Restaurant Brands Asia Limited (RBA) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Restaurant Brands Asia Limited Q4 FY '25 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Naveen Trivedi from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir.

Good evening, everyone. On behalf of Motilal Oswal, I'm Naveen Trivedi would like to welcome you all to the Restaurant Brand Asia's 4Q FY '25 Earnings Conference Call. From the management today, we have Mr. Rajeev Varman, Full-time Director and Group CEO; Mr. Sumit Zaveri, Group CFO and Chief Business Officer; Mr. Gaurav Ajjan, Head Corporate Development and IR; Mr. Kapil Grover, Group CMO; Mr. Sandeep Dey, Brand President, Indonesia; and Ms. Cicily Thomas, Brand President, India. I would now hand over the call to the management for the opening remarks. Over to you, sir.

Good evening to everyone. Thank you for joining the call. We will make this call very quick so that you have enough time for Q&A. I just will take a couple of minutes to walk you through the priorities of being business here in India and then what are priorities for the business in Indonesia. So as we have been speaking in the last few calls, our priorities didn't change, and they kind of continue in the stead path in a way to get more traffic into our restaurants. So the first pillar that we talk about every time is about traffic, traffic, traffic. And this year, that we had just ended, was no different than the previous year as we continue to drive more traffic into our restaurants. And that has been one of the key focuses is to get more people into the restaurant. And as we are seeing more and more people are coming back into the restaurants to actually experience the brand within the four walls. So we saw dining traffic growth of about 9%. This is on top of our value campaign that we have started. So the previous year, we had done a value campaign on the INR 99 combo or the meal -- Crispy veg meal. And then this last year, we did a 2 for INR 79 and 2 for INR 99 crispy chicken and -- crispy veg and crispy chicken. So their first campaign, which is INR 99 value combo, we drove about 5.2% traffic into our restaurants in dine-in. And then this last year, with the 24 campaign, we drove another 9% on top of the 5.2%. So that continues to work well. We also continue to build our cafe pillar. In fact, today, we have 90% of our restaurants with cafes. That's up from where we were in the previous year at 77%. So we pretty much put cafe into every restaurant that we wanted to put cafe. So that's continuing to build that pillar as well. The third pillar that you will see that we have been actually doing for the last couple of years, but you will see an additional focus, a rigorous focus in this coming year is on innovation. And we will continue to build that pillar as well for the next few years driving through value, driving through our cafe business, and then driving through innovation. The second pillar, which is a digital-first brand, this is a pillar where we continue to digitize both consumer-facing as well as employee-facing all processes into digitization. So 90% of our restaurants now have self-ordering kiosks and table ordering. So literally everywhere that this was possible to do we have completed doing that. In all future restaurants will continue to have sell-ordering kiosks. So that's very speedy implementation of the self-ordering kiosks. Also, the app business that we started a few years ago now that -- it's been in it's -- this will be the third year in the running that we have started building on it. The number of transactions that we're doing on the app is 3x what we were doing in the previous year. So that one has moved really well. And we really believe that this is a strong business for us in the future. So that's the second item in the digital first plan. And then last time, I told you about profitability focus that is to be fully focused on profitability on delivery business. That we have moved that profitability by 1% in this year over FY '24, and we continue to kind of drive that piece this year as well, and you will see those initiatives come through this year. The second piece that we wanted to and we have communicated to you in the past is about efficiency and our P&L efficiency, driving more EBITDA out of our restaurants, we have done that as well. So if you just take the restaurants that we have opened in the last couple of years, which really don't have a history behind them or basically new restaurants and look at all the restaurants prior to that, which is FY '23 and before, we moved the profitability of those restaurants by 1.7% on our P&L. So these focus, focus on delivery profitability or running a profitable delivery business, more profitable delivery business and then also bringing in efficiencies on our P&L, these will continue as well. So growing traffic in the restaurant through value leadership, cafe and innovation, digital-first brand through digital SOKs and table ordering, QR code ordering and then through our app that we are building up and then profitability focus on profitability within the restaurants, which is our four walls efficiency that we bring into our P&L and our delivery profitability. Now just coming to the Indonesia business, and Sandeep will talk more about that business. By the way, right after my 2 minutes, I'm going to transfer it over to Sumit Zaveri, who will walk you through all the numbers. I'm not sharing a lot of numbers because he's going to share those numbers with you. Now on the Indonesia business, we spoke about three things, right, 3 buckets that we had. One was to bring in sales, right, to grow back sales post the geopolitical headwinds and bring more business back into our restaurants. We have seen some good recent -- if you look at our business from November till April, we have pushed up our dine-in ADS by 10%. So things are changing there. And it's not just the Burger King business, if you look at the competition over there, the market in general is now turning. I think the bottom is over and everyone's on the climb back to what numbers they used to have the geopolitical issues there. So good green shoots, very early time. There's a long road ahead. So I don't want people to jump to conclusion, but we have now seen a turnaround as we saw this dine-in ADS come back into our business. The second piece is that we keep talking about is rationalizing our restaurant portfolio there. We continue to do that. We had closed 24 restaurants the previous -- now we have closed another 8. So there's a total of 36 restaurants that we have rationalized. So we have got -- and maybe this year, we will look at a few more that are on our pipeline to potentially close, if you're not able to get some good deals on leases and so forth on those, we will look at rationalizing those as well. So that was the second bucket where we are rationalizing, cleaning up the portfolio. And the last piece is really the corporate overheads. You haven't seen a lot on the P&L and in this today's upload that you saw for FY '25 and you've seen very little in FY '24 as well because even though we have rationalized the G&A and bought down the overheads, there have been closing costs of restaurants as well as severances that have kind of addressed been on the P&L for those years. But the run rate, just to give you an example, we are over INR 65 crores in G&A as we had taken over the business. Today, we have bought that down to a run rate of INR 40 crores. So about INR 25 crores reduction. And then we are further looking at another INR 4 crores to INR 5 crores of reduction in this coming year. So that's rationalization, bringing down, optimizing our overheads, optimizing our restaurant base, which is to close down nonperforming restaurants, and then revitalizing and getting sales into our restaurants for which we have seen some initial good results. That's basically the same plan that I outlined to you last time. We will continue to work that plan as we move forward. With that said, I'm going to turn it over to Sumit Zaveri who is going to walk us through the numbers. Over to you, Sumit.

Thank you, Raj. I'll just kind of talk you through the highlights of our financial performance for the quarter and for the full year. From the perspective of growth, we ended the year at a total store count of 513. For the full year, we grew by 58 stores. For the quarter, it was just 3 stores because a substantial part of our growth we had achieved towards the end of December itself. So that's why it's just a small growth, incremental growth of 3 stores in quarter 4. As far as revenue is concerned, good growth led by SSSG of 5.1%. For the quarter, we achieved revenue of INR 489 crores for the full year and 11.5% year-on-year growth. And if you really look at it in terms of translation of that into company-level EBITDA, we achieved INR 26.6 crores of company-level EBITDA, higher from INR 10.6 crores that we had done in the same quarter last year. So there is almost like a 2.5x growth in company-level EBITDA over last year. If we just said I would really kind of just touch upon one more line, which we've been talking about as one of the levers of our efficiency translation is gross margins. If you look at it from a quarter perspective or your perspective, our gross margins were in the region of 67.7% 67.8%. If you look at the trajectory that we've been taking consistently on Slide #10, you'll realize that we've been growing at that pace on a year-on-year basis point 0.5%, 0.7% year-on-year basis over last 3 years consistently. If we go back and when Gaurav talks about it, we would realize it, we would continue the same trajectory as far as gross margin improvement is concerned. Even going forward over next 3 to 4 years to our target to get closer to 69% to 70% over the next few years. So that's something is a strong margin improvement trajectory that you will see us continue to deliver as we go along, they go along and over the next few years. Coming quickly on to the full year numbers, just to highlight as far as full year is concerned, we got to a revenue of INR 1,968 crores for the full year growth of very similar growth to what we achieved in quarter 4, 11.8% year-on-year growth and a positive full year SSSG of 1.1%, led by a strong traffic growth that Raj was talking about in early part when he was talking about our overall performance with company-level EBITDA showing a 32% growth over previous year, INR 99.4 crores for the entire year. Quickly looking at Indonesia part of the business, and I'll just kind of talk broad numbers here again. As far as BK is concerned, we've been talking about rationalizing the portfolio, which we've kind of done. On a full year basis, we came down by 8 stores and quarter, 4 stores ended the year on Burger King at 143 stores with an ADS of 18.5 million. And as far as Popeyes is concerned, 25 stores with an ADS of 14.1%, with total revenue of INR 269.3 billion for the full year. And we're really kind of wanting to take you through -- you will see it in subsequent slides as well. But Burger King, we did report a positive 2% SSSG for the full year. When Sandeep talks about that in terms of recent trends, we will really be happy to see that overall SSSG now starting to see positive at 5% overall and 10% on dine-in basis as well. So but Sandeep will take you through those. But we are starting to see signs of recovery. I wouldn't say that we've kind of completely got out of the challenges that we've been facing in Indonesia. But we continue to make improvements as far as Indonesia, our business is concerned, so just since I've already spoken about the broad numbers, I'm not taking you through the financial performance slides that are already available in Slide 13 to -- 13 to 15. And rather hand it over to Kapil to take you through the marketing initiatives.

Good evening, everyone, and thank you, Sumit. Let me outline the marketing strategy that helped us deliver a very strong quarter. First and foremost, is always a consistent value strategy across 3 pillars of price point, digital app coupons and a shareable value meals platform. These platforms of 2 for INR 79 and INR 99. The crazy app deals available on the app led by INR 99 meals, which is growing every quarter, and the thematic shareable meals bundle helped us deliver great value to our guests across different occasions and across different price points. Moving to Slide #18. As Raj mentioned, menu innovation continues to be driven by consumer insights and need gaps. Last year, we had innovations across burgers with the relaunch of the Mutton Whopper in the junior size, which makes it more affordable for our guests. A new [indiscernible] Americano that strengthens our Cafe menu and the Pizza Puff, which is a guest favorite. Just to continue on the innovation conversation, I just wanted to share with the group that we recently launched a new range of Korean products on our menu with a Korean Paneer Burger, Chicken Burger, Fried Chicken, Wings and Fries. This is obviously inspired by a massive trend that we're all seeing on Korean culture, Korean music, drama. So we took out a leaf from the authentic Korean cuisines and we innovated on the process. So we dumped our patties and chicken snacks in this delicious Korean sauce to give a very authentic, very high-quality Korean flavor in every bite. The burgers were launched with a premium brioche buns. So we upgraded the product there as well. And we are getting fantastic reviews from food bloggers, journalists and Korean fans across the board. I will certainly have more to share on this in the next quarter call. Moving on to BK Cafe. Our 100% Arabica bean took up great quality coffee at a very affordable price. We now have 464 BK Cafes as of last quarter across the country, which is about 90% of our store base. We have clearly been one of the fastest cafe expansion in working system and in India in the recent years. And we continue to now build awareness. As Raj mentioned, the expansion part is done. We now are building -- focusing on building awareness on social media, including the recent AI-based coffee fortunes activations run on New Year. It got us great response. We had over 6,000 people participating and actually playing the whole program for reading their fortunes. Now I'm on Slide #21. We continue our journey to build known diners sales via BK App. As I mentioned earlier, it's a way to give more value to the consumer through coupons and build frequency. But it also is laying the foundation for our CRM scale up in the future. Our acquisitions continue to grow at a very healthy pace with app installs growing by over 28% over last year. We also saw a 2.5x growth in our app user base and a 3x growth in orders via BK App. That's all from my side. I'll now hand over to Sandeep to share the Indonesia business update.

Thank you, Kapil, and a very good evening to all of you. Yes, there were geopolitical challenges. There were external challenges. But then we have always focused on things which are within our control. We stayed laser-sharp focused on controlling costs. As Raj mentioned, we kept on driving efficiencies and at the same time, focused on getting back traffic into our restaurants. Burger King as a brand here in this market, we have a competitive advantage of having a twin engine, twin engine of burgers and chicken. And we continue to work on our strategic pillars of retaining our leadership in burgers and also continue to work on building credibility in chicken by offering great taste, by offering innovation and strong value proposition to our guests across the menu layers and across the channels. And as a result, yes, early days, green shoots, we are seeing some great positive momentum in our business. Now that takes me to my next slide. Now this is a bit of an eye chart, but I want you to focus on two things. First, we are delivering almost about 1 million higher sales for the last 5, 6 months. And secondly, as we speak of a normalized business period, which is the May month, without having any impact of seasonality, we have reached almost 98% of the pre-boycott level sales of October 2023. So that's the good news, and we are confident of maintaining this momentum. As far as Popeyes is concerned, we will continue to play to our chicken destination strength because we know that we not only win on taste, but we, as a brand, have the maximum variety of menu as far as chicken offerings are concerned. We have fried chicken, we have grilled chicken, we have multiple flavors in wings and boneless popcorns. We also have fried chicken sandwich, grilled chicken sandwich. So we win on taste and we win on variety. The one thing which we have done recently is actually we have elevated our services by providing guests a very casual dining experience through table ordering, through table servicing, through serving the food in a particular sequence, serving the food in cutlery's and so on and so forth. It's currently in a test phase. And we are gathering all the learnings and then subsequently, we will scale it up across the restaurant. So that's broadly from the Indonesia side, and I hand it over to Gaurav to share the overall outlook.

This is Raj here. I'll hand it over to Gaurav in a minute. Guys, sorry, we uploaded the results a little late. We'll try to do that much sooner next time. But I just wanted to highlight if you have not seen the results or not yet downloaded the deck -- just the highlights for India. Again, I just reiterating this. As of 31st March 2025, the year that ended we added 58 restaurants year-over-year to reach 513 restaurants on that date. Additionally, 11.8% year-over-year increase in revenues at INR 1,968 crores of sales. That's 11.8% increase in year-over-year average daily sales, SSSG, as we call it, the same-store sales increase was 1.1 for the entire year and 5.1 for the quarter 4. Our gross margin, which ended last year at 67%, went from 67% to 67.7%. That's a 0.7% improvement year-over-year. Our 4-wall EBITDA or restaurant level EBITDA went to INR 206 -- INR 206.8 crores so almost INR 207 crores. That's up 21.2% year-over-year. And the final number I'm going to share with you is the company EBITDA number, which last year was about INR 76 crores. That went up to INR 99.4 crores and that's a 32% year-over-year increase in our company level EBITDA. So I just wanted to reiterate those because some of you might be just downloading the deck. Over to you, Gaurav.

Thanks, Raj. Good evening, everyone. Once again, sorry for the slight delay in uploading the results and the investor presentation. We will make sure that from next quarter onwards, there is a sufficient time gap. I am there on Slide #28, titled A Way Forward India operations. So restaurant counts at the end of financial year '25 stood at 513. If you recall, our previous guidance was reaching 700 restaurants by FY '27. We revised that to a more longer-term guidance. We are looking to open 60 to 80 new restaurants every year for the next 4 years. This will take us to about 800 restaurants by FY '29. On the gross profit margin side, we ended FY '25 or the gross profit margin for FY '25 was 67.7%. As Sumit mentioned on Slide #10 that we've increased the gross profit margin every single year that we've been there in the country. And we want to continue on this journey of increasing our margins. We are targeting an annual increase of 0.5% to 0.7% over the next 4 years, and this will take us closer to a number of about 70% by FY '29. With that, I would request the moderator to please open out the floor for Q&A.

[Operator Instructions] The first question is from the line of Dhwanil Desai from Turtle Capital.

And congratulations for a decent performance in a very challenging time. So my first question is that if I go back in time in -- since FY '22, we have added almost 250 to 270 stores and stores which are older than 2 years are almost now 80% of the total store count. So despite that, our ADS has remained in that range of 115 to 120. So why this dichotomy? And on top of that, you also added almost 400 cafes, which had additional 8,000 ADS. So we are not seeing the increase in ADS despite stores maturing added in FY '22, '23, '24. So some thoughts on that?

Thank you, Mr. Desai, for your question. Actually, if you take away the last 2 years that we built about 60, 70 restaurants each, that's 140 out of 513. So the ratio is much smaller. But anyway, coming to your question here. This last 2 years, as you've seen, especially in the last year that the industry has run a negative SSSG in that environment to kind of hold on to our previous year's sales, that was -- is -- in itself a very big challenge. And we have done that. What's happening is we are seeing a more and more increase in traffic coming into our restaurants. So we are driving that as our initiative to bring more people into the restaurant and experience the brand over there very successfully as well, right? And then we have also, on the other hand, had this whole goal of optimizing delivery profitability, right? So what we have done is, in the past, there was a lot of discounts, either coming from the aggregators or from the brand itself and that drove a lot of traffic, but without a lot of profit. And the last 2 years and especially this last year, we have started to focus on profitable sales. So we have increased the profitability of that business by 1%. We continue to do that over this next year. So the objective of there is not to just bring in the ADS over there, but also to bring in a profitable ADS over there, and we'll continue to kind of walk through that path. The final piece is the cafe. So the cafe just came in, right? So it's brand new. It's got -- if you look at the restaurant we opened 2 years ago, right, FY '23, they've gone up in ADS by INR 2,000. If you look at the ones we opened in FY '24, they have gone up by INR 1,000. So I think in this current year, right, so they're moving up about INR 1,000 per year. And the newer restaurants that just opened, they have, of course, a long way to go. But as we are seeing, these are moving about INR 1,000 a piece. You will see that as a base becomes bigger, which is now that we are at 500 restaurants, we add more and more restaurants in the future. It will be a smaller percentage of the total base. Also, one of the strategies that we have changed with development is, we used to open a whole bunch of restaurants in Q3. We are now kind of spreading it out and we'll have openings in Q1, Q2, Q3. That we'll bring in a few more quarters of sales into those restaurants sooner than later. So you should see and we will see that kind of moving in the right direction and the ADS moving in the right direction. But that ADS movement is a big pillar for us, a big opportunity for us. And we are completely focused, as I said, on the 3 pillars to drive that with those 3 pillars. One is to continue driving value, to continue driving our business through our cafes and then finally through innovation. So those will continue in addition to our digital that Kapil was outlining. I hope that answers your questions.

Yes. That's helpful, Raj. And so, one more question on the same line is that we have done phenomenally well on driving traffic in our stores, right? So in order for us to go to the next level of ADS, do we intend to move the APC values higher, what is the path towards that? What are the actions that we are taking on that front to increase our APC?

Yes. We have a very good strategic plan you'll see in the coming summer and beyond to kind of address that the business as you outlined it. But the traffic is the hot line of the business. We want to continue bringing in more traffic. The traffic in most of the businesses in the industry have not reached pre-COVID levels yet. So there's a lot of opportunities. Those people still exist, and they still want to experience the brand. And so those -- the traffic will continue to be one of the big pillars for us to drive more people into our restaurants and bring them in. But yes, we have innovation, and you will see some of that coming in the summer and beyond. We shall address exactly what you said.

Got it. And one last question on Indonesia. I think before the geopolitical tensions when we were kind of climbing back, the idea was that around 21 million, 22 million, we'll do the breakeven for the Indonesia business. And since then, we have reduced a lot of costs. So two questions. One helps our breakeven point come down? And since now we are near to that number at least in May, and if that trajectory continues, do we see this year breakeven -- cash breakeven in Indonesia?

Yes. So thank you again, Mr. Desai. That's a good question you asked. Look, we are positive for the first time in a given quarter of Q4 in Indonesia for Burger King business was positive 2%, right? So that's why I said -- and then by the way, April and May has been also strong. So it is coming back. Has it come back to the levels we want ? No, by far, right? But it is starting to turn that way. We have started seeing -- and most of this traffic that is coming in, most of the sales that is coming in is at the restaurant. It's not through delivery. We are doing the same thing in delivery over there. We're optimizing delivery to make sure delivery business is profitable over there. So we are more focusing on bringing people back in the restaurant. And similar to India, in Indonesia, also we see a lot of traffic coming back into the restaurant, as I said, in this last November through April, if you take this entire period, we pushed up the ADS of our dine-in business by 10%. So yes, we are moving in that direction. Also, the -- if you look at the closures, we have done the overheads that we have reduced, yes, they have brought down the breakeven point, and we are kind of working towards that. And when we reach that, we'll be the first one who kind of let you guys know. But yes, we are marching towards hitting those numbers and making sure that we stop off the losses there. Good tailwinds now in the last quarter and a little more. So we hope that these tailwinds will continue and people will come back. We have done a U&A, which has got some very good information that we learned about how the people are coming back, and we'll use that study to kind of start driving that business back into it's required full geopolitical sales. So we are working on it, Mr. Desai.

[Operator Instructions] Next question is from the line of Pranay Roop Chatterjee from Berman Capital Management.

Sir, am I audible?

Yes, absolutely.

Sir, could you throw some color on the Indian demand scenario, right? And not just the Burger King, in general as well. Because, especially in QSR, anyway, outside of QSR, we have not really seen management teams really committing that there's a turnaround in demand, et cetera. If we look within QSR, we have seen a range of results, right? You have one player who is reporting double-digit numbers over the last 2 quarters. We have a couple of listed players who have reported flat numbers, and we have shown about 5%. So what is your sense -- is there enough indicators or evidence that there is a turnaround in SSG in the QSR sector that you are seeing? Or is it company-specific actions that you're taking that is driving some of these. And hence, it's still a wait and watch.

Yes. Thank you for your question, Mr. Chatterjee. See, I will tell you, you have to have a balanced strategy, which also starts from value and strategy cannot be done overnight, right? You cannot suddenly implement something and then recognize the sales through it. So this is a long-term strategy that we have worked from inception 2014. And we continue to kind of drive that strategy when the market gets a little weak, if you have a strong value proposition that people know of, they keep coming back. So we continue to drive that full portion of the business. But also, it is just not just that value strategy. There's several pillars that I outlined. Understanding the cafe business and rolling that out on a speedy fashion. I mean, we -- we took a little over 2 years to roll out the entire cafe business, and we think it's going to be a strong long-run strategy for us, right? So that's another tool that we have put in our arsenal that continues to -- you will find that we have been doing innovations. A couple has been rolling out products for a while now, whether it was the boneless chicken or the high price or the chicken nuggets and so forth. So we have been doing this. But we have not been advertising of bringing it in forefront because we are focused on other stuff like value. Now you will find as we move forward that they will be a 360-degree approach to innovation. You saw the Korean campaign just this last month, and that was a 360-degree campaign, did very well for the marketing and the operations team did very well, bought in the businesses. So I think if you ask me this question, I'll just say, reflect on the last 2 years and I said we did FY '24 we did a positive traffic of 5.2%. And on top of that 5.2%, we did another positive 9% in this last year on our dine-in business, right? So the focus is about building that business out. So if you ask me, yes, doing a 5% and then 9%, that's a 14%, 2 years traffic increase on your portfolio. Are we looking at next year? Yes our plan is to continue that route and continue to build that traffic in the business. And then we have put in these new levers, whether it's the cafe, all the cafes are done, whether it's the innovation piece that you will start seeing in there, whether it's the digital piece where the couple was talking about the coupons and the other ways that we kind of drive our business through our -- so you will see all these three things playing and there will be other stuff that you will roll out and we'll talk about in quarter 3 and quarter 4. But a lot of things are in place and -- we had just said past on our same pillars. That's why we don't come every call and give you new pillars. It's the same pillars. It's just more work and more hard work to continue driving those pillars. I hope that answers your question.

I'll interpret it as that it's primarily strategies that you have executed over the last 2 years that is driving the growth, and we haven't seen any demand uptick in the wider market. And that's how I'll interpret that. My second question is on your cost control, right? And it's specifically for the India business. Now while I know that there are several levers that you can use to expand your store margins, what I interestingly saw is that in the Q4 2025, the latest quarter, if I add up all your store costs across stores, it comes to about INR 280 crores. And I'm simply doing revenue minus the store EBITDA, you have disclosed, so that's INR 280 crores. If I do the same math 2 quarters back, revenue minus disclosed store EBITDA, it's still INR 280 crores. But in the same period, you have added about 50 to 55 stores, right? So you have added 50 stores over 2 quarters, but the total cost is flattened, so which one is it? Is it option A that when new stores open up, there is a lag for when the total normalized for store cost actually comes into our P&L. And hence, we will see those incrementally come in for those 50 stores we have added? Or is it Option B where you are, basically those costs are fully ramped up, but we have reduced certain specific cost line items?

The answer to this is not linear. There are so many things we're doing that you're welcome to come join Gaurav separately [indiscernible]. He will be very happy to walk you through this. So there are a lot of initiatives that we are doing, which are partially done, some of them only in certain markets yet, whether it's reducing the utility costs that we're working on that has been partially rolled out, whether it is about this SOKs, which just finally got done finally in all the restaurants. But there are several initiatives that we are putting in -- there are DCs that we are opening as on an annual basis, that brings down the cost in certain markets. So a lot of -- there is a lot of small, simple things that we do that continues to drive costs overall, right? But those initiatives are not completely rolled out in all markets as we can quickly do that. So as they get rolled out, you find the costs coming down. The new restaurants when they open the top line is not -- it takes about 2 years for a restaurant to reach the average kind of top line areas. So they start off at a lower kind of ADS's and then kind of climb up to the average. Those that are above average kind of sites, they kind of start off at their 2-year low and then go up to a much higher ADS's. So you will see that there are multiple factors that work, whether it's our initiatives, whether it's the DCs we are opening, which are driving costs on the gross margin side, whether it's the volume of the restaurants we are opening and so forth. So Gaurav will take this down. He's made a note for himself. Please reach out to him, and he will take the time to kind of walk you through this. It will take some time to explain all this to you.

Next question is from the line of [indiscernible] from Motilal Oswal Mutual Fund.

[indiscernible] numbers in such a volatile markets scenario. I have a couple of questions. First is on the India business. Now you did speak about what are areas we have worked to improve our ADS and why we were not able to improve our ADS in spite all the effort because of the opportunity growth that you have seen in the store addition. So if you can just share your -- some thoughts on how we see the future in the next probably 3, 4 quarters? In this quarter, we've seen a big improvement already. So I mean, in terms of your SSG should we expect the positive momentum to continue? And if you do the mid-single kind of SSG then what is the room we have in terms of ADS and margin improvement from your [indiscernible]. I'm actually looking at comparing you with Westlife and despite you having much lower ADS, actually, your margin that is not such big. So that's why I'm asking this question.

Look, Ali, I mean, I outlined our traffic over the last 2 years. That's no different. We continue to drive in that direction. We spoke about having laser focus on our last annual report on profitability. We continue to focus on that. Look, I don't want to make a forward-looking statement beyond what Gaurav gave you the two items on a forward basis. But I'll share this with you. We have had a very strong April and saved a few days when we had this issue with the war we have actually had a decent May as well. So we continue on that track. We want to completely focus on our pillars, which is driving traffic into our restaurants and continuing to focus on both delivery and restaurant-level profitability. And we have done that for the last 2 years. We have shown it. We have -- quarter-after-quarter, we have come and shown you our numbers, and we keep showing you positive numbers, improvements year-over-year. And we don't think we'll show you anything different. We will continue in that March in a forward way. That's all I can share with you. I don't want to make any forward-looking statements other than that.

Just wanted to follow up without giving any forward-looking statements, just from a potential point of view, that if you are able to know mid-single-digit SSG will have further room to improve your margin from both SSG point of view and an efficiency point of view or only it will be SSG-led margin improvement?

Ali, you're absolutely right. If the top line goes even up by INR 10,000 over the next little while, you will find the leverage all through the P&L, completely all the way to company EBITDA. See the restaurant level EBITDA is leveraged by several line items. The company level EBITDA is leveraged by one item, which is the overhead, which kind of is in the long run is believed to be more than anything, but fixed, slight inflationary increases on an annual basis. So you will find those leverages coming all the way down to the EBITDA.

Second and last question is on Indonesia. So while certainly commendable in terms of the reduction in the losses at the company level. But when I see your presentation, Slide #14, the improvement is more come because of the corporate G&A coming down, whereas the restaurant level pre-invest margins, in fact, on a Y-o-Y basis from positive has become negative. So if you can throw some light in terms of what has happened here despite having a 2% SSG? And I mean, you have made just clear that you will be very strict on loss of curbing, the losses in Indonesia, otherwise, we will probably move out of it. So I mean, your thoughts on that?

Yes. Ali, thanks. Again, good observation. Look, we have had some inflation in beef prices over there and also some currency depletion over there. So you've seen those two things happen at simultaneously literally in the same quarter. So you did see some impact of that. However, the pricing has been taken. It's not just us. It's a uniform across the market. The industry has taken pricing to cover the inflation and you'll find that kind of wash out over the next couple of quarters and kind of fall in track. Look, I think by reducing the overheads -- you now reduced, as I was telling to Mr. Chatterjee earlier, reduced the breakeven kind of ADS. And I think we are now seeing positive sales coming in. Looking at no amount of cost saving is going to help that business unless the sales comes back to where it used to be. And we are working on that. And obviously, as a company, we are astute on all options available to us to make sure the shareholders and the investors get the best bang for the buck on our decision. So we will keep all those options open as you have just mentioned. But we're working very hard right now to kind of capitalize on this increase in sales.

Got it. So is this like a 2- or 3-quarter time period in which you should see the improvement significantly coming through? Or is it something which will take longer?

Let's wait another quarter. Let's see where it goes. We'll have a chat post that. Yes.

Next question is from the line of Gaurav Jogani from JM Financials.

Congratulations on excellent execution. Sir, my first question is with regards to the CapEx per store now. Now given you have driven multiple cost initiated, what would be the average store cost for us [indiscernible] in India and then Indonesia?

Yes. Indonesia, we're not building any restaurants right now, so we don't have any latest costs. But Sumit will share with you our cost here in India. And of course, we have done some -- we are putting in a cafe now. We are putting in self-ordering kiosks in all our new restaurants, right? So when the restaurant comes in now, they come in with self-ordering kiosks. They come in with the cafe already built in there. So over to you, Sumit, if you can just...

As we've been kind of sharing these numbers on a regular basis. We still continue to spend roughly around INR 2.7-odd crores to set up a restaurant in India. And this is average cost, obviously, not led by the format there, depending on which format and concentrate on the cost spend of goodwill But on an average, if you look at it across even from the perspective of balance sheet gross blocking store counts, realize that we've been spending around INR 2.7 crores. This is a number that has been now consistent for almost of 3, 4 years, I would say, and we've been able to kind of maintain this cost at these levels in spite of the really adding cafe as part of our stores or this year, adding kiosk as part of the store is because we've also brought in a lot of efficiencies on our CapEx cost plan. So we've literally been able to offset the inflation impact on the CapEx side part as well as add more into our stores, but still remain at an overall cost of INR 2.7 crores. So that's literally where we stand, Gaurav. As far as CapEx portion in India is concerned. We will continue to improve on this cost line going forward as well. We are working on several initiatives. I'll not go into detailing out the initiatives there, but we do believe that we should be able to further optimize these costs as we go along. As we keep achieving some of the milestones that we are working on maybe going forward over next -- in subsequent calls, we will start calling out consumption on CapEx side that we are working on as well.

Sir, Sumit, just one follow-up. So given that there is a guidance of 60, 80 restaurants that will be needed to open in a year. And I'm assuming there will be some refurbishment or some IT-related CapEx as well. So what would be the CapEx guidance for at least '26, you can highlight?

So on the CapEx side, with respect to new stores, 60 to 80 restaurants that we are talking about roughly INR 2.7 crores plus the deposit that we would -- that we placed sort of including that, it will be around INR 3-odd crores. The large incremental CapEx that we had those initiatives led -- more or less the cycle of those initiatives led CapEx have now come to an end because we are working on -- we're working on cafes over last 2 years. And then last year, you also added the digital investments on the physical asset side and each of the stores. So those have now literally kind of come to an end. And as we kind of went into touch that's kind of a little bit of refurb if required, we've kind of done that. So beyond the new store CapEx and maybe incremental CapEx on the digital side to [indiscernible], maybe anywhere between INR 10 crores to INR 15 crores. We don't expect anything more on the CapEx side over and beyond the new store CapEx, at least in the coming financial year. The incremental investment of CapEx cycle literally is now, I would say, we've literally completed that across the entire portfolio. And we don't have any reshape that we would have on the CapEx side rather now we would start working towards how do we optimize all these investments that we've done on the CapEx side as well as on the digital side. How do we really kind of start optimizing and on the business side is what our concentration would be there, which is what, honestly, what Kapil in his presentation was also talking about or that in the initial slides, what Raj spoke about, that our concentration now is going to be really optimizing the return on some of the other investments that we've done over the last couple of years is what you will see us doing into this coming part of the financial year and without really delving deep into overall strategy. You will see this literally evolving as we kind of go ahead into this year. Honestly, the way we look at this Korean was the first step in to where we kind of start to establish our sales credentials, anyway you will see us -- see our strategy on a per se evolving on the product as well as on the digital side over next few quarters.

And just last question from my end. You have really shown how you have improved the gross margins over the couple of years despite continuing on this value platform. So assuming that -- given that you will be targeting to 70% gross margin, do we -- should we build incremental improvement on the EBITDA margin as well or difference of the leverage? Or would it be largely to assume that at 20, 50 bps improvement that you're targeting in the gross margin would reflect the EBITDA margin?

So yes, Gaurav gave you -- and I'll repeat that. Our intention is to move that gross margin number to about close to 69% to 70% over the next few years, over the next 3 years, right? That's the intention. We will get it to that point. And those -- that money really rolls down all the way to the store level EBITDA and actually, to be honest with you, all the way down to company-level EBITDA. So that's the intention with that number, that line items. But there are additional line items that we are working on, whether it's utilities, whether it is rents that we are working on, our total labor. Now the SOKs are there, self-ordering kiosks are there in the restaurants. So all these things kind of work hand in hand. So when you look at our P&L improvements, a 32% increase in company level EBITDA year-over-year, it's coming from very small single initiatives. It's not one big arrow. It's a lot of hard work, and I think this is really, I call it, a business of pennies and seconds and grands and degrees. It's sort of reason. It's a lot of small things that you work hard on, and it all contributes towards the EBITDA level.

[Operator Instructions] Next question is from the line of Atul Mehra from Motilal Oswal Asset Management.

Am I audible?

Yes, Mr. Mehra, please continue.

Sir, my question is, when we look at the India business, older cohorts, maybe 2022 cohort or 2023 cohort. What would be the kind of response level EBITDA margins these cohorts will be making? I'm asking this in the context of the general time it would take for a store to mature. So it could be reflective of steady-state profitability at the system level. So just maybe if you could share some insights on this.

Yes, Mr. Mehra, I would advise that you spend some time with Gaurav to kind of going to the very extensive answer that he will give you because it's not linear again. So #1 is that we don't have mature stores. We have stores that were opened in 2024 -- 2014, which continue to grow. So -- and you probably have stores in the industry that were open 25 years ago, which are still growing. So this is -- this is kind of a business that continues to grow in many parts of the world. I mean, I've been running this business for a very long time. So it's not that we will mature and then come to a stagnation. There's always an inflationary increase, but there's also increase in traffic from new traffic coming in, new initiatives like we put the cafe and so forth. So that's the first part of the answer. The cohorts are doing better. I just gave you a very simple example. We don't share cohort level kind of gross margins and EBITDA level information. But I gave you a small example just to let you know how the cafe business, which just started 3 years ago, right? How the cafes that we first open up INR 2000 over 2 years and the cafes that were opened last year are up INR 1,000. So they're growing at about INR 1,000 on the cafe side of the business. I'm not promising that, that would be the trend for the next 5 years. But that's what we have seen in the last 2 years, and that's all we can share with you what we have seen. But yes, the cohorts that are more, I would say, more mature, if you will, Atul, we have a better way of defining it. I'm more mature than the younger restaurant, the newer restaurants are doing higher ADSs. And if you do higher ADSs, and if your rent is decent, you do gross margins and you do a restaurant level profitability, which is much higher. But feel free to spend time with Gaurav without kind of sharing any detail inside -- there's some information that we got to keep for competitive reasons to ourselves. But he'll show you how we work that platform out, will help you understand that better.

just to add to what Raj was saying and since we keep getting this question consistently on vintage, I just want to highlight 2 data points from our presentation. One is -- if you look at the year-on-year growth on restaurant EBITDA, Slide 10, we saw 9.7% going up to 10.5%, which is the entire portfolio. At the same time, initial slides, which Raj referred to, which is Slide 4, if you see. We did try to kind of reflect that the older restaurants grew at a faster pace or a better pace in terms of EBITDA. And we reflected the restaurants that opened in FY '23 on an annual basis, grew at a pace of 1.7% on an EBITDA over previous year. So to your question, really, while we are seeing the EBITDA we're seeing the positive SSG growth. We are also seeing a better improvements in the restaurants that were opened prior to FY '22. So I'm just without wearing into what the profitability is, just to still kind of give you a reflection of what's happening in the fourth quarter. And we're just highlighting these 2 data points, which forms part of our presentation on Slide 4 and Slide 10, Mr. Mehra.

Great. And just one other question was on Indonesia side. So that is encouraging that we are seeing signs of growth returning. In terms of strategy level, what are the -- in terms of deliverables from Indonesia for the coming financial year? And I asked from the context that -- we have a large India business, which is doing fairly well. When do we kind of take a call, which is more strategic on Indonesia? The sense of divestment or just doubling down on efforts in India completely and not adding any kind of rest of the world distraction. So when do we really take that call, which is a more strategic long-term call on Indonesia in terms of any time line or any thought process that you could share would be very helpful.

Without, again, making any forward-looking statement, which is what it would be if I did make it, look, we are looking at this business very closely, right, from all points of view. We want to do the best thing for our business over there in terms of our investors and our promoters, stakeholders, myself included in their. We want to do the right thing over there. It's seen some green shoots. That doesn't mean that we have closed other options. We're looking at all options. And we will make a good call very quickly. I was telling this earlier on in the last call that we are looking at the next 2, 3 quarters very crucially and very closely, and we will do the right thing for the investors in that kind of time frame. Last question, please, from whoever. Thanks, operator.

Next question is from the line of Mr. Rishi Mody from Marcellus Investment Managers.

Am I audible?

Yes, Rishi, please go ahead.

Yes. So just a quick bookkeeping one to start off and then get on the operations front. So India store addition guidance you've given is 800 by FY '29. If I remember it correctly, you were supposed to add 700 by December '26. So as the agreement being amended with [indiscernible] international?

Yes. We spoke about this, I think, a couple of quarters ago, that because of COVID, we arranged an agreement with our franchise. So these -- this guidance that you're seeing is reflective of that agreement that we came with them.

All right. Second, on the operations front, on the India front, I just wanted to understand, we changed the strategy on the convenience channel, we are focusing more on profitability. So now I think we've done a bit on that. So just trying to understand now how are we going to ramp up the convenience channel plus also are we facing any issues with, say, either availability or pricing. Just wanted to get your view on that?

Yes. So yes, profitability, but profitability is the third pillar. The first pillar was about driving sales and driving traffic. And what we have seen in the last 2 years is that while we optimize our delivery business to make sure that it's only driving profitable traffic and so forth. We've seen a return of guests, back into the business, which is a strong point that we kind of hang our hats on moving forward, is a very strong dine-in business that's filling slowly. And we have got all the tools. I think Kapil spoke about the app business that is driving a significant amount of people into our business which is going to help him in CRM in the future and kind of continue to build on that traffic. That's a healthy traffic when 30% of your business is known on your app. So we'll continue driving that piece of the traffic. So for us, my primary goal is -- and by the way, this -- when you have a goal, it doesn't mean you're not bringing the other stuff. My primary goal is to make sure that more and more business drive into our 4 walls into our restaurant dine-in business. We want to focus on building that strong over the next 5 years, and we want to make sure that our delivery business grows but grows profitably. It grows with the healthy margins, very similar to our dine-in business. So that's 2 really broad goals that we are working on. In addition to P&L optimization, making sure bringing efficiencies on their innovation on this side, digitization, all that will continue. But these will be primary goal is to bring traffic back into our restaurants and secondly, to drive delivery business on a profitable basis.

And final question on the Indonesia piece, right? So you mentioned Indonesia restaurant EBITDA margins declined because of beef inflation and some currency impact. But I'm just trying to understand because our gross margins have expanded in Indonesia, if I'm not wrong, by about 180 bps on a Y-o-Y basis for Q4. Our EBITDA at a strong level of EBITDA margin has declined by about 300 bps. So just trying to tie the 2 up like, I mean our restaurant OpEx has also increased in the last couple of quarters on a Y-o-Y basis, restaurant OpEx per store...

[indiscernible] your observation is correct. What we've been doing over last, I would say, over the last 2 quarters in order to kind of support the recovery of revenues in Indonesia. We've also parallelly been spending a little more on the marketing side as compared to what you would have seen it last year because last year, we were literally at the middle of the geopolitical scenario that we were facing. But since the time the geopolitical scenario started to get eased out, the new government, which we were talking about even last year as well, and that was kind of getting to ease up. We've really now tried to -- we are working towards getting sales back and which is also the reflection that you are seeing in our ADS growth over last from -- almost from period November to first spot night of day. So there is that element of spends that we have in Indonesia, in order to recover some part of the sales. It will settle down. Finally, this will literally kind of settle down back to the 5% marketing investments that we otherwise would put in the market similar to what we have in -- that we have in India. It's just that some of these investments are kind of front-ended in order to get the sales back to the pre-COVID levels of...

The percentage of sales in the last 2 quarters, A&P spends, like you said, it will settle down INR 500 crores, so how much account are you?

Probably 8%, if I remember the number over the last 2 quarters, [indiscernible]. But you will see that slowly settling down, though this is kind of just -- and you will see that settling down over the next couple of quarters as well as continue to bring things back as far as [indiscernible].

Really appreciate it. Back to you, operator.

Ladies and gentlemen, that was the last question of the day. I now hand the conference over to management for closing comments.

Yes. So thank you, everyone, again, for joining in. I'll just reiterate the few main performance KPIs that we delivered last year, again, we are at 513 restaurants as of 31st March 2025 with 58 new restaurants year-over-year. Our revenues grew by 11.8%, which is INR 19,678 million. SSSG was up 1.1% for the whole year, 5.1% for the last quarter. Gross margin moved up from 67% to 67.7%, it's up 0.7%. Our restaurant level EBITDA was up 21.2%, which is INR 206 crores. And then finally, our company level EBITDA was INR 99.4 crores, which is up 32% over the last year. So with that said, thank you so much for your interest in the call today. Appreciate it. Have a wonderful evening. Thank you very much.

Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.