Barbeque Nation Hospitality Limited (NSE: BARBEQUE) Q3 2025 Earnings Call dated Feb. 03, 2025
Corporate Participants:
Bijay Sharma — Head of Investor Relations
Kayum Dhanani — Managing Director
Rahul Agrawal — Chief Executive Officer and Whole-Time Director
Amit Betala — Chief Financial Officer
Analysts:
Manjeet Buaria — Analyst
Vicky Punjabi — Analyst
Naitik Mutha — Analyst
Rohit Balakrishnan — Analyst
Madhur Rathi — Analyst
Abhishek Nayak — Analyst
Resha Mehta — Analyst
Vivek Kumar — Analyst
Gopinath Reddy — Analyst
Pritesh Chheda — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Barbeque Nation’s Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr Vijay Sharma. Thank you, and over to you, Mr Vijay.
Bijay Sharma — Head of Investor Relations
Thank you for that. Welcome everyone to 2 Hospitality Limited’s Q3 FY ’25 earnings Conference call. For today’s call, I have with me Mr Dhalani, Managing Director; Mr Rahul Agarwal, CEO and Whole-Time Director; and Mr Amit, CFO. We will begin the call with Mr Kayum sharing his perspective on overall demand scenario and key highlights for the quarter. This will be followed by a detailed discussion on business performance and outlook by Mr. Post that, we will open the forum for an interactive Q&A session. Before we begin, I would like to remind that some of the statements made in today’s conference call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to the earnings presentation for a detailed disclaimer.
I now hand over the conference to Mr. Thank you, and over to you, sir.
Kayum Dhanani — Managing Director
Thank you. Thank you. Very good evening, ladies and gentlemen. I take the pleasure in welcoming you to Q3 FY ’25 conference call of BBQ Nation Hospitality Limited. I’m happy to report yet another stable performance in otherwise tough operating environment. Our same-store sales trend has continued to improve as the business recorded an SSSG of minus 2% during the quarter. Each of our three business segments are in different life-cycle and have performed well. In our Barbecution India business, our focus has been to establish Barbecu as a preferred destination for celebration. We have undertaken targeted marketing approach to achieve this. We launched two food festivals during the quarter and continue to upgrade and refurbish our older restaurants to drive guest experience. We have seen a positive impact of these initiatives in our overall guest satisfaction scores. These measures have helped us to improve the SSSG trends despite an overall tough demand environment.
Our focus has been to protect margins in the existing portfolio rather than expansion and have taken multiple efficiency projects to maintain restaurant operating margins. Despite the decline in sales and possible impact of operating deleverage. We have maintained restaurant operating margins of 14.9%. As consumer demand continues to improve, we have increased the pace of our network expansion in-quarter three. We have added four new restaurants in Barbecue Nation India business and have four restaurants under-construction. Going-forward, we expect to maintain a network expansion of 8% to 10% in this segment. Our international business continued its robust performance with SSSG of over 5% plus and recorded an annualized revenue of INR100 crores plus during the quarter. The average revenue per restaurant and restaurant operating margins were also very impressive. We have targeted to add four restaurants this fiscal year, out of which three new restaurants are under-construction and one is in advance discussion.
We are entering new geographies with launch of these restaurants. We will maintain the calibrated expansion plan for these segments and target to add four to six restaurants every year. We will continue to maintain our focus on SSSG, operating margin and strong operating cash flows generation. This business segment will continue to be funded by cash generated in the international business. Our premium CDR business has been growing well and has achieved an annualized revenue run-rate of INR175 crores. The revenue increased by 24% on year-on-year basis led by new restaurant expansions. We have launched our first-in Hyderabad, Delhi and Mumbai this year and have received extremely positive guest feedback.
Restaurant operating margins in this segment is strong at 20% plus. We will continue to grow this store count by 30% year-on-year in this segment for next few years. We are also happy to announce our strategic investment in Willow Gourmet, which operates an ice-cream brand called Omnom Nom through the delivery channel. The brand has strong guest recall, strong cloud kitchen unit economics and have a significant opportunity to scale. This investment is in-line with our strategy of building a portfolio of scalable brands. This will strengthen our existing delivery portfolio and also add another growth vector in future. Our overall performance has been in-line with our strategy and is shaping our three distinct segments, while the overall demand scenario continues to be difficult. We experienced slow and gradual improvement also with the recent budgeting measures by the government to drive consumption. We are anticipating the discretionary demand to get additional purchase. We are geared to accelerate our network growth and benefit from this anticipated demand improvement over the medium-term. We remain committed to our store target of 325 by FY ’27.
Thank you. And I would now hand over to Rahul to walk you through the performance in detail.
Rahul Agrawal — Chief Executive Officer and Whole-Time Director
Thank you,. Good evening, everyone. During the quarter, we added five new restaurants and closed one restaurant, resulting in net count of 226 restaurants. The network included 190 restaurants of BBQ Nation India business, eight restaurants of Barbecue Nation International and 28 restaurants of premium CDR business. During the quarter, we reported a revenue of INR328.9 crores. The revenues were flat compared to same-period last year. Our SSG for the quarter was minus 2% and continued to be on an improvement trend.
Our dine-in business recorded a revenue of INR277.5 crores, a decline of 2% compared to quarter three last year. The delivery revenue for the quarter was INR51.4 crores, an increase of 9% year-on-year, primarily led by strong growth in volumes. The dine-in delivery mix for the quarter was 84% to 16%. Gross margin for the quarter improved by 30 basis-points on year-on-year basis to 68.2%. This was primarily driven by better realization and efficient management of input costs. Pre-Indian restaurant operating margin for the quarter was 16.5%. Despite the operating deleverage, the restaur operating margins were similar to last year. Our adjusted operating EBITDA for the quarter stood at INR33.9 crores and adjusted operating EBITDA margin stood at 10.3%. The margin continues to be among the best-in the food services industry. Consolidated reported EBITDA margin for the quarter was INR61.5 crores and reported operating margin for the period was 18.7%. We also maintained robust EBITDA-to-cash conversion and delivered INR30 crores of cash profit during the quarter. Barbic Nation India business SSH trend continued — continued its improving trend during the quarter and recorded an SSG of minus 2.6%. The business recorded a revenue of INR261.8 crores and maintained gross margins of 67%. The pre-Inders restaurant operating margin for the business was maintained at 14.9%.
Efficient cost management helped in maintaining restaurant operating margin at similar levels as last year despite operating deleverage. Barbecue National International business recorded a revenue of INR25.3 crores during the quarter, an increase of 8% compared to same-period last year. The growth was supported by strong SSG of 5.2%. The international business maintained its gross margin at 75%. Pre-based restaurant operating margin for the business was extremely strong at 26.2%. Our premium CVR business recorded a growth of 24% year-on-year to INR43.2 crores. The gross margin for the segment expanded by 70 basis-points on year-on-year basis to 75%. Pre-India’s restaurant operating margin was 20.2% compared to 24.8% in-quarter three FY ’24. The margins were impacted due to new restaurants additions, which are yet to mature.
On Nine-Month year-to-date basis, our revenues have been lower by 1.7% year-on-year, whereas adjusted operating EBITDA has increased by 5%. We also continue to maintain a robust balance sheet with net-debt provision of only INR17 crores as on December 2024. All the business segment performed in-line with our expectations. We remain focused on building a portfolio of scale brands and maintaining best-in category guest experience. We also committed to our restaurant target of 325 restaurants by FY ’27. Thank you.
With this, we can open the question for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles our first question comes from the line of Manjit Boaria from Solidarity Investment Managers. Please go-ahead.
Manjeet Buaria
Hi, am I audible? Hello.
Kayum Dhanani
Yes. It’s clear.
Manjeet Buaria
Yes, hi. Hi, thank you. Thanks for the opportunity. I had two questions, both on the 51% stake acquisition in Villow Gurma. One, whether it’s a related-party transaction with either the promoter or anyone from management have any stake in this entity?
And second question was, you know, given we already have multiple new growth avenues in, salt, probably some part of international, right? Why do we look to open this new front at this point of time or these two questions, please. Thank you.
Rahul Agrawal
Sure. Thanks, Manjit. So first, no, there is no related-party involvement in any of these. This company is owned by couple Sunja Thomas and Pat and they have built this business over the last six years, very strong best feedbacks. So there’s no other involvement of anybody related to BBQ Nation.
On the second point, yes, we have existing vectors of growth, but if you realize the — if you look at our — our previous two acquisitions like and Salt, these were acquired at very early-stage and in five years now we have built it to an approximately INR125 crore unit business, like this will go in a similar sort of direction. I think this will strengthen our delivery segment. There are synergies in back-end kitchens and capabilities. We believe this is a very strong brand with strong economics. This will add a vector of growth in future for us. And also as part of our capital allocation strategy, I think we should allocate some portion of our operating cash-flow generated to newer ideals, which will help us to give us some better growth in the future. And with that cases, we are — we are investing around INR17 crores in this business.
Manjeet Buaria
Okay. Just two follow-up questions, Rahul. One was, I read in the presentation that the annual revenue run-rate was about INR4 crores. So if you could just highlight which city or state this is in mainly because it doesn’t seem very large at this point of time? And second, sorry, yeah, sorry, go-ahead. Okay. Just the second follow-up linked to this was, you know, when you think about adding these vectors of growth and we take a primary capital infusion in some of these brands, right, how does the incremental thought process on capital allocation take place? You know, whether you want to put more money beyond these brands or no, you know at what scale and when do you get that confidence that now we want to put more money in this brand, which we have sort of seeded in the early-stage? Thank you.
Rahul Agrawal
So this brand is only based on Bangalore right now and not in any other parts. So that’s how this is only INR4 crores. They only do three cloud kitchens currently, but they have an existing manufacturing facility in Bangalore, which can gear up and take this car kitchen from 3 to 10. So in the initial stage, we plan to only launch it in our existing kitchens, which is the system kitchens of or salt or Tuscano in Bangalore and thereafter take it to other markets. And the current primary investment is good enough for at least next two years. And whether we invest more in this will depend on how the business performs over the period of next two years and is it in-line with our — with our current base-case scenario for this business. Your other point on the capital allocation, like I said, largely each of the businesses generate their own cash flows, the three segments that we spoke about and the new growth expansion has been done from that cash-flow itself. Just that some portion of cash we want to sort of also deploy in opportunities, which can become a good vector for us in future.
Manjeet Buaria
Got it. I’ll come back-in queue. Thank you.
Rahul Agrawal
Thank you, Nanjit.
Operator
Thank you. A reminder to all the participants, if you wish to register for a question, please press Tar and one on your touchstone phone. Our next question comes from Vicky Punjabi from UTI Asset Management Company. Please go-ahead.
Vicky Punjabi
Yeah. Hi, thanks for taking my question. Rahul, just to understand, I mean, the — in a way when we look at this quarter, it has come out of a base I think last year also the base was weak, but the SSGs are still not really up to the mark. How do I — how do I read the — how do you read the performance of this quarter because we’re still not seeing the kind of recoveries that we had expected.
Rahul Agrawal
Sorry, your voice was not very clear during the time it was, but did you say that how do you rate the performance of this quarter?
Vicky Punjabi
Yeah, yeah, absolutely, absolutely. I mean, if you had to really rate it because we are still seeing a negative SSG on a base that was really not that great.
Rahul Agrawal
Yeah. Look, overall, I think each of these three businesses are in different cycles. And when I look at when I look at BBQ India business, as you know, over the period of last two years, we have also consolidated some of our — some of our stores and that has given us a very positive results. One thing that we have away from doing during the quarter is do a lot of deep discounting and add to just revenues. I think we were consciously looking at maintaining our margins and despite a 2.5% sort of decline, we have maintained our margins because of various efforts that they’ve taken, right?
You see that in last 3/4, the pace of store expansion has been slightly improving and now also we have a very strong pipeline of new stores that are that under-construction discussions. Similarly, international business has been very, very sound, very strong economics and profitability. We were very cautious about adding more and just that some of the new stores got sort of back-ended and we will see at least two to three new stores coming in-quarter four now in this year. Similarly on Tuscano and salt side, I think performance had been very good in terms of growth. We had grown our business around 24% and have also maintained very strong operating margins at the restaurant-level. So each of these business on — on-net basis have done their part. And going-forward, I think as we add more stores to each of these networks, we will see some impacts on overall revenues and what bottom-line?
Vicky Punjabi
Okay. And just on this margin thing, I mean, my assumption is that we would look to get into early teens in terms of margins on a sustainable basis. But should we consider that at current levels of the throughputs, we need to get there despite the external environment given the prolonged pace of slowdown that we are seeing.
Rahul Agrawal
No, so it’s — I don’t think it’s not that we can’t go to early teens. We have done that in the past, just that last two years have been having tough for the business both from the — from the same-store sales growth perspective. And as we consolidate few stores, this has led to the margin decline. And as we’ve always maintained that the margin will move significantly as same-store sales growth happens. If you look at the performance between quarter three and quarter two, you will see almost 3 percentage point margin improvement all driven by about throughput from the same-stores, right? We have also been taking few measures in terms of guest expenses at the outlet which translates into a same-store sales growth of 3% to-4 percentage, the margins will move to early teens.
Vicky Punjabi
Okay. Okay. And just lastly, I think on the acquisition I mean, my thought process, of course, delivery is a structural growth story. My thought process would be we would look to kind of get into segments that could be possibly highly scalable in future because the current segment looks niche overall, right? So that delivery could become a real vector of growth for us. I mean, what’s the thought process here? Because structurally, it clearly seems that consumers are moving towards that.
Rahul Agrawal
So this will strengthen the delivery and that’s why this sort of fits with us, plus we can also leverage our existing kitchens to supply this — this particular product. This is standardized product which comes out of manufacturing facility. So to that extent the operating this particular brand from our existing kitchens also — also it will be easier. So that’s the thought process here. And I think if you look at the economics of all these cloud features, they are really great.
Vicky Punjabi
Yeah, my question is different. My question is, how are we thinking of leveraging delivery in a bigger way to be there? Because this would be still — this would still remain quite niche even at-scale as a percentage of our total revenues is what I understand.
Rahul Agrawal
So look, the current ADS of cloud kitchens is 30,000 plus, right, and our ADS of cloud Kitchens of barbecue Nation restaurant delivery is around 25,000. So to that extent, if we grow it right, then this can add-up to a significant way in our overall delivery business.
Vicky Punjabi
Sure. Fine. Yeah, that’s it from my side. Thanks a lot.
Rahul Agrawal
Okay. Thanks,.
Operator
Thank you. The next question comes from from NVE Alpha Fund. Please go-ahead.
Naitik Mutha
Hi, sir. Thanks for taking my question. My first question is, you know we’ve seen smaller players, some of the smaller size players doing say a low-single digit SSG or even the QSRs for that matter, we have seen at least doing closer to 0% SSG, but not really a negative SSG. Now I understand that we are not operating in the same like-to-like space, but generally, we are still operating in the food sort of space. So I just wanted to understand the scenario from your end, I mean what exactly are we doing for getting the FSG growth and are we doing all that we can to get the SSG growth back?
Rahul Agrawal
Look, I think we should not be looking at just SSSG in isolation, but also look at SSG comes at what cost is it — is it done through a large amount of discounting or marketing other stuff, right? So it’s very difficult for me to comment on respective players. But like you said, the strategy that we are playing is that we can’t just burn money to get sales and report you achieve and have an impact on our margins. That’s not — that’s not us. And if you look at our numbers in the previous quarter and also during the past quarters, we have shied away from deep discounting and build a brand based on — based on profitability. So I think on a holistic basis, we should look at both SSG and margins. In terms of other initiatives that we are taking for SSSG improvements, I think there’s lot of work being done on this experience side. We have been continuously upgrading and refurbishing some of our older stores. There’s a lot of food festivals that has happened last two quarters. We have done — last quarter we have done two food festivals. Before that nine-month period, we’ve also done four other food festivals. This quarter around we launched three desserts in our menu, also launched rice boats in our delivery menu. So all of new initiatives have been taken to keep the trend brand fresh. And we believe that there has been obviously improvement in these trends. And as we go-forward, this will also continue.
Naitik Mutha
Okay, got it. Sir, I had a bookkeeping question. I just wanted to know what is the ESOP cost for the quarter and for the run-rate for nine months and what was this compared to
Rahul Agrawal
INR2.5 crores,
Naitik Mutha
2.5%, what was this last year, same quarter? Hello?
Rahul Agrawal
Hello.
Naitik Mutha
Yeah. And what was this same quarter last year?
Rahul Agrawal
No, around similar. There has been no significant being issued.
Naitik Mutha
Got it. Got it. Okay, that’s it from my session. Thank you.
Rahul Agrawal
Okay, thank you.
Operator
Thank you. The next question comes from Rohit from iThought PMS. Please go-ahead.
Rohit Balakrishnan
Yeah, hello. Am I audible, sir?
Rahul Agrawal
Yes. Yes, sir.
Rohit Balakrishnan
Yeah, hi. Good evening, sir. So the question I had was, sir, so we are at about 225 restaurants. So I think this year we close at about 230. So the incremental journey of 70 restaurants over the next couple of years. Can you broadly sort of share what would be the split between barbecue versus the premium CDR for Toscano and salt.
Rahul Agrawal
So we are 226 restaurant currently and expect the year-to-end at around 193 for BBQ India, which is three more restaurants in BBQ India, 10 in BBQ International, which is two more in international during quarter-four and 30 in CDR, which is two more restaurant in-quarter four. So overall, we should expect to close the year at 233. And next year we are targeting around 22 restaurants in BBQ India, around five to six in BBQ International and around 16 in premium CDR, which is both for salt and put together. So overall, we expect to close the year at around 270 also.
Rohit Balakrishnan
Got it. So sorry, how much did you say in premium CDR from 36,
Rahul Agrawal
15.
Rohit Balakrishnan
Got it. Okay. So let’s say two years out, the share of premium CDR in our revenue should be like about 20% 25%. Is that a fair number? Right now it is about 10.11% right now on a run-rate basis, if I take 160 crores
Rahul Agrawal
Yeah, no, it’s. It will be around 20% yeah.
Rohit Balakrishnan
It will be around 20%. And sir, if you can just maybe help us with the payback that you look in these restaurants, especially now as you go into newer geographies for and salt, if you can just maybe look at when do you think that these restaurants typically breakeven and what is the maturity unit economics that you would want to see for these?
Rahul Agrawal
Right. So the premium CDR does around INR6.5 crores of current TTM revenues and I think this will settle down at INR6 crores as we open more stores. In some cases, you also opening up of smaller stores of around 1,600 square feet as against the original ones of around 2,400 square feet. So at INR6 crores and we will generate around 21% to 22% of restaurant operating margin here, which will be close to INR1.2 crores. And the capex here is around INR2.75 odd crores. So we’re looking at almost three years in that period with some time for ramp-up.
Rohit Balakrishnan
And typically, sir, how much time does it take for — I mean, what is the typical buildup of this INR6 crores or INR6.2 crores what you said in terms of restaurant-level revenue, let’s say, year-one, year two, year three, how does it work broadly?
Rahul Agrawal
So I think we start with a revenue pipe front of around 32 35 lakhs per month, which will give us around INR4 odd crores. This grows up to around INR40 crore INR45 crores and then settles down at INR50 52 by year three.
Rohit Balakrishnan
Understood. Understood, sir.
Rahul Agrawal
And as the revenues grow, the margin also start increasing the similar proportions,
Rohit Balakrishnan
Right? The gross margins in these would be upward of 70%.
Rahul Agrawal
Yeah. In premium CDR, our gross margins are on average around 74%.
Rohit Balakrishnan
Right.
Rahul Agrawal
24% to 25%
Rohit Balakrishnan
, yeah. So sir, then while they would be 20% in terms of revenue from a operating margin perspective or operating profit perspective, they should be much more than the BBQ brand. Is that a fair understanding? Two, three years out. I’m not saying immediately, but two, three years out. Is that a fair understanding?
Rahul Agrawal
Sorry, they should be what?
Rohit Balakrishnan
No, I’m saying, sir, the premium CDR brand, both Toscano and Salt from an while, as you said, revenue-wise, it will be 20% from a contribution point-of-view. But from an operating margin point-of-view, they should be like significantly more than that. Is that a fair understanding? Not now, but two, three years out.
Rahul Agrawal
As a percentage that happens today also. I mean today operates at an operating margin of 15%. I think this has a potential to grow up to around 18% and if the premium CDR is at, say, 21%, there will be disproportionate share on the operating margins from premium CDR. Yes. And that’s also true for international business because that also operates at almost 25% plus margin.
Rohit Balakrishnan
Right. And just last question for me from my side on the BBQ India business. So of course, I mean, the last few quarters, six, seven quarters have been tough from an operating environment point-of-view. So — but we still maintain our leadership on — in the category that we operate in. However, just — I mean, I think few quarters back, you also alluded that there has been an increased amount of supply from various formats. So I mean from a customer’s mindshare point-of-view, how — I mean, how do you see the brand in terms of relevance? I mean, a lot of our day crowd would be from the corporates, but just from anecdotal or from observation perspective, there are so many brands that come that are opened up. So I mean from a relevance point-of-view, from a wallet share point-of-view, how do you see that brand even though we may be a leader in the barbecue category, but from an overall relevance point-of-view, how do you see it? I mean, any thoughts that would be helpful given that supply has gone up significantly, as you have already mentioned maybe three, four quarters?
Rahul Agrawal
So look the supply has gone up and also there are maybe new copycats or the similar format stores that have come up. But like rightly mentioned, we have the leadership position in this particular segment. And over the course of years, we have also done course correction in our — in our operating structures. So like I was mentioning in the early part of my call is you look at few of the cost initiatives and ensure that in the revised scenarios of the existing throughput that you get from the existing restaurants and the new stores, how do you set your economics right such that on an incremental store basis, you start making at least 18% to 20% restaurant operating margin even though the throughput is say around INR5.5 crore to INR6 crores, right? And those initiatives have been taken, these have been also implemented in our existing outlets and that is the reason why we have been able to sort of maintain our margins the way it is. What this also means is that in the past if you were doing larger stores, we operated to do it in smaller stores also which means that we can reduce our store size by around 20% 25%. So that the economic sort of is maintained. That’s on the format front. Also on the guest front or in terms of value-creation front, the till-date is remains a very value-for-money given brand. I realize that there is 2 to 3 percentage point drop-in same-store sales growth, but I think these remain extremely important for our balance 98% of our consumers who keep coming to us for all you can need and for their celebration needs.
From brand side, we keep upgrading our restaurant design for the new ones that has opened up has been far, far super in terms of ambience and design that we have done in the past. And in the existing months also, we are updating our store assets and doing lot of stuff on our on our food stuff. So I think mix of all of these I am extremely hopeful that that we start seeing positive acquisition in our core India business also.
Rohit Balakrishnan
Sure, sir. That’s very helpful. Thank you. I’ll join back.
Rahul Agrawal
Thank you. Thanks. Thank you, Rohit.
Operator
Thank you. The next question comes from Madhur Rathi from CounterCyclical Investments. Please go-ahead.
Madhur Rathi
Hi, sir, thank you for the opportunity. Sir, if I look at the longer-term like from 2016 to current year, sir, it seems that our store opening has grown at a faster CAGR than our revenue growth. So that would mean that the unit economics of store has decreased because we have taken price hikes as well during this period. And that is true for FY ’16 to FY ’20 period as well. So barring this two, three year of slowdown in the economy and all, sir, on the longer-term trend, sir, do we see the store unit economics getting deteriorated or the product appeal getting down? So your thoughts on that?
Rahul Agrawal
This will also depend on what size of store that we have opened up, which geographies you opened up and also what throughput have been expected from what markets we have opened these up on. But overall, if you look at our our average throughput per restaurant, this have been pretty stable from 2019 to 2024 right now.
Madhur Rathi
But sir, when you see your average throughput has increased, but we are similarly taking price hikes. So something is going wrong, right, because we are saying that we are taking price hikes as well as our store opening has increased, but it is not reflecting in our revenue. So how — I’m not understanding when we say that our throughput is the same, our unit economics is the same, but the revenue is not growing. So from that perspective, sir, I’m not able to understand
Rahul Agrawal
So yes, we would have taken on a CAGR basis 2% price hikes but on a, on a net basis, if I look at five to six year trend, our average revenue per store have been stable. What it means is that in some of these markets as we open up, say, smaller stores or stores in Tier-2, THE market, there’s average throughput will be — will be lower. So in the part of the portfolio with SSSG over a 78 time-frame, the average revenue per store in that portfolio will grow and the new one start with a lower sort of number and the blend and the blended number of this is still flattish at around 6 crore INR6 crore revenue per store.
Madhur Rathi
Okay. So like over the next three to five-year period, considering that the barbecue India,
Operator
You’re sounding a bit muffled. Can you use the handset mode in case of it?
Madhur Rathi
Yes. Is it better right now? Is my voice better right now?
Operator
Yes, sir. Please go-ahead.
Madhur Rathi
Yeah. So over the next three to Five-Year period, sir, where do we see our core store revenue growing considering — so and what are the strategies that we are following to increase this throughput level overall at our stores.
Rahul Agrawal
So there are two, three vectors. One obviously is price. We are maintain around 2% to 3% price hike over a longer period of time. Second is volume growth, while couple of last couple of years have been subdued, there will be some impact of this and you will see some cover growth from the existing stores coming in. And third vector is delivery, which is — which last quarter also has grown at around 9% rate. So with these three vectors overall put together should lead to around 4% to 5% growth.
Madhur Rathi
Okay, got it. Sir, just a final question from my side. Sir, so this willow cloud that we have bought, sir, we have bought it at the nine times sales multiple. So we — at a INR4 crore annual run-rate, we have bought it, I guess, at around INR34 crore valuation. So what gives us confidence that we can scale this segment when players like HUL are demerging their ice-cream business to protect their margins. So — and double-digit margin on a INR4 crore revenue won’t make scale when this goes to INR40 crores. So what gives us the confidence that you can grow this segment? And I would like to understand on that? And sir, are we going to pay them by ESOF of Barbecu Nation or it’s going to be a pure cash transaction as well?
Rahul Agrawal
No, one, I think you’re comparing post-money valuation. So the money that we’re investing into the company is also remaining in the company and will lead to growth. So to that extent, I think your comment on multiple, is incorrect. This is cash transaction. This is not with share transaction. And like I also mentioned in the earlier part of the call, this is — we understand that right now small because they already operate, but they also have — have a third portfolio, they have the respe set for the that we produce, they have great feedback from — from the consumers. The average rating on the platform is 4.8 plus. They also have almost 62% repeat rates as consumers, which is among the best-in-class in industry. So I think we have to look at all of these aspects where we client value something like this. And like also mentioned, this is not something which is likely going to add to our growth, but we have to keep investing in this and in terms of building new business and ensure that this becomes a larger business in the past. So if I — if I look at our past history, we looked at — we acquired Red Apple, which is Tuscano business almost five years back when the business was almost INR30 crores sort of revenue run-rate annualized and today that business is close to INR175 crore license and upgrade. So some of these things will build over a bit of time and as part of our capital allocation strategy, we will invest some part of our operating cash into now these smaller and newer concepts, which will help us to build a portfolio of scalable brands.
Madhur Rathi
Okay, got it. Thank you so much and all the best.
Rahul Agrawal
Okay. Thank you, Madhu.
Operator
Thank you. Thank you. The next question comes from Abhishek Nayak from Hexagon Assets. Please go-ahead.
Abhishek Nayak
Hi, hi. Thank you. Good evening, management. Thank you for taking my question. Sir, my first question — pardon me if you covered in your prepared remarks. My first question is regarding the same-store growth for international. Could you quantify the impact of currency in that same-store growth for me, please
Rahul Agrawal
Is no impact of that. Amit, do you have that number ready with you?
Amit Betala
No, we have to give that my number to them.
Rahul Agrawal
Sorry, Amshek, I think we’ll get back to you with this number.
Abhishek Nayak
All right, no problem. I’ll take it offline. And sir, secondly, I had a question regarding marketing initiatives, particularly with respect to customer data. So when we are looking at trying to grow the dining bookings through your app, for example, right now, I can see that number is at 31% or something. So how is the company trying to kind of use customer analytics to kind of boost, you know customer targeted marketing, one is that. And second, when it comes to India’s operating margins, do you have any other levers because I can see the gross margins are pretty stable. So do you have any other levers, for example, your commissions with your delivery aggregators or any store-level expenses that you are looking to control that might help us improve margins in India
Rahul Agrawal
Right. So look two-parts. One, on our consumer data, we do a lot of analytics and as pointed out, our app has been growing pretty well and a lot of consumers want to book directly with us through either our website or app. We have now a new website that was launched almost two quarters back and we have seen very positive results on that. Apart from the 31% business on buy-in that comes from app and web, around 27% comes from our call-center. A lot of large bookings want to talk to our content representatives to make the booking. And then the balanced large part is also the walking guests.
Our data collection rate, customer data collection rate or the contact number data collection rate is almost 99% and we do mine this data to retarget some of the existing customers through either SMSS or WhatsApp or through other digital channels on Meta or on YouTube. And apart from this, there is similar marketing, digital marketing efforts have been taken to build new customers for the profile. And in some of the communications of meta, we also have clicked our communication to make it very relevant for the type of customer profile and for the type of celebration needs that the customers may have. So this is usual and it like an autopilot once the customer journey has been set. Overall, our company would have maybe around 50 or so customer journeys that are already mapped from the existing data to buying this and this keeps happening on a regular basis.
On operating margin front, there are two, three levers still. One is on our manpower cost. If you look at our store manpower cost, we are — we are still tracking at India business around 18% to 19%. We target to bring this by one percentage point. Then we have other cost optimization levers of around 0.5%, which will come from some supply-chain costs. We will also need to need to work on some of our electricity cost reductions and some other overhead cost that we have. So put together, I think there is — there is around 200 basis-point margin improvement plan that we have and some part of it will also flow-through from higher fees. So with this, we expect the operating margins to go up.
Abhishek Nayak
Okay. Okay. Thank you so much for the color. And pardon me again if you covered this one also in your prepared remarks, but since we are one month down in the 4th-quarter. Can you share some emerging trends that you might have seen this month with regards to, say, traffic or delivery flows or anything that you can help us pinpoint something with customer — consumer sentiment? Thank you.
Rahul Agrawal
I think it’s very early to sort of call-out this quarter, we only have one month gone and then I think we’ll wait for the quarter-end to see how the margins. But overall, the trends have been similar to what we saw in-quarter three.
Abhishek Nayak
Understood. Understood. Okay. Thank you, sir. Thank you. All the best.
Rahul Agrawal
Thank you. Thank you,.
Operator
Thank you. The next question comes from Resha Mehta from Green H Wealth. Please go-ahead.
Resha Mehta
Yeah. Thank you and good evening. So the first question is basically, you know, just extending what one of the previous participants asked that what would be your hypothesis or your informed guests about? Why is it that QSR is seeing a lesser decline now in SSSG versus the past and there seem to be at least from what the listed companies have reported, some improvement in numbers while we are not seeing that for our numbers in the casual dining space. So why do you think this dichotomy is there and would it be of a real concern to you?
Rahul Agrawal
Look, I think QSRs in Syria’s are two separate business segments. If I can I think pinpoint couple of differences which are very apparent is the share of delivery dine-in depending on the company you’re talking about, but broadly QSRs would be around 50% delivery business whereas in our case it is around 15% to 16%, right? And delivery in general has done better and dine-in has not done that well. If you look at our delivery same-store sales growth, it is a positive territory. It is in fact mid-single digits. And on our dining business, our numbers have been lower by around 2 percentage points. Now if I look at — I’ve not actually seen the dining business performance of TSRs. But if you look at that business, I’m sure there is some slow trend in our dining business that we are — that we’re seeing. So if you look at the mix of these two, you will see the differences. Second, as I said, the is not — should not be just looked in isolation of FSG in our industry also leads to margin expansion. And because of operating leverage, right? And if SSG is there without any margin expansion, that in some cases these SSG is also come from increased marketing spend or discounts. In our case, it’s very difficult for me to speak about other, but in our case, I think all these metrics have been in a very — under very tight control. And if I look at our same-store EBITDA performance on a nine-month basis, it’s in a positive territory, right? SSG is important to also protect your margins, right? So I think that’s a conscious call that we have taken and we are happy with that. If you — does it concern us? Yes, obviously, we’d like to see us our overall store throughput to be on a high basis, but does it concern me that there is something you know, absolutely wrong? No, absolutely not. I think there’s no metrics which I’m seeing which is giving me back indication. We obviously keep doing our work on work on experience to drive dial-in business. We keep doing our work on margin improvement through various cost initiatives and also keeping an eye on growth through industry expansion. I think in all the three verticals, we are happy with the way it’s going.
Resha Mehta
So based on your internal studies that you all may be doing, right, how are you all sharing in the casual dining space the dine-in part, right, versus your other like-to-like peers.
Rahul Agrawal
So it’s very difficult to get the same-store sales data, but in terms of revenue CAGR on a five-year basis or in terms of margins, I think we are among the best-in the industry. Despite that almost a larger base of two to three times of some of the other larger base.
Resha Mehta
Right. And see, sir, would you say that the competition — the supply-side has really intensified in the casual dining space because we see a similar trend and intensifying competition also in the QSR space. So here would you say that in the casualt dining space, there has been much more intensified competition or has it now like-kind of started cooling off over the last, let’s say, a couple of weeks or quarters?
Rahul Agrawal
No, it had intensified a lot after the — after the defense consumption pace that we saw in say FY ’23, we saw a lot of supply coming in ’24, ’25 financial years. And now you know the demand government has been tough for pretty much everybody in the foods of the industry. So a lot of smaller Cedia players also are feeling the feeling the heat. And at least from the market perspective, some of the sites that we — that we found to be very non-doable from the from the rental perspective are getting into the realm of something that we should consider for our own brands. So to that extent, I think there has been some green shoots on lower on reduction on the overall rentals in some of these places. So we hope that the new supply pace growth is not as strong as we have seen last two years.
Operator
Thank you. The line for the current participant has been dropped from the queue. So we’ll move on to the next question. The next question comes from Vivek Kumar from West LLP. Please go-ahead.
Vivek Kumar
Sir, am I audible, sir?
Rahul Agrawal
Yes, we.
Vivek Kumar
Sir, the same question of continuation with what Rohit has asked, like you had just mentioned that there is a huge supply and we are facing demand problems. So — and you also mentioned in the previous con-calls and across annual reports that you want to be celebration — destination for celebration. So just wanted to understand that what can we do because we can’t control the external supply nor the incomes or the GDP growth over the short-term, what can we — what are we doing so that the customer — are you calculating or your due to keep track of how frequently customers use it? How do you make sure that they come to you what — like and how do you make sure that our brand doesn’t get diluted? And that’s what we can do, right, better and then how you innovate on your these things and can you also if you can throw some light on how the competition is facing because you have told that many copycats have come. So how are they? Is there anybody who’s doing better and we have to match-up to them? So these kind of thing, because this is what is in our control. So we can throw more light on because that’s our question. That’s my question.
Rahul Agrawal
So I think what we need to do is just keep working on our guest experience and this is what we have done for last one-half decade where to keep ensuring that our food experience and the expense of guests is among the best-in the category. The services that the guests expect from us is also among the best-in the category. We have — we have been able to dispense this over 200 of our restaurants in Barbecue Nation. And also maintain our assets freshness and look and feel, right? And this is what we have been contested doing for last few quarters. In terms of many other formats who are similar barbecue on the top formats. We clearly are market-leader. I think the number two-player would be — would be maybe one-fourth of our size in terms of store count. And it’s not that we have seen any other player who is doing — who is doing extremely well in terms of this category. I think we continue to be market-leader. We continue to add more stores on this and have the widest presence in the in the country.
Vivek Kumar
So you’re growing around INR100 crore cash, IN 100 crores-odd cash, like INR3 to 30 to INR4, so — but you’re trying to add around 50 restaurant next year. So will you go for debt or you are confident that you will grow higher cash next year?
Rahul Agrawal
So we are looking at around INR40 to INR45, which will lead to around INR120 crores of capex here, another INR20 crores for maintenance and provisions around INR140 crores of expected cash. At last year’s say, I think 10% adjusted operating margin, we would generate this amount of cash. I think the delta that will be — that will be there is hardly INR15 crores to INR20 crores. So if operating cash is not as much as INR140, then we will take some debt. And our balance sheet is not leveraged. As I said in my earlier part of the call, our net-debt is approximately INR20 odd crores only.
Vivek Kumar
And we have read in some news articles that you’ve not just this, you’ve also had some new restaurant and bar and distur and open bricks. Is it true or is it some other thing that just got misquoted? Is it to miss information?
Rahul Agrawal
No, it’s true. Bricks is is a bar and restaurant function that we have opened up in in one of our existing restaurants. We have two floors of barbecue nation. We converted that to one floor of and one floor of of of this format called bricks. Now again this is something that has happened without having any incremental rental or any incremental cost towards license. So the payback rates on this are very, very and this is just an experiment to see how it — how it goes. So this is anyway very small to even talk about it.
Vivek Kumar
But no, no, that’s right.
Rahul Agrawal
Initial response is very good. Yeah. No, but this is not a strategy. I think like I said, we have three distinct verticals. We have Bolly in India, we have international and we have and we are focused on ongoing these three operating cash.
Vivek Kumar
Got it. Of the premium CDR will be on or both salt and both equally or it will be more so
Rahul Agrawal
Around 20 stores, it balances sold.
Vivek Kumar
Thank you, sir. Thanks.
Rahul Agrawal
Thank you. Thank you.
Operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict your questions to two each per participant. If you have any follow-up questions, please rejoin the queue. The next question comes from Reddy from PNR Investments. Please go-ahead.
Gopinath Reddy
Sir, given the present environment, are we looking at the new Nation store of smaller size than what we have currently or is it the same size? And where are we opening them? Is it which area of this country
Rahul Agrawal
Yes, we are looking at smaller size of maybe 20%, 25 percentage. We are largely looking the new expansion in metro and Tier-1 markets and are very selective about Tier-2, Tier-3 markets.
Gopinath Reddy
Are we looking into south of South India also or how are we going-in South India especially?
Rahul Agrawal
No, we’ll look at — look at pan-India. We already operational in around 45 plus cities. So I think more than more than any specific region, what matters for us is whether the trade area is attractive for us and what is the — what is the throughput that will take-in the new-store that we open up. And also what are the other commitments like rent and store productivity?
Gopinath Reddy
Which area of India is having this slowdown in same-store sales culture, especially at the maximum, which area is it?
Rahul Agrawal
South has been has been down the most
Gopinath Reddy
Is it because too many are there or any other reasons, specifically South, what may be the region?
Rahul Agrawal
South definitely has higher competition than than other regions but the attribution can also be to some decline in in corporate demand in all these locations.
Gopinath Reddy
Any area in India where we are growing, sir in same-store sales growth?
Rahul Agrawal
Oh, yes, we are growing in two of the regions out of four and one region is flattish.
Gopinath Reddy
Okay. That’s it from my side. Thank you.
Rahul Agrawal
Thank you.
Operator
Thank you. The next question comes from Pritesh from Lucky Securities. Please go-ahead.
Pritesh Chheda
Sir, can you enlist the reason for store closures, these three, four stores in the year?
Rahul Agrawal
So some of these were are not performing to the extent that you wanted, they were loss-making and based on our numbers we believe that they will not turn profitable in near-future.
Pritesh Chheda
And these the comment that you made about regional growth and regional decline. So two regions in India growing, one is flat and one is declining. So that one decline is so significant, a decline for you to have a minus 2 yes.
Rahul Agrawal
No, the other two positive also at low-single digits.
Pritesh Chheda
Yeah, it’s okay. Even if it is — it is low-single digit, it matches your SSG closer to your SSG, right? So the question is this one-fourth, so 25% decline is like to be — has to be a double-digit decline. So can you give out the key reason for — for such a large decline and what exactly should happen in the system for it to rectify or what you should do to rectify either the system or you whatever be the case.
Rahul Agrawal
No, one, I think we don’t give regional level the same-store sales growth numbers. So I won’t going to comment on your double-digit number there. But like I said in the earlier part of my call, the effort that we’re taking for same-store sales growth has been consistent across all locations and we are working on these experiences to increase the cover growth on the side.
Pritesh Chheda
These are the effort. So what efforts has to be taken?
Rahul Agrawal
No, like I said, you have to keep working on your guest experience you have to keep upgrading your food experience like you said, we did two food festivals during the quarter, which is we launched the dessert menues. Keep up with your service levels in the restaurant.
Pritesh Chheda
But sir, these efforts are normal for casual dining sort of for a dining business, these are normal efforts that typically goes in for a customer experience, right?
Rahul Agrawal
But
Pritesh Chheda
Any other areas of improvement that should happen in your opinion? Or is just environment?
Rahul Agrawal
No, I think it’s very difficult to pinpoint which is what, but we have to keep up keep delivering the same experience to the guest and keep improving on it every time so that guest keeps coming back and to some extent it is also environment.
Pritesh Chheda
Can you just tell the Nine-Month operating cash-flow? How much cash did you generated in nine months?
Rahul Agrawal
I think it’s around INR65 odd crores. So Vijay or Amit, can you please confirm that number?
Amit Betala
Yes, all right, it’s around INR65 crores.
Pritesh Chheda
And for the full-year, did you say INR140 is what I heard or I did some error?
Rahul Agrawal
For next year. For next year, I’m saying the capex target at 40 stores is 140. And if you do around double-digit EBITDA margins, we will have enough cash-flow to fund that. If the margins are lower to that extent, we’ll have to borrow debt.
Pritesh Chheda
Okay. So next year store addition is INR40 crore and to which the total capex is INR140 with some INR15 crore INR20 crore of maintenance included in it, right?
Rahul Agrawal
Yes.
Pritesh Chheda
So the store capex is INR40 crores to INR3 crores, about INR120 plus 24 maintenance.
Rahul Agrawal
Yeah.
Pritesh Chheda
Okay. And what is your store addition this year?
Rahul Agrawal
We have done 13 new and we expect to add around seven more in-quarter four. So around 20.
Pritesh Chheda
Okay. Okay. Okay. Thank you.
Rahul Agrawal
Thank you, Pritesh.
Operator
Thank you. The next question comes from Manjeet Boaria from Solidarity Investment Managers. Please go-ahead.
Manjeet Buaria
Hi, thanks for my follow-up chance. I have three questions. One was, do we have any agreement to buy-out the remaining stake is well at a predetermined valuation and within any predetermined time period? The second question I had was, you know, while I understand the need to experiment to create growth vectors as you explained, but is there any formal policy or a cap where you say over a rolling five-year period, we won’t invest more than 6% of our operating cash flows in these experiments was the second question. And finally, if you could just explain what synergies you were mentioning on the kitchen side, et-cetera, because they were not clear to me. And how does this brand go from the INR4 crores revenue to say INR100 crore revenue brand if one takes a longer time period? These are my three questions. Thank you.
Rahul Agrawal
Yeah, Majit. So there is pre-agreement to buy, but not in terms of shareholding, but in terms of quantum of rupees. So I know we — we have an option to buy stake worth INR2 crore to INR4 crores over the period of next 10 years from them, but no obligation to even invest this amount of money in adding to more of state. In terms of there is no formal policy as such but at a board level we don’t want to invest more than say, approximately 20% of our operating cash-in some of these newer initiatives. And in terms of efficiencies, like I said, they have an existing setup from which they run their existing three cloud in Bangalore. As a Nation group or a company between all the three brands, we have around 35 kitchens in Bangalore. We expect to take this particular brand in at least at least 15 to 20 of our existing kitchen depending on space to come out for these brands. And then for the balanced part of the city, we’ll have to contract cloud kitchens, which have got attractive in economics. So that is our plan on this particular brand.
Manjeet Buaria
Sorry, sure, Rahul, if I got this correct, you mean that you will sell this brand via your existing kitchens and BBQ or other restaurants. Why are the aggregators? It’s not to sell-in your existing restaurants, basically.
Rahul Agrawal
Yeah, yes, not in existing restaurants. These are premium icing, so I think is all-you-can-eat we can’t —
Manjeet Buaria
No, that makes sense. Then it makes sense. So I was confused. So Rahul, if let’s say you take this across whatever 30 stores you have roughly, right, what is your expectation on how big will the revenue be on this brand within, let’s say, next one year
Rahul Agrawal
So look at 30 cloud kitchen even at say average of 7 lakh to 8 lakh per month-on each cloud kitchens this can become approximately INR25-odd crore sort of run-rate business for us. But we’ll have to see-through the journey of this brand. I think we are very happy with what we saw in terms of this experience right now and we’ll have to obviously execute this. This comes with the execution that you take.
Manjeet Buaria
But sir, just one last one. You know, when we take these bets, why do we take a 51% stick and not a sub-50% stick because let’s say an experiment does not work-out as the majority owner or the promoter exits become much more complicated. So why won’t you first experiment with a sub-50% stake and then if it starts working out, have the option or call option to buy more stake?
Rahul Agrawal
Look, we are we are long-term holders of these brands and we don’t expect to sell this. We expect to build these — build these brands over the years as we have built say Barbecue Nation or and Salt now. And you’re right that some of these may not work also. And if it doesn’t work, then we obviously have an option to sell this or divest this from our portfolio. And to that extent, if you have operating control or the shareholding control at 51%, this becomes all the more easier to do that. So that broad philosophy with which we operate.
Manjeet Buaria
Okay. Thank you so much.
Rahul Agrawal
Thank you,.
Operator
Thank you. The next question comes from from NV Alpha Fund. Please go-ahead.
Naitik Mutha
Hi, sir. Thanks for the follow-up. I just had a bookkeeping question. Your — if I see your adjusted EBITDA, you know, which is down 4% year-over-year and at the same time, your employee cost is up on a — at a similar amount. This is despite adding four new stores. So I just wanted to ask, is the rental expense of these new stores not yet kicked-in fully?
Rahul Agrawal
No, rentals are pepped in, but like I said, we have done a lot of cost-efficiency projects, which are all sitting in occupancy and other costs and employee costs have gone up largely because of the new-store that we have added.
Naitik Mutha
Right. Okay, got it, sir. Thank you.
Rahul Agrawal
Yeah, thank you.
Operator
Thank you. The next question comes from Rohit from PMS. Please go-ahead.
Rohit Balakrishnan
Yeah. Yeah, sir. Just a couple of questions. So sir, incrementally, as we open stores, especially in BBQ, would you have any mix in terms of Tier-2, Tier-3 versus the Tier-1 cities? That was one in your mind. The context being, I’m assuming maybe the competition would be much lower in the Tier-2 and Tier-3 markets. So if you can share that. In the past, I think you’ve mentioned some of these concepts have not worked in these Tier-2 and Tier-3 cities. So I just wanted to get your sense as — have we changed anything for these formats or is that even something that we are looking at? That was the first question. And second, typically for us in the BBQ format again, what is the rental change that we have and how would that be different from, let’s say, let’s say, top eight cities versus the rest of the markets.
Rahul Agrawal
So in terms of our expansion, we continue to largely operate in metro and Tier-1 markets. Tier-2 — Tier-3 markets, it’s not that they don’t work. We still have around 45 to 50 restaurants in three markets and they’re doing very fine. Just that some of these market takes longer to grow and mature and that’s why we prefer some of these new pockets that are developing in the 21 markets. So going-forward also, I expect to sort of have the same ratio of 25%, 25%, 75% being 21 markets. In Nation, rental rent to revenue ratio for overall Nation would be around 11% to 12%, all of which top eight cities would be maybe couple of percentage points higher than the rest of the city, rest of the country.
Rohit Balakrishnan
Understood. Okay, sir. That is it from my side. Thank you very much.
Rahul Agrawal
Thank you.
Operator
Thank you,. Ladies and gentlemen, we take that as our last question for today. On behalf of Nation, that concludes this conference. Thank you all for joining us. You may now disconnect your lines. Thank you.