Q1 21/22

Jul 21, 2021

Please note that this conference is being recorded. I now hand the conference over to Mr. Sadatrang Nikhar from CGR India. Thank you, and over to you, sir. Thank you, and welcome to Jubilant FoodWorks' Quarter 1 FY 'twenty two earnings conference call for investors and analysts. We are joined today by senior members of the management team, including Mr. Shyam Bhatia, Chairman of Jubilant FoodWorks Mr. Hari Bhatia, Co Chairman of Jubilant FoodWorks Mr. Prateek Potta, CEO of Jubilant FoodWorks and Mr. Ashish Goenka, CFO of Jubilant FoodWorks. We will commence with key thoughts from Mr. Bhatia. Mr. Sapota will follow him with perspectives on JFL's progress and therapeutic imperatives. After the opening remarks from the management, the forum would be opened for question and answers. 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 these statements. A detailed statement in this regard is available in Jubilant FoodWorks' quarter 1 FY 'twenty two results release and earnings presentation, both of which are available on the company's website under the Investor Relations section. I would now like to invite Mr. Adi Bhatia to share his views with you. Thank you, and over to you, sir. Thank you. Good evening, everyone, and welcome to our quarter 1 earnings call. The recovery momentum that had commenced in the second half of financial year 2021, as you know, was interrupted by the 2nd wave of the pandemic, mostly in April and May of this year. The 2nd wave has taken a grievous toll both in terms of lives and livelihood. During a quarter where every day brought new challenge, we have been gratified by the resilience and adaptability with which our team members not only delivered on business continuity, but also rose to the occasion and lend their support to one another in time of this unprecedented health crisis. We swiftly responded to this crisis and offered all possible assistance to our employees and their families. As the COVID caseloads increased, we were faced with multiple restrictions. Dine in operations were largely shut across the country. Mobility restrictions severely impacted our takeaway channel. State specific delivery restriction enhanced the on ground challenges further. However, despite the reduction in operating hours, reduction in operational stores and the impact of restrictions on dining, our sales recovery in Domino's was led by strong growth in our delivery channel. In this challenging environment, we are happy with our performance in quarter 1. When compared to respective period in FY 2020, our revenues for Domino's had almost fully recovered by June 2021, resulting in sales recovery for quarter 1 at almost 94%. With easing of restrictions, our restaurant operating hours will increase further, which will result in sequential improvement in operating performance. We opened 29 stores in India. This included 20 new stores of Domino's, 3 stores each for Hong's Kitchen, 8 Dump and Dunkin' Donuts. The lockdowns and allied restrictions due to the pandemic presented a lot of on ground challenges and it interrupted our store expansion momentum leading to a lower number of new stores compared to the last quarters. Going forward, we expect to see some significant structural changes in the category, which will play to our strengths. The pandemic has accelerated the push towards digitalization and the early movers which continue to invest in their digital capabilities will benefit in the long term. A fair share of portion of delivery growth will be incremental as Tier 2 and Tier 3 cities has adopted well to the delivery in an accelerated manner during the pandemic. Dine in with a different consumer cohort will mostly add to and not cannibalize the overall growth. Consumers will increasingly look to trusted brands and those with proven quality and hygiene credentials. Restaurants will, indeed, look to build their own digital channels and gain control and insights on their customers' data and grow in a sustained and profitable manner. As these trends play out, KFL is well placed to lead and participate in the growth of food service industry with our fundamental strengths in delivery, growing digital capabilities, very product offerings and deep understanding of consumers. As we look ahead, we are excited at the growth potential that lies ahead. Towards that, we will be making 2 significant investments in our supply chain network that is increasing our capacity in Bangalore and Mumbai. We also intend to accelerate our new store openings and plan to open at least 150 to 175 stores this year. Before I conclude, I'm happy to share with you that we are progressing well on our vaccination drive. Our endeavor is to vaccinate all our employees and their families to ensure theirs as well as our customers' safety. This is quite simply the single most important priority for us. With that, I would now request our CEO, Mr. Pratik Potta, to continue this discussion by sharing his perspectives. Thank you, Mr. Bhatia. Good evening and welcome to our Q1 FY 2022 earnings call. I trust that you and everyone around you are safe and well. I'm glad to share our performance for Q1 delivered in the face of significant difficulties on account of the COVID second wave. Revenue from operations was at INR 8,790,000,000 a growth of 131.1 percent over last year. Domino's witnessed 131.4% sales growth during the quarter with a growth in delivery of 123.7% and takeaway growth of 116.7%. Dining growth on the low base of last year was 475.5%. Against the corresponding base of FY 2020, which will make for a more meaningful comparison, Q1 FY 2022 saw a recovery of 94%, driven by delivery recovery of 149.1% and takeaway recovery of 99.9 percent. Diamond remained challenged with a recovery of just 12.3%. EBITDA came in at rupees 2,115,000,000 and EBITDA margin stood at 24.1%. Profit after tax at rupees 6,000,000 to 6,000,000 translated to a profit margin of 7.1%. We'll now share some of the highlights of last quarter. Growth picked up post the easing of the curves on operations in the second wave and the momentum in June was markedly stronger with almost complete revenue recovery. We opened 29 new stores during the quarter, including 20 new Domino's stores, and which marks our entry into 5 new cities. We also opened 9 stores for the new brands, 3 each for Hung's Kitchen, Eat Them and Dunkin' Donuts. While the store opening was lower than the earlier quarters on account of the pandemic related challenges, we intend to accelerate the store opening momentum as Mr. Bhatia said and with a target of opening between 150 to 175 stores this year on ground conditions permitting. Continuing our focus on driving our own digital assets, our app installs during the quarter were 6,800,000. We continue to build upon our digital capabilities and made some changes on our app and our PWA with a focus on enhancing user experience. Our dominant and growing share of our delivery orders continue to come to us from our own assets. We also reintroduced the Hello Domino's toll free number to allow customers to call and use voice to place orders. While the dominant majority of our ordering will remain online, there is a small cohort of customers who are much more comfortable with telephone ordering and this functionality will help address that need. On the international front, Sri Lanka and Bangladesh registered a sales growth of 55.4% and 111.2% over FY 2021 respectively. We opened 4 new Domino's stores in international markets, 2 each in Sri Lanka and Bangladesh. Both these markets delivered strong EBITDA margins last quarter. Our performance in the new brands, especially Nom's Kitchen was encouraging and improved sequentially through the quarter. We now have a total of 11 NOMS Kitchen stores in Delhi NCR. Looking ahead, we are tremendously excited by the possibilities that lie ahead. The foodservice market has come upon an inflection point and we believe that the next few years will see a period of market making and strong growth. We are excited about our own future and are confident that we have the right strategy to drive hyper growth for JFL. Domino's will continue to power ahead and we see a clear potential of 3,000 stores in India in the medium to the long term for the brand. We will invest in expanding our portfolio of brands through Hong's Kitchen, Popeyes, Ekdam, Dunkin' Donuts, etcetera, and aim to own a much larger share of occasions. We will also grow our business profitably in the international markets. Bangladesh and Sri Lanka have exciting potential and we will use our knowledge and our best practices to rapidly scale up in these markets. Our growing strength in technology and our digital transformation will help us improve the customer experience and improve the employee experience and also drive efficiencies. To summarize, we believe that we have the right strategy for driving profitable growth in this exciting category and to transform into a multi brand, multi country food tech powerhouse. With that, I would like to call upon the moderator to initiate the Q and A session. Thank you very much. We will now begin the question and answer The first question is from the line of Avnish Roy from EDWWEISS. Please go ahead. Yes, thanks for the opportunity. My first question is on store expansion. You mentioned $150,000,000 to $175,000,000 in FY 2022. So wanted to understand for the non Domino's, if you could give us a breakup. Also you mentioned Hong Kitchen's performance has been more encouraging. So what is working better in Hong Kitchen vis a vis, egg dump, if you could elaborate? Thank you, Amish. Thank you for your questions and I hope you are well. On your first question of our estimate for sort of the estimate for the new brands, we don't have a number to share with you yet. We are looking to expand the network. And as you've seen, we have opened stores both in the last quarter and the quarter before. So we'll be gradually scaling up our network to begin with across the LNCR and then in the other towns. So that's on your first question. On Home's Kitchen and I think we are very pleased with the performance in both the brands, but Home's Kitchen with the benefit of a longer runway of experience and of learning that we have has done better for us. We have seen a strong revenue recovery. Revenues are back to pre COVID levels. We are seeing an encouraging trend in order volume growth, both in new customer acquisition as also in getting repeat customers. Our customer satisfaction levels, our EPS scores are also trending up, strong and trending up. And our plan, like I said, is to scale things up in a calibrated way and do that for both Hong and Poetna. Two follow ups on this. One is Dunkin' Donuts, 3 new openings and after few quarters, there is no closure. So if you could discuss on the profitability, how things are right now? And second, Bhakti Etzer mentioned Bombay and Bangalore, there will be scale up in terms of the overall system. So again, if you could elaborate, is it a preparation for ONGs and Exams into these markets? Subush, on your first question, on Dunkin' Donuts, as you're aware, Dunkin' has recently been a model that will be more centered on dining. In the last 15 months, in the face of the COVID headwinds, we had to do a pivot and have the business driven a lot more on delivery. We've done well to recover a large part of our pre COVID revenues. Once dining restrictions have eased, we will see our dining revenue stream come back. We will see a greater mix of beverages and our food come back. Our profitability on Dunkin' is under control and you would recall the journey on profitability of Dunkin' where we were earlier and where we transformed to the recent past. So, our result of growing Dunkin profitably remains and we consider that as banning restrictions are revoked and as we are able to drive a lot more of dining revenue and beverage revenues and coffee revenues, we will see strong growth and profitability growth on banking. On bonding in Bangalore, these are investments we are making in expanding our commissaries and growing the capacity. As of now, these will obviously service the large network of stores of Domino's. Prospectively, however, we are creating headroom in these commissaries to allow to service other stores and other brands as and when we enter these markets. My second and last question is on small restaurants bypassing Swiggy and Tomato and starting their own app through third party delivery. So what would be your thought process? Do you see this becoming mainstream or this will be managed? And second is on your own endeavor of toll free number at this juncture, what is driving that? So, Avish, on the first question, I think it is understandable that restaurants seek to bring greater access to their own customers and get a lot more control on their business to get a lot more access to customer data and therefore on customer insights. And we believe that this trend will grow. Restaurants will look to invest in building their own digital channels even as they partner with aggregators. So, this will not be an either or decision for restaurants. We will see restaurants play in both spaces partnering with aggregators, but at the same time, invest in building their own digital channels to be able to get customer data, be able to have much more control on their business and also to help improve their margin profile. Aggregators are a high cost channel for most restaurants, This will also help them mitigate that headwind. I see this as a very clear ongoing trend that will continue. On the toll free number, I think I made the point in my remarks as well. I think this is just in response to customer feedback from a small, but loyal band of customers who believe that they would like to have the voice ordering students back. They are not some of them are not comfortable. They are older customers. Some of them are not comfortable with using smartphones to order. And we responded to that request and that's why we got the toll free number back. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead. Hi, good evening everyone. Two questions. First, your store guidance of 150 to 175 for F 'twenty two, that is despite 20 store additions in Q1. So that essentially means about, let's say, 45 to 50 stores every quarter. Do you think that is in the current context that is something is that achievable one? And second is, is the rush also because you are getting attractive deals from the landlords and which is why there is a rush to build those stores? Yes, thank you for the questions. I think our store opening guidance of 150, 175 stores, despite the fact that we opened 20 stores is a reflection of our confidence in our ability to be able to execute and to open these many stores. If you look at the preceding 2 quarters just before just this one, we have as you know opened 50 stores of Domino's each. So we have the capability, we have the bandwidth, we have the ability to be able to go and open that many stores. We don't expect therefore this to be a challenge. Of course, short of something completely unforcing at least, we think this is well within scope and we will get to 150 to 175 stores in this financial year. Is it in response to opportunistically to better? No, not so much. I think we've always talked about the fact, we talked about it a couple of quarters ago as well that our confidence that this is a category and ours is a business that is poised for hyper growth. And we see a lot of opportunity for opening Domino's stores in existing towns. We see opportunity for opening stores in our new untapped markets. And our accelerated ambition is in response to that demand and that opportunity, not something that is more short term or more temporary. And a quick follow-up, Pratik, will it also lead to cannibalization and because of the store splitting and is that something that we should bear in mind while forecasting? So, Vivek, you have seen our performance in the few quarters where we've opened aggressively stores. And we have called out separately the impact of some of these stores. And we've as you know introduced a measure of like for like growth as well. So while there may be some cannibalization as you split stores and open store in the micro markets, between the stores that we opened and the old store, there is significant incrementality in terms of revenue, in terms of profitability and in terms of customer experience. Got it, got it, Pratik. And the second question is, with the Yum! 2 franchises looking to list and looking at aggressive growth, how do you think about competition? Because you are by far the market leader, but do you think there could be some customer fatigue from a Domino standpoint? And does that change in some ways the market share equation? How do you think about this market share a bit as the 2 franchises of Yum! Get aggressive? So, I think whether it is competition from traditional competitors in the QSR space or would that be investment being made by the platforms in the food tech marketplaces. I really believe strongly that any investment being made in the category and in driving category growth is good for the category. The discussion we should be having Vivek is not a market share discussion. It's a market size and a market growth discussion. In a country like India, where the penetration of the foodservice category is still low, frequency is very low. Any investment made in the category in driving behavior, in driving more excitement, in driving innovation, creating incremental supply, all of this will play to this grow category. Given our strength, our towering strength in delivery and a strong presence on the ground across the country, as the category grows, it will give us incremental growth opportunities. Far from fatigue, we are actually excited about the opportunity that lies ahead. Our customers do not see any fatigue. They are looking for more and looking for more and more innovation from us. So I think as investment go in this category, it will be good for the entire ecosystem as we help grow the category. Got it. Got it. And Vivek, you would recall that only until 2019 2018 2019, we went through as a category as JFL a period of intense competitive activity with aggregators resulting to aggressive discounting to grow their size and to grow orders. Despite that aggressive competitive context, over the 2 years, GSN actually entered emerged stronger with a higher market share for Domino's. So we've been through this phase and we are deterred by it. We believe that any investment like this will help grow the category. Got it. Got it. And last small question, Pratik, you mentioned inflection point in your opening comments. That is essentially because of what? Is it because of the trusted brand factor? Or is it because So, several So several reasons, Vivek. The first one is that in a category R, which is has been predominantly unorganized in nature, we believe that COVID has improved to drive a much faster movement from unorganized to the organized sector. That's the first point. The second point is within the organized sector, consumers will navigate and seek trusted brands, brand whose quality and hygiene standards they can take almost for granted, whom they believe in and that will again drive the share upwards of the credible trusted brands, number 2. Number 3, customers have got used to omni channel behavior and that embraced delivery and embraced takeaway in the last 15 months. That behavior change will for the larger part endure, which means that you will see over time incremental occasions and a lot more omni channel behavior. 4th point, digital. Customers have got used to and have embraced digital means of ordering and digital means of sort of participating in the category. And again, this will mean that there will be a fundamentally new kind of customer, more comfortable with trusted brands, more comfortable with delivery, more comfortable with digital. All of these trends point to a fundamental inflection point and that will of course as dramatically play to us then. Got it. Thank you very much, Pratik, and wish you all the very best, team. Thank you, Vivek. Thank you. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead. Hi, Pratik and team. I just have only one small observation, which actually turned into a question as I was going through the current quarter presentation as well as the previous one. I'm actually referring to the last slide, which talks about the key focus areas, what you have presented this time versus the previous one. There seems to be 2 subtle changes. I'm sorry if it is even relevant actually. So one important thing what I find is you're not talking about the journey to a food tech powerhouse, which was really not there earlier. So which means that there is something you are incrementally trying to convey. 2nd, there is one pillar which was really not there previously, since I'm just comparing at this peak. It used to talk about build digital strengths earlier. Currently, it's all about digital and data strength. Now, so just two things here. 1, what exactly is this change about digital and data currently versus digital? Or is it too subtle to just ignore? And if from a decision tree thought process point of view, the second question is that what's your take on differential pricing as a strategy? Is it feasible in India currently given the data strengths which you have? Thank you. Thank you, Manoj. Let me respond to your first question. Yes, so on what you see as the slide that we've called out and the changes being made, I think the fact that we've called out food tech specifically in our ambition, it refers to our intent of making digital and making technology at the heart of everything that we do. So we intend to use digital and more generally technologies to transform completely transform and revamp our customer experience, our internal employee experience and to drive operational efficiencies and business efficiencies. And towards that as we know, we are building a strong digital team. We have built a large team and we are letting it even further, both in product and user experience and in technology. We also are building a strong digital data science team and that speaks to your second point about how we've nuanced the pillar as digital and data strength, because we are investing in building much stronger data science capability. We also intend to invest in growing our ML and AI capabilities. So all of these are the reasons why we believe that we called out specifically the fact that ambition is to transform into a food tech powerhouse. Yes. So that's your first question. On your differential pricing question, I just want to I wanted you to clarify, how do you differentiate by? Do you mean by channel? Do you mean by day part? Do you mean by geography? How do you mean that? So just to give you an example, honestly, what I had in my mind, looking at your, let's say, the last quarter number of, let's say, 5.7 crore or 57,000,000 downloads. And so you know exactly, let's say, as a consumer, XYZ's behavior, whether an XYZ actually clicks on the discount button or doesn't or what he or she actually orders, etcetera. So based on the actual data availability, what you have about the customer or as a consumer rather in your case, is there an opportunity to actually do the essential pricing directly to me if I am a consumer? So, Manu, if I may, so build on the larger team and talk about that. The fact that we have access to a vast reservoir of customer data, their ordering behavior in the past, the way they've responded to new products, the way they responded to promotions and discounts allows us to personalize experience a lot more. So the broader team of personalization is a critical work stream that we are working on. Within that prospectively, we can separate customers in different cohorts by their purchase propensity and their discount affinity. So the customer is more discount driven versus the customer who is less discount driven, we can prospectively serve up different offerings to them. So, to that extent, we will be able to target discounts a lot more efficiently to customers where we can be fairly certain that there will be incrementality of the discounting spend. Sorry, understood, Tarik. Actually, so it is feasible. But my question here is, this is more from a volume driving point, if I understood correctly that you are really able to, let's say, push messages to me if I'm not using, etcetera. That I understood part of the volume side. But from a value maximization point of view, just simply on a price, basically, just to put it simply, is it even feasible to think about even reduce discounts? And also, if yes, the question varies from a decision point of view, is there a consumer dissonance angle which needs to be kept in mind? Thanks. And that's the last question. Thank you. Yes. No, no, look, I think before we get to differential pricing by customers, I think there are opportunities available in looking at differential pricing by geography, by channel, by day car and those are areas that we can certainly evaluate. I think before we get to pricing for each customer or customer segments very sharply, I think there are these opportunities that lie before us. So certainly, we will be evaluating some of these opportunities before we get to anything that will create, like you said, consumer dependence. Got it. Thank you. Thank you, sir. All the best. Thank you, Manav. Thank you. The next question is from the line of Parsee Bandhakti from Indiant For Line. Please go ahead. Hi, good evening team. My first question is, since we are now sort of having the aspiration of sort of becoming food tech company, not becoming, but I mean going in that direction even more strongly, I would really request if you could share metrics, which are relevant to both tech companies. So if you look at companies like Zomato, Ziggy, etcetera, the kind of data that we would also expect from you is something like what are the monthly active users, how many are the monthly transacting users, what is the average ticket size. I mean if you could share any of this data either on an annual basis, quarterly basis to whatever extent you can, that really helps us to analyze and it also helps sort of brings you in line with the industry in terms of data sharing. So, in this call, is there anything on these aspects that you would be willing to share? So, Bhakti, thank you for your feedback. It's certainly something we will discuss in the value of internally. That said, we can be sure that these are metrics that we look at very closely internally. We look at the monthly active users, we look at the monthly transacting users, we look at the active days. We have of course a very close look at the conversion funnel. So these are these are points that we track very closely. And we will certainly discuss internally and that is whether the model we will be sharing them with the larger investor group or not. So we will come back to you on this. Thank you for your feedback. Sure. That will be useful. Secondly, I just wanted to understand from the portfolio point of view. Now you have a portfolio of several brands. What I see missing here is burger. Now you can say that you are playing burger through Dunkin' Donuts, you might be able to play it partially through Popeye, but this is rather a tangential sort of play to this big industry of burger. So just wanted your thoughts on this, would you be opening to entering this via separate format organically or even inorganically if any opportunity exists or do you think that no, you would just play burger through your existing format? So, Percy, we have, as we speak, an exciting portfolio of brands, all the tremendous potential, whether it's called Domino's or Dunkin', Hom's, Aetna, Popeye's. We have a large number of places and large number of locations with these brands. Like you rightly said, on burgers specifically, 2 brands play, Dunkin' and Popeyesu play as well. And beyond these brands and beyond this, we have no plans of entering the burger market. Right, sir. And my third and last question would be on your variabilization of costs, especially employee costs. Does this work just because we are in a pandemic and employees do not have too many options outside? I mean, what happens once everything is normal and in normal sense, there is a variability in your SSSG like let's say without any pandemic, without any one off, just a normal variability, your SSSG for a year goes into a -one, -two kind of level. In that case, does this initiative really help you to sort of protect you from the operating leverage sort of hit that you would normally have got you have earlier gotten years 4, 5 years ago. Does that really help or this is just a pandemic kind of measure? And how does this even work because your employees are not gig employees, they are committed their entire time to you. So if there aren't orders and you're paying them lesser to that extent, does that really create a problem for them? So, Percy, conceptually, what manpower virtualization does is it allows us to match the supply the manpower deployment very close to the demand factor and the demand curve. If we have fixed manpower, then there is a huge amount of wastage under shoulders and sometimes we end up servicing the peak sub optimally. So the moment we are able to analyze the manpower, as you can imagine, we are able to match them a lot more closely and therefore drive a better customer experience in the peaks and much better efficiency in the troughs. This is a conceptual point that is unrelated to the pandemic. I think the pandemic, the peaks and troughs were sharper and more aggravated, the troughs especially. But the conceptual point remains valid even in a period that will be post COVID or unconstrained by COVID. So is this done by getting more gig employees or sort of contract labor versus your permanent roles? Every employee or every person who comes and delivers to a customer's house has been screened by Domino's, have been screened by Domino's and is on our roles. I think the way this works is that we have a large pool of manpower and we roster them for differential times depending on the need. Okay. Okay. I'll probably take this offline. I really wanted to understand this a little better. But thanks anyway. Thanks a lot. Thank you, Persi. Thank you. Thank you. The next question is from the line of Jay Kumar Doshi from Kotak. Please go ahead. Yes. Hi, thanks. My question is on what is the format of stores that you will open? So 150 to 175 Domino's stores this year. In terms of size and revenue potential, will it be comparable to the size of store? With number of Delco stores, it will not have comparable revenue potential? Thank you, Yatinar. I think the as we said in the last couple of calls, the stores that we open are a combination of stores that are full service stores and stores that are optimized for delivery and takeaway. The 1 hundred and fifty stores plus that we intend to open this year will similarly be an assortment of these kinds of stores. However, given the context and given the fact that in our existing towns, the growth will be led by delivery, A larger share of these stores will be smaller, more compact, more efficient stores, which are delivery carryout focused. And the few foods will typically be in the smaller towns. We do not expect these stores to have a lower revenue structure than existing stores and we don't expect them to have any differential payback than what we have seen in the past. That's very helpful. Now on in case of new brands, can you give us some color in terms of what is the size of average size of stores? What is the kind of CapEx that you incur for HK and Iqdam? And how is the revenue potential for these stores, the ones that have matured as of now and how does it compare versus Domino's? Yes. So, Jaigumar, on Hong's and on Ekdum in terms of the store format, the Hong's stores are a combination of full service standalone stores and combined with a delivery carryout store that is a combination of Hong's plus Iqdam plus Dunkin'. So some stores are shared stores with delivery carryout focus. We also have some standalone stores. I think it would be unfair to compare Hong's Kitchen's financials with that of a brand like Domino's, which has many years of experience behind it. But I think the intention and the objective is for HONST to with its own order volume be profitable and be sustainable and therefore be scalable. And we feel good about where we are on HONST, especially in the older stores, where we've obviously been open for a longer time in terms of the overall business health and overall store level economics. Understood. So I get that that your current arrangement with Dunkin' Donuts allows you to open a single store, which also has Hong's and Ekdom brands, a Delco format. Is that right understanding? That's right, Ditmar. Can you also include Domino's in that store at some point of time? So single location with 4 brands all Delco format or? If there is a market like that which requires that they will carry out service to Domino's, of course, you can potentially do that as well. Understood. Thank you so much. That's it from my side. Thank you, Bhakti. Thank you. The next question is from the line of Ashik Desai from MK Global Financial Service. Please go ahead. Yes. Hi, Pratik and team. Thanks for the opportunity. My question is on your sales recovery. If you look at June recovery, it seems a little lower compared to what we hear from other consumer companies. So when we look at June versus May, the recovery seems a bit lower. If you could throw some more light on that in terms of what has been the impact maybe region wise, we've seen different levels of lockdown. And you may also have different level of stores of being operational throughout these 3 months. So if you could put some color on that, that will be helpful. Thank you for the question, Harshal. Actually, I have a bit of a disagreement with the question in the premise of the question. I do not think the revenue recovery that we had in June was lower. I think we should just go back in time to what we went through in April May in terms of the sudden onslaught and the severity of a second wave and the environment of fear and anxiety that has set in, I think pulling back almost total recovery, I think was a reasonable performance, especially given the fact that we look at the dine in recovery in the month of May June. May dine in was pretty much 0 and June it was under 10% compared to the FY 2020 numbers. So given the just the onslaught of the 2nd wave of COVID and its impact on a large revenue stream of 'nineteen, I think the recovery of almost 100% was reasonably robust. Now of course, there was a pattern of distribution, but some towns recovered stronger, the smaller towns had a slightly higher recovery than the metros. Of course, as you know, the channel wide, everything delivery, our own assets is better than the aggregators. There was a pattern of distribution, but I would say the overall recovery was very robust. No. And I would add what Prateek you said, the operating hours available still in June was lower than a normal month. Absolutely right, sir. And just to add to that, we had a significant reduction in operating loss through all the 3 months, including the month of June. There was some relaxation in restrictions in June. Nevertheless, I think this performance of maximum 0.5% recovery was delivered in the face of a major restriction in operating loss. Okay. And was there a material change in the number of operational stores? Because if I look at your overall number of stores, these were higher by 10% versus Q1 FY 2020? Yes. I think Q1 FY 2020, Ashutosh, did not have COVID related restrictions. In Q1 FY 2022, the quarter has just gone by. We had several restrictions in terms of stores in operational, in corporate parks, in education campuses and travel and transport locations. It's not the placement of operating large in stores that we have been operational as well, whether it was in terms of restrictions on the weekend or closure by 8 pm. So effectively, the operating hours were far lower than what we had in FY 2020, despite the stores being higher. Got it. Got it. And my second question was on competition. Beyond the increased options to consumers, I mean, you now have a lot of USR players, which have announced big expansion plans. So based on that, wanted your thoughts and outlook on employee and rental inflation. What is the outlook on these two cost lines ahead? So as far as the impact of growing competition or employee cost line, I think it's important to recognize that when we look at our talent pool outside the global manpower, Our talent pool is not limited to restaurants and to QSRs. We hire from companies across the board, FMCG companies, other consumer companies, technology companies increasingly. So therefore, as far as the non store manpower is concerned, the fact that there is data competition emerging from QSR will have not having material impact on employee costs. As far as the store manpower is concerned, we have been living in the last over the last few years in an environment that has been a dramatic growth in delivery, not just in food service, but in e commerce space in general across living spaces. So, we have refined the playbook on how do we deal with employee costs when there is much more demand for delivering manpower. And you'll see that reflected in all our productivity measures. The fact that we moved from fixed manpower to full time 60 manpower. The fact that despite our revenue being so variable, being able to pull back on employee costs in a very agile way and not impact margins and avoid operating deleverages, I believe that's a lead to that. So clearly, I think as far as employee costs are concerned, we don't expect the dollar to pay out materially. And rentals? I'm sorry. On the rental part, Ashish, again, given the fact that there is a very clear market and a very clear kind of stores that we're looking for, we do not expect to see any rental inflation. If anything, I think what has happened in the last 15 months is on account of COVID, there have been significant closures, not just of restaurants, but of small businesses and retail businesses in general. And therefore, there are many more options open in the market in terms of the other states, both in larger towns and metro and in the smaller towns. So we don't expect the fact that restaurants are expanding faster to have an impact, material impact on rental side. Okay. Okay. One last quick check, if I may, since you mentioned that some of the new stores are smaller in size and offer delivery carryout, but you look at a similar revenue potential. Given these are smaller and may have lower rentals and lower employees also, I mean, do these operate at a materially different higher margin profile than versus your full service restaurants? If you could give some sense on that based on stores that you have already opened in the last 1 year? I think it's difficult to answer the question, Ashish, because in the last 15 to 18 months, last 15 months especially, there has been a fair amount of noise. And therefore, it's hard to sort of clean up the noise and talk about what could be a long term sustainable margin profile of these stores. I think the encouraging part is that despite the constraints and despite the headwinds in the front of COVID, the stores that we are opening and that we opened in the last 15 months have delivered on target and delivered on plan. Okay, okay. Thanks and all the best. Thank you. Thank you. The next question is from the line of Arnav Mitra from Credit Suisse. Please go ahead. Yes. Hi, Pratik. Congratulations on the strong recovery in June. My first question was on the new brands and the you mentioned that some of the stores will be more delivery takeout stores. Do these brands also have a potential to purely go into a dark kitten format in which there is no frontage at all? And would that be a part of the expansion as you go ahead over the next few years in these new formats? So Arnaud, we talked earlier about the importance of building consumer trust in this new category. And that's especially true of our emerging brands and our new brands. We believe very strongly that one physical way of building that trust would be to have a physical presence of stores, even if they are delivery is category or focused stores for customers to come and feel and experience the brand. And dark kitchens, while they may offer some economies, will not allow us to engender and build that trust. So the way we see our model going for the new brands is a combination of full service stores along with some delivery carryout stores, which are smaller and more efficient. But we do not expect to see completely dark kitchens from a material part of our portfolio. Sure. And one related question to that is with the today the food aggregators being having increased the radius of delivery, the number of stores you actually need to, let's say, cover a geography like NCR, if it was, let's say, I don't know the number, but if it was like 100 stores in Domino's, is it possible to today physically cover like the total PIN codes of NCR with much lesser stores given the aggregator larger radius of delivery? I think the most important thing, Arnab, as we plan the store footprint in any market is the customer experience. We know that time is the enemy of food. We have to ensure that we give our customers food that's hot and that's fresh and that allows them to have a great experience. And the more we expand the Google areas, the less we're able to offer that. So we have to be efficient, but we also have to ensure that we provide the right customer experience. And one last question from my side. From most of the food aggregators, what we have seen is that the monthly transacting users are still not back to pre COVID levels. So the business is back to pre COVID levels and above. I know you don't share NPU data exactly, but in general, are your is your customer set or the number of customers back to the pre COVID levels? Or there is still a big gap between where you were before COVID and where it is now, during that order, values could be higher now? So Arnab, let me ask that question in 2 parts. I think given a very conscious strategy of building our own assets and driving our own app installs and our own performance marketing strengths. In the last 1 year, we have seen a very strong recovery on our own assets and we have seen significant delta growth compared to the rest of the delivery channels on our own assets. And we have seen customers and orders recover and grow over the pre COVID levels. As a brand, given the fact that dining has been constrained, the recovery on orders is still below 100%. Okay. Thanks so much, Satish. All the rest. Thank you. Thank you very much. Hello. So can you hear me? Yes. Yes. You move to the next question. The next question is from the line of Amit Seshdeva from HSBC. Please go ahead. Hi. Thank you so much for taking my question and congratulations on a good set of numbers. So Pratik, my question is on the new formats, but more specific to, say, Popeyes and the way how one should imagine the next 5 year journey, I know maybe it's still too early, but I just want to sort of see given the format is well set, given this is like a market development work has already done in this category quite a lot for many years And given your already PAN India presence with Domino's and network rollout is already in place, you have deeper consumer insight, should we assume that Popeyes should once this initial phase is over, should get a trajectory of like 100 plus stores a year like Domino's and in 5 years' time picture could look very, very sizable presence in India. How one should think about Popeyes version for next 5 years? Would you can you please help us think through it? Thank you. Thank you for the question, Amit. And I must say that we are extremely excited by our partnership with Popeyes. And we believe that as we know that the chicken category is one of the largest segments in the country and the one with very strong growth potential, both on penetration and on frequency. Given that India is a largely non veg market and largely poultry driven market. We have the Popeyes team in place and the team is hard at work trying to put together the launch mix and to get to the market before the end of this year. Given the fact that the chicken category is established and therefore investments in building the category will not be required, even as we launch, we are fairly clear, the trajectory of Popeyes in the scale up would be faster than what we see some of the other brands that we have. This is the category that's growing and established, but with a lot of runway for growth even now. So, when we launch Popeyes, we believe that once we have our learning curve behind us, we will scale up faster on Popeyes. But specific store opening number, I think certainly the runway would be faster. Okay. No, that's very helpful, Pratik, for getting that understanding because this is something that probably because the market is already developed. So I think the opportunity could be captured sooner than probably other new formats like biryani or for example, maybe Hong's Kitchen, which may have larger element of dine in, for example. Thank you so much. But second very quick question is that, I see that margin profile has changed in part because of delivery fee and given that delivery is doing so well. But at the same time, do we see that the value capture this category is now giving you like 24%, 25% kind of margins, the double and gross is 77%, 78%. Are we sort of in a zone where these margin structures are more permanent? Or are we looking at this is a one time impact of because of COVID and consumers are willing to pay for convenience, safety and trust and everything. And that's the reason these margins are sort of one off. I'm not saying that whether you give us guidance for lower or higher margin, but is it just a new shift and you are happy to operate at that level of operating economics for the stores? It's a broader question. It may have delivery is more it is more profitable, dine in is slightly less, costs are higher. It could be many moving parts there. But I'm just asking whether you are happy to operate at 78% or would you much rather have revenues, so put coming at some expensive margins as well? How would you think about this in the next 3 years as is the COVID received? So Amit, I think the one thing we have seen us do is that even as revenues have moderated on account of COVID, we have taken a number of steps that allowed us to deliver strong EBITDA margins. And more recently we've done that even in the face of increasing inflation and increasing food cost. As we look ahead, there will be several pushes and pulls on our PMA. We see inflation cleaned out now, but we moderate in the longer term. We are seeing some impact on account of fuel cost, etcetera. There will also be investments required to be made in digital, in technology, in driving innovations, including customer experience. At the same time, of course, we'll be driving efficiency and ensuring that we are able to run a very tight operating shift. Now, where this will land up in terms of operating margin, EBITDA margins, it's hard to forecast not to tell. But the one thing I think it's fairly clear that this is this is not a one off like you said. These are one off margin. I think we've become out of the pandemic, I think more efficient, stronger as a business model and more reduced. We have been able to introduce ourselves against our revenue reduction and against channel mix changing significantly. So we feel good about where we are and we don't think this is a this is going to be a one off like you said. Okay. No, no, that's very, very good to hear that. Pradeep, but my question was also purely from the gross margin point of view at 78% odd, which is slightly but probably highest in QSR, if I may say. And would that be a good margin to sort of continue with? Or would you rather say, well, this is because of the situation, because delivery is high and we are able to charge delivery fee. But eventually, what you're comfortable with? One is cost efficiency at the EBITDA level, but at the gross level, are you okay to sort of drive purely from 78 kind of margins in largely coming from Domino's, I assume, but is it a comfortable margin structure for you at the gross level? Level? Let me pull back and answer the question very differently, Amit. I think our objective and our singular focus as a brand has been on the remaining offering value money for our customers. We have, as you know, been very, very careful and very guarded about taking pricing despite having inflationary headwinds. Our NPS scores on value for money remain very strong and we keep a very hawks eye on the way customers evaluate us on value for money. So that's our primary objective. The good part is that we'll be able to deliver great value for money by having healthy gross margins. So that's the balance we strike as we go forward. It will not certainly be margins at the expense of value for money or vice versa. Okay, I got it. Thank you so much, Pradeep, and all the best, please. Thank you, Amit. Sorry. Thank you. A request to all the participants, The next question is from the line of Lathega Chopra from JPMorgan Chase. Please go ahead. Thank you. Hi, Pratik and team. Basically, my question is extension, I think, of the previous question. I wanted to check, were there any kind of price changes that you initiated over the last month or so? And also have you seen any specific changes on the promotional intensity dynamics with the market reopening? Thank you, Latika. Thank you for the questions. In response to your first question, we have taken a small pricing actions recently towards the end of June. And that's a very small correction that we made in prices. And this was in response to some of the inflation that we didn't spoke about earlier. And that's something that will only help us cover for inflation. We don't expect that to have any impact on margins materially. On your second question, on the promotion intensity, yes, there has been some increase in promotions and in discounts, but nothing that is out of the ordinary, nothing that we have not sort of been exposed to earlier and nothing that we've not responded to earlier. So, of course, given the unlock that has happened post May, there is some increase in promotions and discounts, but I think we are well pleased to handle that. Sure. Thanks for that. And my second question was, generally, we saw a lot of you keep coming out with new products from time to time. It seems much of them seem to be more on the value added side. Is there any change or any kind of a measure in terms of cadence of value added or better margin products in your portfolio that you could talk about? Sorry, but the question again, please. In terms of So we do keep seeing some of more value added, higher priced variants being launched from you time to time in the Domino's portfolio mix. Is there a meaningful change in the salience of such products from a consumer acceptance perspective? Yes, Abhika. So I think as we've introduced some of our new value added products, depending on the product, we have seen acceptance and greater acceptance of the new product and which has helped improve our mix over time. So very recently, we've introduced 2 new innovations in the last quarter. We introduced an extension of our Lava Cake, the relevant Lava Cake on the platform of Lava Liches. We also introduced the stuffed garlic bread, one vegetarian version and one non vegetarian version, chicken patroony version. And both of these new launches have seen encouraging adoption and both of them have led to an increase in the platform purchase. In other words, we have seen an increase in the sub garlic bread platform with the addition of these 2 new variants and the Lava Cake variants together are now larger than what Chocollava Cake was earlier. We do see increased adoption and we see some of these innovations landing well with consumers. Sure. Thanks, Pratik. Thank you, Aditya. Thank you. The next question is from the line of Aditya Soman from Goldman Sachs. Please go ahead. Hi, good evening. So first question was on delivery fees. I noticed that there are some fees in delivery fees. Where was when was this increase taken on? Is there any sort of impact on 1Q numbers due to this? Aditya, thank you for the question. We had a small correction in delivery charges as we did towards the end of June. This was in response to the growing increase in fuel prices. We rounded off our delivery charges from INR 32 to INR 35. And because that happened mostly towards the end of June, you don't see the impact of that into the Q1 P and L. Thanks, Pratik. Another thing on this I noticed was that at the lower end, the delivery fee seems to scale rather more. And I remember in the previous call, you indicated that there was obviously an increase in volume growth at the lower end of our AT and T double price point. Is this something that you're trying to sort of address where you're seeing sort of the mix or lower end volumes go up and to offset that you're seeing delivery fee go up disproportionately at the lower end? Aditya, no. I think the fact that we have a structured and sort of a clear delivery charge is a reflection of the cost of delivery and what it takes to recover that cost. We believe that if you remember until a year and a half ago, we used to have a minimum order value of INR 300 as a threshold to enter a brand and to enter a category. We've broken that and we've allowed customers to place orders of any value and we service that. And that has led to, like you said, increase in orders and increase in volumes. However, because those orders and those service in those orders come at a cost, our delivery charges being cleared, let's just recover that cost. And we have seen some more research in all our work that customers are not worth to paying high delivery charge, so that's something that they want at that point of time. So, if you're a single user, they need to order 1 pizza or just 1 pie and a beverage. The fact that we are able to deliver it to her or we get a small delivery charge, I think the customer is comfortable with that. So all the changes that we made have been forced extensive customer validation. I understand, very clear. So the impact of this would be felt from 2Q onwards, right? The impact of the slight increase in delivery charge will be felt from Q2 onwards. However, the clear delivery charges have been in operation since earlier. I understand. And for my second question, just a quick one on Domino's Eurasia. We noticed that now you sort of include the associates from there. Is this now profitable this year given the increase in SSG? Because if I look at the financials for the past 2 years, they were not profitable, but we clearly see an addition to the profit in this quarter? No, thank you for the question. I think as far as questions on DQ Rishai are concerned, we would request you to refer to them. They are independent listed companies and we would not be able to offer any comments on their financial performance. You may refer to their most recent release, which they put out last week for their revenues and for the performance of the last quarter. Yes. Thanks, Wathik. And the reason I asked was because I mean that release that's just a sales release, right? You don't talk about profit, but I'll take it offline. That's right. That's right. I mean they don't talk about and they will talk about it when their sign is when they do and he can't comment on that ahead of time. Fair enough. Thank you very much. All the best. Thank you. Thank you. The next question is from the line of Tejas Shah from Spark Capital Advisors. Please go ahead. Hi. Thanks for the opportunity. My first question pertains to Pratik, the vision that you shared in your PPT and you spoke about it also on becoming a food tech company. And you explained the vision broadly on how you want to put a layer of tech in everything that you do. But that looks internal vision or internal application of the vision as of now. And then perhaps the logical end of this vision will be to leverage our front end digital assets, which is actually growing quarter on quarter and especially after pandemic. To leverage the digital asset for all the brands and perhaps on a super app that we briefly test in the last two calls also. So first of all, is that part of our vision on this food tech company journey? Is it part of the vision timeline? And if yes, then how far we see that? It could be 3, 5 years, that's okay, but is it part of that timeline or not? So, Priti, our focus and our work around FoodTech, I spoke about earlier. With respect to your question on Super App, I think our priority right now as we spoke about in the earlier call as well is to ensure that we build these different banks individually. We have a long runway to grow, to grow HONGS, to grow Idum, to launch Popeyes in the country, even as of course we've scaled up Domino's last year. So that's our number one priority. And the super app is a question that we'll come to eventually. So I think we'll be a little premature talking about Super App. We don't do it all, but that's not for now. Sure. So that brings me to the second question, which is the kind of primary capital which is chasing the whole foodservice industry and QSR in particular. In that balance and you mentioned that jubilant Domino's as a format has survived much hyper competition in past also. So that format is relatively safer. But looking at the competition and the capital which is coming, do you see the need to expand your new brands portfolio, be it Hong, Kitchen or Iqdam very fast? And then what is the limiting factor there? Because we have capabilities to open 100 stores. We have shown it in past also. We have cash flow. So what is the limiting factor there to expand it faster than what we are doing today? So, Priti, most certainly our aspiration for hyper growth is not limited to Domino's and we intend to scale up our new brands rapidly. There was a question asked earlier by Amit about Popeyes and he spoke about the fact that we can have a much faster runway to grow Popeyes. And absolutely, similarly, we intend to grow Hong Kong and Pick them and Dunkin' as well. There is nothing that has come in the way of doing. We intend to make sure that we have the right store level profitable model. In the last 15 months, there's been obvious reasons why we've been curtailed and we've had some challenges. But as we work around them, we can be sure that our ambition for growing new brands rapidly remains. And as much as we go dominant, we go deep brands as well. Plant as well. The next question is from the line of Sheila Radey from Morgan Stanley. My question is that you have talked about the tailwinds from the pandemic and thus the confidence towards the growth opportunity. What I want to understand is, of the 3, what are the key what has changed the most for you, which is from a new customer acquisition point of view, frequency of purchase and average order value? So if all these 3 were ex pre COVID, where are they now? And what is giving you the most confidence? If you could give us some insights on that? Sheila, actually, it's I'll have to nuance the answer a little bit, because the answer is a bit of yes for all 3. Let me tell you what I mean. Given the fact that with dining having been curtailed over the last 15 months, differentially over the quarters And the fact that therefore revenue is moved to the delivery channel. There has been obviously an upward impact on the average bill value or the AOVs. They have moved up significantly. So that's only been one driver. Equally, we have seen a significant tailwind in our delivery growth, in our delivery order growth and within that our delivery order growth on our own assets. While overall orders have yet to come back to pre COVID levels on account of dining being curtailed, Delivery orders have shown strong momentum and that momentum has sustained even as dining has reopened in parts. And your first point about frequency, we see customer cohorts where frequency has actually increased. As much as we see customer cohorts, the frequencies have dropped because of the new channel in Cartridge. So, we see all of these and we see green shoots in each of these three indicators, it gives us a confidence. And by the way, just to add to that, it's not just Day 3, it's also POS data, that Metro versus the smaller towns. We see a very strong recovery in the smaller towns, which was more dependent on dining. They've come back very strongly on delivery. So whichever way we look at, we see strong tailwind and we see strong green shoots, which will help us grow much faster as a category and as a company once the core situation normalizes. Okay. Any quantification here from X to where they are now? No, Sheila. No quantification, please. Okay. We don't do that traditionally as you know. Thank you. Ladies and gentlemen, we'll take the last question from the line of Avi Mehta from Macquarie Group. Please go ahead. Hi, thanks a lot. I just had one clarification on the margin front. Now especially I want to clarify the risks to margin not expanding because I can clearly see tailwinds from delivery price increase to pass on the cost inflation, clear the fact that dine in opening is not going to not has traditionally not heard delivery. I'm failing to understand why would margins not expand. Is that not a rational explanation to take forward? Not the quantum, but at least the direction should be expansion? Sorry, come again? It's from the 1Q level, sir. So what we saw in 1Q FY 2022 from here on, it would be rational to expect margins to expand as reopening Spurs dining to come back. What could kind of what are the negative or what is the risk that I'm missing out? I want to just kind of understand that because all those investments are something that we've that are ongoing. We've always been doing that. We've never used any pandemic to let go on investments. That's my understanding. So would appreciate your response to this. So, Avi, I think it's important to recognize that obviously even as we attempt to improve our margins sequentially, there are these various cost pressures that could come in play. There could be personnel cost pressures. There could be investments required to be made in driving marketing. And I think we have discussed extensively early in the call on the increased competitive intensity and the new process data transfer. So there could be investment that we called upon to be made to drive marketing investments, to drive data promotions, to drive data digital assets and data digital sort of downloads. So all of these will have a role to play even as we try and expect even more efficiency and even as we the impact of pricing flows through. So where that land managers, we can't be sure, and which is why the call will be made on the margin. No fair answer. So just one bit if I may clarify or if I can tell, obviously employee bit now, clearly there's been a lot of work that you've been doing from the start and not just pandemic, I think you just accelerated that. This variableization of employee cost, is this not structural in nature? Or what is the risk that you kind of what which you're kind of guiding towards? Is this more a macro risk that you are alluding to? Or is this more that as reopening stores, there would be a demand for more employees? Is that what you're guiding to? I'm not very clear on that part. A bit of that, Avi, but also the need for us to invest in building new capabilities and invest in building new strengths where we want to go forward, such as in digital, such as in technology, such as in data science, can be called upon to be made. But on the store front, yes, the veriplization is a structural change that we need. Okay, sir. So that would not be the okay, perfect, sir. That's all from my side. Thank you very much. Thank you, Abhi. Thank you very much. And I'll hand the conference over to the management for closing comments. Thank you and very brief closing comments. Thank you for joining us on the call today and for taking time out. I hope that we'll be able to answer your questions. In case you have any follow-up questions or any clarification, please feel free to reach out to our Investor Relations team. Thank you. Have a great evening and stay safe. Thank you very much. On behalf of Jubilee FoodWorks Limited, that concludes this conference. Thank you for joining us. You may now disconnect. Thank you.