Industry Analysis Report of Jollibee Food Corporation

In Partial Fulfillment of the Course Requirement in Microeconomics 121

Bachelor of Science in Business Administration
Eastern Samar State University
Can-avid, Eastern Samar

Proponents:
Arca, Jessalyn D.
Diagsay, Jeff C.
Jocosol, Jomar
Legion, Dionisio B.
Leguarda, Angelica G.
Orsal, Coleen
Pajaroja, Rainier N.
Villocillo, Reil C.

June 2019
 INTRODUCTION

Jollibee Foods Corporation (“JFC” or the “Company”) was incorporated on January 11,
1978. Its principal business is the development, operation and franchising of quick-service
restaurant (QSR) under the trade name “ Jollibee”. In the Philippines, the company has, as
subsidiaries, FRESH N’FAMOUS FOODS, INC., which develops, operates and franchises
quick-service restaurants under the trade names “Chowking” and “Greenwich,”RED RIBBON
BAKESHOP, INC. ( through RRB HOLDINGS, INC.), which develops, operates and franchises
restaurants under the “ Red Ribbon” trade name, MANG INASAL PHILS., INC., which
develops, operates and franchises restaurants under the “BURGER KING.”trademark in the
Philippines.

The company also has subsidiaries and affiliates which develop and operate its
international brands, “ Yonghe King,” “Hong Zhuang Yuan,” brands under the SuperFoods
Group ( including Highlands Coffee and Pho 24), “ Smashburger” and “Dunkin Donuts”.
Milestones and updates for subsidiaries and affiliates are discussed further in other parts of this
Report. Strong focus and support for its flagship products, service and product improvement,
network expansion and improved store productivity were among the key factors that helped the
brand achieve double digit systemwide sales growth and stong profit growth. Jolibee achieved its
highest post presidential election year rolling base sales growth since 1998.

Jolibee opened a record 96 new stores in the Philippines, bringing its total store network
to 1,062 – including the milestone at BGC Triangle Drive, Taguig City. By the end of 2017,
there were 1,062 Jollibee stores nationwide, of which 530 were franchised and 532 were
company-owned. (JFC Annual Report, 2017)
 PRODUCTION AND COSTS
This section describes the characteristic of production functions prevalent in the market
or industry. This section also describes the corresponding cost structure for firms in the industry.
Both these description of production and costs are coherent narratives.

I. Production

Product and Services

Jollibee Food Corp. is a quick service food restaurant that offers a good quality of food
and services and cleanliness of the facilities while assuring the satisfaction of their consumers,
and the price preference of the costumers.

Menu Price

Beverages and Desserts

 Coke Float Php 49.50
 Chocolate Sundae Php 33.00
 Pineapple Juice Php 60.50
 Nestea Iced Tea Php 60.50
 Halo-Halo Sundae Php 44.00
Breakfast Meals
 Breakfast Yumburger Php 45.00
 Breakfast Joys Pancake Php 50.00

Burgers
 Champ Burger Php 152.90
 Yum w/ TLC Sesame Seed Php 82.50
 Yum w/ Cheese Php 49.50
 Yumburger Regular Php 38.50

Chicken
 Chicken Joy w/ Jolly Spaghetti Php 108.90
 Chicken Joy with Palabok Php 165.00
 Chicken Joy w/ Fries Php 99.00
 Chicken Joy Php 82.50
 Spicy Chicken Joy Php 82.50
 Chicken Joy Bucket Php 412.50
6 pcs chicken joy Php 544.50
8 pcs chicken joy
Fries and Sides
 Buttered Corn Php 35.20
  Mashed Potato Php 35.20
 Jolly Crispy Fries Php 35.00
 Creamy Macaroni Soup Php 44.00
Hotdogs and Sandwiches
 Jolly Hotdog Php 77.00

Rice Meals
 Burger Steak w/ Spaghetti Php 104.50
 Burger Steak Supreme Php 89.00
 1 pc. Burger Steak Php 60.50
 Shanghai Rolls Php 50.00

The table shows the following products with their respective prices that are available to
Jollibee branches nationwide. Products that are available to other countries vary from the ones
that are available here in the Philippines. A price of each product varies from one branch to
another due to location. Each serving is measured by the quantity of product within the serving
itself, some products were measured by the size of the container, while other branches measure
their product serving for fries by following a specific weight for each size.

Services Provided of the Industry

 Jollibee Delivery
Get fresh, complete and affordable meals, anytime, anywhere through the #8-
7000 Jollibee Express Delivery Service. Whether you find yourself stuck indoors or
craving for a Jollibee treat, dial #8-7000 and enjoy Jollibee’s extensive menu of tasty
Filipino food.

 Jollibee Drive Thru

When hunger strikes you on the road, turn to Jollibee Drive Thru. With the most
number of drives thru outlets in the country, Jollibee awaits hungry motorists wherever
they may be. So why stop when the hunger starts? Get any of your Langhap-Sarap
favorites fast. Anytime, anywhere. For sarap-on-the-go, mag Jollibee Drive Thru.

 Jollibee Kids Party

Looking for the best way to make your child’s birthday extra special? Throw a
Jolly Kiddie Party! It’ll be fun. It’ll be enjoyable. It’ll be absolutely memorable.

 Open 24 Hours
Jollibee is awake for 24 hours to serve you with Langhap-Sarap goodness. Open
all day and all night. Jollibee’s 24 hour service allows you to enjoy your Jollibee favorites
even in the wee hours of the morning. Sa mga laging gising na tulad mo, laging gising
ang Jollibee.
Factors of Production

Inputs Process Output

 Acquire their raw  Keep their items in  Served the finished
materials to suppliers their storage Cooking product to their
preparations customers
 Manpower

 Equipment and
Facilities

The table shows the following inputs, process and output of production. The inputs are
the key to enter the market, process includes the cooking preparation and sanitation of the
equipment through the service provided by the employee and crew, and the output consists of
different order from consumers.

Prevailing Inputs of Production

The company’s main suppliers are:

Food Supplier
Chicken SAN MIGUEL FOODS, INC.
JMT Building, ADB Avenue, Pasig City
Carbonated Beverages COCA-COLA BOTTLERS PHILIPPINES, INC.
1890 Paz Guazon Street, Otis, Paso, Manila
Sauces and Beverages DEL MONTE PHILIPPINES, INC.
Bugo, Cagayan De Oro City
Beverages NESTLE PROFESSIONALS
Nestle Center, Rockwell Center, Makati City
Dressings UNILEVER PHILIPPINES
UN Avenue, Paco, Manila
Oil OLEO-FATS INC.
#5 Mercury Avenue, Bagumbayan, Quezon City
The company has existing agreements with all suppliers.
 Supplier Power
it is the power of suppliers to drive up the prices of your inputs. This is focused by the
number of suppliers of each key input, the uniqueness of their product or service, their strength
and control over you, the cost of switching from one to another, and so on. (Mindtools.com, n.d.)
Jollibee has a low supplier power; items are readily available from numerous suppliers. The
switching cost is low and there is a flow in the availability of supplies.

II. Cost
Audited Consolidated Financial Statements
For the Basis of Preparation, Statement of Compliance, Changes in Accounting Policies
and the Basis of Consolidation. (JFC Annual Report, 2017)
For the Year Ended December 31, 2017 vs. December 31, 2016
(All Amounts are in Million Peso)

Year Ended December Change

2017 2016 Amount Percentage

Cost of Sales
Cost of inventories 62,725.5 54,475.0 8,250.5 15.1%
Personnel costs:
Salaries, wages and other employee benefits 11,021.8 10,472.7 549.1 5.2%
Pension expense 168.1 171.5 (3.4) -2.0%
Rent 9,719.9 8,234.5 1,485.4 18.0%
Contract services 7,305.0 4,875.1 2,429.9 49.8%
Electricity and other utilities 4,587.2 4,022.8 564.4 14.0%
Depreciation and amortization 4,307.8 3,542.6 765.2 21.6%
Supplies 2,570.0 2,155.0 415.0 19.3%
Repairs and maintenance 1,218.6 1,327.9 (109.3) -8.2%
Security and janitorial 795.8 638.3 157.5 24.7%
Communication 227.2 190.8 36.4 19.1%
Professional fees 57.6 35.0 22.6 64.6%
Representation and entertainment 39.2 33.2 6.0 15.1%
Others 2,914.5 2,641.0 237.5 10.4%
Total Cost 107,658.2 92,815.4 14,843.8 16.0%

The table shows the different items that the industry most cost is in the inventories,
change amount and percentage, and the total cost of all items of the year 2017 over the year
2016.
 In order to get the necessary data, the following formula is used:
𝐶ℎ𝑎𝑛𝑔𝑒 𝑎𝑚𝑜𝑢𝑛𝑡
 Percentage = 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟
 Change Amount = current year – previous year
 Total Cost = Summation of all cost of sales

Consolidated cost of inventories increased almost at the same rate as revenues. Cost of
raw materials, particularly imported items such as beef, frozen potatoes, pork and dairy products
increased due to increase in cost per unit and the impact of peso depreciation, as a percentage of
revenues, cost of inventories still improved slightly driven by upward price adjustments
implemented by the domestic brand during the year. (Annual Report, 2017)

Projected Developments in Terms of the Cost of Inputs

Year Ended December 31 Change

Cost of Sales 2017 2016 Amount Percentage

Salaries, wages and benefits 11.189.9 10,644.2 545.7 5.1%
Contract services 7,305.0 4,875.1 2,429.9 49.8%
Project SEEDS* 194.9 408.7 (213.8) -52.3%
Total Cost 18,689.8 15,928.0 2,761.9 17.3%
(Expenses related to the SEEDS Project are booked under the account Cost of Sales – Others.)

In order to get the necessary data, the following formula is used:

𝐶ℎ𝑎𝑛𝑔𝑒 𝑎𝑚𝑜𝑢𝑛𝑡
 Percentage = 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟
 Change Amount = current year – previous year
 Total Cost = Summation of all cost of sales

Skills Enhancement and Educational Development of Labor and Employment (SEEDS)

A joint project of Jollibee Food Corp. and Department of Labor and Employment that
helps the students who has in a post-secondary education that been qualified through the
provision of financial assistance to acquire job competencies – skills, attitudes and work through
the values in-store training, thus enhancing employability upon completion of post-secondary
education. (JFC Annual Report, 2017)
Increase in consolidated contract service due to headcount increase needed to support
store operations and the impact of the implementation of the new labor regulations Slower
increase in salaries and wages and decrease in expenses related to the project SEEDS*.
 MARKET STRUCTURE AND REVENUE
This section describes the pricing and sales characteristic of the industry driven
primarily by its market structure.

The Market Structure of Jollibee Food Corporation

Jollibee Food Corporation

Market Structure

Perfect Competition Monopolistic Competition Oligopoly

The diagram shows the structure of the industry based on the different characteristics
based on price, location, market competition and the barriers to entry.

Perfect Competition
• Jollibee Food Corporation price charged is based on what the other competitive firm
charged their price in the market. JFC pricing strategy is slightly higher price to the
indirect competitor like Burger stall, Carinderia and others however in the direct
competitor like McDonald, KFC and so on and so for is lower price to attain the industry
profitability. JFC is known as price-friendly industry that their one key of their success is
the price preference of the consumer.

Monopolistic Competition

 The competition arise when the other firms like McDonald’s, KFC and other burger,
pizza and fast-food chains enter the market. The industry’s competitiveness is required
due to the strict policy of maintaining the good quality of products and services,
cleanliness and the price preference of the consumers. There’s an alternative or substitute
products that offered in the indirect competitor firms.

Oligopoly

 JFC decides what quantity of product and services need to produce.

 Prevailing Prices Charged
Market Information
Shares traded at the Philippine Stock Exchanges

2017 2016
HIGH LOW HIGH LOW
1st Quarter 219.60 182.10 234.40 194.00
2nd Quarter 219.00 197.00 242.80 221.80
rd
3 Quarter 249.80 206.20 260.00 236.00
th
4 Quarter 259.80 241.40 251.40 185.50
Source: from the Philippine stock Exchange

The table shows the prevailing prices that the industry traded to the Philippine Stock
Exchange charged determined by the high and low prices in every quarter.
The high and low daily closing prices for the first quarter of 2018 are Php. 305.40 and
Php 255.00. Respectively

Market Shares of the Industry

Jollibee Food Corporation

Top 20 Stockholders
As of December 31, 2017

Total Direct and Percentage of

Stockholders Indirect Ownership Issued
Shares and Outstanding
1. PCD Nominee Corporation (Non-Filipino) 303,608,644 27.97%
2. Hyper Dynamic Corporation 273,218,750 25.17%
3. Honeysea Corporation 127,743,747 11.77%
4. PCD Nominee Corporation (Filipino) 120,378,349 11.09%
5. Winall Holding Corporation 54,140,736 4.99%
6. Honeyworth Corporation 40,269,603 3.77%
7. Kingsworth Corporation 29,168,935 2.69%
8. Centregold Corporation 27,430,964 2.53%
9. Gemma Tanbuntiong 21,910,601 2.02%
10. A-Star Holding Corporation 17,553,845 1.62%
11. Venice Corporation 17,423,735 1.61%
12. Tony Tan Caktiong 8,494,565 0.78%
 13. William Tan Untiong 8,479,722 0.78%
14. Ernesto Tanmantiong 7,532,970 0.69%
15. Azucena T. King 7,491,199 0.69%
16. Susana Tanmantiong 1,201,857 0.11%
17. Paul Rosenberg 1,084,010 0.10%
18. Ysmael Baysa 811,667 0.07%
19. Anastacia Masancay 746,000 0.07%
20. Armando Medina 515,625 0.05%
Total 1,069,205,524 98.51%
Others 16,117,876 1.49%
Total Issued and Outstanding 1,101,770,740
Treasury Shares ( per SEC 11-C) 16,447,340 1,52%
Total Issued and Outstanding* 1,086,323,400 100.00%
*(net of Treasury Shares)

The table shows the different market shareholder and the certain amount of shares and
percentage.

Revenues and System Wide Sales

Year Ended December 31 Change

2017 2016 Amount Percentage

System Wide Sales 171,761.0 149,142.1 22,618.9 15.2%
Revenues 131,576.6 113,811.5 17,765.1 15.6%

The table shows the system wide sales and the revenue of the certain amount, change
amount and percentage in the year 2017 over the year 2016.
Consolidated revenues, which consist of sales by company-owned stores, fees from stores
operated by franchises and commissary sales to stores operated by franchise, grew by 15.6% in
2017 compared with 2016. (Annual Report, 2017)

In order to get the necessary data, the following formula is used:

𝐶ℎ𝑎𝑛𝑔𝑒 𝑎𝑚𝑜𝑢𝑛𝑡
 Percentage = 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟
 Change Amount = current year – previous year
 PROFITABILITY AND INDUSTRY PROSPECTS
This section discusses the profitability of firms in the industry and prospects of this
profitability.

The Gross Profit of Jollibee Food Corporation for the Year Ended December 31, 2017

Year Ended December 31 Change

Gross Profit 2017 2016 Amount Percentage
Revenues 131,576.6 113,815.5 17,765.1 15.6%
Cost of Sales 107,658.2 92,815.4 14,843.8 16.0%
21,000.1 2,918.3
-4.1 +4.1
Total Gross Profit 23,918.4 20,996.0 2,922.4 13.9%
Gross Profit Margin (percentage %) 18.2% 18.4% 16.5%

The table shows the consolidated gross profit for 2017 increased to ₱23,918.4 million,
₱2,922.4 million or 13.9% higher than the consolidated gross profit of ₱20,996.0 million for
2016. Gross profit margin for 2017 was 18.2%, lower than the 18.4% gross profit margin for
2016 as store and manufacturing costs increased at a much faster rate than revenues. (JFC
Annual Report, 2017)

In order to get the necessary data, the following formula is used:

 Profit = Total Revenue – Total Cost

𝑟𝑒𝑣𝑒𝑛𝑢𝑒− 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
 Gross Profit Margin = × 100
𝑟𝑒𝑣𝑒𝑛𝑢𝑒
𝐶ℎ𝑎𝑛𝑔𝑒 𝑎𝑚𝑜𝑢𝑛𝑡
 Percentage = 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟
 Change Amount = current year – previous year

Factors that are expected to change

"The product limitation has been caused by the migration to new systems that started on
August 1, 2014, which has resulted in temporary slowdown in sales order taking, product loading
and dispatch of transportation," Jollibee said in a statement Friday. (Magturo, 2014)
 One of the major factors that changed the industry profitability of Jollibee is supply
distribution. If a certain product is no longer available to the branches of JFC then the customer
satisfaction can’t be provided. Due to the limited output to produce the sales operation goes
down. And it fall to higher consumer demanded over the industry product or services supply.

Opportunities to Industry Profitability

 Being an agricultural country, full integration in sourcing raw materials could be done.
 Became the first food service company to be listed in the Philippine Stock Exchange.
 Employees received extensive training so that they could learn the corporate values of
integrity and humility.

Threats to Industry Profitability

 The rivalry between Jollibee and McDonald.

In a monopolistic competition Jollibee focus on the quality of product and service
to make, location of the store, price relation to the consumer, and the taste preference.

 Competition from both international companies and other local eateries.

Some consumers prefer to buy substitute products than to spend more money.

 Jollibee Foods Corporation Is a family-owned chain with about UP_1 billion annual
sales. It has however captured about 52% of the Philippines market (Compared with 16%
of McDonald).

 Jollied was reported to have been using earthworms In its beef patties for many years to
get customers ‘addicted’ to certain so-called chemical elements in earthworms.
 REFERENCES

(n.d.). Retrieved from https://www.jollibee.com.ph/services/

Annual Report 2017 (n. d.) retrieved from https://www.jollibee.com.ph/wp-
content/uploads/Annual-Report-2017-4.5%20(1).PDF

Galvez, Adrianne, and Adrianne Galvez. “Business Strategy of Jollibee.” Academia.edu,

www.academia.edu/16738265/Business_Strategy_of_Jollibee.
“Jollibee Food Production Process.” Essay Service Hoassignmentdswl.blogdasilvana.info,
hoassignmentdswl.blogdasilvana.info/jollibee-food-production-process.html.
Jollibee supply disruptions: Blame it on IT. (n.d.). Retrieved from
http://www.bworldonline.com/content.php?section=Corporate&title=jollibee-
supply-disruptions-blame-it-on-it&id=92450
Swot Analysis Jollibee Foods Corporation. (2017, November 06). Retrieved from
https://business-papers.com/swot-analysis-jollibee-foods-corporation/