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Sapphire Foods India, which operates the Pizza Hut and KFC chains of restaurants, reported a larger-than-expected decline in its first-quarter profit on Tuesday, as costs rose while it struggled to entice budget-conscious customers.

The Yum Brands franchisee's consolidated net profit fell 68% to 85.2 million rupees ($1.02 million) for the quarter ended June 30. Analysts, on average, had expected a profit of 173.9 million rupees, according to LSEG data.

India's quick-service chains have been facing difficulties in attracting customers amid persistent inflation, which remained around 5% during the quarter.

Fast-food franchises are experiencing low demand as financially-strained consumers have cut back on dining out and ordering in.

Prices of key raw materials including cheese, chicken and tomato have also been rising.

Sapphire Foods' revenue from operations rose 10% to 7.18 billion rupees in the June quarter, missing analysts' estimate of 7.23 billion rupees.

The company said prices of ingredients rose nearly 10%, expanding its total expenses by 13% to 7.12 billion rupees.

McDonald's India operator Westlife Foodworld reported a plunge in first-quarter profit amid frail demand, while Burger King's India operator Restaurant Brands Asia reported a narrower first-quarter loss as offers and discounts swayed customers.

Rivals Devyani International, which also operates KFC outlets in the country, and Domino's India-franchisee Jubilant FoodWorks have yet to report results.