Jollibee banks on franchising, overseas expansion to boost long-term earnings

MANILA, Philippines - Fastfood giant Jollibee Foods Corp. (JFC) is banking on franchising and overseas expansion to continuously boost its earnings in the long run.

The aggressive expansion program is in line with doubling the company’s earnings in five years, company officials said.

“The main thrust will still be the aggressive expansion of the company locally and internationally,” said newly-appointed JFC CEO Ernesto Tanmantiong.

“In the long term, more and more of the profit growth will come from franchising,” said JFC chief finance officer Ysmael V. Baysa.

JFC board chairman Tony Tan Caktiong said the ideal business mix is 50-50 for franchising and company-owned expansion.

JFC’s branches outside the Philippines are all company-owned, except those in the Middle East. In the Philippines, 45 percent of the stores are company-owned while 55 percent are franchised.

For its overseas expansion, Tanmantiong said the quick-service restaurant chain plans to expand its global footprint by putting up stores in Malaysia, Myanmar, Europe and Japan “after five years because we need to focus on China and the US.”

JFC is also branching out in Canada next year while the company is still studying prospects in Indonesia, one of the fastest growing economies in Southeast Asia.

Tan Caktiong said there are many parties interested in franchising Mang Inasal, Greenwich and Red Ribbon abroad. However, JFC is still focusing its human resources to the Philippine expansion.

JFC is already profitable in the US, Southeast Asia especially in Brunei and Singapore, the Middle East, and Hong Kong.

Operations in Vietnam and China are close to becoming profitable as the company manages costs and creates an economy of scale, Baysa said. JFC will likely be profitable in China as it hits the 500-branch mark from the current 411 stores.

On Thursday, JFC told the local stock exchange that it plans to double net income in five years through its expansion program in China and the US. It also targets to source half of its sales from the overseas business from the current 20 percent.

Net income of JFC jumped nearly a quarter to P4.64 billion in 2013 from P3.72 billion in 2012, marking the fastest earnings growth in seven years.

For 2014, JFC allotted P6.3 billion in capital expenditures to open 300 new stores and renovate existing branches, both in the Philippines and abroad. The target is to start operations of 200 new stores in the Philippines and 100 new branches overseas.

In the first quarter, strong sales from both new and existing branches significantly boosted the earnings of the fastfood giant. JFC’s net income surged 20.5 percent to P1.07 billion from P895 million a year ago.

Systemwide sales, a measure of all sales to consumers both from the company-owned and franchised stores, picked up 14.6 percent to P27.3 billion from P23.83 billion year-on-year.

JFC operates the largest fastfood service network in the Philippines with 2,217 branches composed of 828 Jollibee branches, 405 Chow-king, 202 Greenwich, 287 Red Ribbon, 460 Mang Inasal and 35 Burger King.

The foreign operations of JFC has 588 stores: Yonghe King with 316 stores, Hong Zhuang Yuan with 43 and San Pin Wang with 45, all in China; 103 Jollibee, 32 Red Ribbon, 46 Chowking, and three Chow Fun located in US, Southeast Asia and the Middle East. It also has a 50-percent stake in Highlands Coffee branches in the Philippines and Vietnam; Pho 24 outlets in Vietnam, Indonesia, the Philippines and Japan; and Sabu stores in China.