Jollibee Foods Corporation (PSE: JFC)

Jollibee Foods Corporation (JFC, the “Company”) is primarily engaged in operating company-owned and franchising quick service restaurants (QSR)  under the trade names “Jollibee”, “Chowking”, “Greenwich”, “Red Ribbon”, “Yong He King”, “Hong Zhuang Yuan”, “Mang Inasal”, “Burger King”, “San Pin Wang” and “12 Sabu”. Below is JFC’s corporate structure:JFC1

Below is the number of stores of JFC’s significant trade names as of December 31, 2012:


Total number of JFC’s company-owned and franchised stores is as follows:


JFC has a long history of stable operating performance. Below is a chart showing JFC performance in the past seven years:JFC4

It is worth noting that JFC’s profit margin has been maintained at above 5% even during the difficult times of 2008 and 2009, a testament to JFC strong market position in the QSR industry. With JFC’s strong brand recall and wide geographic reach, the Company is well positioned in the Philippine consumer industry. JFC’s international operations also holds a lot of promise, in 2012 the Company reported a 21.7% increase in China business, 23.8% increase in Southeast Asia and the Middle East business, and 9.2% increase in US business.JFC5

JFC’s international operations will obviously be the growth driver of JFC’s earnings in the future. However, as long as JFC will not change its business model where stores are mostly company-owned, JFC will not achieve the earnings growth that their current PE ratio suggests which is at 49x at a market price of 174 based on 2012 earnings per share (EPS).

Shifting the business model from mostly company-owned to franchise owned will save the company the much needed capital expenditures necessary for a high growth company with international operations. Although I acknowledge that having company owned stores will boost the Company’s image, I would like to see JFC to minimize it from its current level of 51% of the total stores.

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell. Read more in the ABOUT page.


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