Jubilant FoodWorks is expecting the Dunkin' Donuts vertical of its business to achieve breakeven by the end of the current fiscal, a top executive said.

The BSE-listed franchisee partner of the American doughnut and coffeehouse chain in India has brought down the number of stores from a peak of 77 to 32 now across ten cities, thus shutting down most of the unprofitable stores and cutting losses.

Hari S Bhartia, co-chairman, Jubilant FoodWorks Ltd (JFL), said the company has made continued progress in cutting losses over the last year. "The business is seeing robust same-store sales growth on the back of very strong momentum in the core category of doughnuts and beverages that are driving growth and working for the brand," he said during an analyst call on Wednesday.

While 50% of the stores were closed in the April to June quarter, the company has shut down five more outlets in the July to September period. On reasons for closing the five additional stores, Bhartia said that the management took a very objective call as there was not positive visibility on those outlets.

The company, which also operates fast-food chain Domino's Pizza, posted a 60.2% on-year growth in net profit at Rs 77.7 crore for the July-September quarter. Revenues rose 21.3% to Rs 881.36 crore.

While shutting down of the Dunkin' Donuts stores hit JFL's margins by 55 basis points (bps) in the June quarter, the impact in the September quarter is to the tune of 50 bps. One basis point is a hundredth of a percentage point. "Our intent is to have this business break-even as we exit this financial year. We are confident and remain committed to that," said Bhartia, adding that the management is not expecting any drastic reduction in the number of Dunkin' Donuts outlets going forward.

The US parent recently repositioned the doughnut brand as Dunkin'. According to Pratik Pota, chief executive officer and whole time director, JFL, "We do not expect this to have any material impact in India with respect to either the business model or its own plans."

As for the planned shift in beverage choice from Coca-Cola to PepsiCo, the JFL management said it is in the process of evaluating the future beverage partner and would not want to make any comments on the same.

Talking about the overall business scenario in the foodservice industry, Bhartia said, the landscape is promising and that the management is confident of its future prospects in this space.

JFL continues to see good traction for its everyday value proposition, which has helped drive a significant increase in order growth, especially in delivery. "We also saw a sustained increase in new customers coming into the brand. Our sharp focus on/and investment in digital are working well. The new Domino's app launched in the first quarter has received positive feedback and the train ordering and advance ordering features were supported with an aggressive television campaign. Online sales are now 68% of the total delivery sales," said Pota.

The quarter gone by also saw a significant increase in the competitive intensity and surge in demand for delivery manpower, which was driven by food aggregators and e-commerce players. "We did well in dealing with this challenge by stepping up both retention and hiring efforts. This has resulted in some cost pressures during the quarter and we expect this to continue in the near term and are hopeful of mitigating it through a host of other cost-saving initiatives," said Pota, adding that the company is well on track to open 75 Domino's restaurants by the end of fiscal 2019.

In another development, the company management has decided not to use outsourced (third-party food delivery aggregators) for delivering its pizzas, thereby taking control of the end to end pizza delivery experience for its customers. Accordingly, pizza delivery has been gradually moved in-house in the September quarter and has been reduced to nil in the current quarter.

APPETISING MIX

• 1,167 – Total store count for Domino's as of September-end  
• 50 bps – Hit on JFL's margins in Q2 on account of closure of Dunkin' Donuts stores  
• 32 – No. of Dunkin' Donuts stores of September-end