- The Business Model Shift Behind EverBrands' Growth
- Why the Shift Is Driving Revenue Growth
- Why Are Net Losses Still Rising?
- Where Will the ₹600 Crore IPO Proceeds Go?
- What Could Go Right - and What Could Go Wrong?
- Final Verdict
EverBrands India Limited, the master franchisee for Subway in India, has filed its DRHP with SEBI for a ₹600 crore IPO. The issue is entirely a fresh issue, meaning the proceeds will go to the company rather than existing shareholders through an Offer for Sale (OFS).
But what makes EverBrands interesting is not just its IPO. It is changing how its business operates, moving from a franchise-led model towards owning and running more Subway outlets itself. This shift offers greater revenue potential but also brings higher costs and risks.
The Business Model Shift Behind EverBrands' Growth
EverBrands operates Subway outlets across India alongside a beverage business that includes Fresh & Honest, Lavazza, and Dilmah. Its coffee business has 9,455 installed vending machines, while its Subway network spans 1,008 outlets across more than 160 cities.
This scale has supported rapid growth. Revenue increased from ₹548.85 crore in FY24 to ₹966.17 crore in FY26, a CAGR of 32.68%.
However, the company is not simply opening more outlets. It is changing who owns and operates them.
Under the traditional FOFO model (Franchisee-Owned, Franchisee-Operated), franchisees invest in and run stores, while EverBrands earns royalties and fees. Under the COCO model (Company-Owned, Company-Operated), EverBrands owns and operates the outlets itself, capturing the full store revenue while bearing the operating costs.
The shift is evident in its network: franchise stores fell from 501 in FY24 to 330 in FY26, while company-owned stores increased from 311 to 678. In FY26 alone, the company added 151 new COCO stores and acquired 101 franchisee stores.
Why the Shift Is Driving Revenue Growth
The two models have very different economics. Under FOFO, EverBrands earns only around 2% of store sales as net royalties. Under COCO, it records 100% of store sales at a gross margin of around 72%, but also bears the costs of rent, staff, and other overheads.
The growth is not just an accounting effect of recording full store sales. Store productivity has also improved: COCO Average Daily Sales (ADS) rose from ₹29,671 in FY24 to ₹31,962 in FY26, while Same-Store Sales Growth (SSSG) recovered to 6.2% in FY26 from -2.4% in FY25.
With new store openings, franchisee-store conversions and higher sales per store, COCO revenue reached ₹611.48 crore in FY26, accounting for 88.23% of QSR revenue. Operating EBITDA also rose from ₹43.37 crore (7.90% margin) in FY24 to ₹98.13 crore (10.16% margin) in FY26.
The trade-off: EverBrands captures more revenue from each store but must invest more upfront and bear the risks of fixed store-level costs.
Why Are Net Losses Still Rising?
Despite the improvement in operating EBITDA, EverBrands' net loss widened from ₹16.67 crore in FY24 to ₹58.19 crore in FY26. Yet operating cash flow reached ₹94.18 crore in FY26.
A key part of the explanation is the cost of expanding a company-owned store network.
Because EverBrands leases its stores, accounting rules require it to record depreciation and interest costs, which reduce its reported profit. In FY26, depreciation stood at ₹122.15 crore and lease interest expense at ₹43.51 crore.
Meanwhile, newly opened stores may take time to reach mature sales levels, even as lease-related expenses begin affecting reported earnings.
This creates a timing gap between the costs of expansion and the revenue new stores eventually generate. However, lease commitments remain real economic obligations, and positive operating cash flow does not automatically mean every store is profitable.
Where Will the ₹600 Crore IPO Proceeds Go?
The proposed use of proceeds reflects the same expansion strategy.
- ₹326.85 crore Capex: capital expenditure for setting up 460 new COCO Subway stores across FY28 and FY29.
- ₹125 crore Debt repayment: repayment of term loans of operating subsidiary CBIPL, which had borrowings of ₹149.71 crore as of March 31, 2026.
The IPO will therefore help EverBrands expand its company-owned network while reducing debt. Investors wanting to understand the filing in greater detail can refer to INDmoney's guide on how to read a DRHP.
What Could Go Right - and What Could Go Wrong?
The potential upside lies in operating leverage. As new stores mature, higher sales could spread fixed costs such as rent across greater revenue, supporting better margins and profitability.
But the same model increases risk. EverBrands must bear store-level expenses even when footfalls disappoint or a location underperforms. Poor store selection or slower-than-expected sales growth could leave the company with substantial fixed commitments without sufficient revenue.
Investors should therefore monitor sales per store, COCO expansion, operating margins, cash generation, debt reduction and the pace at which new outlets mature.
Final Verdict
EverBrands' IPO is a bet on its transition from a franchise-led business to a company-owned retail operator. The strategy could improve its ability to capture store economics, but it also requires more capital and exposes the company to greater operating and lease-related risks.
The central question is whether its existing and planned COCO stores can generate enough sales and operating profit to justify the investment.
For investors, store-level execution, not revenue growth alone, will determine whether EverBrands' franchise flip creates lasting value.
Investors can explore other opportunities through INDmoney's IPO tracker.