Mergers, money flow into India’s QSR industry as sales stall

For much of the past decade, India's fast-food chains thrived on a simple formula: open more stores, keep prices low, and count on the young, urban population eager to eat out. That model is under strain.

As consumer spending slows and operating costs rise, India's quick service restaurant industry is turning to consolidation, fresh capital, and menu reinvention to sustain growth in the country.

In recent months, RJ Corporations' Devyani International has emerged as one of the most active dealmakers. Its merger with Sapphire Foods India will create a sprawling platform that includes KFC, Pizza Hut, Costa Coffee, Vaango, and Taco Bell, operating more than 3,000 outlets worldwide and generating about Rs 8,000 crore in annualised revenue.

DIL has also moved beyond Western fast food. In April 2025, the company acquired an 80.7% stake in Sky Gate Hospitality, the parent of Biryani by Kilo, for Rs 431 crore. The dealmaking extends beyond listed players. Privately held snack and sweet group, the Haldiram's, is in advanced talks with the US-based Inspire Brands to bring sandwich chain Jimmy John's to India, while Bikaji Foods Retail plans to invest Rs 131 crore to acquire a controlling stake in hazelnut Factory Food Products.

Private equity firm ChyrsCapital last year bought an 85% stake in premium bakery chain Theobroma.

Money is also flowing in through private investors into QSR giants. For instance, Wow! Momo recently raised Rs 75 crore from Madhusudan Kela. In March 2025, Singapore's Temasek, Abu Dhabi-based IHC, and US firm Alpha Wave Global together bought more than 10% of Haldiram's, underscoring global investors' interest in India's food market.

However, behind the acquisitions and investments lies a more sobering reality. Several QSR chains are witnessing a decline in their same-store sales, weaker brand margins, and low EBITDA over the past few quarters.

Devyani International reported a decline in brand contribution to Rs 941 million in the second quarter of the current fiscal year from Rs 1,105 million a year earlier, while operating EBITDA fell to Rs 462 million. KFC's average daily sales and same-store sales both declined by 4.2% during Q2, and Pizza Hut posted a similar contraction.

Westlife FoodWorld, which operates McDonald's restaurants in India, reported a 2.8% drop in same-store sales over the same period.

"Over the past two years, we faced headwinds with negative same-store sales growth," said Akshay Jatia, the chief executive officer of Westlife FoodWorld, pointing to slower income growth and cautious consumer sentiments.

Industry analysts said that the slowdown has been broad-based. "This is not a single brand issue," said Ravi Swarup, a partner at Bain & Company in India. "Same-store sales growth has softened across the industry over the past five to six quarters," Swarup added, "To counter this (hopefully) temporary slowdown in SSSG, platforms and brands have been pushing deals and promotions. Consumer fatigue is not really a concern, though menu innovation and customer experience will need investments to bring consumers back". Notably, restaurant operators are have started adding value meals, targeted marketing, addition of regional flavours to modernise menus and promotions more precisely. Devyani executives have pointed to strong demand for low-priced items such as KFC's Rs 69 Chana Chatpata Burger, while Pizza Hut has leaned into cheese-heavy offerings aimed at encouraging repeat visits.

"The focus shifting towards menu innovation, premiumization, and technology-led personalisation is critical," said Madhav Kasturia, founder of the logistics startup Zippee. He said that promotions work best when targeted and data-driven.

India's quick service restaurant market is expected to reach about $30.4 billion by 2026, growing at a near double-digit pace, according to Jajabor Brand Consultancy, with delivery accounting for a rising share of transactions. "The next generation is price-sensitive, but not purely price-driven," said Sourya Banerjee, associate director at the firm. "Brand identity and experience are becoming defensible advantages".

For companies like McDonald's, this has meant renewed attention on owned digital platforms. Jatia said the company plans to upgrade its McDelivery app, from its interface to its data systems, as restaurants try to reduce their reliance on third-party delivery platforms and maintain a direct relationship with customers.

Kasturia said that the next phase of growth in 2026 would hinge on precision rather than discounts. He said broad-based loyalty is losing its power. "Loyalty must be built through programmes tied to customer behaviour".

Further, AI-led usage to personalise recommendations, enable targeted upselling and support dynamic pricing, will reshape QSR marketing into "precise rather than noise".

The expansion of India's quick service restaurants, once driven by speed and scale, is entering a more complicated chapter, where growth depends as much on restraint and reinvention as it does on opening the next store.