- This is the 6th consecutive quarter of positive comparable sales of 5.1% while maintaining growth rate of 14.6% in December 2016
- Positive comparative sales of 5.1% compared to 3.1% in Q3 FY16.
- Gross margins remained flat.
- Restaurant operating margin is 12% and operating EBITDA is 5.8%.
- Brand campaign, differentiated menu offerings and addition of new restaurants led to revenue growth of 14.6% in Q3 and YTD 13.7% in FY17.
Impact of Demonetisation
- 8% to 10% drop in revenue due to demonetisation, brand related expenses and employee costs.
- A 20 year advertisement brand campaign yielded no result in terms of top line for November.
- 33% increase in G&A can be attributed to demonetisation and brand expansion. Rupee wise G&A would have been the same without demonetisation, but, percentage wise it wouldhave been lower.
- SSSG in November was negative, but October and December made up for the impact.
- Substantial investments behind cashless technology helped business recover quickly.
- Cashless contribution before and after the demonetisation were 22% and around 50% respectively with 75% spike in the first week.
- No effect of drop in prices of vegetables post demonetisation because, these are long term arrangements and company has a robust supply chain. Impact of this will be seen in next quarters.
- Impact of demonetisation can't be assessed as of now.
- Low inflation will help the business. When the market is down, it is easy to negotiate on prices.
Brand building and brand extensions
- Focused on investing in strengthening the foundation of brand McDonald's in India
- Currently total restaurants stand at 252 with 7 new additions in the quarter.
- Focus on acquiring quality real estate to increase no. of restaurants to 500 by 2022.
- Implementing ROP 2.0 for new restaurants.
- ROP platform increased gross margins. But, operating margins decreased by 100 basis points due to high fixed cost in demonetisation period.
- Brand extensions- 104 McCafe's and new products.
- The company has opened 100McCafe's in 30 months.
- 11 cafes opened this year.
- These are modern restaurants with a wonderful look and feeL
- Focus is on barista training and changing the look of old restaurants.
- Target of having between 110 to 130 McCafe's by the end of year.
- McCafe to catch up with current restaurants plus new restaurants.
- It is expected to have 300-350 McCafe's by 2022.
- Average volume per unit of McCafe's is growing.
- Aggressive expansion of delivery business.
- The delivery platform continues to deliver strong sales.
- Currently there is only one store in Goa.
- Goa attracts lot of international travellers.
- More restaurants to come up soon as a part of sustainable development.
- This scheme is launched 20 days ago.
- Different variants of McAloo Tikki had an excellent response from customers
- It will prove to be a driver for business over the next 2-3 years.
- Growth strategy is centred around value, brand and brand extensions
Launch of new app
- Launched new mobile app with a contemporary interface.
- Web and app platform contributed to 55% of total delivery sales.
- Increase in employee cost by 20% post demonetisation.
- It’s a high operating leverage business and fixed cost is high.
- 29 new stores came into the system Y-O-Y.So, increase in employee cost is justified considering long term view.
- Advertising expenditure is between 5.3% to 5.6%.
- Highlights of the quarter were a 20-year celebration brand campaign along with McCafé and Delivery also driving strong growth.
- 104 McCafe's in west and South India are doing well without any advertisement. This is because of strong base of brand loyal customers andthe way menu of McCafe was expanded, starting with ice tea, frappe, and then smoothies, etc.
- Focused efforts on menu and brand advertisement helped creating brand affinity.
- Advertisements on National Television in North India are funded partly by company and partly by North India.
- Promotions and discounting are negligible and therefore has not much impact on gross margin.