Jubilant Foodworks just put out their quarterly results for March FY21 and they were pretty impressive, considering the pandemic. So we thought we’d take a look at the company and map their journey over the past few years.


The Story

Jubilant Foodworks (JFL) is the master franchise holder of Domino’s in India. Meaning, they hold exclusive rights to sell and market the US-based Domino’s Pizza in the country. And boy have they done it well!

They are the biggest Quick Service Restaurant (QSR) in the country. They sell millions of pizzas every month. They have 1360 outlets to their name. They operate in 282 cities, make revenues to the tune of 4,000 crores, and profits to the tune of 300 crores every year. All this in a span of 24 years.

But it wasn’t always like this.

When they opened up their first Domino’s outlet back in 1996, pizzas weren’t exactly all the rage. Middle-income consumers still thought of them as esoteric meals and most people simply weren’t willing to spend ludicrous amounts of money on foreign pizza (which was the popular perception at the time).

But then in the late 2000s, the perception began to shift. Domino’s began introducing more affordable alternatives and they introduced the 30-minute challenge. Most people at the time didn’t think it would work. After all, how on earth can a restaurant promise to deliver a fully cooked pizza in under 30 minutes while plying the busy streets of India. But JFL had planned things out. They streamlined their order management systems. Pizza’s came out of the oven in under 15 minutes. Local staff knew the areas like the back of their hands. And they even had trial runs to figure out how to optimize delivery times.

They actually managed to do the unthinkable and in the process drew lakhs of new customers. This paved the way for unbridled expansion at the time.

And expansion…

Well, it’s a good thing.

Until that is, it becomes a bad thing.

Between 2012 and 2017, JFL went on an expansion spree like no other. They doubled their store count in just five years — from 576 unique stores in FY13 to 1117 in FY17. That’s an average of 108 new outlets each year. For context, no other Quick Service Restaurant had ever done this before. And soon enough, cracks began to appear.

First, there was cannibalization. When you expand at this pace, it’s likely that you’ll have new stores crop up closer to the older stores. And if you have too many stores in the general vicinity, it’s likely that they will eat into each other's sales. In fact, you don’t even have to speculate about the veracity of these claims. You could simply look at a metric called SSSG — Same-Store Sales Growth and it works like this. If you have a store operating for more than a year, you can look at how it’s performing and you can tell a lot about how these older stores do once they’re fully up and running. So effectively you’re only looking at growth coming in from stores older than one year. And JFL's SSSG was dropping each year — from around 20–25% in FY13 to a negative 2% in FY17.

So when established stores stop generating new money, you’ll inevitably see it reflect in the financials. Between FY13 and FY17, revenue growth remained muted and yet, all the other costs associated with running the company kept adding up. All in all, the company’s operating margin declined from 17% to 9% during the same period and profits fell 40%. It was so bad that top executives were leaving by the bunch, including the CEO himself.

But then, a ray of hope.

A new CEO stepped in and switched things up a bit. Loss-making outlets were shut. New stores only came up to replace old ones and they went slow with expansion. From 100 new outlets each year, JFL scaled down to opening 30–40 outlets every year. They also focused on the products — Pizzas got better, the toppings improved and they began offering more value deals to customers. Soon SSSG was back on track and the company increased its profit by a whopping 230% in FY18.

And sure, the pandemic left a bad taste. But then the company recovered pretty quickly. During the first wave, most stores had to shut shop and JFL took a big hit on their financials. They lost 70 crores between April and June 2020. However, as India began opening up, JFL ramped up its takeaway and online operations pretty quickly, and by the last quarter of FY2021, net profits had jumped threefold.

So yeah, JFL has shown some grit during these last few years. And while their other brands including Dunkin Donuts may not have outperformed in ways that people expected, their core brand is still chugging along pretty well.

Until then…

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