Westlife Foodworld Navigates Challenging Market with Strategic Innovation and Digital Focus in Q2 FY26

Westlife Foodworld Ltd., the operator of McDonald's restaurants in West and South India, reported a consolidated revenue of 641.9 crore rupees for the second quarter of fiscal year 2026, marking a 3.8% year-on-year growth. Despite this top-line expansion, the company faced significant headwinds, with same-store-sales growth (SSSG) declining by 2.8%. The management acknowledged a challenging demand environment, characterized by a 4-6% industry-wide decline in out-of-home food consumption frequency during August and September. However, Westlife Foodworld demonstrated resilience by gaining market share amidst these difficult conditions, a testament to its strategic initiatives and operational discipline.

Operational Highlights and Strategic Pillars

The quarter saw a notable performance in gross margins, which expanded by 270 basis points year-on-year and approximately 80 basis points quarter-on-quarter, reaching an all-time high of 72.4%. This improvement was primarily driven by sustained supply chain efficiencies and robust cost optimization efforts. The company's digital ecosystem continues to be a key growth driver, with digital sales contributing around 75% of the total revenue, reflecting a 300 basis points year-on-year growth. The McDelivery platform and mobile app engagement have been particularly strong, with cumulative app downloads exceeding 47 million and monthly active users (MAU) reaching approximately 3 million.

Westlife Foodworld's strategic focus areas include enhancing meals leadership through menu relevance and marketing, building a robust omnichannel model, and aggressive network expansion. The company launched the 'Protein Plus Slice,' an industry-first innovation developed in collaboration with CFTRI, which received phenomenal demand. This product, designed to add 5 grams of protein to burgers, underscores the company's commitment to nutritious menu innovation and consumer preferences.

Digital Transformation and Future Outlook

The company is making significant strides in strengthening its McDelivery platform, which currently contributes close to 40% of its business. Recognizing the unpredictable performance of third-party aggregators, Westlife Foodworld is investing heavily in its own platform. A major initiative is underway, in partnership with a global consultant, to scale McDelivery sales, with a target to double them in the next two years. This is expected to contribute an incremental 3% to 5% to SSSG over the next 1 to 1.5 years. The company has also piloted 20-minute deliveries and deployed AI-powered video analytics in kitchens to enhance efficiency and product quality.

Network expansion remains a priority, with 8 new restaurants opened in Q2 FY26, bringing the total to 450 across 72 cities. The vision is to expand to 580-630 restaurants by December 2027. To support this, Westlife Foodworld has deployed a state-of-the-art location intelligence platform powered by AI and machine learning algorithms, enabling more accurate prediction of new store performance and identification of high-potential white spaces. The majority of stores opened in the last six months are reportedly exceeding expectations, validating this data-driven approach.

Management's Vision and Resilience

Despite the challenging macroeconomic environment and softer demand, particularly in regions like Bangalore, Westlife Foodworld's management remains optimistic. They anticipate a gradual improvement in the operating environment over the coming quarters, supported by easing inflation and government reforms. The company's focus on cost optimization initiatives is expected to generate 40-50 crore rupees in incremental cash flow over the next year, further bolstering its growth and profitability agenda. Management also highlighted its commitment to maintaining Vision 2027 margins and expects operating margin improvement.

The company's recognition among Asia's top 100 Best Large Workplaces and top 50 large companies for millennials and women in India underscores its strong organizational culture. Westlife Foodworld's strategy is centered on building long-term brand strength through innovation, disciplined execution, and a deep understanding of evolving consumer preferences. The company aims to continue its aggressive market share capture while maintaining discipline in unit economics, confident in McDonald's brand strength and India's long-term consumption growth story.