Good morning [%first_name |Dear Reader%],

It’s good to be back.

If you hadn’t noticed, Trade Tricks’ last two editions were written by my colleague Aayush. The week before last, he had a sharp piece on foodtech major Zomato’s attempt to prevent too many eateries from being run out of a single kitchen. And last week, he delivered a fascinating look at how sellers on e-commerce platforms like Amazon and Meesho play fast and loose with maximum retail prices.

If you haven’t made time to read them yet, you should.

For this week’s edition, though, we’re taking a little hop across the border. By now, I’m sure you’ve read many hot takes on Sri Lanka’s political and economic crisis, and what it means for India—geopolitically and otherwise. Neither is this the right space for it, nor am I qualified enough to wax eloquent on the matter.

But months after Sri Lanka started unravelling, the implications for a certain kind of Indian company are becoming clear—one whose presence in the island nation may be small, but for which the Sri Lankan market is an important part of the expansion strategy.

The Sri Lanka question for India’s fast-food companies

All global fast-food chains have franchisees for most, if not all, of their stores in India. Jubilant FoodWorks operates every outlet of pizza chain Domino’s. Devyani International and Sapphire Foods run the lion’s share of Kentucky Fried Chicken (KFC) restaurants. (Yum! Brands, which owns KFC and Pizza Hut, operates a few outlets of the former.)

But these franchisees, all of which are publicly listed, also own the rights to a few other markets. Devyani, for instance, has nearly 30 KFC stores in Nigeria and 19 KFC and Pizza Hut outlets in Nepal. Jubilant runs Domino’s in Bangladesh and has the exclusive rights to the chain in Nepal, though it doesn’t have any stores there. And Sapphire has a small presence in the Maldives.

But for both Jubilant and Sapphire, the second-biggest market, after India, is Sri Lanka. And that’s not good news.

Jubilant has 36 Domino’s stores on the island, while Sapphire’s ties to Sri Lanka are even deeper. It runs 92 Pizza Hut outlets and six Taco Bell eateries there. In fact, Sapphire is the largest fast-food company in Sri Lanka.

Jubilant may not be losing much sleep considering Sri Lanka brought in just Rs 50 crore (~US$6 million) in revenue in the year ended March 2022—just over 1% of its consolidated top line. It’s not quite the same for Sapphire, whose Sri Lanka sales of Rs 300 crore (US$37 million) in the same period were 17% of its overall revenue.

Between the years ending March 2023 and March 2025, however, brokerage Edelweiss Securities expects Sapphire to add just 10 outlets annually in Sri Lanka, less than half the new stores it added in the year ended March 2022.