Thanks, Rio. Welcome, everyone, and thank you for joining us on Westlife Foodworld earnings conference call for the third quarter ended 31st December 2025.

I am Chintan Jajal, Head IR at Westlife. From the management team, I have with me Mr.

Akshay Jatia, President and CEO; Mr. Saurabh Kalra, Managing Director; and Mr.

Shardul Joshi, Chief Financial Officer. We will commence today's discussion with Akshay presenting his perspectives on the company's overall business strategy, progress, and outlook.

Subsequently, Saurabh will provide an overview of operational and financial highlights. Then we will open the forum for questions and answers.

Throughout the session, we will refer to earnings presentation and financial releases which are available on NSE, BSE, and investors page of our website. With that, I now request Akshay to commence this session.

Thank you, and over to you, Akshay.

Great. Hello and good evening, everyone.

Thank you for joining us today. I hope you had the opportunity to review our Q3 results.

This quarter, our efforts were firmly anchored in strengthening guest count momentum by sharpening our consumer proposition and consistently delivering a high-quality customer experience despite a challenging operating environment. Same-store sales growth in the quarter was negative at 3%.

However, what is reassuring is that the underlying guest counts remain broadly stable on a year-on-year basis. We began to see encouraging traction in guest counts from November.

As a result, both November and December delivered flat to positive comparable guest count growth at a system level, with the West continuing to outperform the Southern markets. This positive momentum extended into January, where we reported positive same-store sales growth supported by healthy mid-single-digit guest count growth.

That said, these are still early days, and we would refrain from calling a sustained revival until we see a few more months of consistent momentum. Before getting into the detail performance of the quarter, I would like to draw your attention to slide nine.

One of the most pivotal shifts in our approach this year has been a sharper and more deliberate focus in driving guest counts through a winning consumer value proposition. We are now beginning to see early evidence of this strategy playing out.

At the center of our approach, there is a clear and unwavering promise: accessible everyday value combined with the iconic McDonald's experience, delivered with absolute consistency and supported by strong economic discipline. The balance between value, experience, and scale is what gives McDonald's its enduring competitive advantage.

This framework is built on five core pillars. First is value.

McDonald's wins when value is predictable and trusted, not through sporadic discounting, but through everyday value that builds habits and reinforces our position as the default choice for consumers. Second is experience.

Guests come to us for the food they know and love, delivered quickly and seamlessly. Speed, accuracy, and those familiar feel-good moments are critical in reducing friction and driving visit frequency.

Third is relevance. We must remain culturally relevant and unmistakably modern while staying true to what makes McDonald's McDonald's.

This means being an everyday choice across occasions, generations, and platforms without compromising on our brand codes. Fourth is profitability.

Guest count growth needs to be volume-led while remaining margin-protective. Growth must be sustainable, driven by initiatives that scale across our system and leverage our operational strength, rather than unsustainable and aggressive discounting.

Finally, it's all about consistency. This is non-negotiable: the same McDonald's experience in every restaurant, every day.

Consistency is what converts trials into trust, and trust into repeat visits at scale. When these five elements work together, they compound.

The outcome is not just short-term traffic uplift, but sustained market leadership powered by a consumer value proposition that is truly differentiated and uniquely McDonald's. We're also pleased to have Shardul Joshi join us as our new CFO, bringing in strong financial leadership and discipline to our next phase of growth.

With this, I will now hand it over to Saurabh to take you through the other highlights for this quarter.

Thank you, Akshay. Good evening, everyone.

During the quarter, our focus remained firmly on driving our guest count momentum, as Akshay spoke about, through consumer value proposition while consistently delivering exceptional customer experiences across both the dine-in and delivery channels. This focus will continue as we move forward.

I'm particularly pleased that we strengthened our value proposition without even diluting margins. I think we talked about it even in the last call that we were trialing out our value platform, and that seems to be giving us good results without diluting any margins.

Our consolidated revenue for the quarter stood at ₹6.7 billion, reflecting our year-on-year growth of 2.6%. For the nine-month period, revenue grew 4.4% YoY.

While the operating environment remains challenging, we are witnessing some early signs of improving guest counts, as Akshay highlighted earlier. The everyday value meal priced at ₹99 was launched in West in December and is seeing very healthy momentum in driving footfalls.

A key highlight of the quarter was the exceptional performance of our digital campaigns, which helped us achieve a record single-day guest count milestone on the McDonald's app. The merry meal introduced during Christmas period generated significant amount of brand buzz across all major social platforms and also in our restaurant, with merchandising selling out just in six days.

Congratulations to the team on these strong wins, which continue to build brand relevance and deepen consumer connection. From a channel perspective, our on-premise business grew 6% YoY, supported by a strong value platform, sharper digital engagement, and focus on hyper-local marketing.

Off-premise saw a slight decline, largely due to volatility in aggregators' numbers. That said, our McDelivery channel continued to grow strongly and is emerging as a robust growth engine, supported by a strong customer acquisition and our promise of seamless and reliable 20-minute delivery experience.

Execution excellence continues to underpin our profitability. Like-for-like gross margin remained broadly stable on a sequential basis, driven by supply chain efficiencies, partly offset by menu price adjustments following GST rate change.

There's an optical impact of approximately 400 to 500 basis points in gross margin this quarter due to the regrouping of processing charges from other operating expenses to cost of goods. For a like-to-like comparison, please do refer to the gross margin note slide in our earnings deck.

Restaurant operating margin improved 150 basis points year-on-year, while operating EBITDA margin improved 70 basis points year-on-year. These improvements were driven through internal cost optimization initiatives, despite higher advertising and promotion spends and continued growth investment.

Cash PAT for the quarter stood at ₹583 million, representing 8.7% of sales. Our digital ecosystem continued to be a grow driver.

Digital to sales remained stable at approximately around 74% to 75%, supported by loyalty program and increased engagement through our mobile app and self-ordering kiosks. Cumulative app downloads have reached nearly 50 million with around 3.5 million monthly active users.

We remain committed and disciplined and prudent network expansion. New store performance continues to improve, supported by better site selection and use of location intelligence tools, enabling a faster path to profitability and greater accuracy in predictive sales.

We opened 10 new restaurants during this quarter, taking our total restaurant count to 458 across 73 cities. All eligible restaurants now feature McCafé and Experience of the Future formats, and 24% of our restaurant network offers drive-thru facility.

We remain on track to reach our 580 to 640 restaurants by 2027. In summary, Q3 marked meaningful process in strengthening our guest count momentum and enhancing brand relevance, underpinned by disciplined and sustained profitability.

Going ahead, we remain focused on the core fundamental that differentiate McDonald's: winning consumer proposition, consistently superior consumer experience, and long-term margin discipline. Thank you for your time, and we are now happy to take any questions you might have.

Hi, Saurabh. Thanks for the opportunity.

My first question is on this differentiated merchandise-based marketing strategy. First socks and now a speaker also is creating a lot of positive noise on social media.

What has been the intent behind such campaigns, and maybe initial takeaway from a growth acquisition perspective? Is there any additional cost related to these merchandises?

Where will it sit in the P&L?

Thank you, Devanshu. Obviously, it's a part of the larger framework, as Akshay spoke about.

Driving value experiences for our consumers are one of the most important part and top two pillars to drive our guest count momentum in the near to midterm. Given that was the context, then these are experiences which we would like to add, and this is something which is not only new to McDonald's, a lot of countries do this.

We have just used the McDonald's playbook to drive experiences for Gen Z, kids, and adults. In that format, I don't think there is cost additional attached to it, because we charge it as a wholesome combo when we are providing it, and all of that is factored when we are creating a proposition for our consumers.

Fair enough. Saurabh, our gross margin has stayed flat sequentially, and there are two things here, right?

There was this nearly 100 basis points of positive benefit that could have accrued from a GST perspective. Then I guess in December you have launched these value promotions in the West region, and I could gather from the initial remarks.

How should we see from a full-quarter perspective, as in from Q4 expectation perspective, should we see some moderation in gross margin because the 100 bps impact that was there has been nullified by one month of value promotion? Any comment on that?

I think we had commented on that last quarter itself that we have passed on all the benefit which we are getting to the consumer. Because we have passed on every benefit, we also took this opportunity to simplify our operations business, and therefore you see reclassification of some of the gross margins.

We did not see any additional benefit coming out of that. However, we have not randomly launched ₹99.

I think there is a lot of work which went, and we realized that it is not adverse or we will not take a margin hit when we do this 99, and we have rolled it out in a certain manner so that it's accretive as far as the business is concerned. It's been rolled out across all West, and two and three select markets in South, and some trials are going in few cities in South, too.

I don't think we have done anything which is going to have a negative impact on GP.

Sure. Fair enough.

The GP levels should sustain, right? Got it.

Lastly, sir, digital has been a key focus for us as well, right, along with the value. Growth in off-premise channel has been a bit soft.

I understand that your own app is doing relatively better, but we are facing some challenges on the third-party aggregators front. Such challenges though are not visible for other QSRs that are reporting, right?

Anything that you can sort of highlight which is impacting us more versus other players?

Just to add over there, I think our digital sales continue to grow. We definitely have not as much growth as we would like on 3PO platforms for our brand, but we're working quite closely with them to figure out how to do this in a sustainable manner, because our approach is to do it in a partnership approach, which will allow us to grow in a sustainable manner.

That's continuing. Like you said, lastly, we are very focused on our own McDelivery platform as well, which will allow us to kind of stay very close to our loyal consumer base.

That has actually seen a lot of traction with a lot of the growth investments that we've done over the last six months. We've mentioned this before, but we've had significant uptick in December and January on our own platform as we've connected better with our customers, and it's been done through a multipronged strategy.

It's not only about marketing or discounting. It's about making sure that the customer gets value for money across the experience, from buying to fulfillment.

I think that's how we're looking at digital sales, and we've seen healthy growth in our overall contribution of digital sales to the business. I think we're quite pleased with where we are today, and things should only get better.

Got it. Just small bookkeeping question, Akshay.

Monthly active users and overall app downloads is a key metric here. We used to provide the growth rates in these metrics, but somehow we have avoided providing that.

If you could comment... We've still provided, Devanshu, the monthly active users as well as cumulative app downloads.

Definitely, they are important metrics to track, but what I said in terms of overall growth of the business should kind of supersede that, right? Because it's eventually about business growth, and we have seen very encouraging business growth on the app and our McDelivery platform over the months of December and January as all of the work that we've been doing has come together.

I would look at it in that way, and we'll keep sharing more color as we break down the numbers.

If there is any specific query, I think, Chintan, you can write to Chintan, and he should be able to help you out on that.

Sure. Thanks.

Thanks, Akshay and Saurabh, for taking my questions.

Thank you for taking my question. My first question is with regards to store openings.

If we look at the store openings during this quarter, it was a bit lower versus last year or maybe the target number for the year now seems a bit higher for Q4. Is there some bunching we can expect, because you have kind of maintained the guidance for FY

'27? We do foresee that we will open around 20 to 25 restaurants this quarter, which should be able to compensate for whatever was happening in October, November, December.

Oh

sure. Thanks.

My next question is with regards to the growth investments that you have been doing for the own app as well as this store opening app as well. Are these expenses now done, and are these already reflecting in the Q3 and Q2 the other expenses line item?

Some growth investments are always on, because you're always working on trying to do projects, etc., etc. Largely, the two which we had called out last time are largely done.

Some of the variable component might kick in, and we are starting to see results from January. Maybe next time we'll try to share a little bit more flavor on it.

Despite that, you have seen a decent gross margin expansion and despite the negative leverage. It is quite commendable to see that.

Is the right inference that once the SSG starts to turn positive, we can see good expansion in the EBITDA margin from here on?

Definitely. That's the business model we operate.

Okay. Sure.

Just lastly, on the growth on the delivery front. You did highlight to Devanshu earlier that your own apps are continuing to do well.

Any sense you can give, because the inference that comes is that there will be definitely decline on the 3PO apps for you in terms of the [deliveries?] .

Very clearly, what I can tell you is, we had a deep red on one of the platforms. One of the other platforms was okay.

We are working with them to get the relationship right and to be able to create a plan by jointly working on sustainability, and we've been seeing gradual progress on both of them. December and January has seen significant amount of progress as far as the 3PO partnership, etc., is concerned.

Now obviously, there is a choice which all of us make depending on the investment, whether it's profitable, not profitable, and what is everyone's core line. We made our choices, and that's also showing in some of the things which you see in terms of results.

We are re-evaluating it. We are always trying to make sure that we're not losing a competitive advantage in any of the platforms.

That's the endeavor. We keep re-evaluating, and we keep working with even the 3PO partners.

I think this was what happened in October, November maybe in some bit was happened because of the lack of planning, etc., on our part jointly, and then some of it we'll recover that.

I think like we said, right, the delivery platform, we feel, has opportunity. As we continue to work with our partners and grow our own app, you will see a growth in on-premise.

I think that's the way you should look at it. Off-premise.

Sure. Just lastly, can I slip in one more in terms of the growth trajectory.

Can you help us out even on the offline piece during Q3, how the growth has progressed for you? The positive SSG, the growth trajectory, how month on month that is progressed for you, and if this January month positive SSG, how much do you feel is sustainable going ahead?

See, we don't break down those numbers, right? For last quarter, you have our overall numbers, we don't really break down how every month grows.

What we have called out is we definitely saw good recovery in guest counts in November and December, and we've also called out what the numbers are looking like in January to give you all more flavor. Now, beyond that, unfortunately, we can't give because that would be completely forward-looking.

I think that let's take this positively, because we are experiencing good momentum, and we're confident that that should play out over this quarter. I think this is different to what we've said in the past, but again, it's too early for us to say too much, and second, we can't really make any more forward-looking comments.

Sure. Thank you for answering my questions.

Thanks.

Thank you.

Good evening to the team, and thanks for giving the opportunity. My...

Reyan, your voice is very muffled.

Am I clear? Hello?

Yeah. Now is better.

Okay. My first question is around your regional demand.

You have highlighted continued softness in the South, while the West shows healthy footfall growth.

Sorry, we can't hear you.

Please give me a second. Am I clear now?

Sorry?

Am I audible now?

Yes. Yes, go on.

Yeah. Yeah.

As per you have highlighted regarding softness in South, while the West shows healthy footfall growth, is this divergence driven more by macro demand conditions or competitive intensity and discounting? Or how should we think about regional recovery timelines?

This is my first question.

I think we had given a flavor and color of it last quarter, where we said South is a little underperforming for us. Like I just mentioned, last time also we had given a flavor that we are doing a lot of trials.

I think the experimentation which we had done even in OND, I think right now we are very clear on the playbook we want to play with. We've experimented with app, we've experimented with promotions, including merchandise.

We've also experimented with value platform, and like I said, a couple of trials in South are still on. When we look at this holistic bucket, we believe we have an answer to be able to grow guest counts both in dine-in and delivery across West and South.

That's what we are seeing in January, and that's what we do believe that we have the solution, a holistic solution which will help us grow across our geographies.

Oh, yeah. Okay.

Fair enough. My second question is around your restaurant operating margin.

Correct? Which we have seen that which increased by 150 basis points Y-o-Y despite higher A&P spends.

How much of this improvement is structurally cost efficiency versus temporary operating leverage? What should be sustainable ROM kind of on a medium term?

See, if you look at it, I think the best way of looking at a holistic restaurant operating margin is year-on-year improvement. I think you should take a nine-month to nine-month view, last year versus this year, and be able to gauge of where are we heading, because nine-month to nine-month remove all the exceptions which might be there.

We've also, if you go to page number six, we've pretty much given how the breakup looks like on the nine-month to nine-month margins.

Okay. Okay.

Fair enough. Last, one bookkeeping question, that we have seen one exceptional cost normalization, which in quarter three, one-time gratuity-related exceptional expense has done.

Post this adjustment, should we assume PAT volatility to reduce meaningfully, or are there any other known cost normalizations that we have to factor in?

Sorry, we couldn't hear the last question. Whatever I followed was a question around one-time exception, gratuity was one-time exception.

Yeah. Apart from that...

Apart from that, there was nothing. Gratuity was the only exception which we had in the P&L.

Yeah. Hi, I have a couple of questions.

My question pertains to slide 13, where we have two heads: one is royalty and one is other operating expenses, and there's very sharp reduction in both of them. Any explanation on that could be useful.

No. Actually, if you look at it, every year in month the month of December, we do get some amount of benefits due to if there is any exception in terms of reward, etc., McDonald's gives in order to open a holistic number of stores, etc.

We continue to get that, and we accrue it in December. Every year, you will see some amount of that.

Then gratuity, like and like I said, as we mentioned, is one-time exception. Otherwise, if you look at normal nine-month to nine-month yearly P&L, it is like for like for the course.

Okay. What about the other operating expenses?

Because this quarter, they have come off very sharply.

Other operating expenses is the regrouping which I talked about. We have used this opportunity to simplify our life as far as operating life is concerned from an FP&A standpoint.

FP&A has gone down, and we did provide on another sheet, on gross margin, there's a note on page 15, slide 15, how processing charges are gotten added. There is no difference in actual of the gross margin.

It's just regrouping and reclassification.

Okay. Sure.

My second question is regarding the demand environment, because you are indicating that post-November, things have now started looking up. In terms of, say, overall scenario, put together the variations which are there in West and South, how probable are we that in the current quarter, we will end up with a positive SSG?

We, as I mentioned, cannot make forward-looking statements. What we have done is definitely spoken about the momentum that we saw in December as well as extending into January.

We've spoken about guest counts going significantly positive, and we are witnessing same-store sales growth that's positive as well. I think we can't say more than that, but that itself indicates that there's very good momentum that's building.

This is different to what we've seen in the past, we're going to continue to build on it.

Yeah. Hi.

I hope I'm audible. My question is slightly maybe looking at last two quarters, not necessarily this itself.

For the same stores where if you keep out the new stores we've added, would you say the billing count or the footfall count that we are growing Y-o-Y to whatever extent, are we getting a lot of new customers, or is it largely higher repeat rates from existing customers? Just wanted to understand what is the target and impact of all the marketing and product initiatives that you've launched so far?

Sure. I'll give you a little bit of flavor of it without actually giving you the real stuff.

The reality of this is, obviously, we had started to lose the momentum of acquiring new customers at the rate which we required to deliver on our results. That's why we went experimenting, because otherwise, we might do stuff which might not be rational for business.

We've always maintained cost is a discipline, business is a discipline. We've got to do right things all the time, and sometimes it might take time.

That's why we're talking about by the end of this year, we should be in a place where we would have experimented completely and have our playbook ready. Now keeping that in mind, I think we we did prepone some experiments, like you talked about, during the quarter of July, August, September and continued completing it towards October, November, December.

Akshay already mentioned, we are pretty much now complete in terms of the playbook we have, and that gives us confidence that that this playbook will now work across geographies and and will help us drive sustainably the momentum as far as the GC is concerned. That's why if you look at the slide slide number slide number nine, Akshay talked about aggressive guest count growth and on value, experience, relevance, profitability, and consistency.

I think we've we've looked at those pillars, and we were comfortable to give you out this this guidance of saying how it is all coming together. I don't know if I answered it, but in December, we for sure saw the kind of new store new guest count we needed to bring in more customers.

We've seen that kind of momentum stay in December and sustain and improve far more in January. That's where the big picture lies.

Understood. New guest count is the primary sort of focus and result.

That's what I was wanting to understand.

Correct. Correct,

because obviously, a value-led entry-level price point communication, which is a holistic value, though, will obviously bring in a lot of customers. We also have a lot of levers within the restaurant to trade them up, keep them coming back through our whole McDonald's experience that I mentioned in my commentary.

It's a holistic approach. It's not just about acquiring new customers, it's about acquiring them, retaining them, and keeping them coming back at a particular frequency.

Fair. That's helpful.

Hi. Can you tell me what is the issue in South India?

What is the reason why the sales growth is lower?

I wouldn't say there's an issue. I think obviously, as we've been kind of focusing on the customer, right, even in the West, it's kind of taken us some time to fully understand how to deploy our strategy.

It's not very different from what we're doing and what we've been doing in the past, but we're bringing everything together across the five pillars that I spoke about. We started that journey in the West.

We've seen tremendous response in the West. We've already deployed it in certain markets in the South, where we are already seeing a good response, as expected.

I don't think there's anything too fundamentally different. I know that we have been calling it out, because obviously traditionally, the West has done better.

Our penetration in Gujarat, Mumbai, etc., has always been higher. We have been correcting that over a period of time in the South, too, and I think we've reached a good stage where now with these interventions, both should come up to the levels that we require.

I don't think that there's a fundamental issue. I think with this momentum that we're seeing, we'll see a broad-based growth across our business.

The growth in South India over the last two, three quarters has dropped versus what it used to be earlier, right? What is the reason for that?

That's what I was explaining, right? We've been very well-penetrated in the West.

I think our brand has obviously grown stronger as a result of that. As we've been correcting that in the South, opening more restaurants, focusing more on our experience in the South and execution in the South, I think we've replicated what we've been doing in the West, and that might have been a gap earlier.

As we've been fixing that, we've also deployed this value-led communication in the South a little after the West. It is lagging slightly, but we are seeing it now converge in terms of momentum, and you will see that gap narrow and narrow in the quarters to come as our strategy starts or continues to play out.

Okay. Second question is on the delivery.

Is the growth very different between the two main aggregators, or it's very similar, just the Y-o-Y growth rates or whatever you call it, growth or decline, whatever it is? Are the numbers different between the two aggregators, or they are in the same ballpark?

No, they were very, very different for us. Obviously, needless to say, there are disciplines in terms of planning together, working together, improving partnerships.

As people change from either side, some things always get dropped, and sometimes it becomes transactional. You have to pull it up and make it again a partnership.

There it was different for us, without naming which one was better or which one was worse.

Which means that there's a problem in only one out of the two aggregators, which has to be resolved, right?

Yes.

How quickly do you think that can happen? Will it take one quarter, or will it take two, three quarters?

What's your estimate?

Like I spoke about, we started correcting a lot of things in November, December. I think we've gotten the playbook right even for delivery.

I think in January, we are seeing some amount of fruition of improvement across both the channels, too. We don't think it is going to take quarters.

We think that we should start becoming flat-ish for sure across channels. Our focus remains, like Akshay said, to be able to grow our own channel, too, so that delivery continues to remain a strong pillar, because the market is growing.

Heartiest point was, not too many brands are able to create a delta on dine-in. I feel very proud of the fact that we now have a playbook to grow dine-in at a very high level, which we already have, and grow from there and also then play on the delivery side of it.

This recovery which is expected in one of the aggregators, does it come at a cost of margins for you, or no?

Like we've always maintained, we don't rush into things. That's why if we have to take a punch on our face on lower sales, etc., we do it.

We make sure that none of our disciplines get compromised, because we are not here for the short term. What we are doing with all the partners is sustainable and is in the spirit of partnership.

Okay. Understood.

While the growth might be muted versus what it could be possibly.

Okay. Okay.

Thank you so much.

Hi, good evening. Just had one on the operating expenses on the employee cost.

If I just do a quick math on employee cost per store, we've seen actually that number coming off a little bit. Could you—and that's the feature of the last maybe three, four quarters on a Y-o-Y basis.

If you could just give a sense on whether on the tech side, there has been some help which has allowed you to do this. How should we look at this number?

The second part is on the operating cost side is the royalty bit. While you did mention that incentives do fluctuate, especially end of calendar year, this one is far lower than we've seen as a percentage.

The rates are much lower than we've seen the last several quarters. Is it just kind of end-of-the-year incentive structure stuff, and it should go back to normalcy from the next quarter?

These are my questions on the operating costs. Yeah.

Yeah. Like I said, it's an annual occurring activity.

If you look at nine months to nine months, that will give you absolutely clear view. As far as labor is concerned, some of it is operating deleverage.

I don't think there is fundamentally anything which is there. If you look at it, we have been able to compensate for it in the other line items of the P&L.

If you look at the P&L holistically, I think we have been able to do quite a decent job as far as cost is concerned. Despite a little bit of negative sales growth, we've been able to maintain and improve our profitability.

Okay. Actually, my question was that you've done a very strong job, because it's actually employee cost per store actually come down, so that's actually something that I was trying to understand why.

Okay. Payroll and

benefit holistically is a little up by point 20 bps, but yeah, yeah. Go on.

Yeah. The second bit was yeah, okay, fine.

I'll take that. 9M view.

The second bit was on the uptick in growth that you were talking about in December, Jan. Sorry to just harp on this one, but how much of this would you believe would be driven by your own initiatives, which is either normalizing aggregator as the months go by, as well as the pick up a value as your advertising is hitting with the consumer and footfalls are getting picked up?

How much of it is kind of, in your view, just overall demand-led, which you would probably be seeing in your other SKUs also, because you're seeing that trend another competitor also has called that out that you've seen some improvement. Do you think it's also kind of overall demand-led or overall macro-led improvements also that have been favoring this performance?

When we look at our October, November, December, which is our brand track, we don't see that the market has uplifted. It remains how it was in July, August, September.

It's been flat-ish as far as that is concerned. We don't know about the results of Jan, Feb, March.

If market becomes a little bullish, we would know about it in our track results. In October, November, December, definitely, we've not seen overall at an IEO level, which is informal eat-out level, there being tremendous amount of growth.

In fact, it remained pretty flat-ish from what it was in the previous quarter. We would like to believe a lot of change has happened with experimentation, what we have done, and then deployment of those experimentation in the marketplace.

Got it. I'll come back for more if I have any.

Thank you.

Yeah. Hi.

Thanks for taking my question. Few questions on McCafé.

The management has consistently maintained that 100% McCafé penetration is certainly not the endgame, and there is a lot that can be done from product offerings perspective. Could you elaborate on some of the initiatives that you've taken so far, and have some of these been postponed in view of the operating environment?

We are at 100% penetration in terms of McCafé, and now the main job that we're doing is to ensure that people try our coffee and our beverages. I think we've been doing a lot of work in ensuring that our quality remains consistent across all these outlets now that have McCafés.

Number two, I think it's about creating the habit. We have a great product at a great price, and we're figuring out ways and implementing ways to make them have our coffee more regularly.

I think that's the first task to be done. In terms of product innovation, we definitely can keep improving on that, but I think the first task to be done is most important.

You will see innovation at the beverage level quarter-on-quarter, and you'll see that as we deploy offerings. Most importantly, in fact, this last quarter, we launched a subscription plan, which is actually being received extremely well by our customers.

It's a digital plan, and I encourage everyone on this call to try it, because I know that most people would be coffee lovers. I think it's fantastic value, and people are commending the overall experience from purchase to redemption to constant usage.

I think it's a great question, and I think our entire task is focused around making coffee drinking at McDonald's a daily habit.

Sure. Thanks.

Akshay, one of the other things that you maintained is that one of the strengths that McDonald's has is its ability to cater to various dayparts, unlike some of the other QSRs, and coffee was an important component of that. Would you agree that, say, competition from some of the newer players, specifically Third Wave, Blue Tokai, has affected that strength that McDonald's or McCafé has had?

Therefore the initiatives that you're talking about are even more important now?

No, definitely. It's a similar story with western fast food, right, and QSR.

Why did it become so popular eventually? Because obviously, customers got exposed to it.

This job has to be done by the entire industry, which is why I always say competition is good, because it, number one, exposes customers, and secondly, differentiates the best from the average to the bad. I think obviously, as market leaders, we're going to continue to operate in that high level of quality, and as the market expands, it only makes us better positioned to take advantage of the consumer opportunity, which is what's happening, definitely.

I think that we're very fortunate that we've been ahead of the curve. I think the market's only going to grow, and we are here to take advantage of that.

Thanks, Akshay. Lastly, I don't know whether you will be able to share this or not, over a two to three-year perspective, because of all of these initiatives, do you see the revenue contribution from McCafé increasing by, say, 200, 300 basis points without sharing the absolute number?

Obviously, if beverage consumption increases, it is beneficial for margin. The way I look at it is going back to our targets in terms of EBITDA and revenue growth.

I think that'll kind of tell you the whole story, because there's no point going into it at a category level in regards to our business model, because something goes up, something goes down. Obviously, if overall consumption goes up, high-margin products sell more, it will be beneficial from a profitability point of view.

It's definitely a growth category for us.

Very useful. Thanks a lot.

Yeah. Hi, guys.

Can you hear me?

Yes, loud and clear.

Yeah. My first question is on the ₹99 value proposition that you all have launched.

You mentioned that it's not gross margin dilutive. Could you just give me an understanding on how and where has the cost efficiency come through for us versus, say, the prior quarter, what's being done different to ensure that this doesn't turn out to be gross margin dilutive?

Rishi, again, I will not give you too many details, but we used to run 1+1 proposition at 69. You have to look at it holistically of saying what would have happened in the promix.

It's about landing the product mix right. We have worked on it, we don't see any dilution.

I'll not give you any details beyond that. I think I've given you enough hints

on that. We have discontinued the ₹69 offer, have we?

No, we have not discontinued, but in the promix, when you put XYZ proposition, something goes down, something comes up. Overall, whether it's first accretive on rupee value, then accretive on percentage, how many customers can it get, there is a full match to it.

That's why we wanted to do a lot of trials before we went live into it. We did all that, and needless to say, there are parts of supply chain efficiency.

When you know that you are going to sell a product at a certain level, you can go back and do things at the back end also. Overall, in the net scheme of things, this is not margin dilutive.

Okay. EBITDA level, it's not margin dilutive.

Gross margin, a little bit here and there. Is that the interpretation right now?

I will not give you that interpretation, but broadly, you can accept if that makes sense to you, because like I said, product mix, supply chain efficiency are still at the gross margin level. If this category becomes 100% of my sales, the percentage will go down, it's needless to say.

You're actually running an entire product mix, right, in which McCafé is a category, this is a category, there is core category, there is delivery business. There are so many nuances to it that which I can't explain to you on a call for sure.

I think what is important is for businesses which are front end facing is to be able to have the discipline of not doing stuff randomly, and being able to go to the market and see what really impact it is creating. For us, as we've seen now across the entire West and stores in South, we don't see it as margin dilutive.

Got it. Second question I had was on the royalty piece.

About 2.4% is the royalty for this quarter, and for nine months, it's 4.5% versus last year nine months was 5%. Should we consider that this year there's some accretion on the royalty piece or some discounting that we've gotten from McDonald's?

I think the way to answer that is this year would be the right base to look at it. I think we continue to work with our partner in terms of our royalty structure, and we've come to an agreement in terms of what the base should be.

This year is very well reflective of that base. As we had put out a release when we closed that conversation, so that was only a few months ago, and I think this quarter is when the benefits have started kicking in.

Okay. It will drop further, if H1 was higher royalty?

No, no, this will be the royalty base, and the rest is out on our website in terms of what the year-on-year escalation will be.

Okay. All right.

Final question, other cuisine QSRs, like you say Domino's or even Chinese QSR players, have also increased their value proposition. They are also coming with ₹99 lunch menu, ₹99 combos, which used to be slightly higher priced earlier.

Is that leading to reduction in the pie overall for, say, burgers or for you guys? Is that impacting you all, or it's now kind of settled down?

Rishi, I think we've spent a lot of time talking about how these propositions that we've been deploying across the five pillars that I mentioned are actually bringing in more customers to our restaurant, right, where we've seen significant positive traction on guest counts over December and January. If that was the case, then this wouldn't be happening, right?

I think we've already answered this question, and competition will always exist. It existed 20 years ago, it exists now, and people will consistently try to capture the customer's mind.

It's about how we do it differently, which allows us to continue to tread the path of market leadership, and we're very confident with the way we have centered our strategy around these five pillars that this will only continue.

Okay. All right.

Great. Thank you.

That's it from my end.

Thank you. Hi, team.

Just one question on innovations. If you could just highlight how has been the performance of the recently launched Surprise Burger and also the protein slice, how it has done versus your internal expectations, if you could give some numbers on that?

I think in terms of product innovation, the protein slice is definitely a great introduction. It's the first of its kind globally, and it's allowed us to continue to expand our offerings to be in the consideration set of customers.

We've gotten a huge thumbs-up over there, and it's just the start. We're going to continue to build on these type of offerings that are valuable to a lot of the customers that come to us, and we have an opportunity to continue to grow this.

In addition to that, we'll be deploying innovations over the years, and we're thinking through it by keeping the customer at the center, and we're very confident that our calendar for this year also coming up is extremely strong.

Chicken Surprise we launched 2 years back, and we've got great feedback. That's why we've brought it front and center as far as even our value proposition is concerned.

Old product, but we brought it front and center.

Just a follow-up on the protein slice, what is the number in terms of upgradations among the restaurants?

We don't break that down, because it goes up, it goes down, but the idea is to increase the consideration set or to make sure that we fall in the consideration set of all customers. Even those health-conscious customers who are looking for a wholesome, nutritious option can come to McDonald's and have a protein slice.

The idea is definitely to build on this conversion opportunity. As it keeps building, we'll figure out how to share more flavor.

I think it's too early right now to talk about it.

Okay. Just secondly on one of the initiative that we have done many quarters back, which is basically going away with the toy and introducing a book in the Happy Meal.

What's been the performance after that? How's been the family guest count after that kind of change in the portfolio?

Actually, there was an issue that we could not import toys out of the regular sources because of BIS issues and Government of India regulation, and we had to discontinue. We've been working on getting the toys back.

As a short-term measure, we brought the books in. Needless to say, books haven't been able to do what toys used to do for us.

Till now, we are still working on being able to create a manufacturing facility either in India or being able to get a certified supplier outside India, so that we can start importing toys and we can get back the toys in our restaurants.

Hi. Thanks for the opportunity.

My question pertains to broad QSR industry and our value proposition also. Post COVID, we saw that the whole industry kind of dialed up aggressively on value offerings, which also weighed on billing value.

All the recovery that we are hearing on QSR for last 2 months, should we also assume that at least when the traffic improves now, the transaction or billing value will increase, and there won't be any further downgrading or more value-seeking behavior from customers from here on, at least from the base perspective?

I think it depends on how we look at it. I think the important part is, like I said, in October, November, December, we haven't seen IEO movement.

Luckily for us, western fast food has continued to grow. On the back of rapid store expansion by everybody, so that's continued to grow.

That's the good news in our category that out of the eat-out, we've continued to remain high-growth area amongst all the relative scale in the eat-out segment. Now when eat-out improves, how it will play out is a question which we'll continue to listen, observe the consumers.

What we know is as McDonald's, we're successful when we serve a lot of consumers. We would like to do that over the next one to two years, anchor back in serving more and more customers.

That's why Akshay, when he talked about on slide nine, talked about aggressive guest count growth as one of the key levers which we have. We don't want to get distracted by right now with any other task than to be able to grow the guest count for near to midterm.

Just one follow-up there. Let's say the linearity between aggressive guest count growth and the overall billing value or transaction value, would that be narrowing down, or you believe that you don't want to commit anything on that front?

Right now I don't want to commit, because there's so many levers, and it will give you ability to take price increases. The moment you are able to take price increases, obviously, your bill value goes up.

There are so many levers in order to increase bill value, but if you get overly focused on bill value when consumers are not walking in the restaurant, it doesn't yield good results. For us, the short to medium term is to be able to get the momentum of guest counts in the restaurant.

We feel the second task is easier. You can do that even in the toughest time.

Getting an extra penny from the pocket of the consumer is not the most difficult task. I think the difficult task is, how do you make a lot of consumers walk in?

That's our focus. That's why I don't want to comment on what happens on the other side.

Needless to say, if there's availability or we can focus on both of them together, we'll focus on both of them together.

Hi, sir. Hi, team.

Am I audible?

Loud and clear.

Just one question from my side. If we look at our overall performance, say, from our metro Tier 1 versus, say, rest of the market basis, point one, has there been de-growth which has been more significant in one side of the market?

Any comments on that, sir?

As we have mentioned in July, August, September quarter also, South was a little higher as far as the decline is concerned, and West was relatively better for us. That's continued for us.

However, like I said, we've experimented, and we're now pretty confident that we have got a playbook to be able to grow in both the geographies.

That's perfectly understood, sir. Just on our metro and Tier 1 versus, say, rest of the market side, why I'm coming to it, this is the second part of the question, that over last 2, 3 years, would it be fair to assume that relatively higher shares of our stores have been opened in relatively smaller Tier markets, given that, say, metro and Tier 1 were more...

No, no.

No? Okay.

I think we've opened, if you look at, maximum numbers of stores have opened in the key cities. We've not opened more than 20% of our total restaurant openings in smaller towns.

Sure. Compression is across these key cities, too, hypothesized maybe due to competition or overall market being lower.

Fair enough. Secondly, just a follow-up on the discussion on the value proposition side.

Do we look at our portfolio right now as value versus rest of the portfolio? Is that an internal thought process or marker we look at at our overall restaurant side, or that's not something we directly keep a track on?

I think one of the levers of value is an everyday affordable platform, but we would like to believe that our entire menu is value. A lot of people find value in McSpicy Chicken, a lot of people find value in the McCrispy proposition.

We would not like to break value down into an everyday affordable platform. Needless to say, we do evaluate an everyday affordable platform with a new customers coming in.

Is it doing that job or not? I wouldn't club value and say value means the cheapest item on the menu.

Correct. Sure.

Directionally this piece continues to improve for us, or is that one conduit for driving our overall growth in the...

Yes, definitely, because it's value for money that keeps customers coming in, and it is our core pillar of driving guest counts.

Sure. Helpful.

Thank you for the answers

here. Thank you very much.

Thank you so much, everyone. Thank you for...