The restaurant business in India appears to be well on the way to recovery as it recorded major growth momentum during December, reports Macquarie Equity Research. The growth was attributed to an increase in discretionary spending, demographic shifts, and growth in the number of working women.

Higher per capita incomes, smaller household sizes, and lower dependency ratios are providing a better context for the sector. Along with these positive elements, value offerings and cost control are helping to stabilize the growth in same-store sales (SSSg) and profit improvements all around the industry.

International restaurant brands are gaining a competitive edge, especially in high-rent areas, thanks to their ability to operate in lower-rent locations and more effective unit economics. The report anticipates additional support for the sector from the upcoming Union Budget, with potential personal income tax cuts for lower- and middle-income groups. This could further boost discretionary income, accelerating SSSg recovery.

Macquarie also puts much emphasis on assessing the expansion capabilities of brands while keeping the operational efficiency and minimizing the dilutive impact of new stores on margins. The report remains optimistic about international brands, which can expand into less saturated regions, pass on the rising input costs, and maintain customer loyalty to ensure long-term sustainable growth.