Jubilant FoodWorks Limited (NSE: JUBLFOOD) Q2 2025 Earnings Call dated Nov. 11, 2024
Corporate Participants:
Lakshya Sharma — Deputy General Manager, Investor Relations, Sustainability and M&A
Hari S. Bhartia — Founder and Co-Chairman
Sameer Khetarpal — Chief Executive Officer and Managing Director
Suman Hegde — Executive Vice President and Chief Financial Officer
Analysts:
Nihal Mahesh Jham — Analyst
Jaykumar Doshi — Analyst
Tejas Shah — Analyst
Shirish Pardeshi — Analyst
Devanshu Bansal — Analyst
Aditya Soman — Analyst
Ankit Kedia — Analyst
Latika Chopra — Analyst
Akshen Thakkar — Analyst
Sheela Rathi — Analyst
Vishal Gutka — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Jubilant FoodWorks Limited Q2 and H1 FY ’25 Conference Call. [Operator Instructions]
I now hand the conference over to Mr. Lakshya Sharma. Thank you, and over to you, sir.
Lakshya Sharma — Deputy General Manager, Investor Relations, Sustainability and M&A
Thank you, Darwin. Good evening, everyone, and welcome to Jubilant FoodWorks Limited Q2 and H1 FY ’25 earnings call for investors and analysts.
We are joined today by senior members of the management team, including our Chairman, Mr. Shyam S. Bhartia; our Co-Chairman, Mr. Hari S. Bhartia; our CEO and MD, Mr. Sameer Khetarpal; our CEO of Turkey Business, Mr. Aslan Saranga; our CFO, Ms. Suman Hegde. We will commence with key thoughts from Mr. Hari Bhartia and turn to our CEO and MD to share his perspectives. After the opening remarks from the management, the forum will be open to question-and-answer session.
A cautionary note, some of the statements made on today’s call could be forward-looking in nature and the actual results could vary from the statements. We will also share the replay and transcript of the call on the Company’s website under the Investor Relations section.
I would now like to invite Mr. Hari S. Bhartia to share his view with you. Over to you, sir. Thank you.
Hari S. Bhartia — Founder and Co-Chairman
Thank you, Lakshya. Good evening, everyone, and thank you for joining us.
We are excited to build on the momentum from quarter one of FY ’25 as we move into quarter two, despite facing a challenging demand environment in foodservice and broader consumer space. Our commitment to convenience, innovation and delivering unmatched value to customers has positioned Jubilant FoodWorks to gain market share and drive category growth. The results from both quarter two and H1 reflect the success of our strategy. Our investments in direct-to-consumer apps, cutting-edge technology and our unique commissary-based sourcing model have allowed us to excel in operational excellence. Additionally, our move to a 20-minute delivery is not only enhancing customer experience, but also reinforcing our commitment to quality service.
The dedicated team at JFL remains focused on delivering exceptional value to consumers and driving growth. We have maintained price stability over last nine quarters, absorbing inflation through cost optimization and productivity initiatives. On top of this, we have waived delivery fees. We have also accelerated new product launches, including popular Cheese Volcano range and Cheesiken, each crafted to meet evolving consumer preferences and to drive order growth.
The shift from dine-in to delivery continues in India and abroad. With our own end-to-end delivery ecosystem, covering fleet, riders and advanced delivery management systems, we are well-positioned to embrace this trend. We are doubling down on reducing delivery times from 30 minutes to 20 minutes and accelerating new store openings, expanding into new cities to capture growing demand. Simultaneously, we are committed to delivering value to our dine-in customers. Through new dine-in-only menus, we are seeing order growth during lunch hours, a promising shift that signals consumer preference for dining with us.
In Turkey, our business is continuing to grow with margin improvement and store expansion, all while navigating macroeconomic headwinds. Across all markets and brands, JFL Group System sales for H1 reached INR45.1 billion. We have added 139 net new stores, bringing our network to 3,130 stores. Overall, we are very pleased with our growth and increased profitability of JFL Group, which benefits from corporate-owned setup in India and largely franchised network in Turkey.
With that, I request Sameer to share his quarterly update and his perspectives.
Sameer Khetarpal — Chief Executive Officer and Managing Director
Thank you, Mr. Bhartia. Warm welcome to all in our earnings call today.
Our strategy of doubling down on Domino’s is working. To recap, we increased investment in brand-building; stepped-up pace of product innovation, for example, Volcano Pizza, Cheesiken; reduced span of control by adding three regions; increased density of stores to enable 20 minutes delivery; and relentless investments in customer-facing technology. This has resulted in momentum build-up from Q1 into Q2, with August as our highest month in sales. We are seeing this carry-forward into Q3, driven by new customer growth and greater than 20% order growth year-on-year. Domino’s India scaled new record with highest orders, highest app traffic, highest conversion and highest volumetric metric throughput per store.
Let me now share our performance summary for the quarter and help you with growth composition, along with updates on India and Turkey segments. Performance summary. Consolidated revenue stood at INR19.6 billion, up 42.8% year-on-year. The growth composition is as under. DP Eurasia revenue contributed 33.7% to overall growth, with 9.1% being the organic growth from the existing business. EBITDA margin came in at 20.4%, up by 14 basis points year-on-year and 57 basis points quarter-on-quarter. As a Group, the network stands at 3,130 stores, strong with 73 net new additions in this quarter. In Domino’s, we added 61 stores, with 50 stores in India, six in Turkey and five in Bangladesh. In COFFY and Popeyes, we added 11 and four stores, respectively.
Specifically coming to India segment. In India, revenue was at INR14.7 billion, was up by 9.1% year-on-year. Domino’s growth came in at 8.1%, LFL came in at 2.8%, led by delivery growth in Domino’s at 11.4%. At channel level, delivery grew by 15.9%, led by record order growth of 32.3%. This is highest delivery volume per store. We have 36,400 riders on our roles who engage — who deliver for Domino’s. Led by menu innovation, we also saw a sequential growth in dine-in orders. ADS for matured stores is at INR80,200, which is the highest in last six quarters. Gross margin and EBITDA margins are at 76.1% and 19.4%, largely flat quarter-on-quarter. Ad traffic grew by 18.5% year-on-year, with 12.8 million monthly active users and material improvement in app conversion with a total of 27.8 million loyal members.
Domino’s network is now 2,079 stores strong, serving customers across 447 cities. You will notice that we have increased the pace of store expansion quarter-on-quarter, 50 versus 34 last quarter and we have entered 26 new cities in H1. As guided earlier, we continue to tap on white-spaces with new stores and formats at university campuses, highways and airports. In the last quarter, we introduced Volcano Pizza, Cheesiken in South India, and a special INR77 menu during Independence Day in August. All three interventions exceeded internal plans.
In Turkey, last year’s same quarter on account of minimum wage hike mandated by the government, consumption saw a huge surge, hence the business is lapping a very strong base. Also, the Central Bank’s focus on bringing down inflation, there will be a transient impact as anticipated on demand in the near-term. Overall system sales came in at INR7.7 billion. Within it, Domino’s Turkey system sales was at INR6.9 billion. Domino’s Turkey like-for-like growth came in at minus 6% on a base of 52.6% LFLs in the last year of quarter two, which is Q2 FY ’24. I’m pleased to share that Domino’s was awarded the recognition of being Turkey’s Lovemarks for the second consecutive year and third time overall. For context, Lovemarks Award is a survey conducted by Ipsos to find out brand consumers are absolutely in love within the category. We are humbled with this recognition which reflects deeply the brand love and support that we receive from our customers.
The coffee brand COFFY system sales came in at INR651 million. COFFY like-for-like growth was at minus 3.9% on a base of 35.3% LFL last year of Q2 FY 2024. All new stores opened in the quarter were franchisee-owned and the franchisee mix now for COFFY stands at 78.4%. The revenue from DPEU came in at INR4.6 billion, flat quarter-on-quarter. Margin expanded with EBITDA at 26.1%, plus 110 basis points quarter-on-quarter and PAT margins are also strong and accretive to Indian business at 10.5%, plus 130 basis point quarter-on-quarter.
In closing, as we are into almost six weeks past big days of Diwali, Domino’s India, we continue to carry-forward the growth momentum and which is accelerated. On network, we have crossed 2,100 stores milestone. We are — however, we are maniacally focused on operations excellence; making bid days bigger, given Q3 is lot about big days and festivals; increasing our investments in marketing; launching new products and making our technology assets and app work harder, while continuing to partner with aggregators.
Thank you so much. With that, I request the moderator to initiate the Q&A session.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]
We have the first question from the line of Nihal Mahesh Jham from Ambit Capital. Please go ahead.
Nihal Mahesh Jham
Yes, good evening to the management. Sir, my first question was on the dine-in side. If you look at the growth, it’s still negative similar to what it was in Q1. Just wanted to get your thoughts that the INR99 menu launch has had not seen an activation in some traffic and maybe would have expected a sequential improvement there on back of that intervention?
Sameer Khetarpal
Yeah. I think the — what is — let’s step-back and view how is INR99 dining menu helping. So, firstly, it is an investment to draw customers into the stores during lunch hours, i.e., 11:00 A.M. to 3:00 P.M. When I look at the — look at that window, the — it’s obviously increased our orders for sure. In the last quarter, it also increased the sales in that period. So, it was a specific intervention when our store sales are low. Our fixed cost, man-power, electricity, everything is running. So, it is — we believe it is the right thing.
Having said that, see, the movement towards delivery is far higher in the market in terms of consumers and, therefore, that continues to grow faster. But what we are focused on is driving growth during lunch hours, that piece is working at INR99. So, we are seeing order growth in our stores during 11:00 A.M. to 3:00 P.M.
Nihal Mahesh Jham
Understood. But maybe the time post 3:00 P.M. is where the drop is higher and in a way not compensating for the increase in traffic from 11:00 AM to 3:00 P.M.
Sameer Khetarpal
See, the dining is available — see, we want to specifically focus on 11:00 A.M. to 3:00 P.M. and also bit of post that. But post that, we — anyway, in our business, we start seeing traffic increase in 3:00 P.M. So, that’s not a — and that’s not an intervention we have at the moment. But right now, we are focused on 11:00 A.M. to 3:00 P.M. and we are doing more initiatives to increase that.
Nihal Mahesh Jham
Got that. Second question was in terms of the store addition, this quarter, we see a lot of new format stores step-up like the university campuses. Is it fair to believe that in the future, the ADS profile of the incremental set of stores would be, say, similar, lower or higher, just that these are some new formats that are coming along that we are seeing?
Sameer Khetarpal
Yeah, in fact, our throughput per new stores have also increased and we keep a track on it. I think what I have gone on record in saying that the opportunity to expand in India is very large. So, for example, there are 1,000 campuses with more than 5,000 students. There are about 48 airport terminals that matter where we are present. For the first time, we opened three airport terminals. So, the — these stores are all in terms of ADS either similar or accretive.
So, we are not going to pockets with dilutive ADS. So, we are very focused on getting the right ROI and payback period and we are seeing that. So, no reason to believe these are dilutive. In fact, some of these stores in campuses, we become the captive or the only place to go to for dine-in for students. So, very happy with the progress. It is not dilutive at all.
Nihal Mahesh Jham
Got that. Quickly one clarification. You said that the India growth momentum had accelerated in Q3 for the first 50 days, if we heard that right — 40 days, I’m sorry.
Sameer Khetarpal
That’s correct. So, I think we are seeing the momentum carry-through from Q1 to Q2 to Q3, led by delivery. That is correct.
Nihal Mahesh Jham
Sure. Thank you so much. Sure.
Operator
Thank you. We have the next question from the line of Jay Doshi from Kotak. Please go ahead.
Jaykumar Doshi
Yeah. Hi, thanks for the opportunity. I have a question on your order growth. Clearly, in the last six months since you waived-off delivery, it has picked-up very strongly and it’s tracking at two times your revenue growth, especially for the delivery channel. So, when you look at the numbers internally, are these new orders and new business, or are these numbers also influenced by some shift from take-away to delivery?
And second question is that this delivery fee — delivery waiver, how does — how has it shaped up for you versus your own expectations on SSSG front, on order growth front and on profitability front? That’s it from my side. Thank you.
Sameer Khetarpal
Yeah. Jay, firstly, great questions, both of them. Of course, let me say that when you do free delivery, the incentive to take to go to a store take-away goes away. And with our focus on 20-minute delivery, the incentive is even lesser. So, we do see a decline in take-away. So, in fact, the — and if you were to take on-premise sale in some ways, right, like, it’s a dine-in plus take-away with our new store design, dine-in is actually growing, right? It’s the take-away business which is moving to delivery. So, you’re right, lot of — there is a share shift, but overall delivery is growing far, far bigger than or greater than the loss in take-away.
Now, how does it pan-out? I think we are very positively surprised on two dimensions. The amount of order growth that we are seeing in our — like I told you two quarters ago that we had experimented in a — in few stores for almost six months before we came to this conclusion. So, when we — when I look at that experiment, the order growth is much higher than we anticipated. Also, the new customer growth is much higher than we anticipated. And both these counts are actually very positive stories for us, because new customers we know ultimately repeat at almost three for the compounding will happen or we are beginning to see in few areas. Our network is poised to deliver to customers in 20 minutes and, therefore, this doubling down on order growth only increases productivity inside the store, our rider productivity and customers get a better experience. So, it allows us to expand more number of stores. So, very positive on this account.
Yes, are we paying in form of margins, yes, you can see we are paying in form of margins. But to me, it is a matter of time as growth picks — momentum picks up, we will get that margins. Also, we know that to — that I will give credit to the team that we almost had — this would have dragged almost 150 basis points to 170 basis points, but you don’t see that drag on the P&L, because we have worked on internal efficiencies to recover almost two-third of it. So, I would say, I’m very positive on new customer order growth and the — on margin dilution, we are — through internal efficiencies, we’ve been able to shave off almost two-third of the margin dilution.
Jaykumar Doshi
That is very helpful. Just one more question, please. 2Q — 1Q to 2Q, the trend — SSSG trend was broadly similar. Are you expecting some uptick going into 3Q, 4Q? What’s the outlook based on the last 40 days of the current quarter year?
Sameer Khetarpal
Yeah. See, again, we always refrain from giving a guidance, but given that five weeks have passed and the big days of Diwali are behind us, we are seeing actually momentum accelerate from Q2 to Q3.
Jaykumar Doshi
Thank you so much and good luck for the quarter.
Sameer Khetarpal
Thank you.
Operator
Thank you. The next question is from the line of Tejas Shah from Avendus Spark Institutional Equities. Please go ahead.
Tejas Shah
Hi, sir. Thanks for the opportunity. Sir, first question is on most operational parameters or even in our commentary, we seemed relatively positive versus the larger basket of consumption, not even only QSR that we would have heard this quarter. So, would you say this optimism is primarily driven by the positive response that we are seeing to our interventions or our read on the demand sentiment itself is different from what the broader street has?
Sameer Khetarpal
Yeah. Tejas, thanks for asking that question. I think it is — it’s a — I’m no economist to correlate to that. I will definitely firstly give credit to my team who have worked on five different elements to bring it together. Number one is our investment in technology. So, like I said in my last few earning calls that we have doubled down on the — our app, micro services-based architecture, removing defects, right? So, that was one piece on our app.
Second was we moved from four regions to seven regions. Therefore, we have tighter control over stores, the service quality has improved. Number three was we — three quarters ago, we launched a new campaign. It happens only with Pizza. So, we have increased our investments in marketing. We — through sharp data analysis, we learned that delivery is a big barrier. Our delivery fees is a big barrier and, therefore, we very carefully waived-off delivery fees, but recovered partially in packaging charges. So, that gave in set of new customers. And lastly, I would say that the sheer execution on big days and getting these riders onboarded through technology and sheer will of the team, I think, this is what is playing out.
And then, yeah, of course, Suman is correcting me that we have increased the pace of product innovation as seen in Cheesiken in South India and Volcano Pizza. So, all of this is coming together. When I hear the commentary of QSR players or broader FMCG space, I think my guess is as good as yours, there is — the sentiment is obviously quite different. So, therefore, I’m calibrated, but we are seeing positive momentum continue in Q3.
Tejas Shah
Helpful, sir. Very encouraging. Sir, second question, the way all these food delivery companies have built-up capacity and capability, both led by their quick commerce exposure in terms of faster delivery. And then, we are seeing one of the quick commerce players is now kind of cross-pollinating that in one of the food delivery offering also as a 10-minute ready-snack kind of delivery. How do you perceive this threat? And the 20-minute promise that we had started as a very discretionary fact, do you think that it will become necessity to be competitive in the market?
Sameer Khetarpal
No, I think it’s a — see customers love speed and they love free speed, right? So I’m always a very big believer of that. And so, firstly, we have the network to post the limits of speed, right, on a very large menu. Our philosophy on technology has been that we have to ride-on all sorts of technology, whether it’s aggregators, ONDC, our own apps, we are present. So, any technological asset or a wave that we are in, we will — as Jubilant, we are fully prepared to go to participate in it.
I generally believe if somebody can actually deliver faster speed with a 2,200 store network in about 500-odd cities, it is Domino’s. So, I worry less about it. I love that challenge, Tejas, and we will — we are evaluating it. There is no reason why we will not participate in it.
Tejas Shah
Sure. And sir, last one, if I may. In our store addition, Dunkin’ seems to be subdued versus rest of our portfolio. So, any insight there?
Sameer Khetarpal
Yeah. I think, again, the — firstly, there is tremendous opportunity in Domino’s and we’ve doubled down, triple down as — howsoever you may want to put it. Then I said Popeyes is one area where we will accelerate and we are opening stores, very encouraged by the results. All our stores open at a new high and that we are very satisfied with that. For Hong’s and Dunkin’, I want to drive store economics and profitability, right? And once that model is proven, we will definitely expand. So, there is no reason why we will not do it.
But at the moment, the teams are focused on getting the margins, ADS is right. And again, no cause for alarm over there, all on-track, but no expansion story there either.
Tejas Shah
Perfect, sir. Very clear. Thanks and all the best for coming quarter.
Sameer Khetarpal
Thank you.
Operator
The next question comes from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Shirish Pardeshi
Hi, Sameer. Thanks for the opportunity. Good evening. I — just one observation. Over last one year, we have entered into 50 new cities. And I’m just trying to look at the slide, which says that delivery channel revenue has grown up almost 15.9%. So, I have this question specifically this 50 new cities, are we now getting into less than 1 lakh population, that’s the growth area we have found out? And maybe if you can give how this new cities, the SSGs or LFL can happen over the next two quarters to three quarters?
Sameer Khetarpal
Yeah. So, firstly, Shirish ji, the — I think these new cities are still very large cities, and sometimes, I — when we look at it as internally, we actually laugh. For example, we were not there in Ayodhya right now. You would say you have to be, and I think we can open four or five stores in Ayodhya to be very honest, right? One of the smart cities in Gujarat is called Dahod, right, and we were not there. So, it’s one of the 20 smart cities in India. Similarly, we were not there in Vrindavan.
So, now, these are all very-high traffic, high footfall cities which are becoming bigger and expanding, right? So — and I believe we can actually add more stores into, these are still very more than 1 lakh population at the moment. And so, what they do is — we obviously not only get favorable rentals, they have higher dine-in proportion and we are the go-to destination when it comes to international cuisine experience. On LFL, etc., we are seeing — continue to see same — similar LFLs, in fact, slightly higher, because we had some differentiated pricing in these cities. So, no, we are very, very happy with it. We will continue to expand into new cities.
Shirish Pardeshi
Okay. The reason, Sameer, I was asking, the addition of 50 new cities and if I look at the Y-o-Y addition of stores is 191. So, I was more curious that 50 new cities would have started with maybe one or two stores, that’s the way we should look at or more numbers stores, because you just alluded saying, Ayodhya, you have opened four stores.
Sameer Khetarpal
No. What I’m saying is — sorry, I mean maybe I was not — so a new city is defined for us where we have zero stores. So, whenever we open one store, that becomes an existing city. So, Ayodhya is a new city, because we didn’t have a store over there. So, now, if we open the second store, so we will not count it as an existing city.
Shirish Pardeshi
Okay. My second question on the DP Eurasia. I think the system sales has been little muted and even LFL. So, how one — we should look at the second-half for the year? And maybe some more color, because now almost 89% of our stores are franchisee-led. So, maybe in terms of revenue projection and the margin performance for next half.
Sameer Khetarpal
Yeah, I think, the — again, we refrain from giving guidance, but let me give you some color. So, firstly, the — it continues to be a PAT accretive business as 10%. And as you see the teams despite fiscal tightening by the government, continue to expand margins. COFFY margins have also improved materially and we are expanding stores also. So, now, the quarter-on-quarter growth seems muted, largely on because of higher base. I expect this to kind of change in couple of quarters. So, there is no cause of alarm or anything. Teams are meeting — a large part of it, Shirish, was in their internal plans and budget, because we could see Q3 of — sorry, Q2 of last quarter last year was a very high base for them. In fact, the average weekly throughput per store was very high and which has — which was not the norm. So, again, happy with the performance.
In terms of color, I would only say that the like-for-like should only improve from here and the team is on-track to open their new store and the EBITDA margin should remain broadly in-line and PAT around 10%.
Shirish Pardeshi
Okay. That’s helpful. Thank you and all the best.
Sameer Khetarpal
Thank you, Shirish ji.
Operator
Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Devanshu Bansal
Yes, sir. Hi, thanks for the opportunity and congratulations on growth position [Phonetic] in first few weeks of Q3. Sir, I wanted to check the delivery channel order count growth is at 30%, right? So, wanted to check your view on whether we are gaining share versus other participants in the online marketplace. So, if you could comment on that please.
Sameer Khetarpal
So, I think the — if you look at the — even the value growth, volume growth or SSG, right, of all the listed players, right, and even the store growth, so definitely we are gaining share, Devanshu, all indicators are that and also confirmed by our own internal research.
Devanshu Bansal
And sir, there was a period where good amount of smaller franchisee-led brands sort of picked-up and they expanded significantly by franchisees. So, this extended period of consolidation or market share gains, do you think that this can lead to some amount of consolidation in the online marketplace as well?
Sameer Khetarpal
Hard to say, I think, it’s a — for me to comment. But at least the — one — my own learning [Technical Issues].
Operator
Ladies and gentlemen, we apologize for the disconnection. We have now connected with the management. Over to you, sir.
Sameer Khetarpal
Devanshu, I think, was asking the question. Devanshu, if you can repeat, we can start from there.
Operator
Yes, sir. Sir, Devanshu seems to have dropped from the queue.
Sameer Khetarpal
Okay.
Operator
Yeah. Should we go ahead and proceed with the next question?
Lakshya Sharma
Yes, please.
Sameer Khetarpal
Yes, please.
Operator
We have the next question from the line of Aditya Soman from CLSA. Please go ahead.
Aditya Soman
Hi, good evening. Sir, just one question from me. I think in terms of ADS, when I compare the ADS, of, let’s say, 1Q ’24 that you reported today versus the 1Q ’24 that was reported earlier, there is a big gap, I mean, almost a 5% gap and it’s similar for preceding quarters. So, why is this happening? Why is the ADS for older stores reported today lower than what was reported earlier?
Sameer Khetarpal
Sorry, Aditya, which chart are you referring to? We have shared the Domino’s mature store ADS, which stood at…
Aditya Soman
Correct. So, the mature store — yeah, so, the mature store — sorry.
Sameer Khetarpal
Yeah, go ahead.
Aditya Soman
Yeah. So, the mature store ADS for, let’s say, 1Q FY ’24 as reported in today’s presentation is INR77,000, whereas it was almost INR81,000 in the 1Q FY ’24 presentation.
Lakshya Sharma
Yeah. So, basically what we do, Aditya, is that we report on mature store ADS. So, whatever is the stores we split, we actually remove that from the base and, therefore, we present a full series to you every quarter, you will get the new series. So, it is computed on 1,621 stores, there is a difference of 15 stores and, therefore, the base also gets correct. This is a recurring metric, which we have been reporting for almost eight quarters now.
Aditya Soman
Yeah. No, I understand that. I’m just trying to understand why is it consistently lower, the base — maybe — and should the impact of 15 stores equate to almost 5% difference in the mature store ADS? I mean, I was just trying to understand how that economics is working.
Lakshya Sharma
Yeah. So, Aditya, it will not be like-to-like comparison. So, effectively, what we would be doing at 1,621 stores is giving you a continuum of six quarter performance. So, we can’t be 100% sure that what will be that number with a higher base of, let’s say, 1,640 stores.
Sameer Khetarpal
So, I think, maybe worthwhile spending some time with the IR team on how that is calculated, so you can understand. So, I think what Lakshya is saying is, any store that is split is removed from the base of the previous quarter and this quarter. So, I think that is what he is trying to say.
Lakshya Sharma
I’ll connect with you, Aditya.
Aditya Soman
Fair enough. Thank you.
Sameer Khetarpal
Happy to get that calculation.
Aditya Soman
Yeah. No, thank you. I think intuitively I sort of get it, because, I mean, I’m assuming the stores that get split are the ones with the highest ADS given that, that would…
Sameer Khetarpal
That’s correct.
Aditya Soman
Yeah. Understood.
Sameer Khetarpal
That’s correct.
Operator
Thank you. The next question is from the line of Kshitij Bansal from White Oak Capital. Please go ahead. Kshitij Bansal, your line has been unmuted. You may proceed with your question.
As there’s no response from the current participant, we will move to the next question, which will be from the line of Ankit Kedia from Phillip Capital. Please go ahead.
Ankit Kedia
Sir, just one question. We are seeing a structural shift towards delivery from dine-in or take-away. Do you think it’s time to experiment with few dark stores with only delivery channels? And would the unit economics of these stores be significantly better?
Sameer Khetarpal
Yeah, I think that’s a constant debate that we have and it’s not that we have not done it. So, I think we have actually, like, say, three kind of formats. So, there are mall stores which are in food court stores, very easy to understand. Second, our full high street store, which is about 1,200 in metros and about 1,500 in Tier 3, Tier 4 cities when we are entering into that city, so which have larger dine-in over there.
Then what we have is a delivery and carry-out store. So, the best ROI payback period in store where there is not only this delivery, there is also customers can walk-in and carry-out. So, these are 700, 800 square feet store, and our kitchen size is about 400. So, what we do is we add maybe eight or 10 cupboards for somebody to sit and eat. Those are even more positive from an ROI standpoint. So, I think the brand power is so strong, Kshitij [Phonetic], is that it doesn’t make sense for us to have dark stores. In fact, we experimented with few dark stores and, in fact, customer found that and came, walked up the stairs, and said, why can’t I carry an order from there? So, we do get like some incremental sales from carry-out. Always good to have that in the mix.
Ankit Kedia
Understood. Thank you. Thank you so much, sir. That’s it from my side.
Operator
Thank you. The next question comes from the line of Latika Chopra from J.P. Morgan. Please go ahead.
Latika Chopra
Yeah. Hi, Sameer and team. Thank you for the opportunity. Two questions. The first one was, if you could talk a little about the cost trends for the business in terms of raw material? It seems gross margins have been fairly stable sequentially. And also, on rentals and employee expenses, if you could give us some sense on any potential levers for margin improvement from these 19%, 19.5% levels that where we have been for the past two quarters other than, of course, the LFL improvement?
And the second question was on Popeyes. You mentioned, you would look [Technical Issues] taking business there. So, if you could share any updated thoughts on pace of store additions, any intensive data points on how it should be per store or [Technical Issues]…
Operator
Sorry to interrupt, ma’am. But the last part of yours wasn’t very clear.
Sameer Khetarpal
Moderator, I was able to get the two questions.
Latika Chopra
Yeah, thank you, Sameer. Yeah. Thank you.
Sameer Khetarpal
Yeah. Hey, Latika. So, Latika, on the first one from an — I think the raw material prices and inflation aided by Project Vijay, as I’ve been called out, I think we’ve actually seen some deflation, both based on commodity prices being stable or marginally declining and equally also the efforts that we have taken. Wage inflation is there, inflation in vegetables is there. It’s very erratic, especially during rains, the likes of capsicum, tomato and today, onion, right, all these, I would say, are elevated.
The rentals, I would say that with seven regions, the teams are better-positioned to scout for rentals and properties which are lower than the average for that region. So, I feel good about the — how the teams are executing over there. But definitely wage inflation is high. What we’ve done over there, we have increased our store productivity inside by almost 30%, 35% in the last four quarters. So, there is a concerted effort that went into through technology, also partially aided by the increased throughput for store.
So, net net, I think the — what you see, the dilution in margins at an EBITDA level is largely on account of mix change to delivery and we waving off almost INR40 per order, I think, that’s the only thing, rest — everything we’ve been able to kind of manage through internal efficiencies. So, that’s the color on this. But I do expect raw material prices to kind of go up in Q4, Q1 timeframes. That is my — so, again, we have to gear up for more tightening of the belt over there, so we had to find efficiencies.
Popeyes, I think, given that we are still nascent and early, we are looking at trends all over the world, Latika, how is Popeyes doing in Turkey to U.S. to all the other countries that they are opening. Popeyes in India stands for bold flavors and therefore lot of launches around wings, hot and messy range and we continue to double down. We’ve also increased our pace of expansion in malls. And in high street, as we see the throughput for some of the competition has very rapidly moves towards delivery. We are also reducing the store size as we — so that we — their stores are more geared towards delivery.
Very happy to note improvements on three dimensions. Number one being gross margin improvement at about 50-odd stores. We are we are actually very close to competition over there on gross margins. Second is our store capex has come down, because we have localized a lot, we have fine-tuned the equipment, we have reduced the kitchen sizes and civil work. So, that work has happened. And number three is our own delivery, right? So, a large part of Domino’s strength is their own rider fleet and delivery capabilities. We’ve been able to replicate that. And, in fact, in — within the Popeyes world, we don’t even measure 30-minute delivery. We only measure 20-minute delivery.
Latika Chopra
All right. That’s good to know. Just one follow-up on your comments on the cost structure, and you mentioned that you expect inflation, probably, in Q4 and Q1. At a broader consumer industry level, we have started to see pockets of inflation companies trying to pass-on some bit of pricing. Just trying to get a comfort or a bit better understanding that if there is inflation hardens, other than your cost-saving measures, would you be open to consider pricing as a tool, considering over the last now, I think, four quarters to six quarters, we have not seen any price increase, right? So, any initial thoughts there?
Sameer Khetarpal
Yeah, I think — so we have not taken a price hike in nine quarters. We have established a very sophisticated pricing center of excellence to look at pricing in various pockets. A lot of this learning actually comes from Turkey, which because of in high inflation environment has to do it on fortnightly basis. So, we are very shamelessly copying from what Turkey is doing and building that capability over here.
And there is no reason, Latika, that if inflation is high and we see pockets where we can with increased throughput per store, wherever we have to take, we will take at the right time. But I think the message that you should take is we will be relentless on growth.
Latika Chopra
Understood. Thank you so much, Sameer, and all the best.
Sameer Khetarpal
Thank you, Latika.
Operator
The next question is from the line of Akshen from Fidelity. Please go ahead.
Akshen Thakkar
Hi, team. Congratulations on a relatively stable SSSG in this environment. My question was pertaining to margins. Now as you’ve indicated SSSG is sort of inching up a bit for you in second-half, how should we be thinking about margin? Maybe we can stick to PAT margins, given that there is a confusion around where rent gets classified. So, you are at 3.5% PAT margins today on stand-alone, close to 3.7% on consolidated, your peak margins have been 7%, 8%. Do we see margins go back over there second-half? How about — like, some handle of how do we think about margins? Because right now, frankly, it feels like orders are growing because you’ve got delivery charges and the margins have come off because of that. So, while it’s leading to better order growth and revenue, it is not translating into better profit growth. So, just some better understanding over there would be really helpful. Thanks.
Sameer Khetarpal
Definitely, I can talk and then Suman can share her understanding. See, I think, we — of course, we want margins to increase, right? It’s not that we don’t want margins to increase. So, when you look at PAT, there are two elements that have gone into PAT. One is we had debt on our books. So, there is an interest element. And second is also, we said that we were in a high capex cycle, so there is additional depreciation that comes in over there. Pre-EBITDA Ind AS, we do want that, so pre Ind As EBITDA, we do want that to go up, right? And — but like I said, the — I don’t want to lose the growth momentum at this at this stage.
If we can gain market share, definitely. And LFL, at some point, will get into margins. So, there is no reason why it will not. We are seeing that in pockets also.
Suman Hegde
And just to add to what Sameer said, right. I mean, I think, Q4 FY ’24, we kind of came up with numbers in our top three Ind As now is about 10.9% in terms of EBITDA. And since that call and we also said at that time, yes, with the delivery charges being taken off, with all the investments that had gone, like Sameer said on commissaries, on our front-end tech, on setting up a new system and the investments we did pre-cycle of momentum of growth coming back are now baked in.
From there, if you see quarter-on-quarter, the last two quarters, there has been improvement, albeit minute, but still we are seeing modest expansion while we continue to keep our pricing under check. I think in this environment and we said in the last quarter as well, it is a growth market. There is growth out there to capture. Consumers are looking for value propositions. And if we get that franchise going, in time, the margins will follow. But I think our focus right now is growth and, of course, the absolute profits of this business will generate in a market like India and where it is already muted demand. So, in the short-term, if you ask us a point blank answer, I think it’s not about margin being on focus. Of course, we’d like to maintain and maybe modestly keep improving it through internal productivity initiatives that we take, but the focus is on doubling down on growth and getting whatever demand is out there to take.
Akshen Thakkar
Appreciate the answer. If I may be allowed just one follow-up. I get that prioritization of top-line and growth is the right strategy at any stage in the cycle, especially now. I think where the disconnect is that when Street looks at your numbers, people are thinking about a V-shape recovery to, 15% 16% margins, second-half next year as it was. And from what you seem to be suggesting is that we’ll be a little more gradual. I just wanted to be sure that the expectations are set, right, that level of margins will come at a significantly higher ADS levels. Is that understanding correct?
Suman Hegde
Yes, it will be gradual recovery on margins, because we continue to invest behind the brands here.
Akshen Thakkar
Okay. Thank you so much, ma’am, and all the best for the rest of the year.
Sameer Khetarpal
Thank you, Akshen.
Operator
Thank you. The next question is from the line of Sheela Rathi from Morgan Stanley. Please go ahead.
Sheela Rathi
Thanks for taking my question. My first question was with respect to the new store formats which we are opening. On an average, what would be the size of stores, or what could be the range of store sizes with respect to we are opening?
Sameer Khetarpal
Yeah. Hey, hi, Sheela. So, I think the — again, firstly, these are — none of this is new, right? It’s not that we have gone into a university first time, right? We — I think five or six quarters ago, we had shared a picture from IIT Mumbai, right? And so, that model once we experimented, now we have the confidence these are container stores, right? Like a container, we can have a one container store, two container store or three container store depending upon the demand. So, each container is about, 600, 700, about that in that range, right?
So, airports is largely a food court kind of a model, so whatever space you get 450 square feet to 600 square feet, that is the space. University campuses, some university campuses where we can actually build a full restaurant, whatever is available. I think the way to look at this, Latika, is that, if you give us — Sheela, to look at that is, you give us 400 square feet, we will be able to build a store.
Sheela Rathi
Okay. But — and what would be the proportion of these 600 square feet to 1,100 square feet stores now? I mean is it…
Sameer Khetarpal
So, we don’t track that, the — Sheela that is not a metric that we track. In fact, we look at how many white-spaces we have, what is the house count and the student count and the footfall. So, that is what we are more focused on. The economics are very positive on all of the formats. So, that’s — so, we keep a threshold of payback period and then we try to fit-in whatever space is available at the right rentals.
Sheela Rathi
So, would it be fair to say, Sameer, that over a period of time, the ADS numbers may look on the lower side, even though what we are trying to do is optimize in terms of store expansion?
Sameer Khetarpal
I would — yeah, I mean, the — that’s one way to look at it if the management doesn’t do any interventions, right? So, if we do interventions for lunch, for example, that’s quite accretive. If we start selling chicken, right, and chicken as a percentage of sales for Domino’s worldwide is quite material, right? And if you bring those, it will be incremental.
The — in fact, we had a very low share in the late night, right, and post 11:00 P.M. sales. So, now our stores are open from 11:00 P.M. to 3:00 A.M., so that is all incremental. So, the — I would like to challenge myself and my team to can we push the ADS up by having the right set of launches, right, occasions and, of course, making big days bigger, right? I mean if we continue to do that, then the store ADS is only going to go up.
Sheela Rathi
Understood. My second question was, we have done lot of interventions and I concur with what Suman had to say with respect to the value offering. Are there thoughts around more interventions going into 3Q, because, obviously, the delivery LFL growth has been strong for us. But do we need to do more interventions at the right price point or anything on the beverage side to ensure that we can see the growth coming back in a big way?
Sameer Khetarpal
No, absolutely. I think — Sheela, thanks for putting words in our mouth. I think everything is an opportunity. Beverage and why beverage — why stop at beverage, desserts is such a big opportunity. Then, why stop at desserts, the chicken, rice, snacking, lunch and many more, right? These are under works, which are huge, huge opportunity.
I think what we’ve learnt is consumer at this stage are seeking enormous amount of value. And for a given threshold experience, if the value is there, then you start becoming first among the first [Phonetic]. And that is what we are beginning to see in our data.
Sheela Rathi
And my last question, and just trying to verify, Sameer, you sounded more positive on 3Q with respect to the demand trend or is this something to do with the base effect?
Sameer Khetarpal
No, I think, I generally feel — see, I look at store ADS and store volume, right, that’s the metric what I look at, right? So — and where I stand is where I sit, right? So, I look at quarter-on-quarter. So, from that perspective, I’m more bullish on the internal performance, and base to me doesn’t matter, right? I mean, as — are we improving quarter-on-quarter, that is what I am most interested in. And the answer to that is yes.
Sheela Rathi
Understood. Thank you.
Operator
Thank you. Ladies and gentlemen, we will now take the last question, which will be from the line of Vishal Gutka from HDFC Securities. Please go ahead.
Vishal Gutka
Yeah, hi, Sameer and team. My question is specifically on new launches. I think really — you’ve really pushed the pedestal on new launches, interesting launches that have come out. Just wanted to get — I have one main question and sub-questions. So, how is the response overall on a — for new launches and the trajectory going forward, given that you have a lot of white-spaces?
Two specific questions, one is on Domino’s Cheese Volcano. So, what we have garnered from our checks that, although the experience is excellent while dining-in, but in case when you deliver at-home, there is some challenge that is there. How do you plan to address that? Because the — otherwise, the product is very — is an excellent product? And second question is on Cheese Burst. So, recently, the — for your Euro [Phonetic] product, you have brought in some new launches, three new flavors you brought in. Just wanted to get a sense, how is consumers’ acceptance to those products? Thank you.
Sameer Khetarpal
So, thanks for the feedback, Vishal, if you do encounter any feedback in delivery, I think, experience in delivery, let us know. Of course, this product is best experienced fresh out of the oven, but I will give credits to the teams to practice this delivery — the delivery for three months, right? We had to change lot of our bikes, train our workforce. Of course, there can be slippages, I’m not saying there are none. So, I think from we look at the satisfaction, in fact, this is a product that has been launched in at least 10 countries. And the customer experience or rate — customer satisfaction score are actually highest in India and it has continued. We thought this will be a limited time offer, but we are very surprised by the sales and the love that Gen-Zs have for this product, that it is the most Instagram product on our — in our portfolio. And therefore, it has continued well beyond what we thought was the right life for it. So, we have grandfathered this on our menu. So, therefore, it has exceeded our expectations.
And I think the consumer insight from the marketing team was that when customers think about Domino’s, they think about craving, they think about cheese and that and the volcano launch proved that and, therefore, we took that to during Diwali and the festive period to most loved cheesy portfolio called cheese burst and with Korean makhani and fiery cheese burst pizzas, translated also to garlic bread. So, we have dramatically increased the pace of innovation, giving more crave worthy products and Instagram worthy product to Gen-Zs, I think very happy to note and that’s why you see the confidence in our tone when we look at our Q3 to date performance.
Vishal Gutka
Great. Sir, and any more always being — all they’re working on new launches, but I think lot of ground has been covered in what do you call last six months. So, any meaningful launch with — shall we expect on the core pizza, or now for timing it is — I think we’re done with it?
Sameer Khetarpal
No, I think, of course, we want to accelerate. So, these are all core pizzas by the way, this is not pizza mania, these are all core pizzas. Cheese burst is type of a crust. We actually through again — through marketing insights, the team realized that this is under-indexed, right, the hidden jewel as we call it, inside. Therefore, we brought it up. So, it’s again a core pizza. This is all high-quality cheese products that we are giving. And same way, there is more in works, you will be surprised by the pace of the innovation.
Vishal Gutka
Got it. And just one last book-keeping question, which we can — I believe it was launched in Tamil Nadu and Kerala, which is the other state because you mentioned three states. I just wanted to check, which is the other state where you launched?
Sameer Khetarpal
So, Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Kerala.
Vishal Gutka
Okay. Great, sir. Wishing — great, sir. Wishing you all the best for future quarters. Thank you.
Sameer Khetarpal
Sorry, my bad. I think the team is correcting me. It was launched in East also last week.
Vishal Gutka
Okay. Great, sir. Wishing you all the best, sir, for future quarters. Thank you.
Sameer Khetarpal
Thank you, Vishal.
Operator
Thank you. Ladies and gentlemen, this brings us to the end of the question-and-answer session. [Operator Closing Remarks]