Domino’s and Dunkin Donuts Not So “Jubilant” Anymore

The resignation of the CEO of Jubilant FoodWorks(JFL) Ajay Kaul, has left the company in absolute misery as franchises like Domino’s and Dunkin Donuts give a major setback

India: After the exit of the Chief Executive of the company, Jubilant FoodWorks witnessed its stocks take a plunge and slump down 6 per cent. All this has led to the market value of the company being halved. The company claims that its main priority right now is to find a new successor in order to bring the things together.

The plans for Domino’s to penetrate almost every geographical area is something the JFL has not been able to cope up with. Adding 150 stores every year has significantly reduced the same-store sales growth(SSG). Moreover, there have been price increases of about 6 per cent per year. On a non-sale day, a pizza can cost a consumer a hefty and steep price, which is not favorable for their sales.

The franchise of Dunkin Donuts, also owned by Jubilant FoodWorks, has reporting a steady and consistent drop in its sales for the June quarter. The profits and value of the franchise has taken a toll, reducing by over one-third of the value registered last year. Yet, the company seems to have slowed down its expansion plans as 23 stores were added in the quarter as compared to the previous average of 30-40. Jubilant FoodWorks currently has over 1,000 Domino’s outlets and 70 Dunkin Donuts outlets. Moreover, the company’s failure to win the Burger King franchise, has also hindered their performance. JFL eyed the franchise of Burger King as an opportunity as it would have boosted their revenue significantly as the consumers find burgers more appealing than pizzas and donuts.

According to TechSci Research, JFL’s plans have led to their own downfall. The Domino’s franchise is expanding with a pace the company is not able to cope up with. This is due to the fact that the company planned its expansion relentlessly when the consumption was down. Moreover, consumer fatigue and products less appealing to the consumers has also led to this scenario. The company introducing offers to their products and adding new food items to their menu has also not worked since there are a lot of other brands that are more appealing. Although, this setback will not hold JFL down as the market is set to expand further in the coming years.

According to a recent report published by TechSci Research, “India Food Services Market Forecast & Opportunities, 2020”, the market for food services in India is expected to grow at a CAGR of over 12% through 2020. Growth in the market is anticipated primarily on account of higher disposable income, improved standard of living and changing preferences of consumers. In addition, expansion of brands into tier II and tier III cities, is also a major factor which is expected to drive growth in food services market of the country over the next five years. In 2013, the market was dominated by unorganized and non-branded players, however, with growth of various foreign and domestic brands, these players are expected to lose their market to organized branded players. Segment-wise, dining food services segment was the largest contributor in India food services market in 2014, on account of the large number of dining restaurants in the country.