Given India's heavy reliance on Middle Eastern imports, the commercial sector-particularly Quick Service Restaurants (QSRs) like McDonald's, Domino's Pizza and KFC - is bracing for operational disruptions if the shortage of liquefied petroleum gas (LPG) persists, according to a research note by JM Financial.

The brokerage firm highlighted that for QSR operators such as Westlife Foodworld, Sapphire Foods India Limited, Devyani International Limited and RBA, the immediate concern pertains to higher kitchen operating costs and the probability of store closures in certain micro markets, which could temporarily affect outlet operations and restaurant-level margins.

Westlife Foodworld is the operator of McDonald's restaurants in West and South India, while Sapphire Foods India Limited and Devyani International Limited jointly operate KFC and Pizza Hut, and RBA (Restaurant Brands Asia) operates Burger King and Popeyes quick-service restaurant chains, respectively.

The brokerage further warned that a prolonged disruption in LPG supply could pose operational challenges for the quick service restaurant sector, where cooking processes depend heavily on gas-based kitchens.

"If supply tightness persists, companies may need to absorb higher fuel costs or pass them through partially via menu price increases. Our channel checks suggest 60-65% of cooking at most of these QSR chains is LPG-dependent and they have a buffer of one-two weeks of supply," the brokerage added.

"In the event of non-availability of LPG cylinders even for five days, we estimate revenue/store would drop by 6% and EBITDA (restaurant-level) by 14-20% for the quarter versus the normalised level of operations," the brokerage added.

LPG disruption: Restaurants are more vulnerable than households

• The brokerage further emphasised that restaurants are more vulnerable than households in the event of shortages. "Commercial LPG users are typically rationed first because governments prioritise household cooking gas supply. Recent news reports too suggest that dispatch of non-domestic cylinders has been temporarily halted in some regions to protect household supply," JM Financial said.

• QSR kitchens depend on consistent, high-volume LPG usage for: i) ovens and fryers; ii) grills; and iii) high-speed cooking lines.
• Any disruption in cylinder supply can: i) reduce operating hours; ii) limit menu availability; and iii) force temporary outlet shutdowns. Smaller restaurants may shut immediately, but QSR chains may experience partial capacity constraints.
• Impact on large QSR chains such as Domino's, McDonald's, Burger King and KFC is lower than that of independent restaurants, but they will not remain entirely immune to the disruption.
• The price of a commercial LPG cylinder has already increased by 8 per cent MoM in March 2026 amid supply disruption.
  
• For QSR companies, this can: i) increase kitchen operating costs; ii) compress restaurant-level EBITDA margins; and iii) raise delivery pricing or menu prices.
• "Our channel checks suggest that 60-65% of overall cooking at major QSR chains is LPG-dependent, and we estimate they might have a buffer for one-two weeks of supply. If the LPG supply chain issue persists beyond that, then their operations are likely to be hampered," the brokerage said.
• Assuming restaurants dependent on LPG cylinders are forced to shut down even for five days amid LPG supply disruptions, we reckon their revenue per store would decline by ~6% for the quarter; restaurant-level EBITDA would decline by a much sharper 14-20% versus the normalised level of operations.

Potential LPG shortage in India: Implications for QSRs

Geopolitical disruptions may constrain LPG availability

Escalating geopolitical tensions in West Asia have begun disrupting global energy supply chains, raising concerns about LPG availability in India. Commercial LPG supplies have reportedly been disrupted across several major cities, including Mumbai and Bengaluru, affecting restaurants, hotels and food courts, which rely heavily on cylinder-based cooking fuel. Some eateries have even warned of temporary closures if supplies remain constrained, the brokerage said.

Why restaurants are more vulnerable than households

In the event of shortages, JM Financial said the commercial LPG users are typically rationed first because the government prioritises household cooking gas supply.

• Dispatch of non-domestic cylinders has been temporarily halted in some regions to protect household supply.
• Restaurants and food vendors rely almost entirely on 19kg commercial LPG cylinders for cooking.
• The National Restaurant Association of India (NRAI) has warned that sustained disruptions could lead to "catastrophic closure" of restaurants across the country, highlighting the sector's dependence on uninterrupted LPG supply.

LPG disruption impact on QSR chains

• Large QSR chains such as Domino's, McDonald's, Burger King, KFC, and others are not immune to the disruption, although their impact profile differs from that of independent restaurants, the brokerage stated.
• Operational disruption risk: QSR kitchens depend on consistent, high-volume LPG usage for: i) ovens and fryers; ii) grills; and iii) high-speed cooking lines. Any disruption to cylinder supply can: i) reduce operating hours; ii) limit menu availability; and iii) force outlets into temporary shutdowns. Smaller restaurants may shut immediately, but QSR chains may experience partial capacity constraints.
• Cost pressure: The price of one commercial LPG cylinder has already increased by 8% MoM in March 2026 amid the supply disruption. For QSR companies, this can: i) increase kitchen operating costs; ii) compress restaurant-level EBITDA margins; and iii) raise delivery pricing or menu prices. Additional fuel cost inflation may further pressure margins.
• Supply chain complexity: Large QSR operators typically maintain centralised procurement, multivendor cylinder supply contracts and back-up fuel arrangements. However, if system-wide cylinder availability drops, even large chains may face challenges due to the scale of daily cylinder consumption across hundreds or thousands of stores.

"Our channel checks suggests that for major QSR chains 60-65% of their overall cooking happens through LPG, and we estimate they might have a buffer for one-two weeks. If the LPG supply chain issue persists beyond that, their operations are likely to be hampered," the brokerage warned.

Assuming restaurants dependent on LPG cylinders shut down for five days amid LPG supply disruption, the brokerage said they estimate revenue decline of around 6 per cent per store for the quarter and a higher decline of 14-20 per cent on restaurant-level EBITDA versus normalised level of operations.

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)

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