When Devyani International reported its results for the three months ended December last week, one statistic stood out.
The largest franchisee of fast-food giant Yum! Brands claimed it had added nearly 100 Pizza Hut outlets between April and December. This took its total store count to almost 400—a target that analysts expected Devyani to take another three months to reach.
This kind of frenzied growth is unusual for Pizza Hut, which saw a net addition of just 25 stores in the two years before the pandemic. It has, in the past, tried and failed to measure up to its larger rival Domino’s Pizza. Both global pizza chains entered India in 1996, but Domino’s store count is 2.5X that of Pizza Hut. And by revenue, Domino’s is 5X bigger.
To many Indians, pizza is simply Domino’s.
But there are signs that Pizza Hut could change that. And what better way to do it than by borrowing from its rival’s playbook—stick to small stores and focus on delivery. The strategy, which began to take shape three-four years ago, has only been turbocharged by Covid.
“Pizza Hut is basically not dine-in now,” Devyani chairman Ravi Jaipuria said on an analyst call after the recent quarterly results. “It’s a delivery store, but if anyone wants to eat there, we just give them the box.” No cutlery, sorry.
From outlets that could seat around 120 diners pre-pandemic, Devyani is now happy with stores with a capacity of just 40 seats. That’s a radical shift for a brand whose roomy restaurants used to serve as a counterpoint to the cramped outlets that characterised Domino’s.
That shift is beginning to reflect in Devyani’s numbers. Even as it goes on an expansion spree, its average daily sales (ADS) per store have been on the rise, up 18% year on year to Rs 47,000 ($630) in the quarter ended December. “For a store to hit ADS of Rs 45,000 ($600), it would take 18-24 months (since its launch) earlier. Now, it’s happening in 12 months,” says Nihal Jham, an analyst with brokerage Edelweiss Securities.
But there’s still a lot that could still hold Pizza Hut back. For one, while Jubilant FoodWorks Ltd is the sole franchisee for Domino’s in India, Devyani has to share the rights for Pizza Hut—and KFC, also from the Yum! Brands stable—with Sapphire Foods.
And Domino’s doesn’t have a team in India, unlike Yum!, giving Jubilant a free hand. “Domino’s is a non-entity when it comes to operations. It’s just Jubilant,” says a senior executive from Yum!. “But Yum!, Devyani, and Sapphire all need to be aligned on Pizza Hut.” The senior executive and a few others The Ken spoke to requested anonymity.
More importantly, Domino’s gets more than half more than half The Ken How Domino’s defied the might of Zomato and Swiggy Read more its business from its own app and website, while Pizza Hut generates just 10-20% of its online orders on its own, according to an analyst with a domestic brokerage.