Jubilant FoodWorks, Westlife, Sapphire: What if QSR operations shut for 5 days? 

Shares of quick service restaurants (QSR) traded mixed on Wednesday after declining in the previous session, amid ongoing concerns over a shortage of commercial LPG that could disrupt operations if the situation persists for over two weeks. Channel checks suggested 60–65 per cent of overall cooking at major QSR chains is LPG-dependent, and they are keeping a buffer for one-two weeks of supply, said JM Financial adding that if the LPG supply chain issue persists beyond that, their operations are likely to be hampered.

Price of commercial LPG cylinder has already increased 8 per cent month-on-month in March so far amid supply disruption. The imemdiate impact could be increase kitchen operating costs; compression in restaurant-level Ebitda margins; and a rise in menu prices. 

JM Financial said any disruption in cylinder supply can reduce operating hours, limit menu availability, and force temporary outlet shutdowns. Smaller restaurants may shut immediately, but QSR chains may experience partial capacity constraints, JM said.    

"Assuming restaurants dependent on LPG cylinders are forced to shut down even for five days amid LPG supply disruptions, we reckon their revenue per store would decline by 6 per cent for the quarter; restaurant-level Ebitda would decline by a much sharper 14–20 per cent versus normalised level of operation," it said.

On Wednesday, shares of Jubilant FoodWorks Ltd, which holds franchise rights for Domino's Pizza, Dunkin' and Popeyes, traded 0.73 per cent lower at Rs 477.95. Westlife FoodWorld Ltd, the master franchise for McDonald's in western India and South India, fell 2.06 per cent to Rs 465.75. Restaurant Brands Asia Ltd edged 0.24 per cent lower to Rs 62.29. Sapphire Foods India Ltd, which runs KFC and Pizza Hut stores, slipped 0.23 per cent to Rs 172.90. Devyani International Ltd, India’s largest franchisee for Yum Brands, operating KFC and Pizza Hut outlets, added 1.27 per cent to Rs 112.     

Impact on large QSR chains such as Domino’s, McDonald’s, Burger King and KFC is lower than independent restaurants, but they will not remain entirely immune to the disruption, JM said.

Restaurants are more vulnerable as commercial LPG users are typically rationed first because governments prioritise household cooking gas supply. JM Financial cited reports of temporarily halt in dispatch of non-domestic cylinders in some regions to protect household supply.

QSR kitchens depend on consistent, high-volume LPG usage for ovens and fryers; grills; and high-speed cooking lines.

Net-net, the LPG supply disruption highlighted a hidden operational risk in India’s food service ecosystem. While independent restaurants face the most immediate risk of closures, large QSR chains could also experience margin pressure and operational disruptions in certain micro markets.

"In the near term, the key variable will be the duration of the ongoing geopolitical conflict and the extent of disruption to LPG shipping routes, particularly through the Strait of Hormuz. If disruptions persist, restaurants and QSR operators may need to shift toward alternative cooking fuels and centralised kitchen infrastructure," JM said.