Editor’s Note
Sapphire Foods, a major franchise operator for KFC, Pizza Hut, and Taco Bell in South Asia, is pursuing a dual strategy of multi-channel expansion and cost optimization to improve profitability. This article examines its approach to balancing near-term pressures with affordable, sustained growth.
Sapphire Foods India Limited, the franchisee operator for YUM! Brands in India, Sri Lanka, and the Maldives, is implementing a strategic multi-channel growth approach coupled with cost-saving initiatives to enhance its profit margins. The company, which operates KFC, Pizza Hut, and Taco Bell restaurants, is navigating short-term challenges while focusing on affordable growth across its operations.
Sapphire Foods is adopting a multi-faceted approach to drive growth:
Smaller Location Expansion: The company is optimizing its restaurant sizes to improve efficiency and reduce costs. For KFC, the average restaurant size has been reduced by approximately 40% from 2,736 sq. ft. to about 1,600 sq. ft. Similarly, Pizza Hut has seen a 45% reduction in average restaurant size from 2,427 sq. ft. to around 1,200 sq. ft.
Omni-Channel Presence: Sapphire Foods is strengthening its omni-channel mix, with delivery accounting for 44% of sales, take-away at 23%, and dine-in at 34%.
Digital Integration: The company is rolling out digital kiosks across 50% of its KFC estate to enhance customer experience and streamline operations.
To improve profit margins, Sapphire Foods is implementing several cost-saving measures:
Zero-Based Cost Budgeting: This approach is leading to permanent cost reductions across operations.
PACE SETTER Program: The company has introduced a benchmarking system to compare costs among restaurants, promoting efficiency.
Restaurant Size Optimization: By reducing the average restaurant size, Sapphire Foods aims to lower rental and operational costs while maintaining sales efficiency.
Despite challenging market conditions, Sapphire Foods has shown resilience:
Restaurant Sales: Increased by 8% year-over-year to ₹7,748.00 million.
EBITDA: Reached ₹1,134.00 million, with a margin of 14.6%.
Restaurant Count: As of June 30, the company operates 974 restaurants across its brands.
KFC India
510 restaurants as of June 30
Restaurant EBITDA at 15.7%
Focus on premium offerings with the launch of KFC Gold range
Pizza Hut India
336 restaurants as of June 30
Implementing a dine-in led omni-channel customer promise
Launched the “Juicylicious” pizza range in April
Sri Lanka Operations
128 restaurants as of June 30
Restaurant EBITDA at 12.7%
Strong performance with 19% year-over-year revenue growth in INR terms
Sapphire Foods is well-positioned to capture future opportunities through:
Organic growth by accelerating conversion from unorganized food services to KFC and Pizza Hut brands.
Exploring inorganic growth through potential acquisitions of high-quality and scalable QSR and food brands in existing and new geographies.
With a cash net of debt of ₹2,450.00 million as of March 31, Sapphire Foods has the financial capability to support its growth initiatives and navigate market challenges.
As Sapphire Foods continues to implement its multi-channel growth strategy and cost optimization measures, the company aims to strengthen its market position and improve profitability in the competitive quick-service restaurant sector.
