Ladies and gentlemen, good day and welcome to United Foodbrands Limited Q2 FY26 Earnings Conference Call. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bijay Sharma. Thank you, and over to you, sir.
Thank you, Sipha.
Most welcome.
Welcome, everybody, to United Foodbrands Limited Q2 FY26 Earnings Conference Call. For today's call, I have with me Mr. Kayum Dhanani, Managing Director; Mr. Rahul Agrawal, CEO and Wholetime Director; and Mr. Amit Becala, CFO. We will begin the call with Mr. Kaiyum sharing his perspective on overall demand scenario and key highlights for the quarter. This will be followed by a detailed discussion on business performance and outlook by Mr. Rahul. Post that, we'll open the forum for a Q&A session. Before we begin the presentation, I would like to remind you that some of the statements made in today's conference call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to earnings presentation for a detailed disclaimer. I will now hand over the call to Mr. Kayum Dhanani. Thank you, and over to you, sir.
Good evening, ladies and gentlemen. It's my pleasure to welcome you all to the Q2 FY26 Earnings Conference Call of United Foodbrands Limited. While overall consumption demand remains subdued, we remain cautiously optimistic about our performance. For the past few quarters, both the industry and our dining segment have faced challenges with flattish or negative chain store sales growth. During this period, we implemented several initiatives aimed at enhancing guest experience and driving footfalls, which have enabled us to outperform the industry. We are pleased to share that we are now replacing an uptick in both dining volumes and delivery transactions, resulting in return to positive SSSG. For Q2, SSSG stood at positive 0.8%, excluding Navratri days, while for the four-month period from July to October 2025, it was 0.3% positive, entirely driven by transaction growth.
We are confident that the improvement trend continues, supporting our performance in the upcoming seasonal strong quarters. Our focus will remain on driving sustained volume growth across formats. During the quarter, we reported revenues of approximately INR 305 crore, a 2.6% increase over Q1. Despite Q2 being a seasonally softer period and impacted by Navratri, gross margins were affected by lower realization from value-based group offers and the higher food costs associated with our month-long Kavagali Food Festival. Nevertheless, we maintained strict cost control discipline and achieved a reduction of 6% of the overhead costs within our barbecue industry. Our international operations continued to perform strongly, delivering 27% revenue growth and a sustaining 20% restaurant operating margin in the metro portfolio. The premium casual dining segment also performed robustly, with 17% year-on-year revenue growth, metro store margins of around 50%, and acute expansions into the new metro markets.
We added six new restaurants during this quarter, taking our total network to 241 outlets. We remain on track to open 35 restaurants in FY 26 and are firmly progressing towards our full FY 27 target of 300+ restaurants. Thank you, and with that, I will now hand over to Rahul, who can take you through the operating performance in greater detail. Thank you.
Thank you, Kayum. Good evening, everyone. During the quarter, we added six new restaurants, taking our total portfolio to 241 restaurants. This includes 195 Barbeque Nation India restaurants, 12 international restaurants of Barbeque Nation, and 34 premium CBR outlets. Additionally, 15 new restaurants are currently under construction, and we remain on track to open 35 new outlets in FY 26. For the quarter, our same-store sales growth stood at 0.8%, excluding the impact of Navratri, which was not part of the base quarter. Over the four-month period, July to October 2025, SSSG was 0.3%, driven entirely by approximately 4% transaction growth. We reported consolidated revenue of INR 303.5 crores, a 2.6% sequential increase, despite quarter two being a seasonally weaker quarter. This reflects continued positive revenue momentum.
Our dining business grew by 1.6% quarter-on-quarter, with approximately 2% transaction growth over the four-month period, while our delivery business grew 7% sequentially, supported by 12% transaction growth during the same period. Gross margin for the quarter stood at 66.2%, down by about 150 basis points sequentially, primarily due to culinary initiatives and value-driven group offers. We expect our consolidated gross margin to stabilize between 67%-68% range going forward. Pre-Ind AS restaurant operating margin was 8.2%, temporarily impacted by the softer gross margin, around 1.2% increase in marketing spend, and ramp-up of new stores. Despite this, we maintained strong cost discipline, achieving 1.3% year-on-year reduction in overhead costs in our consolidated business. Mature restaurants delivered around 9.6% pre-Ind AS restaurant operating margins. Consolidated reported EBITDA stood at INR 37.7 crores with 12.4% margin, while adjusted operating EBITDA was INR 3.3 crores at 1.1% margin.
Barbeque Nation India business revenue from India stood at INR 230 crore, approximately 0.5% quarter-on-quarter increase, with an SSSG for the segment being - 1.1%, excluding Navratri, and around - 1.6% for the four-month period, even though the transactions grew by around 3.7% in our India business. We maintained tight cost control across existing units while continuing to invest for future growth. Marketing investments increased by about 1.2% of sales this quarter, with a focus on driving volume growth. While this temporarily impacts margins, we are confident that these investments, combined with operating leverage, will strengthen performance in upcoming quarters. Operationally, we remain focused on enhancing guest experience through culinary innovations and engagement activities across all our restaurants. During the quarter, we enhanced focus on value-led campaigns such as Sizzling 7, Big Buffet, and Grill & Chill, which were well received by guests.
These offers reinforced our value proposition while driving traffic. We also rolled out a deal module to promote value offers through our own app and website, leading to a higher share of our direct digital sales. Our international business recorded revenue of around INR 28 crore, representing 27% year-on-year growth, supported by a strong same-store sales growth of 8.4%. Gross margin for the segment stood at 72%, and pre-Ind AS restaurant operating margin was around 18%, with mature restaurants achieving 20%+ margin. We successfully opened our first restaurant in Riyadh, Saudi Arabia, during the quarter, which was very well received by our guests. This experience positions us well to deepen our presence across the Middle East. We plan to open four to five new restaurants in FY 26 while maintaining focus on same-store sales growth and operational excellence.
In our premium CBR segment, we delivered a revenue of around INR 47.3 crores, up 17% year-on-year. Gross margin was 73%, and pre-Ind AS restaurant operating margin stood at around 13%. While new restaurants are still maturing, the established network continues to deliver 20%+ margins in this business. We added two new restaurants in Hyderabad during the quarter and continue to expand the business. We target to add 30% network growth in FY 26 in the premium CBR segment. Our focus remains on scaling Toscano and Salt in new metro markets while sustaining guest delight through continuous culinary and service innovations and maintaining strong operating discipline. Our strategic focus remains unchanged. We'll continue to strengthen the Barbeque Nation brand both in India and overseas through best-in-class guest experience, culinary innovation, curated value offerings, and tight cost management.
Simultaneously, we'll expand the premium CBR business to build a robust portfolio of scalable brands that complement our core. Thank you. With that, we can now open the session for Q&A.
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 touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets 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 Devanshu Bansal from Emkay Global. Please go ahead.
Yes, sir. Hi. Thanks for the opportunity. I wanted to check on.
Mr. Devanshu, your line has been unmuted. Please go ahead.
Hello. Are you able to hear me?
Since there is no response from Devanshu, we will proceed to the next question from Rishabh from Pravin Ratilal Welt. Please go ahead with your question.
Yeah. Am I audible? Hello. Am I audible? Hello.
Mr. Rishabh, your line has been unmuted. Please go ahead with your question.
Yeah. Am I audible? Hello. Hello. Rahul?
Since there is no response, we will proceed with the next question. Devanshu Bansal from Emkay Global. Please go ahead.
Yes. Am I audible now? Hello.
Mr. Devanshu, your line has been unmuted. Please go ahead with your question.
I hope there's no technical glitch here because if I.
No, sir. There is no glitch.
Okay.
We will proceed with the next question from Viraj Mehta from Enigma. Please go ahead.
Yeah. Hi, Rahul. Rahul, my first question is regarding our India business margins. In spite of being INR 5.6 crore revenue per quarter in Barbeque, our margins saw significant decline even at gross levels. Can you talk a little bit? You did talk a little bit, but what exactly do we want to do with that? Because, see, our growth is also not coming, and now we are compromising margins also for growth. In spite of that, growth is not coming. I am a little confused what is the strategy per se.
Hi, Viraj. If you look at our margins, our gross margins are down by approximately 2 percentage points. Like you mentioned, there are two impacts here. One is the impact of higher food costs because of this food festival that we ran for a month. On a percentage basis, there is almost 1 percentage point impact, which has subsequently been removed from the numbers. If I look at October, 1 percentage point has been recovered from gross margin. The second impact is because of some of the campaigns that we ran, which promote group offers like Sizzling 7 and Big Buffet. These have helped us to achieve transaction growth. In the four-month period, and why I am using four-month period is because there is a like-to-like data given Navratri fell between two different quarters.
We are growing at around 3.7% on the transaction side, right? I think we are in a stage wherein we are investing some bit in terms of either gross margin or in terms of some marketing spend to ensure that we start getting back the traffic that we need. Obviously, not that the industry is at its best wherein there are a lot of other players who are really thriving. In that context, I think we will have to invest some amount to build this business, and we will see that traction coming in as this rolls over. Also, if you look at our overall margin performance, broadly between last year's quarter two and this year's quarter two, we would have lost around INR 13-14 crore of absolute number of gross margin, which is where we also lost in our overall India's operating margin, right?
There has been a very strong cost discipline on our operating cost structure. It's not that we are over-investing to get sales, but if you look at the current quarter, I'm actually extremely happy with the way quarter-on-quarter we have shown slight improvement in our traffic and also in our overall revenue.
Right. Right. I mean, we have now seen festive season go by in Diwali in October, and you have shown a little bit that our SSG is slightly positive for these four months put together. How do you see the traction? From this quarter onwards, should we see low single-digit kind of SSG growth? Also, because last year's Q3 was a terrible quarter in terms of negative SSG, it is a very low base that we are anyway starting with. What are your thought process on that?
Viraj, last year's quarter three was around -2% . In this industry scenario, I do not think 2% is an extremely terrible scenario, but I respect that. Overall, as you see in the current four-month period that we have given a flavor of, on the reported basis, the entire quarter is at - 2%, right? On the four-month basis, we are on positive territory. That is because October was up by approximately 6-7% on same-store sales growth on a consolidated basis. The India business was also up by upwards of 5% in the month of October. I think October has gone by. November has just started. The momentum is continuing, but quarter three is very peculiar because a lot of business happens from around the second, third week of December and continues till the first week of January, right?
I think we'll have to wait and watch how that period spans out. Like I said, overall, there has been some good positive momentum, and I'm not comparing it with one month, part of the month. I think comparing for a period of four months and moving to a negative territory is a very, I think, decent performance given the way the industry is right now.
Absolutely. In terms of your CapEx, because let's say we do around 265, 265 total restaurants end of the year, what is the total CapEx, Rahul, you think we will end up spending this year?
We plan for close to INR 125 crore in this financial year to meet our plan of around 35 new restaurants. This also includes some maintenance CapEx, some renovation CapEx that we do, and some corporate CapEx that we end up spending. INR 125 crore is the number.
Then your debt, because our cash flow will be in the region of INR 60-80 crores, you will see a significant increase in your debt this year. That's correct?
Yes, and that has already happened in the first half because in the first half, the cash flow generation was lower given the margin got impacted. As of the current date, also September, we have borrowed additionally around INR 40 crore. The second half, given that there is also a seasonally stronger quarter, and we are also seeing some positive momentum, the cash flow generation will be higher. We expect that the gap between cash flow generation for the next six months versus the CapEx requirement should not be more than INR 50 crore.
Sure. Thank you so much, Rahul, and best of luck.
Thank you, Viraj.
Thank you. Next question is from Milansha from Pravin Ratilal Investments. Please go ahead.
Yeah. Good evening. Am I audible?
Yes, sir.
Yes, sir.
Yeah. Thanks for the opportunity. I have two questions. My first question is on ROM. Since Q3 FY 25, there is a gradual decline in ROM, and it is down by 50% already. It is mentioned in the earnings presentation on page number eight that ROM is impacted by lower gross margin and higher marketing spend and some new restaurant reforms. Can you guide from when any improvement in ROM is expected? Any comments on marketing spend? Are you going to increase marketing expense or will it be at the same level going forward?
I think it's not correct to compare quarter three of the business, which is seasonally the best quarter for us, with quarter two, which is seasonally one of the worst quarters for us. The right comparison would have been quarter two of last year versus quarter two of this financial year.
There is definitely a drop of around 4 percentage points as we have reported on our ROM, restaurant operating margin. Like you mentioned, out of this 4%, broadly, a couple of percentage points have impacted because of gross margin. Some part of it we are already seeing coming back in the current quarters. As I mentioned, we have increased our marketing spend by close to 1.2%, and the balance has happened from new restaurant ramp-up. In the new restaurant ramp-up, categorically, we had some higher initial dampener because of our premium CBR business. I think directionally, all of these are moving in the right direction. I think gross margin impact is a short-term investment that we have made to increase momentum in our transaction growth. Marketing spend overall at a company level is approximately 3%. There's something that will maintain at this level.
I don't expect a reduction from 3% in the coming quarters. Also, not at a point of time when the core focus of the business is to drive transactions growth in the company. New restaurant ramp-up is directionally okay. That's the way it happens, and this also will come back in our business. If you look at quarter three of this financial year, you will obviously see improvement, and the right metrics to compare would be quarter three of last year with quarter three of this year.
Understood. Yeah. My second question is on HSHG. On page number five in the earnings presentation, it is mentioned that pre-Navratri HSHG was 0.8%, and for the entire quarter, it was - 2.2% HSHG. Is it the right understanding that these nine days of Navratri have impacted the business that much heavily that the entire quarter HSHG turned negative? Any further explanation if you can give?
No, you're right in that. We are, at least our Barbeque Nation business is a predominantly non-veg heavy business. We get almost our non-veg ratio is between 70-75%. During those nine days period, there is a drop in non-veg consumption, and the impact is specifically because of that. That is exactly the reason why we have also compared it with the four-month period, so that four-month period versus last year's four-month period has actually no abnormality and covers pretty much every difference of the calendars that happen in the business.
Yeah. That's it from my side. Thank you, all the best.
Thank you, Milansha.
Thank you. Next question is from Devanshu Bansal from Emkay Global. Please go ahead.
Yes, hi. Apologies. Am I audible now?
Yes, Devanshu.
Yes, sir. Rahul, in Q1, we were on a consolidated basis. SSG was about -3%. Over the last four months after that, it is closer to flattish. We had to sort of make certain investments or leave certain offers on the table for consumers, right? I wanted to check whether you see this as a structural thing that has happened to the business where consumers need additional value to sort of come back to the stores? Secondly, obviously, we will not be happy with, as a business, you may not be happy with this flat SSG performance, and we would be targeting same single-digit type. Do you foresee a need for further such investments in the format to sort of revive mixing a little kind of SSG growth? That was the first question.
Yeah. On the margin front, if you look at quarter one, also we have started these group offers in quarter one. Last quarter, also, we had started to do some marketing investments. There is obviously a lag impact of that. I think at industry level, there has been some positivity from the GST rate reductions, right, that has been impacting the business. I think on the gross margin level, like I had mentioned in my opening remark, the guidance for us is around 67%-68% margin level. I think that is an achievable number, and we do not need to go further down from that. The business does not need to go down because our format is a certain level of menu, which can be delivered at this particular gross margin. Your second question was on SSSG.
I think we're definitely seeing a good trend on the four-month basis, and there has been, on a sequential basis, a good improvement of around 4 percentage points, right? We are frankly extremely happy about that. I'm extremely happy about the transaction growth that we are seeing. Like I said, October month has also delivered around mid-single digit. The momentum is there right now. Like I mentioned, we have to see how November, December stands out. The focus of the business would be to build transaction growth. Also, in our format, in any of those restaurant formats, the operating level is very high, right? We might be sacrificing some bit of gross margin here, but if we could deliver better sales growth from this to our consumers, the operating leverage impact will be more than the gross margin sacrifice that you will see here.
I think we have done good, we've seen good traction over the last two quarters and would definitely like to continue this.
Maybe, actually, Rahul, I got your point, but because you provided us SSG numbers for four months, but we have not provided operating margin numbers for four months. Maybe it is becoming hard for us to correlate what you are saying. Exactly my point was that if operating leverage would have been high, then gross margin obviously has been impacted. SSG has seen a recovery, but there is a very strong impact on the restaurant operating margin, at least for Q2 FY 26. I do not have the number for four months. That was there. Anyways, second question, what I wanted to understand is that you mentioned that from a difference between CapEx and debt increase for the year, it is about INR 15 crore. For H2, according to you, what is the margin improvement that you are sort of factoring in for such kind of outlook, right?
It definitely is indicating that you are expecting a healthy rebound in the margins because you said 125, so that requires additional INR 75 crore of CapEx, and then you have to repay, say, INR 40 crore. You are expecting like INR 110-120 crore of EBITDA. I just wanted some thought process there.
Yeah. On H2 basis, which generally is a stronger quarter for the business, I'm expecting around 8% corporate-level EBITDA margin pre-index. The numbers that we have just discussed right now are based on that assumption.
Fair enough. Fair enough, Rahul. Okay.
Thank you. Next question is from Rishabh from Pravin Ratilal . Please go ahead.
Yeah. Apologies. I hope I'm audible now.
Yes.
Yes, speak.
Yeah. So Rahul, the first question is on the number of restaurants that you have in Bangalore. Can you just quantify the number of restaurants that you have in Bangalore, and can you just split it between barbecue and premium CDR?
We have around 20 of Barbeque Nation, and for premium CDR, we would have around 15 in Bangalore.
Okay. So out of the total restaurants that we have, 240, we are having 20+ 15. So around 35 restaurants we have in Bangalore itself, right?
Right.
Just following up on that question, we have a negative SSSG of 4.3%. Can you just give me a split between what is that number in South India and non-South, that SSSG?
I can't give you that split right now, but what I can tell you is South have been one of the struggling markets for us. In the previous quarter, we have seen that South has also performed pretty much similar to how other regions in the country have performed. I can't, so the impact that we saw on our revenue numbers, South India has reacted better to some of these offers.
Help me understand if I got you right. What you're trying to say is that the negative SSSG number is similar in South and non-South. Are you what?
Yes.
Is that what you're trying to say?
Yes.
Okay. Okay. No, we were under the assumption that the rest of India is actually started to do well. So we obviously had a QSR report number some time ago, and they said that we have extreme problem in Bangalore. Can you then just let me know what would be the SSSG in Bangalore particularly since we have 35 restaurants?
I can't give you the specific number, but if you want to have some inference, our premium CDR business has done an SSSG of around 5% for the quarter. Out of 34 restaurants, 15 are there only in Bangalore.
Okay.
That portfolio is 5%, and Barbeque Nation portfolio is, I'd say, - 4% for the entire quarter. Barbeque Nation gets more impacted because of Navratri. Broadly, I think Bangalore, if I look at all 35 restaurants, my sense is that we would be actually better than Pan India because the premium CDR portfolio has done better.
Okay. So just one more question on the, so from Q4 onwards, can we start seeing positive same-store sales growth in the Barbeque Nation India business?
Like I said, the focus is on transaction growth, same-store sales growth. We are seeing some positive momentum. We have seen that in the period during pre-Navratri. We are seeing that also in the month of October. We have seen that over the period of the last four-month period. I think that momentum is continuing. We'll just build upon that.
Got it. Got it. Thanks and all the best.
Thank you, Rishabh.
Thank you. A reminder to all, anyone who wishes to ask a question may press star and one. Next question is from Madhur Rathi from Counter Cyclical Investments. Please go ahead.
Sir, I'm trying to understand that it has been now almost three years, that is 12 quarters since our SSG is in negative, which is an achievement in itself that on such a low base, also, we are continuously clocking negative SSG. It seems that we were already loss-making on a net basis, but very soon, even at the operating level, we will start making losses because in the second quarter, the company hardly broke even. The EBITDA was really INR 3.3 crores. I think there is something that the management is missing because there is no point in continuously opening new restaurants when your existing SSG growth is negative for 12 quarters continuously. On top of that, now I can see that we have a net debt on our balance sheet.
It is like there is already a fire, and you go and start a new fire at some other place. That is what I think the direction that the company is moving in. Please correct me if I am wrong.
We do not see it obviously in that fashion. Yes, SSSG has been negative for quite some time. The negative numbers in the current financial year, previous financial year, are broadly in line with where the industry is, right? It is not exactly full support wherein the industry is really going at a very handsome number, and we are dragging behind. Obviously, the margin numbers in the current quarters are lower. With a specific mindful thought process on where to invest money and where not to invest money, we have very thoughtfully invested in some of our consumer offers and campaigns, and we have also very thoughtfully spent some bit on the marketing spend. That too continues to remain at a very lower end of the entire, let me say, industry average spend on marketing.
Similarly, on our overall portfolio, we have been very, very cautious about our cost control. I think, and in the current quarter, like I've been mentioning throughout, we are seeing some positive momentum to transaction growth, which is I'm building. Yes, we did increase some of our debt as we have expanded our network base. Expanding network base and SSSG are two different things. SSSG is in a one-quarter trade area, and we have a separate team who develops stores and manages the new stores that opens up till the time it's integrated with the existing ops team. We obviously don't see this business on a one-quarter or one-year basis. We've been around for almost two decades now, and have built a very strong business that we are extremely proud of.
I'm very happy to see the current momentum that we are seeing in the business, and we hope that this will turn positive.
Basically, to the best of my knowledge, the rest of the industry, at least the listed players, they turned SSSG positive two quarters back, whereas we are still clocking negative SSSG. Do you believe that Q2 was the bottom, or there are still a few more quarters of negative SSSG growth remaining for us?
Madhur, look, I can't compare with the listed numbers. It's out in the public. Some brands have done positive. Some brands have done negative. There's no point discussing that. Obviously, there has been a negative trend till quarter one, and that trend also has been only plus minus 2%. 2% number doesn't mean that there is fire all around. More importantly, you have to see that trend. Something will not turn positive immediately. There is a momentum that's built up. What I've been trying to say till now is that whatever we've seen last four months, we have been happy with that, right? Would you see minus 2 turning into suddenly positive 10? That won't happen. I think there's step-up that keeps happening in the business, and I'm very happy with the current momentum that is there.
Got it. Sir, when we try to think about this volume versus value strategy, sir, when can we expect there is a reduced realization to reflect in volume numbers? Can it happen over the next two quarters, and we will start to see some improvement on margins as well with operating leverage, or how should we think about that?
Yeah. I think, like you said, SSG is looking positive right now. Maybe better we would wait for one more quarter to see how these numbers pan out. I unfortunately do not have the MIS numbers of October in terms of profitability. Sales numbers are quicker to come. We have disclosed that, but I think this is obviously with tight cost control, if sales turn higher, it will flow through bottom line.
Got it. Sir, there's one I need a clarification, sir. In our last quarter's update, sir, we had mentioned that we were doing 27% per year as EBITDA margin on the BBQ international business, but for this quarter, we have mentioned that we are doing 20% margin on the BBQ international business. So is this figure correct, or is there something I'm missing out?
It is higher than 20%. Secondly, quarter two is seasonally one of the weakest quarters in our Middle East business. As you know, temperatures generally rise higher in quarter two, and it also matches with a lot of school vacations and vacations that normally people take out from that region. To that extent, despite the fact that there is lower sales than average, we have seen our margins holding up to 20% plus. Plus, we opened up our first restaurant in Riyadh during the middle of the quarter, which has the initial period sort of impact there. Otherwise, I think there is nothing to worry about in our international business. It is solid and giving us good returns right now.
Got it. Sir, thank you so much and all the best.
Thank you, Madhur.
Thank you. Next question is from Manjeet Buaria, an investor. Please go ahead.
Good evening, and thanks for the opportunity. Hope I'm audible.
Yes, Manjeet.
Hi.
Hi. Rahul, I just wanted to understand the strategy on giving away some of our gross margin for transaction growth once more because I recall about, I think, 18 or 24 months back, we had attempted sort of pricing lower to pull through revenue, and then we realized, if I recall correctly, that that's not a good strategy for us because the moment that discounts went away, the transactions fell off or the revenue fell off. It seems this time you are sort of seeing it differently, and I missed that initial part. It wasn't clear to me. If you could just probably just go over that once more, what the difference is versus last time.
You're right, Manjeet. I think last time around, we did it blanket for the entire session. This time around, it is done differently, right?
Some of these impacts have been reflecting in our transaction growth. We are focusing a lot on larger group offers, which is the sizzling offers, which is driving higher volume. We are giving slightly better pricing if the group sizes are larger. To some extent, that also matches with our brand philosophy of the brand being a group dining celebration-driven brand, right? It is not that we have reduced our pricing blanket at a company level. We have done this change based on group offers, and the share of group businesses in the business has gone up. To that extent, there is some pricing impact.
What you're saying, Rahul, is last time when we tried this, it was more blanket, and that didn't affect transaction growth, is it?
Right.
There was no transaction growth as well back then. This time?
No, so I'll cross-check, but that time, I'm sure there was some transaction growth because in our business, pricing definitely moves transactions.
Okay. This time, it's limited to larger groups, so there is a minimum throughput you get on the discount, is what you're saying.
Yes. Plus, I also get larger volumes, which helps in the overall operating leverage also.
Got it. The next question, Rahul, was you mentioned that there were sort of enhanced marketing spends this time around. So are they meaningful enough to call out as percent of revenue? What were they in this Q2 versus last Q2?
Close to 1.2% higher of the percentage of sales.
In Q2 versus Q2 last year?
Yes.
Is this marketing mainly like advertising and outdoor publicity or something, or is this promotional expense?
No, it is largely digital spend. A large part is on Meta and to some extent also on Google platforms. A large part of this is digital, and around 20% you will see in local trade areas. In local trade areas, we might do some collaborations, some bus shelters, those kinds of branding exercises. It is very trade area specific.
Got it. But it's all marketing, marketing. There's no promotional element within it on a price. Got it. So that's one thing.
What do you mean by promotion?
As in something like discounts that would get netted off from our revenues, right, under index?
No, no.
1.2% about that.
Yes, no, it is all we only clock net revenues, so there's no discounting as such.
Okay. The last question I had was my understanding, if I'm not wrong, is the difference between our restaurant margin and company-level margin consult basis is about 7%, which would be our corporate overheads today, right?
Right, right.
I think it is more loaded onto India and not split very relevantly between India and overseas, perhaps, or even within India on the premium CDR if it's in a separate entity. Is that the right understanding, whereas a lot of corporate overheads get loaded onto our BBQ India P&L?
Not entirely because every business has their own operating teams and also the backend teams. Just that the larger company-level group CXOs, their cost sits in Barbeque Nation India P&L, right? Apart from that, every other respective business has their respective heads. For example, our premium CDR business has a respective head for human resource who would end up reporting to a Chief People Officer at the group level. Only to that extent. Otherwise, there is clear distinction between these two businesses, and the operating teams are separate.
Okay. So then the margin we see Barbeque Nation India standalone is largely reflective of the correct overhead that business carries?
Largely, yes.
Got it. Sorry, one last question, Rahul, was in this obviously, you are taking a longer-term view on the business, so you'll accelerate store openings when you see the opportunity, right? Is there an outside limit? Have you thought about the debt you want on the balance sheet, assuming that the demand environment remains soft and the cash flows do not materialize as we think? Is there an outside limit on debt you would want, as to which once you hit that, you'll probably again slow down your store openings?
In the current scenario, I do not see this beyond INR 100 crore, but it is very difficult for me to give you an offset limit. It also depends on the operating environment, how the margins pan out. I think if on a cash flow basis, if we revert back to our double-digit EBITDA margins, which we have done for many years, and on a larger base, if we generate INR 150 crore of cash flow and there is an opportunity to add more, I think we will do that. That call, I think we can only take at that point of time. On a short-term basis, I think we will not go beyond INR 15-20 crore more than what we have currently. We would focus on, so for example, I have some exemptions for the margins.
If the margins do not pan out in the same fashion, I may decide to slow down, right? Very difficult to give that answer, Manjeet. In our business, the CapEx cycle is by restaurant, and that is also by over a period of three to four months. I would definitely not sort of take a short-term view, but would take a long-term view to build a stronger business.
Got it. I'll come back on the queue, Rahul. Thank you.
Thank you, Manjeet.
Thank you very much. Next question is from Santosh Singh, an investor. Please go ahead.
Hello. Am I audible?
Yes, Santosh.
Yeah. So my question is at a very high level. As we know, we are not doing good for the last three, four years. So have we done some analysis? What are we really missing, actually? That is my first question. Maybe you can answer that, and then I can ask the other one.
Look, it's very open-ended. We are not doing good. Obviously, this is also industry. SSGs have been lower, and on an annual basis, SSGs have been lower by, for example, last year of around 3%. We are seeing some positive momentum. We are only continuing to invest in our guest experience and trying to build that. If there's a particular specific, I think I can answer that.
Yeah. Maybe my second question is related to that. See, we are continuing to invest, but our base model is not in place. That is what I think, right? Maybe you can put some more color on the number of the positive restaurants and negative restaurants you have. What is that contributing more until we have some proven model which is working? Why are we investing or have things in place first and then scale, basically, right? That is my second question.
Obviously, the overall restaurant-level operating margin on a consolidated basis, or let's say India basis, which is one of the portfolios which has dragged the most, on an annual basis, last year was approximately, I think, 12-odd percentage, right, with a blended average revenue per restaurant of around INR 5-odd crore. Even at that number, we are broadly making around INR 60 crore of operating EBITDA from that particular, from an overall portfolio level, despite the fact that there is some decline in SSSG and margins, right? On our current CapEx model, we are at an average CapEx of approximately INR 2.5 crore, which is translating into almost four years of payback period, right? This is in a scenario when we're looking at one of the worst time periods that at least I've seen in my eight years in my company, right?
I, for any reason, don't believe or agree that this model is not working, right? I think even in a subdued performance, the model is working fine. We obviously have, we are continuously working on this to improve our performance. Across some tweaks, we have also done changes whenever required to get out of some of the models which are not working. We have corrected our operating structure. We keep working on our cost structures to see how we can deliver the same experience to the guest at a lower cost structure. We have resized our new restaurant openings. We have come up with new concepts and models. We have used a lot of tech processes in our company to make things more efficient. I'm extremely positive, frankly, about Barbeque Nation brand.
The same brand, the same offering which goes in India, the same offering which goes internationally, despite we are running that for nine years, is delivering 20%+ or 25% on an annual basis operating margin. I am actually very, very happy with this model, and we are investing in this model. We obviously have some work on our hand. We have to keep working on increasing our throughput. We will also keep working on our margins. That is what we are doing, and we will continue to do that.
Yeah, I understand that. That is why I was saying that is really we missing, right? Are we at that? If overseas model is working better, we can scale in that area, right? Or something is not working, we can be more aggressive in closing out those restaurants. I think we have to be more focused on result, right? That is the point I wanted to highlight here.
Noted. Obviously, we have done multiple things over multiple quarters. International business is growing at around 30% year-on-year basis. I think that's a good rate that I would like to maintain in terms of annual growth rate. India business, also we have done multiple things that I mentioned in my previous comments. Your point is well noted.
I think that is my question. Maybe a last question. When can we see aggressive, positive EPS generating? That is my maybe last question. Roughly, I mean, you can give some highlight on that.
We obviously focus on P&L. Like I said, the first priority is driving SSG, which through operating leverage will help in your margin also, right? We are going through a difficult industry timeline. In that context, I think we should see improvements from here on. We'll know that in a few months about quarter three and hopefully quarter four.
Okay. That's it from my side, and all the best for your future quarters.
Thank you, Santosh.
Thank you so much.
Thank you. Next question is from Sandeep from LKP Securities. Go ahead, please.
Thanks for your question and answer. Thanks for asking. Thank you.
Thank you. Next question is from Jay Vora, an investor. Please go ahead.
Yeah. Hi, Rahul. I just have a bit of a qualitative aspect over here. I understand that we have been going through a rough patch and so on. Do you think that we have kind of seen the worst of the scenario? Also, how has the competition been? Because I recall in one of the con calls, you were saying that some of the restaurants have vacated as well. Basically, the competition intensity was sort of coming down. That was a broader takeaway I could get, I think, a few con calls back. Can you throw some light on that?
Unfortunately, there is no reported number by the competition, but in the business between last year and this year, have we seen increased competitive intensity? The answer is no. I think we are focused on what we need to do, and we are driving that. Honest simple answer is no. We have not seen any increase in competitive intensity, at least from the competition in the same all-you-can-eat buffet category restaurants. There are obviously a lot of new restaurants which keep coming up in our industry across various trade areas, and consumers do go and try those places. I think as a brand, we have done this over two decades, and we will continue to work towards that. Whatever initiatives we have taken in our operating model, in our structures, is all driving towards that.
In terms of the first question, which is the worst over, look, I think the only point I'm trying to say is, obviously, quarter two is a difficult quarter, but we have navigated it quite well. I'm also seeing some positive momentum in the initial days of the quarter three numbers. I would be very, very cautiously optimistic to maintain that momentum, build this business, focus on getting more transactions and more volumes in our restaurants, deliver that guest experience. Once that starts reflecting in our revenue numbers, with operating leverage, I think margins also slow down. I think as a team, the team here has shown tremendous strength on the operating cost control discipline. That I'm not too worried about. Whatever margins we have lost is actually in our control. Toss margin is in our control. Marketing spend is in our control, right?
I'm very, very happy to at least see, after quite a few quarters of negative transaction growth, positive transaction growth momentum. That's the only takeaway that I take from last four, five months.
Right. One last question is that you had said that once we start building momentum, that's when that trend sort of continues. I just wanted to understand how many quarters of turnaround do you need to see to feel confident that now the cycle has turned around?
No, it is not. I wish the answer was in my control. It is not. It is market. I think we will, like I said, currently, we are focusing on transaction growth. We are seeing that momentum. We will focus, and it will reflect on positive SSG numbers. We will make practical tweaks to our offering, to our pricing, to our cost structures to ensure that we also deliver at least mid-teens restaurant operating margin at a consolidated level, right? That is our overall endeavor to reach there, and then hopefully come back to around 18-20% that we used to do earlier. That is the target that we have in mind, but obviously, we have to climb it step by step in our business. Will it happen in two quarters? Will it happen in four quarters? I think only time will prove.
In your assessment, this buffet and the concept that we have, that is not broken, right? I mean, you still think that it has value, especially in India, because we can see from the numbers that the international business is doing well. You do not see that this is a structural problem in India, right?
Absolutely not. At a price point of around INR 800 with the unlimited offering, with the unlimited protein-based diet, I think there's a great value for consumers. This is holding up, right? When I talk about the transaction growth, the transaction growth is not just happening on the delivery side. It is also happening on our dine-in business. We have more walk-ins this year on the same store basis than we had in the previous year, right? There's absolutely no question of this buffet all-you-can-eat model being broken. If it's working fine in overseas markets, where obviously the per capita income is far higher, it has to work in a value-conscious market like ours, right? Also, the other data point that I'll notice is that this is a model of value which a lot of à la carte restaurants have also followed.
A lot of à la carte restaurants who do not sort of see their business working so well during lunch on weekdays revert back to buffet offerings to attract more guests. Consumers love this model. I have not seen this happening ever. This has been happening for the last 20 years. I do not see any shift in the attractiveness of this model. In fact, my view is, yes, there are different Indias in the country that we operate in, right? We may not be a relevant brand for a certain section of the consumers, but we are definitely at a general slightly premium to mass market sort of segment, which is a larger segment. We are very, very relevant and offer a very, very attractive proposition, right?
Got it. Got it. Okay. Thanks. Thanks for answering the questions and all that.
Thank you, Jay.
Thank you. We have a follow-up question from Devanshu Bansal from Emkay Global. Please go ahead.
Yes. Hi. Thanks for doing this. Rahul, just wanted to confirm. March 2025, we were at INR 70 crore debt. Now we are at INR 120 crore. Were you mentioning that year-end we will be at INR 140 crore or INR 90 crore? INR 20 crore above INR 70 crore or INR 20 crore above current levels of debt?
No. I think I mentioned INR 15 crore-odd over the current level of debt. But our net debt today is around.
Sorry, Devanshu. I think the net debt today is around INR 90 crore. I was more referring to a net debt number. Now, we'll see our cash flows. Do we need to dip into some cash? There are some other receivables. I was referring to the net debt number.
Fair enough. Fair enough. This INR 125 crore CapEx is for the full year. Obviously, from the second half, you're expecting INR 50-60 crore of a billion. Ballpark, this is how the math is going, right?
Yes. Also, on the CapEx side, also note that whatever CapEx we have done in the first half, the number of international restaurants and premium city restaurants are higher. We opened three international restaurants in the first half, which are higher CapEx. In the second half, given our current pipeline, we do not expect more than one or two international restaurants. To that extent, the CapEx will come in also will be lower.
Fair enough. Great. Thanks for taking my question.
Thank you, Devanshu.
Thank you very much. Ladies and gentlemen, that was the last question for today. On behalf of United Foodbrands Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.