cities. And sometimes when we look at it internally, we actually laugh. For example, we were not there in Ayodhya. Right now, you would say you have to be in. I think we can open four or five stores in Ayodhya, to be very honest. One of the smart cities in Gujarat is called Dahod. And we were not there. So it's one of the 20 smart cities in India. Similarly, we were not there in Vrindavan. So now these are all very high traffic, high footfall cities which are becoming bigger and expanding. And I believe we can actually add more stores into. These are still more than 1 lakh population at the moment.
What they do is we obviously not only get favorable rentals, they have higher dine-in proportion, and we are the go-to destination when it comes to international cuisine experience. On LFL, etc., we continue to see similar LFLs, in fact, slightly higher because we had some differentiated pricing in these cities. No, we are very, very happy with it. We will continue to expand into new cities.
Okay. The reason, Sameer, I was asking, the addition of 50 new cities, and if I look at the overall addition of stores is 191. So I was more curious that 50 new cities would have started with maybe one or two stores. That's the way we should look at or more number of stores because you just alluded saying Ayodhya, you have opened four stores.
No, no. What I'm saying is, sorry, maybe I was not. So a new city is defined for us where we have zero stores. So whenever we open one store, that becomes an existing city. So Ayodhya is a new city because we didn't have a store over there. So now if we open the second store, we will not count it as an existing city.
Okay. My second question on the DP Eurasia. I think the system sales has been a little muted and even LFL. So how, when we should look at the second half for the year and maybe some more color because now almost 89% of our stores are franchise-led. So maybe in terms of revenue projection and the margin performance for next half.
Yeah. I think, again, we refrain from giving guidance, but let me give you some color. So firstly, it continues to be a profitable business at 10%. And as you see, the teams, despite fiscal tightening by the government, continue to expand margins. Company margins have also improved materially, and we are expanding stores also. So now the quarter-on-quarter growth seems muted, largely because of higher base. I expect this to kind of change in a couple of quarters. So there is no cause of alarm or anything. Teams are meeting. A large part of it, Shirish, was in their internal plans and budget because we could see Q2 of last quarter last year was a very high base for them. In fact, the average weekly throughput per store was very high, which was not the norm. So again, happy with the performance.
In terms of color, I would only say that the like-for-like should only improve from here, and the team is on track to open their new store, and the EBITDA margin should remain broadly in line and back around 10%.
Okay. Okay. That's helpful. Thank you and all the best.
Thank you, Shirish Ji.
Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Yes, sir. Hi. Thanks for the opportunity and congratulations on the momentum in first few weeks of Q3. Sir, I wanted to check the delivery channel order count growth is at 30%, right? So I wanted to check your view on whether we are gaining share versus other participants in the online marketplace. So if you could comment on that, please.
Yes. I think if you look at even the value growth, volume growth, or SSG of all the listed players and even the store growth, so definitely we are gaining share. Devanshu, all indicators are that and also confirmed by our own internal research.
Thanks, sir. There was a period where a good amount of smaller franchisee-led brands sort of picked up, and they expanded significantly by franchisee. So this extended period of consolidation or market share gains, do you think that this can lead to some amount of consolidation in the online marketplaces?
Hard to say. I think it's for me to comment, but at least my own learning.
The conference is now being recorded.
Reporting INR 135.9 crores for H1FY25 compared to INR 68 crores for the same period last year, representing a 100% increase. With the profitability growing strong, our EPS also improved substantially. So our basic EPS for H1FY25 came in at 11.03 per share, reflecting a 76% increase from 6.27 per share last year. I would request you to put others on mute. There's slight disturbance somewhere. Giving you business updates and strategic initiatives that we have taken. Okay. In addition to our strong financial performance, I'd like to highlight a few of the key strategic moves we have made this year. Number one, expansion of independent power production. So what we call as an IPP, our segment where we invest our own capital, and we set up the plant and we sell power to third party in the utility scale or in the third party CNI customers.
We installed IPP capacity as of H1FY25.
[Foreign Language] 13 भी हुआ है तो फिर तो सच्चाई हुआ होगा ना?
I'll request everyone to please go on mute.
Thank you. Thank you. And we have orders in hand for IPP of around 1.26 GWs, which is the biggest order book still laid in the KPI's book. Moving on to the second business segment, that is our captive power producer, where we set up the plants for others, and we sell the plant to them, and we also do the O&M of that plant. So our CPP business continues to show strong momentum with 336 MWs installed capacity as of half-year FY25. And we have orders for 1.148 gigawatts. So both the segments have a strong order book and a strong execution capabilities also are there. So we expect this coming year also to be a strong performance as we saw this half-year. Moving on to technological advancement, we have adopted cutting-edge technologies like single-axis solar tracker, bifacial solar panel, and AI-driven robotic cleaner.
The conference is now being recorded.
Jubilant, silent right now. Ladies and gentlemen, we apologize for the disconnection. We have now connected with the management. Over to you, Sir.
Devanshu, I think, was asking a question. Devanshu, if you can repeat, we can start from the last.
Yes. Sir, Devanshu seems to have dropped from the queue.
Okay.
Yes. Should we go ahead and proceed with the next question?
Yes, please.
Yes, please. We have the next question from the line of Aditya Soman from CLSA. Please go ahead.
Hi. Good evening. Sir, just one question for me. I think in terms of ADS, when I compare the ADS of, let's say, 1Q24 that you reported today versus the 1Q24 that was reported earlier, there's a big gap, I mean, almost a 5% gap. And it's similar for preceding quarters. So why is this happening? Why is the ADS for older stores reported today lower than what was reported earlier?
Sorry, Aditya, which chart are you referring to? We have shared the Domino's Mature Store ADS.
Correct. So the mature store. Yeah. So the mature store.
Sorry. Yeah. Go ahead.
Yeah. So the mature store ADS for, let's say, 1QFY24, as reported in today's presentation, is INR 77,000, whereas it was almost INR 81,000 in the 1QFY24 presentation.
Yeah. So basically, what we do, Aditya, is that we report on mature store ADS. So whatever is the store we split, we actually remove that from the base, and therefore we present the full series to you every quarter. You will get the new series. So it is computed on 1,621 stores. There is a difference of 15 stores, and therefore the base also gets corrected. This is a recurring metric which we have been reporting for almost eight quarters now.
Yeah. No, no. I understand. I'm just trying to understand why is it consistently lower, the base? And should the impact of 15 stores equate to almost 5% difference in the mature store ADS? I mean, I was just trying to understand how that economics is working.
Yeah. So, Aditya, it will not be like-for-like comparison. So effectively, what we would be doing at 1,621 stores is giving you a continuum of six-quarter performance. So we can't be 100% sure that what will be that number with a higher base of, let's say, 1,640 stores.
So I think, Aditya, maybe worthwhile spending some time with the IR team on how that is calculated so you can understand. So I think what Lakshya is saying is any store that is split is removed from the base of the previous quarter and this quarter. So I think that is what he's trying to say.
Yes. I'll connect with you, Aditya.
Fair enough. Thank you.
Happy to share that calculation.
Yeah. Yeah. No, thank you. I think intuitively I sort of get it because, I mean, I'm assuming the stores that get split are the ones with the highest ADS given that it would.
Exactly.
Yeah. Understand.
Yes, correct.
Thank you. The next question is from the line of Kshitij Bansal from WhiteOak Capital. Please go ahead. Kshitij Bansal, your line has been unmuted. You may proceed with your question. As there's no response from the current participant, we will move to the next question, which will be from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Sir, just one question. We have seen a structural shift towards delivery from dining or takeaway. Do you think it's time to experiment with few dark stores with only delivery channel? And would the unit economics of these stores be significantly better?
Yeah. I think that's a constant debate that we have, and it's not that we have not done it. So I think we have actually, let's say, three kinds of formats. So there are mall stores, which are in food court stores. Very easy to understand. Second are full high-street stores, which is about 1,200 in metros and about 1,500 in tier three, tier four cities when we are entering into that city, so which have larger dining over there. Then what we have is a delivery and carry-out store.
The best ROI payback period in stores where there is not only just delivery, there is also customers can walk in and carry out. These are 700-800 sq ft stores. The kitchen size is about 400. What we do is we add maybe eight or 10 covers for somebody to sit and eat. Those are even more positive from an ROI standpoint. The brand power is so strong, Shitij, that it doesn't make sense for us to have dark stores. In fact, we experimented with few dark stores, and in fact, customers found that and walked up the stairs and said, "Why can't I carry an order from there?" We do get some incremental sales from carry-out. It is always good to have that in the mix.
Understood. Thank you. Thank you so much, sir. That's it for me.
Thank you. The next question comes from the line of Latika Chopra from J.P. Morgan. Please go ahead.
Yeah. Hi, Sameer and team. Thank you for the opportunity. Two questions. The first one was if you could talk a little about the cost trends for your business in terms of raw material. It seems gross margins have been fairly stable sequentially. And also on rentals and employee expenses, if you could give us some sense on any potential levers for margin improvement from these 19%-19.5% levels that we have been for the past two quarters, other than, of course, the LFL improvement. And the second question was on copays. You mentioned you would look to upgrade the business there. So if you could share any updated thoughts on basis of two additions, any increases, disappoints on how the throughput for store or specific stores for.
I'm sorry to interrupt, but this last part of yours wasn't very clear.
Moderator, I was able to get the focus on.
Yeah. Thank you, Sameer. Yes. Thank you.
Hey, Latika. So Latika, on the raw material prices and inflation aided by Project Vijay, as I've called out, I think we've actually seen some deflation, both based on commodity prices being stable or marginally declining, and equally also the effort that we have taken. Wage inflation is there. Inflation in vegetables is there. It's very erratic, especially during rains. The likes of capsicum, tomato, and today onion, right? All these, I would say, are elevated. The rentals, I would say that with seven regions, the teams are better positioned to scout for rentals and properties which are lower than the average for that region. So I feel good about how the teams are executing over there. But definitely, wage inflation is high.
What we've done over there, we have increased our store productivity inside by almost 30%-35% in the last four quarters. So there's a concerted effort that went into it through technology, also partially aided by the increased throughput for store. So net-net, I think what you see, the dilution in margins at an EBITDA level is largely on account of mix change to delivery, and we're waiving off almost INR 40 per order. I think that's the only thing left. Everything we've been able to kind of manage through internal efficiencies. So that's the color on this. But I do expect raw material prices to kind of go up in Q4, Q1 timeframe. That is my. So again, we have to gear up for more tightening of the belts over there so we have to find efficiencies.
Popeyes, I think, given that we are still nascent and early, we are looking at trends all over the world. Latika, how is Popeyes doing in Turkey to US, to all the other countries that they are opening? Popeyes in India stands for bold flavors, and therefore a lot of launches around wings, hot and messy range, and we continue to double down. We've also increased our pace of expansion in malls and in high street, as we see the throughput for some of the competition has very rapidly moved towards delivery. We are also reducing the store size so that the stores are more geared towards delivery. Very happy to note improvements on three dimensions. Number one being gross margin improvement at about 50-odd stores. We are actually very close to competition over there on gross margins.
Second is our store CapEx has come down because we have localized a lot. We have fine-tuned the equipment. We have reduced the kitchen sizes and civil work, so that work has happened. And number three is our own delivery, right? So a large part of Domino's strength is their own rider fleet and delivery capabilities. We've been able to replicate that. And in fact, within the Popeyes world, we don't even measure 30-minute delivery. We only measure 20-minute delivery.
All right. That's good to know. Just one follow-up on your comments on the cost structure. You mentioned that you expect inflation probably in Q4 and Q1. At a broader consumer industry level, you've started to see pockets of inflation, companies trying to pass on some bit of pricing. Just trying to get a comfort or a better understanding that if inflation hardens other than your cost-saving measures, would you be open to consider pricing as a tool? Considering the last, I think, four to six quarters, we've not seen any pricing, right? So any initial thoughts there?
Yeah. So we have not taken a price high since nine quarters. We have established a very sophisticated pricing center of excellence to look at pricing in various pockets. A lot of this learning actually comes from Turkey, which, because of high inflation environment, has to do it on fortnightly basis. So we are very seamlessly copying from what Turkey is doing and building that capability over here. And there is no reason, Latika, that if inflation is high and we see pockets where we can with increased throughput per store, wherever we have to take, we will take at the right time. But I think the message that we should take is we will be relentless on growth.
Understood. Thank you so much, Sameer, and all the best.
Thank you, Latika.
Thank you. The next question is from the line of Ashish from Fidelity. Please go ahead.
Hi, team. Congratulations on a relatively stable SSSG in this environment. My question was pertaining to margins. Now, as you've indicated, SSSG is sort of inching up a bit for you in the second half. How should we be thinking about margins? Maybe we can stick to PAT margins given that there is confusion around where rent gets classified. So you are at 3.5% PAT margins today on standalone, close to 3.7% on consolidated. Your peak margins have been 7%-8%. Do we see margins go back over there second half? Some handle of how do we think about margins? Because right now, frankly, it feels like orders are growing because you've got delivery charges, and the margins have come up because of that. So I'll explain to you the better order growth and revenue. It's not translating into better profit growth.
So just some better understanding over there would be very helpful. Thanks.
Definitely. I can talk, and then someone can share her understanding. Of course, we want margins to increase, right? It's not that we don't want margins to increase. So when you look at PAT, there are two elements that have gone into PAT. One is we had debt on our books, so there is an interest element. And second is also we said that we were in a high CapEx cycle, so there is additional depreciation that comes in over there. Pre capex EBITDA in there, we do want that. So pre capex EBITDA, we do want that to go up, right? But like I said, I don't want to lose the growth momentum at this stage. If we can gain market share, definitely. And LFL at some point will get into margins, so there is no reason why it will not. We are seeing that in pockets also.
Just to add to what Sameer said, right? I mean, I think Q4, FY24, we kind of came up with new numbers. I'll talk pre-IndAS now. It's about 10.9% in terms of EBITDA. And since that fall, and we also said at that time, yes, with the delivery charges being taken off, with all the investments that had gone, like Sameer said, on commissaries, on front-end tech, on setting up a new system, and the investments we did pre-cycle of momentum of growth coming back are now baked in. From there, if you see quarter on quarter, the last two quarters, there has been an improvement. Albeit minute, but still we're seeing modest expansion while we continue to keep our pricing under check. I think in this environment, and we said in the last quarter as well, it is a growth market. There's growth out there to capture.
Consumers are looking for value propositions. And if we get that franchise going, in time, the margins will follow. But I think our focus right now is growth. And of course, the absolute profits of this business to generate in a market like India and where it is already muted demand. So in the short term, if you ask us a point-blank answer, I think it's not about margin being on focus. Of course, we'd like to maintain and maybe modestly keep improving it through internal productivity initiatives that we take. But the focus is on doubling down on growth and getting whatever demand is out there to take.
Appreciate the answer. If I may be allowed just one follow-up. I get that prioritization of supply and growth is a right strategy at any stage in the cycle, especially now. I think where the disconnect is that when Street looks at your numbers, people are thinking about a recap recovery to 15%-16% margin second half next year, as it were. And from what you seem to be suggesting is that we'll be a little more gradual. I just wanted to be sure that the expectations are set, right, that that level of margins will come at a significantly higher ADS level. Is that understanding fair?
Yes. It will be gradual recovery on margins because we continue to invest behind the brands, yeah.
Okay. Thank you so much, Sameer. And all the best for the rest of the year.
Thank you.
Thank you. The next question is from the line of Sheela Rathi from Morgan Stanley. Please go ahead.
Thanks for taking my question. My first question was with respect to the new store formats which we are opening. On an average, what would be the size of stores or what would be the range of store sizes with respect to we are opening?
Yeah. Hey, hi, Sheela. So I think, again, firstly, these are none of this is new, right? It's not that we have gone into a university first time, right? I think five or six quarters ago, we had shared a picture from IIT Mumbai, right? And so that model, once we experimented, now we have the confidence. These are container stores, right? It's like a container. We can have a one-container store, two-container store, or three-container store depending upon the demand. So each container is about 600, 700, about that in that range, right? So airports are largely a food court kind of a model. So whatever space you get, 450-600 sq ft, that is the space. University campuses, some university campuses where we can actually build a full restaurant, whatever is available.
I think the way to look at this, Latika, is that if you give us, Sheela has to look at that is if you give us 400 sq ft, we will be able to build a store.
Okay. And what would be the proportion of these 600-1100 sq ft stores now? I mean, is it?
We don't track that, Sheela. That is not a metric that we track. In fact, we look at how many white spaces we have, what is the house count and the student count and the footfall. So that is what we are more focused on. The economics are very positive on all of the formats. So we keep a threshold of payback period, and then we try to fit in whatever space is available at the right rentals.
Would it be fair to say, Sameer, that over a period of time, the ADS numbers may look on the lower side, even though what we are trying to do is optimize in terms of store expansion?
Yeah. I mean, that's one way to look at it. If the management doesn't do any interventions, right? So if you do interventions for lunch, for example, that's quite creative. If we start selling chicken, right, and chicken as a percentage of sales for Domino's worldwide is quite material, right? And if you bring those, it will be incremental. In fact, we had a very low share in the late night, right, and post-11 P.M. sales. So now our stores are open from 11 P.M. to 3 A.M. So that is all incremental. So I would like to challenge myself and my team to, can we push the ADS up by having the right set of launches, right occasions, and of course, making big days bigger, right? I mean, if we continue to do that, then the store ADS is only going to go up.
Understood. My second question was, we have done a lot of interventions, and I concur with what Suman had to say with respect to the value offering. Are there thoughts around more interventions going into 3Q? Because obviously, the delivery LFL growth has been strong for us, but do we need to do more interventions at the right price point, anything on the beverage side to ensure that we can see the growth coming back in a big way?
Absolutely. I think, Sheela, thanks for putting words in our mouths. I think everything is an opportunity. Beverage, why beverage? Why stop at beverage? Desserts is such a big opportunity. When we stop at desserts, chicken, rice, snacking, lunch, and many more, right? These are undertapped, which are a huge, huge opportunity. I think what we've learned is consumers at this stage are seeking enormous amounts of value. And for a given threshold experience, if the value is there, then you start becoming first among equals. And that is what we are beginning to see in our data.
My last question, and just trying to verify, Sameer, you sounded more positive on 3Q with respect to the demand trends, or is this something to do with the base effect?
I think so. I genuinely feel, see, I look at store ADS and store volume, right? That's the metric what I look at, right? And where I stand is where I sit, right? So I look at quarter on quarter. So from that perspective, I'm more bullish on the internal performance. And base to me doesn't matter, right? I mean, are we improving quarter on quarter? That is what I am most interested in. And the answer to that is yes.
Understood. Thank you.
Thank you. Ladies and gentlemen, we will now take the last question, which will be from the line of Vishal Gutka from HDFC Securities. Please go ahead.
Yeah. Yeah, hi, Sameer and team. My question is specifically on new launches. I think really you have really pushed the pedestal on new launches, interesting launches that have come up. So I just wanted to give I have one main question in the sub-questions. How is the response overall on a four-quarter new launches and the trajectory going forward, given that you have called out of white spaces? Two specific questions. One is on Domino's Cheese Volcano. So what we have done from our checks that although the experience is excellent while dining in, but in case when you deliver at home, there is some challenge that is there. How do you plan to address that? Because otherwise, the product is an excellent product. And second question on Cheese Burst.
So recently, for your newer product, you have brought in some new launches, three new flavors you have brought in. I just wanted to get a sense, how is consumers' acceptance to those products? Thank you.
Thanks for the feedback, Vishal. If you do encounter any feedback in delivery, I think experience in delivery, let us know. Of course, this product is best experienced fresh out of the oven, but I will give credit to the teams to practice the delivery for three months, right? We had to change a lot of our bikes, train our workforce. Of course, there can be slippages. I'm not saying there are none. So I think from our we look at the satisfaction. In fact, this is a product that has been launched in at least 10 countries. The customer experience or customer satisfaction scores are actually highest in India, and it has continued. We thought this will be a limited-time offer, but we are very surprised by the sales and the love that Gen Zs have for this product, right?
It is the most Instagram product in our portfolio. And therefore, it has continued well beyond what we thought was the right life for it. So we have grandfathered it on our menu. So therefore, it has exceeded our expectations. I think the consumer insight from the marketing team was that when customers think about Domino's, they think about craving, they think about cheese. And the Volcano launch proved that. And therefore, we took that to during Diwali and the festive period to most loved cheesy portfolio called Cheese Burst. And with Korean Makhani and Fiery Cheese Burst pizzas translated also to Garlic Bread. So we have dramatically increased the pace of innovation, giving more crave-worthy products and Instagram-worthy products to Gen Zs. I think very happy to note. And that's why you see the confidence in our tone when we look at Q3 to date performance.
Great, great, great. Sir, and any more? Already been all year working on new launches, but I think a lot of ground has been covered in what we call last six months, so any meaningful launch shall we expect on the core pizza, or now for timing it is, I think, we're done with it?
I think, of course, we want to accelerate. So these are all core pizzas, by the way. These are not pizza menus. These are all core pizzas. Cheese Burst was type of a crust. We actually threw again through marketing insight. The team realized that this is underindexed, right? It's a hidden jewel, as we call it, inside. Therefore, we brought it up. So it's again a core pizza. This is all high-quality cheese products that we are giving. And same way, there is more in store. You will be surprised by the pace of the innovation.
Got it. And just one last quick question. I believe it was launched in Tamil Nadu and Kerala, which is another state because you mentioned three states. I just wanted to check. Is it another state where you launched?
Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, and Kerala.
Okay. Great, sir. Wishing all the best for future quarters. Thank you.
Sorry, my bad. My bad. I think the team is correcting me. It was launched in East also last week.
Okay. Great, sir. Wishing you all the best for future quarters. Thank you.
Thank you, Vishal.
Thank you. Ladies and gentlemen, this brings us to the end of the question and answer session. On behalf of Jubilant FoodWorks Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.