New Delhi [India], March 3 : The increased disposable income after the rate cut announcements in the Union Budget 2025 will push the sales growth of the quick-service restaurant (QSR) sector from the first quarter of Financial Year 2026 (1QFY26), Goldman Sachs said in a recent report.
The report added that the QSR sector, severely impacted by the high inflation and geopolitical issues in the third quarter of Financial Year 2024 (3QFY24), will witness improvement in sales growth through fiscal year 2026.
The sector, which witnessed a sign of deceleration in dine-in sales growth, has started showing signs of recovery. The QSR players have reported improved sales growth in regions impacted by geopolitical issues.
According to the report, 3QFY25 also saw a sharp recovery in dine-in sales growth at QSR players. QSR dine-in sales growth was 4.2 percent YoY in 3QFY25 after several quarters of negative or low single-digit growth.
The demand slowdown started in the QSR sector around 2HFY23, led by high inflation and price hikes. Four quarters later, the demand slowdown got extended longer than expected because of the impact of geopolitical issues starting 3QFY24. Over the last few quarters, most QSR players have not taken any significant price hikes, which has resulted in better financials for the QSR players.
Other than the impact of inflation, the report highlights that geopolitical issues like political instability, wars, trade disruptions, or other international conflicts negatively impacted the performance of these QSR companies in the past, adding that the sector will move forward after a low base.
With a low base in place, analysts predict that QSR players will experience a positive SSSG trend starting in 3QFY25, which is expected to continue through FY26.
The report added that the third quarter was the beginning of a cyclical upturn in QSR demand, driven by improving affordability.
The value offerings, such as the introduction of a four-course meal by some players and other initiatives, will continue to drive order-led recovery for the sector going forward, as affordability has improved over the last 8 quarters, said the report.
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