Ladies and gentlemen, good day, and welcome to the Restaurant Brands Asia Limited earnings conference call for Q3 FY24. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Naveen Trivedi. Thank you, and over to you, sir.
Yeah, thank you. On behalf of Motilal Oswal, I would like to welcome you all to the Restaurant Brands Asia Q3 FY24 earnings conference call. From the management today, we have Mr. Rajeev Varman, CEO, Whole Time Director; Mr. Sandeep Dey, Brand President, Indonesia; Mr. Sumit Zaveri, Chief Financial Officer; Mr. Kapil Grover, Chief Marketing Officer, and Mr. Prashant Desai, Head of Strategy and Investor Relations. I will now hand over the call to the management for the opening remarks. Over to you, sir.
Yeah, good evening, guys. This is Raj. Thank you for joining the call this evening. Just to, you know, give you a rundown, we reported 3.6% positive same-store sales in Q1 and then 3.5 in the last quarter, in Q2. We continue that positive trend again today. We are going to report 2.6% positive in same-store sales. The good thing about this is, we are driving this positive sales by driving traffic into our restaurants. So we continue to maintain between 6.5 and 7% kind of a positive traffic into our restaurant.
That is the, you know, that, that is the effort that we wanted to put this year, which is to drive more people into our restaurants, especially into our dine-in business. We continue to do that, and we have not missed a beat on that. So that's the great good news. The market at large is a value market right now, and we have, and Kapil will walk you through the promotion that we are doing, which is now national all across the country, and it's doing very well for us and continues to drive traffic into our restaurants. So that's the opening remarks on, you know, how we are as faring in Q3 as we did in Q2 and Q1.
The sales revenues were INR 445 crore, grew 20% year-over-year same quarter, and 23% up, if you take the 9 months that have we have operated in this year. SSSG, as I said, was 2.6% positive, and I'm talking about only the Indian numbers right now, driven primarily through traffic. So traffic was up quite a bit. So thanks to all the effort by the operations and the marketing team, they continue to drive more people into the business. Again, some very good profitability numbers, thanks to all the work that we have done in the last year and now into this year. The highest ever company EBITDA. I'll give you post Ind AS numbers, and then I'll give you three.
So INR 70 crores was delivered in Q3, which is 48% up year-over-year. And if you take pre-Ind AS, we delivered INR 30 crores. Again, that's double what we delivered last year, same quarter. So very good profitability numbers. Last year, last quarter, I told you that the entire company continues to be focused on unit level economics. That is not going to change. We will continue to work on those, and then now we are seeing the results of that. PBT, again, this is the second quarter we are breakeven, for a brand new company that's hardly 8-9 years into operations. We have started breaking even on PBT, so that's again two quarters in a row.
We built 38 restaurants this quarter, bringing us to 441 restaurants. As we sit today, we are actually crossed our target for this year as we had set it up at 450 for fiscal year. We are at 452 restaurants as we sit today. So congratulations to Cicily Thomas, her team, and the entire construction projects team that they've pulled this target ahead three months ahead of where we were. And then, you know, the cafes, we continue to build cafes, as you know, and today we have 334 Burger King cafes as of December 31st. Now, the digital experience that that Kapil and Cicily both are running across our business.
Today, they have built 68 restaurants. They have 68 restaurants that are on the King's Journey. Again, reminding you of King's Journey, obviously, Kapil will kind of give you the details of it, but really this is about the kiosks, about table ordering, about the app, ease to order, the entire experience where customers actually go and place the order on the kiosk or on their mobile app, or on a QR code scanned and go into the website, place order there, and the food actually comes to their table. That's the King's Journey kind of thing, which is doing so well globally and here as well in India. We moved to 68 restaurants doing that, and next year we will complete the 100% of the restaurants on King's Journey. Now, little bit about Indonesia.
Again, Sandeep Dey is on the line. Sandeep Dey runs our business in Indonesia, both Popeyes and Burger King. And, Sandeep will give a detailed update on Indonesia, while Sumit will kind of give you the overall financial of both the countries. Kapil will walk you through the India marketing strategy that we are so proud that we are moving in the right direction. So Indonesia numbers, now, one of the things that I don't know if you're following the Indonesian market, there's been some geopolitical forces once this war started in Israel versus the Hamas. There's some anti-sentiments in Indonesia towards, you know, the U.S. brands.
That's kind of easing up a little bit, but it has taken a significant toll in the last couple of months, predominantly by customers are trying to stay away from the US brands. Again, like I said, it's starting to ease, and we are hoping that this will, you know, eradicate over time period. So anyway, Q3, the ADS was IDR 17.8 million. Again, I'm giving you IDR numbers here. This was a lower than 18 million IDR, which is the previous year, same quarter, down about 1% year-over-year. Now, however, the good news of here is, Sandeep put together a fantastic strategy a few months back with the help of, you know, the same program that we have here in India.
We put the strategy up in Indonesia, and the quarter-on-quarter growth on delivery sales. Again, we are aligning the business so that we start doing business. We used to do 50, 60 transactions, you know, we have moved that to north of 100 transactions on delivery, and we continue to push that. That has been the saving grace, because brands have seen a significant toll on traffic going into the restaurants, as an industry, right? But our saving grace is we have now started driving traffic into our delivery business. So some good news there, as we kind of wait for the market to recover as a whole.
ADS in IDR on Popeyes, which is a business today with 25 restaurants open as of December 31, that was at 23.3 million IDR. Revenues in the Popeyes business, 35 billion versus 27 billion IDR in the previous quarter, grew about 28%. So, some good news on the Popeyes end. We continue to build that business and a very strong economic business over there. Profitability, restaurant level, EBITDA, this was a break even for us in Q3. And this is driven predominantly by cost optimization. A lot of work going in that direction. It's not complete. We have another two quarters of work to do in completely cost optimizing our economic model there, but significant improvement in that as well.
We have 162 restaurants, Burger King restaurants in Indonesia and 25 Popeyes restaurants in Indonesia. We added 13 new Popeyes restaurants this semester last quarter. Again, the strategy in marketing both markets continues to be driven through value and to bring in traffic and to grow traffic business. So we continue with that traffic over there as well, and you will find that Sandeep will talk more towards that. So with just those highlights, and I'm obviously here for the rest of the call to answer questions and so forth, I will turn it over to Sumit Zaveri to kind of walk you through the numbers as we see it. Over to you.
Thank you, Raj. I'll just quickly take you through our performance for the quarter and nine months. Starting quickly with India, how we performed in Indonesia and on the consolidated basis. On the back of us closing December at 441 stores, 452 as we speak today, and continue to show positive SSG on an average of around 3%. We delivered a revenue of INR 445 crores, a growth of 20% over last year. So it is literally on the back of SSG and the new store opening that we've been able to achieve 20% growth. We've always been talking about taking our gross margins forward and continue to kind of work towards that.
We had set our targets, and we will look at that later as well. We've always been saying that we want to get to the number of 67%. We've got to 67.1 for the quarter, FY 2024, and we strongly believe that we should be able to hold on to this as we go along. So, a very clear shift that we've been able to achieve this year over last three quarters. And a strong shift is what we strongly believe we've been able to get to. As far as store EBITDA is concerned, we delivered 12.2% for the quarter.
and if you really look at it from the perspective of nine months as well, for nine months, we are now on early double digits at 10.3%, for the quarter, as far as restaurant EBITDA on a pre-Ind AS basis is concerned. As far as company EBITDA is concerned, we're continuing our journey to show improvement quarter-on-quarter. This quarter, we've got to a company EBITDA on a pre-Ind AS basis of INR 30 crores, 6.8%. And if you look at it on a nine-month basis, almost close to 5% at INR 65 crores on India base.
So we feel very strong about where we stand on India, as far as our performance for the quarter and nine months is concerned. Raj did mention about some of the headwinds that we faced in Indonesia. That's in view of that, our revenue for quarter three stood at INR 158 crore, in line with what we had achieved last year in quarter three. The only difference is last year we were close to around 80 stores, whereas this we achieved with 162 stores. So lesser number of stores, but achieved very similar revenue. The issue impacted us in November. So November and December is where we literally got it was fairly muted.
Our target was to at least ensure that we continue to improve our performance on at the restaurant levels. As you could see, with difficult situations as well, we've been able to at least get to break even at a company EBITDA level, which if you look at it, last year, same quarter, we were INR -18 crore at a reported company EBITDA level. Company EBITDA pre-Ind AS level as well, from INR -28 crore, we've been able to move the needle to INR -13 crore. So there is progress, but yes, we really wanted to move farther than what we moved in this quarter or this nine months as far as Indonesia is concerned. Quickly looking at consolidated operating performance, revenue for the quarter stood at INR 604 crore.
At a consolidated company EBITDA level, INR 17.2 crores, 2.8% company level EBITDA, which was -INR 13 crores last year. So again, INR 30 crore shift as compared to last year. And similarly, if you look at nine months, FY 2024, 1,840 crores revenue as compared to 1,540 crores, which is 20% growth, with INR 25 crores of company EBITDA, 1.3% as compared to a -2.5% that we had. So, overall, it means, we have very clearly shown improvement in India as well as in Indonesia. And our journey would be a very strong focus on profitability in addition to driving revenue at the top line, is what we will continue our journey going forward. So that's, that's actually how we're going to focus.
Sandeep will take us through some of the trends on the Indonesia side. But before that, I hand it over to Kapil to take us through some of the initiatives that we did on the marketing side that helped us through our performance in quarter three. Over to you, Kapil.
Well, thanks. Thanks, Sumit, and good evening, everyone. As always, we'll just remind ourselves of the focus areas that the team is working on, and then update everyone on the progress. Number 1, being the value strategy as a key driver of growth and traffic to our stores, and innovation on core burger platforms. And last quarter, we also added a new popular chicken side to some of the existing products to improve the adoption of these ideas, and we'll share more details on that. The third focus area is building the digital experience for our consumers in our stores and synchronizing all touch points for a seamless experience for our consumers. Last but not the least, building a very strong, engaging brand for the Gen Z and millennials. Now on slide number 12. Our value proposition is focused on satiating meals platform.
Tasty Meals at INR 99. We spoke about it last couple of quarters. We consistently built this platform over the last 9 months, and we continue to focus on this. The campaign has helped us sustain dine-in traffic growth despite seasonality impact of, you know, whether there was Shradh Navratri in October or there were some headwinds. Whatever there is, we've been able to sustain traffic growth, as Raj mentioned in his, in his opening remarks, on the back of this campaign, especially towards dine-in restaurants. And this will continue to be our focus area as we go forward. The next area I want to talk about is the Whopper. Last quarter, we came up with a new campaign on the Whopper also, which was to sustain that platform. And it's not an idea for a quarter, it's an idea for many quarters to come.
The insight behind this campaign was, you know, based on the feedback we heard from our guests, that they want the taste of a Whopper to be more closer to their Indian palate expectations. We had made that change in the product a couple of years ago, but we could not communicate it because of COVID disruption and other priorities. This quarter, we crafted a new insightful campaign. It was a multilingual campaign. We shot in three different languages with a unique cast, and it was much deeper connect with our guests. Now, just to give you a little anecdote, the protagonist here is a sensitive, someone who's not sure, and then a Whopper fan urges her to try the Whopper, and then they discover the fantastic taste of the product, and they get converted.
So this idea is deeply rooted in our deep cultural insight, and we will continue to use this over long term to build the Whopper trials and Whopper love. Slide number 14 is about how we continue to build BK as a concept and generate trials. You know, we continue to promote on social media, we continue to promote through influencers and drive trials of that, of that program. On the innovation side, I spoke about the, you know, the popular chicken snack that we've added. We've launched Crunchy Nuggets. It's nuggets with a twist. You know, typically what you get in the, in the category are tempura-coated soft nuggets, but we understand that the Indian consumer loves multi-textural snacking, and we've built this product out based on that insight.
It's got a crunchy texture and a very juicy, flavorful chicken inside, and we're getting very good response. It's early days, but already hearing good response from our consumers, and it will help us build the chicken snacking portfolio over time. We also relaunched the BK chicken burger with 50% more chicken in the same price, and this will now offer consumers even better value for money in our classic burger range. The second product is the premium wraps. You know, now this premium, very soft paneer wrap and the fiery chicken wrap is available nationally across our stores. These premium wraps have been launched at a price point of INR 199.
So now the King's Collection menu, as we've been talking about in the last four quarters, is now consistent of four burgers and two wraps at the same price point, and consumers can pick any of those items, you know, to their taste and likability at that price point of INR 199. The third product relaunch was the new, improved, softer and fluffier muffins. Now, these are now available across all our cafes, and we are already seeing improvement in uptake as we build the cafe layer in 334 stores across the country. Right. Now, I move to slide number 16. The Burger King social feed continues to drive engaging content.
You know, we are always having a conversation with our, with our guests on trending moments, on festivals like Diwali, Halloween, movie releases, and we stay connected with a loyal BK fan base, through our social media handles. Last but not the least, and Raj mentioned in the open conference, is the update on King's Journey rollout. Now, this King's Journey rollout that we have built, the platform that we've created, is a platform where our guests are offered fantastic experience through digital ordering, app-based ordering from the table without queuing up at the counter and then getting their food served at the table. Now, this will significantly improve our customer service and our customer experience at our stores.
As we speak, we have 68 stores that offer kiosk ordering to our guests, and we have a very good adoption of the same, with almost 32% of the orders being placed using the kiosk interface. The BK app continues to grow with exclusive offers, and we have seen significant growth in orders and users on the BK app in the last quarter. Finally, table service. The initiative has been rolled out across 244 stores, and it continues to expand every week. As I mentioned, this should significantly help us further improve our guest experience over time. That's from my side. I will now hand over to Sandeep to share an update on the Indonesia business.
Thank you, Kapil, and very good evening to all of you once again. You know, the last quarter has been quite challenging for us. End of October onwards, the entire industry kind of witnessed a major setback due to the geopolitical crisis, which Raj was mentioning in the beginning of the call. Of course, our business also suffered, and sales started to decline since then. We were delivering a very strong performance for the first two quarters. Even in the month of October, we were 17% higher in sales compared to the same period last year, which is when, unfortunately, this crisis hit us and our dine-in business got massively impacted by more than almost 30, 32%.
However, as Raj was mentioning, we quickly pivoted our strategy to drive sales through delivery channel and compensated a large part of that dine-in drop through a very strong performance on the delivery side. The entire operation team also did a fantastic job in tightening all the controllable cost lines and thereby making sure that we break even at a store level despite such a significant drop in sales. Now, before I move forward, let me quickly recap what are our three strategic pillars for the Burger King business. First, continue to build credibility in chicken. Second, establish and retain our leadership in burgers. And third, building a comprehensive dessert menu and drive incremental locations through that.
Most importantly, the bedrock for all these strategies are having a very solid ops excellence and continue to provide a very strong value proposition to our guests across the menu layers and across all channels. For the next few minutes, I'm going to share with you some of the work we have done to move forward these strategic pillars. Indonesia is a very strong fried chicken market, and having a winning product is a key motivator in this category. Last time in our previous call, I spoke about launching two variants of chicken, the regular crispy and spicy variant, at aggressively trial price of IDR 25,000 for a meal, which in the Indian context is approximately INR 135 for a piece of chicken, rice and a drink. We also supported that launch with a comprehensive 360-degree marketing campaign.
The results were quite positive. The incidence of chicken improved by more than 20%, volume grew by more than 50%. In fact, it's been now three quarters and we are seeing a sustained results, and this has become a part of our everyday value offer. Now moving to the next slide, which is slide number 22. The next, you know, strategic priority is to establish the burger leadership, and we continue to focus on two-pronged strategy here. First is the value and tier strategy. This is where we offer some of our flagship and preferred products at extremely aggressive price of IDR 17,000. It is continuing to drive trials, continuing to drive frequency and delivering sustained results, and also helping us building the Whopper equity. The second part of the strategy is where we continue to provide new excitement through taste innovation and branded collaboration.
Last quarter, we partnered with Heinz and launched a Mexican Whopper, and this month as we speak, as a part of our LTO strategy, we launched a new variant which is inspired by a local favorite called Cheese Dunk Whopper. Now, as a part of the dessert strategy, which is the third pillar, we continue to drive innovation every quarter. Last quarter, our collaboration was with Ferrero and launched a Nutella Fusion, and that is also witnessing a sustained volume growth of almost 2.5 times. Now, I'm on slide number 24. On the delivery side of the business, which is what both Raj and Sandeep was mentioning, we picked up some of the best practices from India and crafted a single price menu.
This was a collection of bunch of products, about 18, 20 products preferred by our guests at a very attractive pricing, and we also increased our visibility in the platform. So this combination of attractively designed single price menu and an increased visibility is driving significant growth. As Raj was mentioning, our traffic in the delivery channels have increased by almost 40%, and we will continue to drive this strategy as this is going to give us a steady and a sustainable growth. Now, let me quickly give you an update on the Popeyes side of the business. This quarter, we opened 13 stores, and we are now a 25-store business. As a part of our asset strategy, most of the growth has been FSDT led, so out of 25, you know, 21 is freestanding drive-thru.
Now that we have 25 stores and operation is getting stabilized, our single-minded focus is to build awareness of our products and generate trials. We are doing that by using the digital menu board as an ad board, and we are building product awareness through various video assets. In fact, every store has a video wall which runs brand videos and product videos. Other than building the product awareness, we are also generating trials through enterprise value, generating trials through digitized coupons, and also a single price menu strategy on the delivery side. We are building this brand with a digital-first experience, and I mentioned in our previous calls that every single restaurant has kiosks, and our ambition is to have 100% known diners. We have made a significant progress in that journey.
In quarter one, 37% of our dine-in sales was through kiosks, which increased to 70%, and by the end of quarter three, it has gone up to 90%. This is definitely going to help us to enjoy in driving a very strong CRM program in the times to come. Now, that is from the Indonesia side, and now I hand it over to Prashant to share the overall outlook for the business.
Thanks, Sandeep. So guys, no major change if you would look from a FY 2024 guidance perspective. As far as the number of stores were concerned, Raj mentioned we've already delivered our entire, you know, FY 2024, guidance, in January itself. On the same store side, given the headwinds that the industry is facing, we still continue to believe that, Burger King will deliver a positive same store growth. We expect a 3% positive same store growth for the current year. As Sumit mentioned, we already delivered on our promise of a 67% gross margin, so that's also one thing that we've been able to deliver. On the Indonesia business, we were hoping to break even, by March of this, next coming month, March 2024, the Indonesia business.
But given the challenges that, Sandeep mentioned extensively on the geopolitical front, we had to take a little bit of a setback there, and we are pushing the Indonesia business, cash breakeven, from this year now to next year. Our long-term guidance continues to remain where it is from an FY 2027 standpoint, no change there. So that's from the outlook side. I guess with this, we'll open up the floor for questions. Happy to take, any questions that you would have. Thank you.
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 their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets only while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nihal Mahesh Jham from Nuvama. Please go ahead.
Yes, thank you so much, and good evening to the management. So my first question was on the India business. Just looking at our employee and OpEx spend, despite the aggressive store addition, I see that it's remained flat or even seen a slight moderation versus the last quarter. So just some feedback on, you know, what led to this kind of, movement in these two line items?
So, Nihal, thank you for the question. Yeah, we've been very, very tightly monitoring. We've been very tightly monitoring our costs at the store level, and as I mentioned when I was talking, our focus in addition to improving the overall revenue is going to be how do we constantly get better with our flow through at the store level? And that is something why we've been able to maintain the overall costs at the employee-related expenses of store level within a very tight range in spite of some more store openings that we've done during the quarter.
That is something which, philosophically, we will continue to be in that zone, where we'll tightly control the middle out of PNL, so that we can see the improvement at the store restaurant EBITDA level as well going forward.
Understood. And on the OpEx side, any adjustment to the marketing spends? Because I know in the first few quarters there was an accelerated-
So that part, if I may refer to slide, page six or slide six, you know, our commitment has always been that it's a spend around 5% on an annual basis. It does get kind of differentiated, differentially spent through the quarter. This quarter it was 4%, whereas if you would see last quarter, it was 5%. But on a nine monthly basis, we are now at 5% for the full year, as far as marketing spend is concerned. So which is where it, which is where also I was highlighting that one should also very closely look at how the nine months number look like at early single, early double digits at 10.3%.
That's literally where we believe that we will build from here on.
Understood that. The second question was that the traffic growth is healthy. To get a sense, would it be fair to say that maybe the value strategy, based on, say, the data you have, is driving majority of these incremental footfalls that are happening? Just one last question to conclude, would be that possible to get a sense of how you would look at the SSG performance, excluding cafe, which has now been in the base for more than a year? Yeah, that'll be it from my side.
Yeah. Nihal, good questions, both of them. Look, we have always maintained a traffic strategy through value, right? You. If you go back the 8 years of our existence, we have always had a value mechanism always in play, right? So that's just basically the discipline that we have in marketing. We will always have a value, whether it is, you know, in the past we had a 2 for INR 50 offer, or, you know, now that we have a INR 99 meal, that Kapil spoke about. We will always continuously have a value traffic driving kind of a strategy, right? So that's nothing different than what we did years ago and what we're gonna continue doing moving forward, right? Now, as far as the discipline, like, you know, Kapil went through several new product introductions, right?
Whether it was the wraps that came in or the nuggets that we rolled out, the cafe that we rolled out in the past and so forth, right? All these are product, you know, traffic driving kind of tools, right? Cafe drives in people that add on to traffic, which is not through value. So it's a product traffic driving kind of mechanism. So those will continue. So it's not that we will only drive traffic through value. That is definitely something that is ingrained in the way we operate. But there is also this new product, NPD, as we call it, new product development, which will continue to draw new traffic into the business. Cafe is no different from that. Cafe is a kind of a long term.
We think that in the first two to three years, we will kind of slowly convert as we. You know, today, you see the conversion of people coming into our restaurant who actually buy products like combos and then add a coffee to it. There will be a time in the future that this will be driven predominantly with people just coming in to have a coffee, filling in day parts. So it's a slow kind of improvement that we are kind of putting good energy in terms of operations, making sure that, you know, we continue to improve our cutlery, right? Our cups that we are serving this in, the products that we are testing on the food side of our cafe, all these things we continue to do.
And we have a good footprint. We have 334 cafes operating right now, and we continue to open all the new restaurants with cafes where we can, right? So this will be a business that will continue to build, but traffic will be driven by day parts, which is our strategy bringing in NPD, and it will also be driven through value. So both these things, I don't know, Kapil, if you want to add anything.
Pretty much on point. Traffic value will continue to be a key driver as a mass media communication, out of store communication. There will be a lot of these new product introduction that we'll see over time, which help us build, you know, more trials and more traffic into the stores on the back of NPD.
Okay, next question.
Yeah, just add on, on the SSG, BK Cafe, if possible.
So Nihal, on that, principally, if you will see now, coffee's been operating for a while now. So from an SSG perspective, has coffee been an outperformer, underperformer? It's been in line with the overall SSG that we've done. If your question is more towards, 16 versus 14, that you see, that has a lot to do with the new cafes that came up, during the quarter, which took this down.
Understood. So thank you so much, sir.
Thank you very much. The next question is from the line Dhwanil Desai from Turtle Capital. Please go ahead.
Hi. Good evening, everyone. My question is that we have revised our guidance on SSG from 6% to 3%. If you can elaborate since last call, what has changed? What are the assumptions which we made at that point in time, and what has changed, you know, for us to kind of now go back to 3%? If you can talk a bit about that.
Right, got it. Dhwanil, essentially, every time we come, every quarter, we kind of guide basis what we expect the business to do versus what we expect, you know, where the industry is going to trend from. One of the things that RBA we have done is been very transparent with our investor fraternity and share what we feel at that point of time. As you would notice that the industry is currently going through its share of tailwinds, and the outperformance at RBA continues from our standpoint. But at the same time, you know, because if you look at your October, November, December, where we had hoped to do a much better SSG that did not turn up, I thought it was important to communicate that to our investor fraternity.
Okay. Okay. So, kind of a, you know, follow-up on that is that we are expecting FY 2025, you know, 8% SSG. So are we baking in a much better market environment than in the case if, you know, this kind of a headwinds continue, is there a risk to downside revision to that number?
So no, Dhwanil. Dhwanil, we are not saying my FY 25 guidance will be 8%. What we are saying is our long-term guidance, given that the country is going to grow at 6%-7%, we believe 8% is a fair assumption from a country perspective. However, if the headwind continues, we will only come to know by the end of next quarter. We will come back and give you the guidance for 25. As of now, we are not guiding anything on 25. This is a broader, overall long-term guidance.
Okay, got it. Second question is on Indonesia. So, I think, you know, when we acquired Indonesia business, I think our overall aim was to take gross margin to close to 60%, from, I think mid-50s. So where are we in this journey? I think we are currently at around 57-odd%. So what are, what are the things, you know, we see that will work to take it to 60%?
So, a lot of this was mentioned by Sandeep in terms of all the effort that we are doing on the product side. That was our first phase. Second phase, as you know, when you look at the Indonesia business, it has two components. First component is the Burger King side of Indonesia, which is where you are reading the 57.5, 58 odd % gross margin. If you look at the Popeyes side of the business, Popeyes side of the business has much stronger gross margin. As we had shared this with, you know, all of you, that going forward, at least for the next 24 months, we are not opening any more Burger King Indonesia, but the capital allocation process will be more towards Popeyes Indonesia.
As the contribution of Popeyes to the overall business kind of increases, that's one step where you will see the overall Indonesian gross margin moving up. And number two, as Sandeep said, as we begin to gain more foothold on the Burger King side of the business, we will also see the, Burger King gross margin moving up. Also, just to, brief you, Dhwalin, this 57-60 was guided over a 3-5-year period, which we even now feel reasonably confident to deliver.
So I just want Hi, Sumit, I just want to add one more thing, that our current focus on Indonesia, like in India, is to really drive traffic to our stores, especially now with the current scenario more so. We've also, as Sandeep was mentioning, we are also focusing very strongly on the delivery side of the business with a very attractive price offering. With that traffic, we feel that we will try and maintain the gross margins in the current range of 56.7%-57%. Once we kind of get a little more structured or stable with the traffic, once we kind of see the traffic coming back, we'll begin our journey or restart our journey on the gross margin side.
So it is certainly a very strong focus area to work on, but at this point in time, with the current scenario, traffic and the overall revenue is going to be the key focus for us.
Got it. Got it. Thank you, and all the best.
Thanks, Dhwalin.
Thank you. The next question is from the line of Mr. Manish Poddar from Invesco Asset Management. Please go ahead.
Yeah, hi, team. I just had one question. So if you look at before this quarter, we had opened roughly 25 stores in 12 months, 13, 12 months before that. And now, if you look at this quarter plus January, we've opened roughly 50 odd doors. Whereas when you look at the guidance which you had given, let's say, you know, the quarter four last year, the SSG for this year was 10%, which was expected, and now you are saying the SSG is going to be 3%. So I'm just trying to understand why accelerate the pace of store expansion if, you know, the demand environment is still similar, or are you witnessing something else on ground? Just trying to get sense on that. Thanks.
Thanks, Manish. So Manish, two, three parts. One, from an SSSG calculation standpoint, the store comes into SSSG after it completes 13 months. So it, from that perspective, you know, if your reference is towards SSSG and store opening in last December, the stores that would have completed 13 months would have been part of the 2.6% this quarter SSSG. That's one on the SSSG comment linked to the store openings. Number two, you know, the store opening process is something that happens 3-6 months in advance. And sometimes you will see the bunching up of store happens because of, you know, how the property is coming up, you know, when the landlord gets the clearances, et cetera.
It just so happened that this year, that bunch-up happened in the month of December, and hence the, the quarter, you know, we ended up opening a lot many stores compared to previous year. As we said, there is an MFDA that we have signed with Burger King Global, and there are ... You know, we have to open 700 Burger Kings by December of 2026, and the team is working towards delivering that number. When we open a store, Manish, the life of that store, even on a, on a store-to-store agreement that we do, is 20 years. So when we open a store, if we find a property which is great, we will go and open the store.
It could be so that, you know, currently in this quarter, probably there are a lot more industry headwinds, but that will not, you know, deter us from not opening the store. If the site is great, if the, if the rent to revenue are something where we believe we'll be able to deliver a 4-5-year payback, we will still go ahead and open the store. Because that's essentially having spent over a decade in this in India, I think somewhere the team now gets a sense whether this is a good property, and we would want to go with that. So from that perspective, you know, our store opening targets continue to guide, continue to be guided by the MFDA, and so far we've delivered on all our store opening targets, Manish.
So effectively, Prashant, if I hear you right, there's no material change in terms of demand on the ground. Would that be a right understanding?
There is, Manish, which is where the 10% earlier same store guidance has come down to 3%. What I was trying to tell you is that that is a reality-
that there is a demand slowdown or a tailwind or, sorry, or a headwind that we are facing as an industry. We are relatively facing this much lesser compared to competition for a lot of reasons that Raj mentioned, our relentless focus on value and some of the steps we took very early, starting in February of last year. But all I'm trying to mention is that as a result of this, we've not come down on our store opening targets. As and when we see a store which we believe will deliver the 4- to 5-year payback, we'll go ahead and open it.
Yeah, Manish, just adding to what Prashant is saying. See, building stores is a long-term strategy, right? We don't base that on one quarter or a slowdown in one quarter. We feel very strongly about the Indian market. We have very good, strong views on, long-term views on, on how this is going to evolve, where this is going to go as a, as a market or vehicle of QSR and especially for the burger business. And all our strategy is to build a long-term, strong business. So, you know, one quarter here, there, does not, you know, you know, slow us down on, on that long-term belief and long-term, you know, strategy that we have in place. So that's the difference.
Also, you know, you can't suddenly stop building a restaurant in a quarter and suddenly start building restaurants in the other quarter. These take a lot of planning, sometimes even 6 months to 1 year to open a restaurant. So, those are all the points, including the ones that Prashant already mentioned.
No, I hear you. I. My question was more from a perspective that has things on ground actually started improving, and that is why, to capitalize on that, you all are, you know, probably accelerating, but I think it's more bunching up is what you are trying to say, and not really any, any change in the planning margin.
The answer is clear. We are still not seeing, you know, on the ground significantly, things significantly improving.
Got it. Got it. Great. Thank you so much.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking . Please go ahead.
Hello? Hello, everybody. Yeah, hi. Hi, Prashant, thanks. Congratulations for exceeding the number of stores and also the margin expansion. If I look at the slide number 17, where we have mentioned that 68 stores is now having a King's Journey experience, and we have also provided 244 stores with the table service. Other reading is that we also have been talking value propositions. So as a culmination of this, is what is the quantitative number, if you can say that? Because you and even Rajeev has mentioned that there is a traffic growth. So quantitatively, quantitatively, is there any number you will be able to place in front of us that this is the number of traffic or the traffic growth which we have achieved?
Shirish, you'll appreciate that I know QSR will share that traffic number in terms of an absolute, more from a competitive dynamic basis. But Raj did mention a number, that overall, so far we've seen a 6% growth in traffic. I think, he would probably like to answer that on a percentage basis than on an absolute basis. I hope you understand, Shirish.
Yeah, that's helpful. The other question I have that we have been talking about value for money layer, and now we have added some more contours to that is tasty meal at INR 99 and chicken at INR 149. So the question is that despite this attempts, we have shown the margin expansion. So I wanted to understand from Sumit, what are the levers which, which is actually helping us or which has surprised us positively for expansion of this margin, despite our value for money strategy is intact?
Sure, Shirish. A couple of ways in which we've always been working. One is, we really kind of worked on trying to lock in prices whenever we see that the price points are attractive for us to kind of go along. That's one which we've always followed. The second one is that we've also very actively worked on expanding our vendor base. And when I say expanding vendor base, not tactically, but strategically going closer to where we open our newer clusters. That's something which really has worked. And thirdly, some of the scale benefits, you know, some of the advantages of growing rapidly is also starting to see the results into that line as well.
We've always been saying that scale is going to be one of the key levers for us to help improve the overall margins as we go along. It's a combination of various things that has helped us on improving the margins. Yes, we very strongly follow the value strategy, but that is not necessarily equals to revaluing our margins. You know, we also, whenever we run any aggressive value strategy promotions, we also parallelly think how will we also balance out our overall margin targets. So that all the efficiencies that we built through our entire supply chain team effort is not necessarily just getting balanced out by way of a promotion. We kind of do that balancing act really well.
So far, at least for the nine-month period, we've been able to demonstrate success through that strategy. That's what I would rather say.
No. The reason why I'm asking is because you have not changed the guidance on gross margin at 67%, but we are expecting a margin, operating margin should improve from here. So that's why I want to be sure that this journey will continue.
Yes, if you look at the FY 2027, you will see we are forecasting that, you know, we are committed towards taking this from 67 to 69 by FY 2027.
Thank you. And last question on the, when I look back, Prashant, your argument that 13 months before, we were close to about 345 stores. So if our SSG of those 345 stores is clocking at 2.6, so the question here is that how many stores or what percentage of stores are above 2.6% in terms of SSG?
Sir, we don't share that, but, but one thing I will tell you where you are coming from, one of the interesting trends that we are seeing at our restaurant level is, all the new restaurants we are opening are doing very, very well compared to what it used to do pre-COVID as well. So that's a standard that trend that we have seen, that all our new store openings are doing very well for us, which is why we've been able to deliver not just a positive same-store, but overall also a very strong trajectory in terms of our ADS journey.
Okay, all right. All the best to you and the team.
Thanks, Shirish.
Thank you. The next question is from the line of Pratik Poddar from Nippon India Mutual Fund of Mumbai. Please go ahead.
Sorry, just one small question. Could you... I didn't understand how is it that when you've opened 37 doors during the quarter, your other expenses and neither employee-related costs have not gone up? And this is also because you've also opened a higher number of BK Cafes, right? So I'm just trying to understand.
So one, Pratik, to your question, one is, yes, we've opened quite a few number of stores during the quarter, but a large part of these additions came towards the second fortnight of December. So that is one of the reasons why, we've not necessarily seen a substantial impact-
on the revenue as well as on the cost, that's one. But at the same time, you know, Pratik, we have, we have been very, very mindful in terms of the way we manage middle of the PNL through the quarter. Marketing is one which we've already shared, that it was 5% in quarter.
Which is 4%. But we will continue to, in our journey, Pratik, on being tighter with our middle of the P&L. But I'm saying, just to your question, when you are relating it to store openings.
A substantial part of the store openings has come towards the later part of December. Second fortnight of December is where literally we saw-
Okay. It's mostly a timing mismatch. That's it.
More a timing mismatch as well. Yeah.
Got it. Got it. Okay, thank you.
Thanks, Pratik.
Thank you. The next question is from the line of Devanshu Bansal from Centrum Broking . Please go ahead.
Yes, sir. Hi, thanks for taking my question. So basically, sir, Q3 is a seasonally strong quarter, where there's a healthy ADS pickup sequentially. And against this backdrop, we have seen a 6%-7% sequential decline in ADS in India business. From a slowdown perspective also, this, this is sort of sustaining is now prolonging as well, and the slowdown is now in its fifth quarter. So what are the key reasons, according to you, for this? And also, if you could highlight some triggers that should drive an industry turnaround, as per your study on the consumer.
Yeah, thank you. Thank you for your question. See, we look at this yearly, right? First, we look at it based on the point of view of traffic, right? Is the traffic this quarter over last year's same quarter, going up or down? Now, consistently, over the last three quarters, we've been reporting, in fact, I think it's more than three quarters, we have been reporting positive traffic coming in, right? So that is the best news for us to continue growing, continue doing all the things that we do, that we are now driving more traffic in. Now, you see the Q2 numbers and Q3 numbers, and that's the question you're posing.
There's been some seasonality shift between the two quarters. For example, there's a, you know, movement of Navratri and Shradh into the Q3 from Q2 from last year, right? Those are almost 20 days, 25 days, which are low volume days, predominantly because people then stop consuming non-vegetarian food, as well as, in many cases, eating outside. So that shift has happened from one quarter to the other quarter. This, that's the trigger that you were asking. That's one of those things. But also, you know, the expectation was that we will have a strong December. We will have a long, strong, you know, week, last couple of weeks in December because of all the sales and stuff that goes on in malls and so forth, right? That really didn't come through, right?
It hasn't come through this year and it hasn't come through last year. It's just a kind of a seasonality shift that we are understanding post-COVID, and, you know, we'll continue to study that. What we are happy about is, that even on our numbers from last year, we have improved on traffic, this quarter. Even on our numbers, the last quarter, we have improved over, the previous year, all three quarters, which tells us whatever the new trend is, whether it's driven by, you know, some external factors or it's just time, time-driven, we continue to improve on it. And that's, that's all that, you know, kind of, we can work on. But what is, the, the future, the next, Q3, where, which is the next year?
We will wait and see, but we will plan for it. We will make sure that we have a promotion, we will have something aggressive, so that we are not sitting at a INR 119 kind of ADS that you see on your papers now. The other part is, as you grow bigger and your comping restaurant become a bigger base, right? As you continue to grow, your comping restaurants become a bigger base. The impact of new restaurant openings.
T hose that are not comping on the overall ADS becomes less and less, so you will find that impact slowing down.
Got it, sir. And, secondly, wanted to understand what is the extra incremental CapEx that is associated with King's stores? And, what are the initial trends that we are seeing in terms of improvement in store unit mix prices with this introduction?
Incremental CapEx for King's store. Okay. So, sorry, sorry, Devanshu. As far as, incremental CapEx requirement is concerned, for per store would be in the region of around INR 10 lakh. But, what we're also doing is that we are also simultaneously going to realign our total tech investments at the store. Like Kapil in his slide mentioned that we might relook at, having the DM be in the store. So while I'm saying INR 10 lakh is what we would need to put the cost, if we were to not make any change or realignment, we would work towards that. As far as, looking at, how it, how it is impacting from the perspective of metrics, it's still early days, because we've just got, 68 stores, in there.
What we are at this point in time concentrating on is really improving the overall customer journey and concentrating on getting more customer information through the implementation of King's Journey. And that's actually how we are looking at focusing on this. We'll kind of share some numbers as we also gain some more information or gain some learnings out of it. But at this point in time, it is still early days. But our focus is going to be complete this entire investment towards over the next 12 months. So March 2025, you will see the overall all our stores across the portfolio getting converted to having the King's Journey.
Thanks, Amit. Thanks for taking my questions.
Thank you. The next question is from the line of Mayur Gathani from OHM Portfolio Equity Research Private Limited . Please go ahead.
Thank you for the opportunity. If I look at the Indonesia numbers, you know, the occupancy and other expenses, there is a absolute drop from INR 61 crore to INR 48 crore. What is this? Because, you have, you have, you know, added 13 stores of Popeyes, though the Burger King stores are flat. How is this number consistently dropping? Absolute number.
So one is, due to, Mayur, one is that we have, as compared to last year's quarter two, we have, shut down, quite a few restaurants, almost around 20 Burger King restaurants. And those were malls high rent to revenue ratios as well. So that is the reason why we are very clearly seeing the occupancy of the expenses, as a ratio coming down. Whereas Popeyes, yes, we've added Popeyes, but the rental, these are FFTs. And we've, I think, shared in our earlier commentary as well, that those comes at a very attractive rent to revenue ratios, as well. So that is very clearly the reason for a drop from INR 60.6 crore to INR 48 crore.
It's purely on account of shutting down of Burger King, almost around 20-odd stores that we have kind of shut down. And then we also are look very actively working with our landlord partners as well there, in order to get some more further benefits or improve the rent to revenue ratios. It's purely on account of those efficiencies that we've we work on. That's one. And the second one, you would recollect that we had made last year in current quarter two, we had made a substantial amount of marketing investments there. If you were to look at it in quarter two, last quarter two of 2024. That is also now starting to kind of settle down into quarter three of 2024.
It's a combination of both store shutdowns as well as some of the investments that we had done starting to taper off. But this journey will continue, because that's something which we are going to work towards with the current scenario that we have.
My question was more on the sequential drop from 61 to 48. What you explained was from quarter three last year to this year, this quarter, which I understand, because there are many store shuts. But from quarter two to quarter three, you've not shut any store in Burger King, and in spite you opened some 13 stores in the other brand.
It is also on account of all the investments that we have done in quarter two on the marketing side, and also we've kind of tapered some of those investments on that side. And we've started rationalizing the costs quite substantially. We will share the details of those costs plan as we go along.
Right.
The reason is because we started rationalizing the costs as well.
That's great. So can we take this as a sustainable thing that... And what was your marketing cost? I mean, as in India, it is 5%, that you have to spend. It is the same there in Indonesia?
Yeah. So our requirement of MFD has always been at 5%. What I can tell you is that what we are constantly working towards as far as Indonesia is concerned is that while the headwinds really continue to impact us. Our journey is that how do we really make sure that we achieve the breakeven during the challenging times as well? So that's something which is going to be our focus. So while we might have said that we will get to breakeven later but our focus is on how do we get better in the current scenario. That is actually the focus while you are seeing the shift, and we will only, you will only see the continuation of this journey as we go along as well.
Okay, great. And, Sumit, I heard that you will not be opening any more Burger King stores for the next 24 months in Indonesia?
We will come back and revisit that part, Pratyay.
So, we had mentioned this, what I was sharing with, I think, Dhwanil, was that this is the guidance that we had given at the beginning of the year for next two years. So at least-
Right.
For the next 12 months, we don't expect to add any Burger King. And if we choose to add it, the scenario, as Sandeep mentioned, a lot of efforts have gone, and if the economics really, unit economics change in favor of Burger King, we'll come back to you. But as of now, at least for the next, you know, next year, you can expect that we won't open any Burger King, and we'll continue to open Popeyes.
Okay, great. I mean, fantastic job, guys, with the cost cutting that is happening. I mean, we're just waiting for the top line to deliver, and we will see margins flowing down. Great job, sir.
Thank you very much.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you. Thank you, everybody, for joining the call. I'll wrap up by sharing 2-3 perspectives. You know, yes, the industry is facing certain amount of headwinds. The sheer focus towards delivering, getting more people into our stores, into our stores on the dine-in side, the journey which started early part of January, February of 2023, has consistently shown and driven our traffic growth. Traffic continues to be a very, very strong pillar for RBA in India and in Indonesia. You will see us continue to build momentum on the traffic side, so that's a very, very strong pillar. Number 2, just to add to what Raj, Sumit, and Sandeep mentioned, as we continue to build traffic, with the same store growth, overall ADS will continue to grow.
But our sharper focus remains to better our unit economics. As we had mentioned earlier, as our ADS continues to grow, you will see improvement on operating leverage beginning to play its role, both at a restaurant EBITDA level and at a company EBITDA level. We continue to be big believers that this is a business which is still in its infancy from a perspective of there is so much of demand for QSR, whereas supply is lagging behind. There are so many cities for us to go and cover and open new restaurants. So we continue to remain extremely positive about this business over a medium to long-term perspective, and we thank each one of you for your support in this journey. Thank you.
Thank you. On behalf of Restaurant Brands Asia Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.