Jubilant FoodWorks sees near-term margin hit as costs rise

Jubilant FoodWorks Ltd, the operator of Domino’s Pizza in India, said it was continuing to gain market share in the pizza and quick service restaurant (QSR) segments but noted short-term margin pressure due to pressure on the business from rising energy, labor and commodity costs.

The company faces multiple inflationary headwinds, particularly from liquefied petroleum gas and piped natural gas prices, wage inflation and rising logistics-related commodity costs, managing director and chief executive officer Sameer Khetarpal said on the March quarter earnings call with analysts.

“We believe there could be some pressure in the near term,” Khetarpal said. “There is inflation pressure in the short term”

A careful phase

The comments from the country’s largest QSR operator underscore the growing pressure on foodservice companies struggling with weak consumer demand, intensifying competition and rising inflation.

Experts said the industry has entered a more cautious phase after an aggressive expansion cycle. “Store expansion will continue but in a calibrated manner,” said Madhur Singhal, managing partner and consumer industry expert at Praxis Global Alliance. “Players have gone through an aggressive capital spending cycle and will look to generate returns before the next big wave of reinvestment.”

Singhal said the companies expect “consumer spending and outdoor dining to continue their growth trajectory” before accelerating expansion again.

Energy inflation alone affected margins by around 100-120 basis points, the company said. Khetarpal said rising LPG and PNG costs are among the biggest challenges facing the business right now.

“The biggest hit has been the cost of energy, the cost of LPG has increased, the cost of PNG has increased,” he said.

However, higher gasoline and diesel prices could trigger broader commodity inflation in the consumer sector.

“Commodities, I think we’ll all wait to see how this plays out. There’s some commodity inflation coming in right now,” Khetarpal said. “If gasoline and diesel prices rise and logistics costs increase, there will be more inflation in commodities in general.”

Management has also said there is pressure from commodity and energy costs, as well as labor inflation, including minimum wage increases in several states, labor law-related changes and increased delivery-related personnel costs, as delivery sales continue to dominate the business mix.

“The minimum wage increases we have seen in some states have already been implemented,” Khetarpal said.

Despite short-term pressures, the company argued that Domino’s continues to gain market share in both the pizza category and the broader QSR market.

“There’s a fact: Domino’s gained share. It gained share in the category, it gained share in the QSR space,” Khetarpal said.

According to experts, value propositions will remain critical for growth in an environment where discretionary demand is weak. “While cheaper product versions are driving growth, this is not always due to an increase in traffic,” Singhal said. “Low-priced stock keeping units (SKUs) will drive volume growth online and help increase average order value (AoV) and order volumes in stores.”

The company said delivery remains a strong growth driver, although AoV was impacted after Domino’s lowered its minimum order value. ₹from 149 ₹99 to attract more customers and gain share.

Company’s income announced ₹2,499.46 crore in the fourth quarter, up 19.3% year-on-year. Net profit increased by 67% on an annual basis ₹82.42 crore.

The company’s revenue will increase by 17.37% in 2025-26 ₹9,512.51 crore as compared to the previous fiscal. Net profit increased by 104.61% ₹444.24 crore.

At the end of FY26, Jubilant FoodWorks had 2,562 stores in India, including 2,455 Domino’s stores, 78 Popeyes stores and 29 Hong’s Kitchen stores.

Jubilant FoodWorks previously operated Dunkin’ in India under a franchise agreement, but decided not to renew the deal after it expires in December 2026.

“We are prioritizing growth. From a growth perspective, we are prioritizing volumetric growth because we are building a long-term business,” Khetarpal said.

No price increase

The company also stated that it will avoid sharp price increases despite the inflationary environment.

“We’re not going to make big price increases; that’s off the table,” he said.

Khetarpal said the company is relying on operational efficiency, world-class product offerings and supply chain improvements to ease margin pressures.

Jubilant FoodWorks is also accelerating its transition to electric ovens and PNG systems to reduce reliance on LPG, while continuing its expansion plans with 280-300 new restaurants and focusing on increasingly smaller, delivery-focused formats.

Still, the overall outlook for the industry remains cautious. “The sector has a cautious outlook as inflation and discretionary consumption are under pressure,” Singhal said. “The QSR industry will remain vigilant until geopolitics improves and job growth returns.”

HT Media Ltd, which publishes Mint, and the backers of Jubilant Foodworks are closely related. However, neither promoter has cross-holdings.