Jollibee bringing Tim Ho Wan to China, Q3 profit drops 8%

Iris Gonzales (The Philippine Star) - November 15, 2019 - 12:00am

MANILA, Philippines — Jollibee Foods Corp. is expanding in China by bringing the Tim Ho Wan brand in one of the world’s biggest economies.

In a disclosure yesterday, JFC said its wholly owned subsidiary Golden Plate Pte. Ltd. (GPPL) entered into a joint venture agreement with Dim Sum Pte. Ltd. (DSPL) to form a company in the People’s Republic of China (PRC) to bring the famous dim sum brand.

The joint venture will then sign a franchise agreement with Tim Ho Wan Pte. Ltd., the authorized master franchisor of Tim Ho Wan in the Asia-Pacific, to develop and operate Tim Ho Wan stores in Shanghai and other cities in China.

Under the plan, GPPL will own 60 percent of the business and DSPL will own the remaining 40 percent.

The partners have also  committed to invest up to $13 million to the joint venture. Of the amount, up to $7.8 million will be contributed by GPPL in proportion to its ownership in the business.

Tim Ho Wan is a dim sum restaurant chain which originated in Hong Kong in 2009. Its Hong Kong restaurant has been awarded one Michelin star since 2010.

The latest deal would add to JFC’s three brands serving Chinese cuisine.

These include Chowking, a Chinese fast casual concept with presence mostly in the Philippines and JFC’s third largest brand in terms of systemwide sales (602 stores worldwide), Yonghe King, a Chinese fast food restaurant chain in China that is famous for its freshly prepared soya milk (330 stores), and Hong Zhuang Yuan, a full-service Chinese restaurant chain in Beijing, PRC famous for its congee (44 stores).

The three brands combined account for close to 20 percent of JFC’s systemwide sales.

Singapore-based DSPL is a wholly owned subsidiary of Titan Dining Holdings Pte., which owns and operates restaurants in Singapore.

JFC operates the largest food service network in the Philippines with 3,238 restaurant outlets in the country as of the end of September.

Abroad, it was operating 1,451 stores.    

Jollibee Foods Corp. continued to post lower income in the third quarter due to losses from Smashburger and Red Ribbon.

In a disclosure yesterday, the company said its third quarter earnings fell 7.9 percent to P1.9 billion. This brought its nine-month income to P4.5 billion, down 25.5 percent.

Production in the new Red Ribbon commissary reached normal volume level in September, but productivity level has yet to reach the desired level, the company said.

JFC’s profit for the third quarter included an extraordinary gain of Pl.3 billion arising from the purchase of The Coffee Bean and Tea Leaf® (CBTL) brand, which was completed on Sept. 24, 2019.

“The legal structure of The Coffee Bean & Tea Leaf® is being redesigned for fast growth both in the United States and in Asia, to be driven mainly by franchising. This is in line with JFC’s plan to build a truly global business.

We expect CBTL to be accretive to JFC’ s profit within a short period of time. The current profit challenges of JFC are short term. We look forward to profit resurgence in 2020 and in the years ahead, both in the Philippines and abroad,” Baysa said.

Systemwide sales grew 7.7 percent to P57.4 billion in the third quarter.  This brings the nine-month systemwide sales to P171 billion, up 11.7 percent year-on-year.

Third quarter revenue came in at P43.2 billion, up seven percent, while nine-month revenue rose nine percent to P127 billion.

Global same store sales grew by 2.5 percent, while restaurant expansion contributed 6.6 percent, partly offset by the negative impact of changes in currency exchanges rates.

Sales from the Philippine business alone grew 10.8 percent, sustaining the growth in the second quarter of 2019. Same store sales grew by 3.3 percent and new stores contributed 7.5 percent. Same store sales growth in the Philippines was driven largely by growth in volume of customer visits in the stores compared to a year ago.

“Foreign business reported flat sales growth for the third quarter due to the negative impact of foreign exchange translation and Smashburger’s sales. Excluding these factors, system wide sales of the foreign business grew by 10 percent in the third quarter of 2019 versus same quarter last year with EMEAA (Europe, Middle East and Asia) growing by 18.7 percent. Growth in same store sales in foreign business was also largely driven by increase in customer visits in the stores and in delivery business in the case of China,” JFC said.

As of Sept. 30, 2019, JFC’s worldwide store network reached 5,863 stores, representing an increase of 34.7 percent year-on- year.

The split of global systemwide sales between Philippines and international is now at 64 percent /36 percent, but JFC is targeting to bring this to a 50 -50 percent sharing.

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