Rapido takes on Swiggy and Zomato – this week, my social media feed has been flooded with this news.

As Rapido stepped into the food delivery segment with a new platform that proposes charging restaurants a fixed fee per order, the competition to industry giants Swiggy and Eternal’s Zomato, is heating up.

Whilst this viral image compares how each of the platforms charge their customers, what struck me was the cost pressure on QSR companies in India.

India’s Quick Service Restaurant (QSR) sector—once the darling of post-COVID recovery stories and the poster child of our consumption boom—is facing a reality check that’s hard to digest.

From Domino’s to McDonald’s, Burger King to KFC, the numbers are telling a story — Same-store sales are falling, footfalls are dropping, and what was once considered “recession-proof” is now looking decidedly vulnerable.

But here’s what makes this particularly fascinating from an investment lens: we’re witnessing a fundamental shift in how India consumes.

The question isn’t whether QSRs will bounce back. With less than 1 store per million people compared to America’s 40+, the math on future growth is still compelling. The real question is simpler, yet more complex: In a market where everyone’s fighting for the same wallet, who’s actually building habits that stick beyond the honeymoon period?

In today’s edition of the Create Wealth newsletter, let’s uncover —

• The great QSR cooldown
• How to evaluate a QSR business: the four metrics that matter
• Cracking the unit economics of QSRs
• The QSR strategy reset
• Future roadmap 

What industry leaders are seeing: A market in transition

The QSR sector is experiencing a shift, and the insights from industry leaders paint a picture of adaptation and strategic recalibration rather than decline.

Across the board, India’s QSR players are witnessing the same trend: demand is slowing, volumes are softening, and discretionary spends are under pressure. The post-COVID boom that lifted food delivery, dine-in formats and store expansions has now clearly plateaued.

Let me show you a few excerpts from a few recent earnings calls of QSR companies. 

Rajeev Varman, who runs Restaurant Brands Asia (Burger King’s India operations), put it most directly. The QSR industry has been running negative same-store sales for two years straight. Stores that have been open for more than a year are actually selling less than they did the year before. In Varman’s words, just maintaining last year’s sales numbers has become “a very big challenge.”

Saurabh Kalra from Westlife Foodworld (McDonald’s India) offered perhaps the most telling insight: this slowdown isn’t limited to organized QSR chains. The local dhaba, the roadside chaat vendor, the neighborhood fast food joint—everyone’s feeling the pinch. When both premium burger chains and street food vendors are struggling simultaneously, it signals something deeper about how Indians are spending on food.

Sameer Khetarpal, CEO of Jubilant FoodWorks (Domino’s), refrained from directly commenting on the demand slowdown, but his messaging reflected a cautious backdrop. He emphasised that recent growth was driven largely by internal initiatives. The underlying tone suggested that the company is navigating a subdued consumption environment, particularly in the mass and value segments.

The situation becomes even clearer when you look at Devyani International, which operates both KFC and Pizza Hut. Having two major brands under one roof gives them a unique vantage point, and their message is unambiguous: demand stress is real, and it’s persistent. Two consecutive years of declining same-store sales have forced them to slow down their expansion plans—a significant shift for an industry that’s been in growth mode for years.

Perhaps most telling is what’s happening with Swiggy and Zomato. These platforms revolutionised how Indians order food, making it as easy as tapping a phone screen. Even they are seeing quarter-on-quarter declines in their core business.

What emerges from these data points is the recalibration we are seeing in the QSR industry. 

The industry is moving from a phase of explosive growth to one of sustainable building. The companies that are being honest about these challenges—and adapting their strategies accordingly—are likely positioning themselves better for the next growth cycle.

The message is clear: the easy growth is over. Now comes the harder work of building businesses that can thrive in a more selective market.

How to evaluate a QSR business: the four metrics that matter

With demand under pressure, understanding how QSRs are really performing comes down to a few key metrics. These are the levers investors and operators track closely that define profitability, scalability, and long-term resilience.

1. Same-Store Sales Growth (SSSG)

This tells you if demand is getting stronger or weaker. It looks at how stores that have been open for more than a year are doing compared to last year—ignoring any boost from brand new locations.

2. Average Daily Sales (ADS)                                                                                                             

ADS tracks the daily revenue a store generates. When this number falls, it’s because either fewer people are coming in or customers are spending less per visit. Dropping daily sales often means the store is making less profit and is one of the first signs that a location is in trouble.

3. Store expansion and payback period

Fast food companies often grow by opening more stores, but what really matters is whether each new store makes financial sense. A healthy business should earn back what it spent to open a new store within a reasonable time frame.

If it takes too long to earn back that investment, it hurts cash flow and returns. When demand is weak, new stores take even longer to become profitable, making the decision of how fast to expand much trickier.                                                                             

4. Operating margins                                                                                                                    

This shows how well a company controls its costs compared to what it earns. Fast food businesses face fixed costs like rent, rising food prices, and fees to delivery apps—all of which squeeze profits. During slowdowns, this gets even harder: costs stay the same or go up while sales drop, crushing profitability. Brands with leaner operations and better pricing power stand out.

Cracking the unit economics of QSRs

At first glance, the QSR business looks deceptively simple – standardised menus, fast-moving inventory, and predictable footfalls. But under the hood, it is a margin-tight, volume-driven model where profitability hinges on scale, efficiency, and time. 

Several factors have made profitability elusive for QSR players in FY25. A few are: 

• High fixed costs and underutilised capacity: Rent and staff expenses can account for 25 to 30% of store-level revenue. QSRs are built for volume, but when footfalls drop, that structure turns into a liability. Stores run below capacity, especially those designed for high throughput, and margins take a direct hit.
• Expansion plans: Store additions continued in FY25, but volumes lagged. This has led to higher depreciation and cost absorption without proportional revenue lift, as new stores take time to mature but start hitting the P&L from day one. In a subdued demand environment, this mismatch weighs heavily on profitability.
• Rising Input costs: Inflation in ingredients like cheese, flour, and edible oil continues to pinch. Without the headroom to raise prices meaningfully, gross margins remain under strain.
• Aggregator commissions: Post-COVID, delivery orders have taken up a larger share of the revenue mix, but at a cost. Brands with a high dependence on digital orders face a double squeeze: aggregator commissions of 18 to 25%, and the added burden of platform-driven discounts. While delivery boosts reach, it also dilutes margins more sharply than dine-in.
• Royalty and brand fees: Franchisees pay 3–8% of sales as royalty and marketing fees to global QSR parent companies. These fixed payouts put further pressure on weak demand cycles as they are paid on sales, not profits.

In FY25, these dynamics played out across the board. With SSSG declining and ADS under pressure, many brands saw profitability take a hit. The squeeze was compounded by continued expansion. Depreciation costs rose sharply, as capital expenditure rose, leading to an impact on profitability.

The top five listed QSR players by market capitalisation reported an average Return on Equity (ROE) of -2.8% and Return on Capital Employed (ROCE) of 5.7% in FY25. Among them, only Jubilant FoodWorks crossed the double-digit threshold on both metrics. Its performance stands out in an otherwise subdued sector, helped by a relatively mature brand, strong consumer recall, an established network, operational efficiencies, and deeper penetration across markets.

The QSR strategy reset

In a softer consumption environment, India’s QSR majors are shifting gears with a series of focused tactical plays. The goal is to protect volumes, preserve margins, and stay relevant in an increasingly value-conscious market.

Here is what the new playbook looks like:

• Loyalty apps and digital promotions: App-only deals and reward programmes are driving repeat orders, nudging users toward direct channels and improving data capture.
• Value menus to protect frequency: To retain frequency, brands are rolling out ₹99 combos, bundled deals, and smaller, single-serve meals instead of relying on full-ticket orders.
• Low-capex formats: Express stores, kiosks, and smaller layouts are gaining traction. These formats lower setup costs while preserving market presence.
• Tech-enabled ordering and operations: AI-driven menus and app integrations are boosting throughput. Backend systems are also being tightened to reduce inefficiencies.
• Supply chain optimisation: Central kitchens and tighter inventory controls are being rolled out. Vendor contracts are also being renegotiated to improve unit economics.
• Measured global expansion: QSR brands are eyeing underpenetrated Southeast Asian markets as long-term plays.

Future roadmap 

Despite the current slowdown, the long-term thesis for QSRs in India remains intact. The sector is still massively underpenetrated.

The table below highlights this clearly. McDonald’s operates over 40 stores per million people in the US, but fewer than one per million in India. Even Domino’s, the most deeply penetrated player in the Indian market, has just 1.5 stores per million, compared to 21 per million in the US.

It is a signal of the headroom for future expansion. And because the base is so low, even modest improvements in per capita penetration can double or quadruple store counts over the next decade.

Urbanisation is accelerating, nuclear families and dual-income households are becoming the norm, and eating out is no longer reserved for special occasions. The real question is not whether demand will return, but when and who will be best positioned when it does.

FY26 could bring a cyclical recovery with inflation well within control, base effects fading, and the possibility of tax cuts giving consumption a nudge. India’s Q4FY25 GDP growth of 7.4% surprised even the optimists, and if the momentum holds, it could translate into stronger discretionary spends.

But it is equally possible that we are entering a more selective consumption era, where only brands with pricing power, strong unit economics, and execution discipline will thrive.

The real test for QSRs isn’t whether someone tries your burger once. That’s easy. A well-placed ad, a coupon, or a craving can pull that off. The real test is whether they come back for the third, fourth, and tenth time without a discount or a push notification.

When the novelty fades, does the habit stick?

That’s where brand gravity kicks in. Consistency, convenience, and recall take over. India’s still a young, underpenetrated market where loyalties aren’t fixed, and habits are still up for grabs.

Which QSRs are building that habit today? And which ones are quietly losing it? That’s the question every investor should be asking right now.