Domino’s Pizza, Dunkin' Donuts Flourishing In Huge Indian Market

Jubilant FoodWorks Ltd., an Indian company that operates the Domino’s Pizza (DPZ) and Dunkin’ Donuts (DNKN) chains in South Asia, reported a 7.5% increase in net profit for the third quarter of fiscal 2020 (which ended in December) while revenue surged 14.1%.

Same-store sales rose by 5.9% year-over-year.

"During the quarter, the business faced significant inflationary headwinds especially in dairy. However, the strong focus on driving operating efficiencies ensured that the business delivered a sequential improvement in operating margins," the company said in a statement.

Jubilant FoodWorks, which owns exclusive rights to develop and operate the Domino’s Pizza brand in India, Sri Lanka, Bangladesh and Nepal, opened 47 new stores. including 44 for Domino’s Pizza, two Dunkin’ Donuts and one of its recently launched Hong’s Kitchen -- the highest number of store openings in 20 quarters. It also closed two Domino's outlets during the quarter.

On the whole, the company operates 1,325 Domino's stores in 282 cities in India. During the quarter, Domino’s Pizza opened its third outlet in Bangladesh.

Online sales now account for 87% of delivery sales.

“We have maintained strong growth momentum despite [a] slowdown in consumption trends. This was driven by our increased focus on basics of the business, while elevating the customer experience. We will continue to emphasize on our key pillars of growth to deliver sustained growth going forward," said Shyam S. Bhartia, chairman, and Hari S. Bhartia, co-chairman, Jubilant FoodWorks.

Last October, Jubilant FoodWorks said it planned to spend up to about $35 million to open up 120 new stores over the following 12 months in both existing and new markets.

“As consumers seek more convenience, they want the option of home delivery and there are many more brands to bring them delivery. It is also a reflection of the current consumer sentiment,” Jubilant FoodWorks chief executive Pratik Pota said. “We recognize the importance of dine-in as a channel for maintaining consumer connect. So, even as we work with aggregators to drive market expansion, we will also invest in building our own digital assets and investing in strengthening dine-in.”

The first Domino’s Pizza store was opened in New Delhi in 1996. India is now Domino’s second largest market after the U.S., having surpassed the U.K.

The company launched Dunkin’ Donuts in India in April 2012 in New Delhi. As on Dec. 31, 2019, Jubilant FoodWorks has 30 Dunkin’ Donuts restaurants across 10 cities in India.

As part of its growth strategy, Jubilant FoodWorks will not hesitate to close underperforming stores.

“We check profitability of stores, and if there is a possibility of a turnaround, we do it, otherwise we are unemotional about closure,” said Pota.

An Indian research and investment firm named Emkay said it thinks Jubilant FoodWorks is the most attractive fast food franchise in the country.

“The company has got stronger unit economics, better profitability and ability to invest for growth than its peers. Cost comparison indicates Jubilant’s margins have scope to expand further,” Emkay said in a recent report.

Jubilant has also expanded its network faster than peers like Westlife Development Lt .which operates McDonald’s restaurants in India and Yum Brands (YUM) which manages KFC, Pizza Hut and Taco Bells.

Jubilant FoodWorks also owns the rights for Domino’s franchise Nepal, Sri Lanka and Bangladesh while Burger King and Westlife Development Limited are only found in India.

But the fast food market in India may soon get a little more competitive.

U.S.-based pizza chain Little Caesars had asked entrepreneur Nandish Patel, a Little Caesars franchisee to establish a foothold for the company in India.

Last month, Patel’s Langhorne, Pa.-based Phoenix Nexus launched Little Caesars in India with the first store opening in Ahmedabad.

“The Indian food market is huge, and we want to sell best quality pizzas at a very affordable price,” said Patel.

Phoenix Nexus has gained Indian franchisee rights in the states of Gujarat and Maharashtra and plans to open about 250 outlets within the next five years. These stores will employ 5,000 workers in these two states.

Phoenix Nexus has bigger ambitions – it wants to expand across India over the next decade.

“I want to create more than 30,000 direct and indirect jobs in India over the next decade by investing in different business verticals,” he said.