Franchisee ad row hurting sales: Sapphire CEO
Differences between two of global restaurant chain
Pizza Hut
's biggest franchisees in India -Sapphire Foods and Devyani International-have led to pausing of advertising in common franchisee zones, impacting sales, a top executive said.
"Starting January-March '25 quarter, we have not been able to invest in
mass media advertising
(for Pizza Hut)... That's resulted in an impact on our transactions," Sanjay Purohit, group chief executive of
Sapphire Foods
, said in a post-quarter earnings call. "That's arising because of a difference of view between us and our sister franchisee (Devyani) on marketing strategy and investments on advertising."
While Ravi Jaipuria-owned Devyani is the largest franchise partner of Yum! Brands-which owns quick-service restaurant (QSR) chains including KFC, Pizza Hut and Taco Bell-with rights to operate these brands in North and East India,
Sapphire
operates the brands in South and West India. Devyani operates an overall 2,000-plus stores, while Sapphire's total store count is over 900.
"While Yum is aligned with investing (on Pizza Hut ads) similar to us, the difference in opinion has meant that we've not been able to advertise in common markets," Purohit told analysts.
When contacted by ET, Jaipuria declined to comment.
Devyani International
's January-March quarter earnings are scheduled for later in this month.
Store operations of both franchisees overlap in markets such as Maharashtra, Andhra Pradesh and Karnataka, with stores across delivery-only, takeaways and airports.
Purohit's comments come amid continued slowing sales of QSRs.
Reacting to an analyst query on when
Sapphire Foods
expected a resolution to the differences, Purohit said it may take one-two quarters.
"The difference of opinion really stems from our belief whether spending on or investing behind mass media advertising is resulting in increased transactions or not... If there are questions in someone else's mind on that, that's perfectly alright... The only way to do that is through data and through actually proving that this can work," he said.
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