Burger King India

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About the Company

Burger King India Ltd is an international QSR chain in India. It started operations in 2014 and has established ~260 restaurants across major cities.

Restaurant Brands Asia has exclusive rights to develop, establish, operate and franchise Burger King branded restaurants in India as a master franchisee.

Q4 FY23 Updates

Financial Results & Highlights

Detailed Results:

1. Same-store sales growth was 23.1% for the year ending March 23. And for Q4, it was 8.3%.
2. The revenues for FY ’23, Rs. 1,439 crores vs Rs 943 crores in FY ’22 a growth of 52.6%.
3. The revenues for Q4 FY’23 were Rs 365 crores versus Rs 268 crores in Q4 FY’22.
4. Gross profit continues to be 66.4% since the last three quarters and for FY23.
5. EBITDA in Q4 FY’23 is Rs 66 crores at 18.3% EBITDA margin against Rs 47 crores at 17.8% EBITDA margin. EBITDA margins have gone up by 50 basis points.
6. The company opened 88 new restaurants and closed 12 in FY23, taking the total count to 391 restaurants as on 31st March, 2023.
7. 240 BK Cafes were opened in FY23 taking the total count to 275.
8. On the Indonesian front, in Q4 FY ’23 the revenue was IDR 276 billion ( Indonesian currency) which is approximately  Rs. 165+ crores. 
9. The dine-in and delivery mix is such that, delivery is at 43% and dine-in is 57%.
10. EBITDA moved up from 8.2% to 10.4% on a pre-IndAS 116 basis. 
11. Company-level EBITDA margin moved from 11.3% to 11.6%.
12. Employee rate expenses went up by 10.6%.

Investor Conference Call Highlights:

1. The company currently has 15 restaurants that are now under construction and 38 are in the pipeline as the growth story continues.
2. BK app revenues grew 327% year over year with 6.2 million apps installed, 107% growth over the last years installed. The company shall continue to spend on the app and continue to work with aggregate partners while servicing consumers both on dine in as well as delivery. 
3.  Store count is 186 in Indonesia as of March 31, 2023. 
4. Popeyes in Indonesia has 10 healthy stores which are doing sales at two and a half to three times the volume of the Burger King business. 
5. The company is going to build additional 25 to 30 stores for Popeyes in Indonesia towards the end of the year.
6. The management is very excited and positive about Indonesia and wants to lay the foundation for the next 5 to 10 years in the country.
7. The company has now got two new versions for Chicken in Burger King Indonesia. These are the revamped versions.
8. The management states that 60% to 70% sales in Indonesia are in the chicken area at an industry level.
9. The management continues to have focus to improve the dine-in share of the business because that is where they believe the customer experience is at its best. 
10.  At the company EBITDA level it was at 2.5% with cash generation of Rs.36 Crores. 
11. The company launched the brand Popeye in Indonesia towards the later part of the year and spends in order to launch the brand stand at almost Rs.6 Crores to Rs.7 Crores.
12. The management expects that brand should do high teens in terms of store level EBITDA as the performance in FY2024 and start seeing meaningful numbers coming out.
13. The Indian business with the veg chicken, mutton whopper and indie tikka whopper are three variants which are designed specifically for Indian guests and they continue to be amongst the highest whopper selling markets in the Burger King world. 
14. The company also launched a 100% veg restaurant that serves no onion and no garlic menu on the Vaishno Devi Pilgrimage
15. During the year, the company carried out an extensive training program for 100% of operators and 100% of crew members to make sure that they are retrained on products, bills and so on so that they are fully ready to deliver and create customer experience.
16. The management plans to reach 450 stores by FY2024 and has postponed its 700 stores target from December 2026 to FY2027. 
17. The management gives a guidance of 10% SSSG growth by end of FY24. After which, a growth of 8% YoY is expected there-on.
18. The management gives a guidance of 67% Gross profit margins for FY24, after which it is expected to improve by further 2% over the next few years. 
19. The management gives guidance of getting at cash breakeven in Indonesia by the end of FY24.
20. The company plans to get Popeye stores in Indonesia upto 25 stores by March, FY24.

Analyst’s View

Burger King is one of the leading QSR chains around the world. Restaurant Brands Asia is the master franchisee of Burger King in India. The company grew by 29% YoY in revenues while PAT went down by 9% YoY. BK Cafe continues to expand rapidly and was perhaps one of the fastest-growing cafe concepts in the year. The BK app is also seeing good traction and orders coming in while dine-in sales are expected to grow faster going forward. Because of the strategies that the company is planning in Indonesia it is expected that additional traffic coming in, additional sales coming in. It is expected that very, very strong numbers will be delivered by Popeyes in FY ’24. It remains to be seen what challenges will the company face in its expansion in both India and Indonesia, and how will the rising competition in the QSR space in India pan out for it. Nonetheless, given the high potential of the QSR sector, the strong brand of the Burger King franchise and the rapid planned expansion of the company, Restaurant Brands Asia is a pivotal QSR sector stock to watch out for.

Q1 FY23 Updates

Financial Results & Highlights

Detailed Results

1. The company revenue from operation grew by 125% YOY and 25.4% QoQ.
2. The company has achieved SSSG of 66% in Q1 FY22 ADS and 21% in FY22 ADS.
3. GPM improved by 120 basis points YOY to 66.4% in Q1 FY23 and 30 basis points in QoQ despite inflationary pressure.
4. Restaurant EBITDA stood at Rs 49.9 Cr; 14.8% for Q1 FY23 and improved by 410 basis points YoY.
5. Company EBITDA stood at Rs 33.2 Cr; 9.9% for Q1 FY 23 and improved by 880 basis points YoY.
6. As of 30 June 2022, Company has a total of 328 restaurants and 86 BK Cafe. 
7. Company has 3.7 Mn App installs.
8. BK App Delivery revenue by 13% QoQ.
9. Indonesia’s business revenue has increased by 16.2% QoQ
10. GPM for Indonesia has improved by 140 basis points over FY 22 to 59.9% in Q1 FY23

Investor Conference Call Highlights

1. The company has 19 restaurants under construction while 40 restaurants are in the pipeline.
2. The company opened 13 restaurants in Q1 FY23.
3. The company made an upfront investment for the development of a celebrity-led campaign which resulted in incremental marketing spending of 220 basis points in Q1 FY23
4. The ADS recovery in Indonesia business is 78% and Management expects to fully recover by September.
5. The company spends zero rupees on buying paid followers, so all of the followers on those social media are organic fans.
6. Because of the strong loyal base company has an engagement rate of 10-12% compared to an industry average of about 4-6%.
7. The company witnessed 14% QoQ growth in App traffic with an MAU of 753k.
8. The company’s investment in the marketing campaign results in a 20% growth in dine-in traffic.
9. The company opened 51 BK Café in Q1 FY23 and brought a total of 129 Café.
10. Company has signed master franchise agreement for Popeyes in Indonesia and plan to open 300 restaurants in the first 10 year and as per requirement company has made initial investment of USD 5 million
11. The management expects to open 370 stores and 200 BK Cafés by the end of March 2023
12. The management expect SSSG to grow 25% by September.
13. The management outline four key growth driver for the business in long term a. Strong Value Proposition b. Differentiated & Relevant Menu c. Incremental sales & Occasions sales d. Digital Delivery Ecosystem
14. The company has opened the first 100% Veg BK restaurant in the world with a no garlic and no onion menu.
15. Company is planning to open more Freestanding Drive-through (FSDT) locations in Indonesia as they are better margin profiles compared to malls.

Analyst’s Views

Burger King is one of the leading QSR chains around the world. Restaurant Brands Asia is the master franchisee of Burger King in India. The company has delivered a strong quarter with revenue rises of 125% YoY and 25% QoQ. Going forward BK Cafés are likely to be a key growth driver in addition to the business recovery in Indonesia. The company also faces a lot of competition from a historical player so it would be interesting to see how the company handles this challenge and expand its business. Nonetheless, given the high potential of the QSR sector, the strong brand of the Burger King franchise, and the rapid planned expansion of the company, Restaurant Brands Asia is a pivotal QSR sector stock to watch out for.

Q4 FY22 Updates

Financial Results & Highlights

Detailed Results

1. The company had a great quarter with revenues increasing by 26% YoY
2. Q4 FY22 ADS recovery stood at 95%, April @ 102% & May @ 111%.
3. Region Recovery: West: 141%; South & East: 112% and North: 100%
4. GPM improved 50 bps from 65.6% to 66.1%.
5. Restaurant EBITDA% stood at 17.3% Vs 17.1% YoY.
6. Company EBITDA% stood at 10.7% Vs 10.2% YoY.
7. Restaurant count stood at 315 after 21 net new additions in the current quarter.
8. BK app installs stood at 3 Mn which is a 25% growth QoQ while BK app delivery revenue growth stood at 24% QoQ.
9. The company launched 17 BK Cafés in the current quarter.

Investor Conference Call Highlights

1. The company saw SSSG of 17% in Q4FY22.
2. The company has a pipeline of 50 restaurants while it has 13 restaurants in construction.
3. The company did several activities like meme premier league & launching NFTs to increase its brand engagement with the users.
4. The company re-launched its kings collection variety of burgers along with new desserts like choco-lava cake & mouse cup which will be rolled out nationally.
5. The management expects a payback period of about 1.5 years on the cafe investments.
6. The company saw 25% QoQ growth in its app downloads.
7. The management is guiding for store count of 390 & 470 in FY23 & 24 respectively.
8. The management expects to grow SSSG by 25% in the coming FY.
9. The management changed its ADS growth guidance from 5-7% to 7-10%.
10. The company increased its GPM guidance by 100 Bps to 67% in the coming FY.
11. The GPM of Indonesia biz improved from 56.7% to 58.5% YoY while the management expects the benefits of synergies to be more visible from the 2-3rd quarter.
12. The Indonesian biz has 11 restaurants in construction & management is building freestanding drive-through restaurants which will have higher ADS & EBIDTA margins.
13. The current recovery from pre-covid levels in Indonesia is 80% & management expects it to reach 100% levels within 2-3 quarters which will drive margins close to 60%.
14. The costs of building cafe kiosks in normal stores will be close to Rs.20 lakhs & the company doesn’t need to close its stores for this renovating activity.
15. The management states that EBIDTA margins in Indonesian biz are higher than in Indian biz despite the GPM of Indian biz being higher by close to 10% due to lower rents & delivery costs.
16. The management expects very high double-digit company level EBITDA in FY 24.
17. The management states that the company’s growth in the West was aided by IPL.
18. The company’s store split comprises 50% in North, & 25% each in South & West.

Analyst’s Views

Burger King is one of the leading QSR chains around the world. Restaurant Brands Asia is the master franchisee of Burger King in India. The company has seen impressive growth and a blockbuster IPO just over a year ago. It saw revenues rise 37% YoY but profits remained subdued with an increase in losses of 35% YoY. The BK app is also seeing good traction and orders coming in while dine-in sales are expected to revive going forward. The company is also looking to acquire 83% of Burger King Indonesia to expand its business to a new market. It remains to be seen what challenges will the company face in its expansion in both India and Indonesia, and how will the rising competition in the QSR space in India pan out for it. Nonetheless, given the high potential of the QSR sector, the strong brand of the Burger King franchise and the rapid planned expansion of the company, Restaurant Brands Asia is a pivotal QSR sector stock to watch out for.

Q3 FY22 Updates

Financial Results & Highlights

Detailed Results

1. The company had a great quarter with revenues increasing by 13% QoQ
2. Q3 FY22 ADS recovery stood at 104% on FY20 ADS.
3. Region Recovery: West: 119%; South & East: 108% and North: 95%
4. GPM improved 70 bps from 65.4% to 66.1%.
5. Restaurant EBITDA% stood at 17.2% Vs 16.6% QoQ.
6. Company EBITDA% stood at 11.7% Vs 10.4% QoQ.
7. The company received shareholder’s approval to acquire 83.24%  stake in Burger King Indonesia at Enterprise Value of USD 183 Mn (on a cash free and debt free basis for 100% of the shares of BK Indonesia).
8. Restaurant count stood at 294 after 20 new additions in the current quarter.
9. BK app installs stood at 2.35 Mn which is a 55% growth QoQ while BK app delivery revenue growth stood at 41% QoQ.
10. The company launched 18 BK Cafés in the current quarter.
11. The company is in the process of acquiring 83% of Burger King Indonesia for $183 million.

Investor Conference Call Highlights

1. The company surpassed its guideline of 100% ADS recovery vis-à-vis FY20 within the third quarter itself & will thus stop referring to the phrase “recovery” from now onwards.
2. Dine in sales have recovered to from 65% to 78% of FY20 levels while delivery ADS remains strong at 160%.
3. The company’s foundational work in BK App is providing a good dividend to the company according to the management in the form of higher delivery sales & it is currently deploying 177 E-bikes for the same.
4. The management expects FY23 to be a big year for the company due to recovery in malls, launch of BK café and consolidation with BK Indonesia.
5. The company expects dine-in to start gaining more attraction in the coming quarters due to covid led restrictions coming off.
6. The management delivered on its guidance of attaining 66% GPM by Q3 itself.
7. The company is on track to close the FY with 320 restaurants.
8. The management states that the company uses  price differential as a mechanism to make sure that they realize very similar gross margins from both dine-in and delivery, as a business model.
9. The management states that the EBITDA margins of delivery are lower due to incremental cost of doing business.
10. The company currently has higher costs in its own app delivery model compared to delivery through aggregators. However it expects the costs to come down to levels of the aggregator channel once a decent scale of operations is achieved.
11. The company’s future plan with regards to business & profitability growth is laid out into three buckets – gross margin improvement, broad basing of store level fixed cost largely on the rental side and the broad basing of the corporate costs on an overall business.
12. The management expects that due to maturing of the company’s stores, its rental model will shift from minimum guarantee revenue model to percentage based rents leading to lower rental costs.
13. The management states that “traffic will be one of the biggest and strongest KPI of this business”
14. The balance 17% stake in BK Indonesia is owned by a retail group called Mitra Adiperkasa Group.
15. The management expects BK Indonesia’s store count to go from 176 to 350 in the next 5 years.
16. The company’s new BK Café will be developed as a single special café along with presence in the company’s existing Burger King restaurant outlets. Management further states that all the new BK outlets will have an inbuilt space for BK Café.
17. Company is seeing good traction for its Whopper & stunner menu.
18. Northern region is taking longer to recover due to previous issues like farmers’ protests in the previous quarter and restrictions in malls & theatres in the current quarter.
19. Royalty is capped at 5% till FY39 and is currently at levels of 2.5-3%.

Analyst’s Views

Burger King is one of the leading QSR chains around the world. Restaurant Brands Asia is the master franchisee of Burger King in India. The company has seen impressive growth and a blockbuster IPO just over a year ago. It has seen good growth with average daily sales above pre-covid levels for the 1st time since the start of the pandemic. The BK app is also seeing good traction and orders coming in while dine-in sales are expected to revive going forward. The company is also looking to acquire 83% of Burger King Indonesia to expand its business to a new market. It remains to be seen what challenges will the company face in its expansion in both India and Indonesia, and how will the rising competition in the QSR space in India pan out for it. Nonetheless, given the high potential of the QSR sector, the strong brand of the Burger King franchise and the rapid planned expansion of the company, Restaurant Brands Asia is a pivotal QSR sector stock to watch out for.

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