Who’s really winning the QSR race in India: A comparative analysis of key players

The quick-service restaurant (QSRs) business model is primarily built around speed and efficiency to serve a larger volume of customers. Unlike traditional restaurants, where meals are prepared only after the order, and service can take 20–40 minutes, QSRs use pre-prepared, standardised ingredients, making orders ready in just 10–15 minutes.

Following a self-service model, they reduce staff needs, keeping operational costs low, while traditional restaurants focus on full table service and offer high customisation for their meals.

Why should you have a QSR in your portfolio?

India’s QSR sector has been growing steadily, with a CAGR of 24% between 2010-20, far outpacing the growth of the overall food services industry, which grew only at 9% over the same period. This momentum is expected to continue, with the sector projected to rise from ₹18,800 crore in 2020 to around ₹80,000 crore by 2027, growing at a CAGR of approximately 23%, making it an attractive long-term addition to a portfolio.

• High growth potential: For every $1 trillion of GDP, the US has 566 McDonald’s outlets, 288 Domino’s, and 276 Pizza Huts. Emerging markets like China and Mexico also have more outlets per $1 trillion GDP than India.
  
  In comparison, despite being the most populous country in the world as of FY25, India’s presence is much lower: McDonald’s: 48, KFC: 85, Burger King: 36, far below global averages, indicating significant headroom for expansion. Sensing this gap, local chains are also scaling up, with Wow! Momo and Burger Singh are aiming for a total of 950 and 300 outlets by FY26.

Rising urbanisation and per capita income: Urbanisation in India is rising, with over 37% of the population living in cities in 2024, expected to reach 40% by 2030. At the same time, per capita income has increased from USD 2,050 in 2019 to USD 2,713 in 2024, growing at a CAGR of 6% during this period.

Together, higher spending power and an increasing urban lifestyle are supporting stronger demand for QSRs in India as consumers increasingly prefer convenient, quick-to-eat options.

• Young population and digitisation: India has the world’s largest young population, with a median age of 28.7 years, far below global peers. Their growing preference for fast food is steadily driving the expansion of QSRs in India. This digitally active age group has also made QSRs more accessible, with over 6.6 crore urban consumers using food delivery apps regularly, boosting order frequency and reach.

Key players shaping India’s QSR landscape:

Westlife Foodworld stands out for its strong gross margin of 70.1%, the highest among peers, but reports the weakest 3-year sales growth at 16%. The payback period, which shows how quickly a company recovers its investment in a new store, highlights Westlife’s strength at 2–3 years, ahead of Devyani and Sapphire’s 3–4 year cycle. On the storefront, Devyani operates over 1,700 outlets across 280+ cities in India, well ahead of its peers, while Westlife has only 444 stores across 21 cities in West and South India, limiting its nationwide scale.

Restaurant Brands Asia reports a positive same-store sales growth of 1.1%, while its peers see declines. This metric indicates that existing outlets are selling more than last year, reflecting stronger performance and sustained customer demand for its burgers.

Overall, Westlife demonstrates higher gross profits on the operational front level but lags in nationwide reach, whereas Devyani leads on scale but struggles with same-store sales. Restaurant Brands Asia shows steady demand but with the lowest gross margin among peers.

Valuation snapshot across peers:

Devyani International and Sapphire Foods appear highly overvalued, given their lowest same-store sales growth among peers (a key metric in the QSR industry that reflects core business growth) and the longest payback periods, indicating slower returns on investment.

In contrast, Restaurant Brands Asia appears cheaper on P/S and P/B ratios but reports negative EBIT and the lowest gross margin, highlighting weak profitability and operational challenges. Westlife Foodworld, despite negative same-store sales growth, stands out for its highest gross margin, net-level profitability, and relatively short payback period, making it a more balanced performer compared with its peers.

What are the risks you should consider before investing in QSRs?

• Rising health consciousness: Indians are becoming extremely health-conscious and increasingly preferring healthier food options over fried, calorie-heavy fast food. This shift in consumer behaviour poses a clear risk to the total addressable market for conventional quick service restaurants, as rising awareness of nutrition, obesity, and lifestyle diseases could lead to slower sales growth and pressure on traditional QSR offerings.
• Franchise agreement risks: Most QSRs in India operate through Master Franchise Agreements that grant exclusive rights to run outlets for a fixed term, such as 10 years. Breaches like delayed or unpaid royalties, quality issues, or compliance failures can lead to termination or non-renewal, forcing outlet sales or transfers to the franchisor. Even a hike in royalty rates can hit margins. A notable example is the McDonald’s Connaught Plaza case, where disputes between McDonald’s India and its franchisee over management, royalty payments, and operational compliance led to multiple outlet closures and legal battles, highlighting franchise conflicts risks to QSR chains.
• Rising raw material costs: Rising prices of key raw materials such as wheat, chicken, and dairy present a significant risk to QSR businesses. Wheat and dairy prices have already risen around 12% over the past two years, and any further increase could sharply escalate operating costs, impacting gross margins, and, if passed on to consumers, potentially reduce sales.

Conclusion:

The QSR sector demands a careful balance between valuation, growth, and profitability; companies that command high valuations without demonstrating strong same-store sales growth or core operating profits pose significantly higher risks. As inflationary pressures, intense competition, and evolving consumer behaviour shape the QSR landscape, investors should prioritise companies combining solid financial health with better payback periods to balance risk, while benefiting from the QSR growth in India.

Finology is a SEBI-registered investment advisor firm with registration number: INA000012218.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.