A retail chain reports revenue up 8.5%. The press release says “strong growth”. Split it, and 4 points came from stores that existed a year ago and 4.5 from new stores opened during the year. That is a healthy combination. The same headline with same-store sales falling 3% and all the growth from new openings would describe a business whose existing stores are losing customers while it spends heavily to keep the total rising — the most expensive way there is to look like you are growing.
A restaurant owner can sell more thalis by filling more tables in the restaurants he already has, or by opening new restaurants. The first costs almost nothing extra — the rent and staff are already paid — and each extra customer is mostly profit. The second costs rent, fit-out and staff before the first customer walks in, and takes time to fill.
Retailers and restaurant chains report both kinds of growth together as revenue growth. Same-store sales growth isolates the first — the kind that lifts margins. Growth from new stores is necessary for expansion, but it consumes capital and takes years to earn it back, so the split between the two decides how much a year of growth is really worth.
Splitting growth: same stores and new stores
| Metric | What it measures | What to look for |
|---|---|---|
| Same-store sales growth (SSSG) | Growth in stores open a full year | Positive and ideally above inflation; watch whether it comes from more customers or only higher prices |
| Revenue per square foot | How productively store space is used | Rising productivity; new formats or cities with lower figures dilute the average at first |
| Average daily sales (ADS) | Restaurant sales per store per day | Stable or rising while the chain expands; falling ADS can signal cannibalisation |
| Store additions and closures | The expansion engine | Net additions, and how many stores closed — closures reveal mistakes |
| Gross margin | Pricing and mix | Private labels and own brands lift it; discounting and heavy promotion cut it |
| Inventory days | Working capital, and fashion risk | Rising inventory in apparel or electronics risks markdowns later |
A new store is an investment with a payback
Each new store needs fit-out capex, a rent deposit and stock before it sells anything, and most take time to build up regular customers. The useful question for any chain is how long a typical store takes to pay back its investment, and whether newer stores are maturing as fast as older ones did. Companies sometimes disclose this in investor presentations; where they do not, compare revenue per store for older and newer cohorts, and watch whether expansion into new cities produces weaker stores.
A restaurant chain grows revenue 20% by adding 30% more stores, while average daily sales per store fall 6%. The most likely concern is:
Retail ka growth do jagah se aata: purani dukaanon mein zyada bikri (same-store sales growth) aur nayi dukaanein kholna. 8.5% growth mein 4% purani dukaanon se aur 4.5% nayi se — achha mix. Par agar purani dukaanon ki bikri gir rahi aur sab growth nayi dukaanon se, toh core kamzor ho raha. Restaurant mein average daily sales dekho. Aur dhyaan: 2019 ke naye lease rule (Ind AS 116) se kiraya EBITDA ke neeche chala gaya — margin kaagaz pe badh gaya, cash nahi. Pre-Ind AS 116 EBITDA se compare karo.
- Split revenue growth into same-store growth and new-store growth; the first lifts margins, the second consumes capital.
- Watch revenue per square foot for retailers and average daily sales for restaurants as the chain expands.
- Each new store is an investment with a payback; compare newer and older store cohorts.
- Use pre-Ind AS 116 EBITDA to compare margins, because lease accounting inflated reported EBITDA.
- For franchise chains, the royalty to the brand owner is a permanent cost on revenue.
Mark it done to track your progress through the curriculum.
Common questions
Short, direct answers to what people ask about this topic.
- SSSG meaning for retail and restaurant companies
- Same-store sales growth (SSSG) is the growth in sales from stores that were already open for a full comparison period, usually a year, excluding stores opened or closed in between. It separates growth from existing stores — driven by more customers, larger baskets or higher prices — from growth that simply comes from opening more stores. Weak same-store growth hidden behind rapid store openings is one of the commonest warning signs in retail.
- what does average daily sales mean for QSR companies
- Average daily sales (ADS) is the revenue a restaurant earns per store per day, a common measure for quick-service restaurant chains. Rising ADS means each outlet is busier or customers are spending more; falling ADS, especially while the chain opens many new stores, suggests new outlets are cannibalising old ones or demand is weakening. Because restaurant costs are largely fixed per store, small changes in ADS move margins a lot.
- why is EBITDA not comparable after Ind AS 116 for retailers
- Because since April 2019 most store leases are treated as right-of-use assets and lease liabilities: rent no longer appears as an operating expense but is replaced by depreciation and interest, both of which sit below EBITDA. EBITDA therefore rose sharply for retailers and restaurants without any change in cash. To compare margins across years or with companies reporting differently, use pre-Ind AS 116 EBITDA, which deducts rent as before.