Case Narrative

Jollibee food Corporation (JFC) is a food empire with interest in American fast
food chain (burgers, fries, fried chicken, etc.) including pizza chain (Greenwich), grilled
chicken (Marys Chicken), and Chinese fast food (Chow King). Jollibee is slowly
acquiring these companies.

After two decades, Jollibee Food Corporations market share was 57% while
McDonalds (its main competitor) garnered only 36%, two decades later. By the end of
1998, Jollibee had 302 company owned and franchise stores in the Philippines and 27
franchise stores overseas while McDonalds had almost 200 stores. Around 43% of
Jollibees stores were franchised-owned. Jollibee used franchising to rapidly expand its
business and achieve market penetration. Jollibee is facing a dilemma in their
franchising on to whom they will reward the franchise between two applicants. This may
be a sign of Jollibee that the company is booming like mushrooms, closing the gap
between one Jollibee fast food from the other in terms of location and distance. Despite
of this, its growth is incomparable to McDonalds global power in the international
market.

Situational Analysis

A. Internal Analysis

Jollibee used franchising to rapidly expand its business and achieve market
penetration. Franchising is the force which provides the strength to the Jollibee Food
Empire. Jollibees management faced a dilemma of choosing a franchisee or selects
individuals with a successful track record in business, of good standing in the
community that leads them through their weaknesses because they have so many
franchisee which is targeting at the same spot. Jollibee continue dominate the
hamburger market despite the influx of new foreign players.

B. External Analysis

Jollibee always select individuals with successful track record in business, with
good standing in the community, and providing total customer value and satisfaction
who have excellent people handling skills. And in order to attract more customer by
increasing business income. They also develop high technology in the operation
system to improve products and services they offer to their customers. They
innovate so that it will gain an advantage against its competitors especially
McDonalds. It can provide an organization with means to improve its performance
and competitive advantage in a competitive market. And some opportunities can be
foreseen, such as being able to expand a franchise into a new city. The threat of
Jollibee is the high competition against McDonalds. Just like the Jollibee was 57
percent and 302 company owned and franchised stores in the Philippines, while
McDonalds only 36 percent and had almost 200 stores. And outside environment
that can adversely affects its performance or achievement of its goals. Due to
economic crisis in the Philippines, people have less money to spend on their meals.

C. S.W.O.T. Analysis

Strength
Jollibee dominates the hamburger market despite the foreign competitors
Jollibee offers famous burger influence from United States to keep up with
changing taste and lifestyle of the customer
Jollibee captured the palate of every Filipino with its uniquely flavored
burgers, chicken and sweet spaghetti
Jollibee use franchising to rapidly expand its business and market
penetration

Weakness
Dilemma in choosing franchisee eyeing for the same location
The criteria in choosing a franchisee is vague.

Opportunities
Jollibee Food Corp. provide BOTP ( business operational training
program) for new applicants franchisee which provide seminars and hand-
on exposure to all level of store operation
Jollibee Food Corp. has a conservative background and accept
franchisee in order to drive innovation to led them and hire equally driven
people that helps to successfully fast food industry

Threats
 Jollibee Food Corp. has a great challenge with keeping up the demand for
the production of product to distribute in all over 302 stores franchise-
owned.
Jollibees wrong choice of franchisee may destroy the companys
reputation with subpar quality products and services. This will affect the
brand name resulting loss of quality of service, product etc.

D. PORTERS FIVE FORCES ANALYSIS

Threat of New Entrants

Jollibee Foods Corporation continued to dominate the market. It contribute a market

share of 57 percent while McDonalds occupied 36 percent, and the rest was divided
among other hamburger chains like Wendys, A & W, Tropical hut, and recent entrant
Burger King.

Bargaining Power of Buyers

Jollibee Foods Corporation. Mr. Tan added the famous hamburger and hotdog
sandwiches to keep up with the changing taste and lifestyle of customer. Jollibee
became the fast food to go to with its uniquely-flavored Filipino burgers, chicken, and
sweetish spaghetti.

Bargaining Power of Suppliers

Item is readily available in many suppliers. There is a surge in the availability of the
supplies. Switching cost is low.

Rivalry among Competing Sellers

The fully Filipino-owned hamburger chain had overtaken American multinationals in

their own fast food game. Its market share was 57 percent while McDonalds occupied
36 percent. Jollibee had 302 company-owned and franchised stores in the Philippines,
and 27 franchised stores overseas. Its closest competitor, McDonalds, had almost 200
stores.

Threat of Substitute Products

 With so many firms in the quick service/burger industry, low switching cost, similar
products, and healthier options, the threat of substitutes is very high.

E. P.E.S.T. Analysis
Political - political factors have a great impact in fast food operations.
Government controls the license given the open of the fast food restaurant and
other business regulation that need to follow as for a franchise business. Since
Jollibee franchised to expand their business and achieve market penetration, it
affects the political issues based on the policies governing tax, licenses,
regulation and employment.
Economic - Based on the case study, Mr. Artiaga wants to invest a Jollibee
franchise in order to attract more customers to his gas station which will increase
his business income or profit. The economic condition (supply and demand) and
growth of his business will certainly expand as it has a corresponding fast food
restaurant which is supposed to be Jollibee that capture more customers to dine
while purchasing a full tank of gas or the other way around. Therefore it will
increase the profit of his business.
Social - If Jollibee franchise will incorporate with the gas station business it will
expand the range of customers. From targeting customers that have only cars or
motorcycles it will expand to targeting the customers who eat the Jollibee
products, thus referring to the impact of lifestyle of the customer that includes
religion, age, family, career, class and etc.
Technological - Jollibee is looking forward to innovation and improve itself in
terms of integrating technology in managing its operation. For example in
inventory system, supply chain management system to manage its supplies,
easy payments and ordering system for customers and other technological that
can make the management more effective and cost-saving. This will also make
customer happy if cost-savings result in price reduction or promotional campaign
discount which will benefit them from time to time.
Primary Problem

What is the mean to achieve company globalization of Jollibee Foods

Corporation?

Alternative Solution

A. Diversification Jollibee could use diversification to expand its business by

acquiring internationally known companies.
 B. Market Development Being geographic set-up as the main focus of the
company, Jollibee Foods Corporation could develop franchise partners
toward countries with existing Filipino minorities.
C. Co-Branding of Existing Company Jollibee Foods Corporation could use
co-branding by using JFCs existing business such as Red Ribbons, Chow
King, Burger King Philippines, to partner up. A JFC owned business will
create products that will give Jollibee brand recognition.

Evaluation Alternative

Diversification
Pros
The intent of the franchisee is `a great indicator on the direction of the
company. Tells what the franchisee is aiming. Jollibee Foods
Corporatation can take advantage of existing expertise,
knowledge and resources in the company when expanding into new
activities. This may result in transfer of skills, such a research and
development knowledge and sharing of resources
Cons
Diversification is considered the riskiest and the most expensive form of
strategy in the Ansoff Matrix since it involves new products and new
market bundled into one.
Market Development
Pros
The spreading of risks by multiplying the number of locations through
other peoples investment means faster network expansion and a better
opportunity to focus on changing market needs. Marketing on existing
Filipinos means that it is a safe bet for the company since Filipinos are
very aware on the brand image of Jollibee already.
Cons

The franchisor is required to have the appropriate resources to recruit,

train, and support franchisees. At the beginning of the franchise program,
there is a broader risk that the trade name can be spoiled by misfits until
 such time the franchisor is capable of selecting the right candidate for the
business.

Co-Branding
Pros
Since Jollibee Foods Corporation already owned a huge portion if
not all of its acquired business then extensive research and expenses is
not as great since JFC already has its viable resources. Co-branding can
increase the visibility and market share of both franchises. Co-branding
allows individual franchises to share promotional and running costs. This
can be especially important with national franchise brands.
Con
A disadvantage to co-branding is the need for a complex joint-
venture and profit-sharing agreement. Reaching an agreement on co-
branding can be a time-consuming and complex process, generally
involving lengthy negotiations and complicated legal agreements.
Whatever legal and financial agreements the franchises come to, it is
important that neither franchise has a differential or financial advantage
over the other.
Recommendation

We recommend that the franchisor to choose Solution A. The aim, vision and
mission of the franchisee to his future franchise is a great priority. We already
considered that both franchisee A and B can afford the franchise, ergo it is a measure of
who can acquire better features for the franchise. We prefer an intention rather than a
higher income because the priority is growth. We want a business partner that knows
the next step for the business. Jollibee will provide Basic Operations Training Program
(BOTP) The BOTP provides franchisees hands-on exposure to ALL levels of store
operations. They will also provide supplemental seminars that are deemed helpful for
the business.
Action Plan

What: Proposing that the main priority of a franchisee should be his intent of the
business.

When: It should be implemented as early as possible, regularly during the initial

screening prior to site evaluation.

Who: This action is done between the franchisor to the franchisee.

How: The Company should rigorous screening and debate by focusing on the
intent albeit the net worth and the expertise should also be considered.

Secondary Problem

Who should Jollibee Food Corporation in granting a franchise, Mrs. Ng or Mr.

Artiaga?

Alternative Solution

A. Mr. Artiaga The Company could choose Mr. Artiaga, a married man with a
net worth of Php 30 M. He is managing a gasoline station for five years. He
wanted to be a franchisee of Jollibee to attract more customers to his gas
station. The building is located right beside the gasoline station.
B. Mrs. Ng The Company could choose Mrs Ng, who is a 50 year old widow
with Chinese lineage, BS Hotel and Restaurant Administration graduate with
a net worth of Php 40 M. She owned a Pawnshop that lasted only for five
years (1992-1997). She wanted to start a career in the restaurant business.
The building is located across AZA Gasoline Station.

Evaluation of Alternative

A. Mr. Artiaga
Pros
He has a specific intent for the company. He has a sufficient net worth to start a
franchise. He is well-experienced with managing since he is handling a gasoline
 station for five years. He keeps up with the demand of the customer - customers
are seeking a restaurant, he provides one. He is benefitting is gasoline station all
at the same time.
Cons
His net worth is not as great as Mrs. Ngs.
B. Ms. Ng
Pros
She has more than an adequate amount of income to start a business. She
handled a pawnshop for five years. Chinese lineage may be a big plus to the
Chinese entrepreneur of Jollibee Foods Corporation.
Cons
Her Pawnshop business was not able to sustain and compete the market. She is
vague in her intent to start a franchise.

Recommendation

We recommend solution because Mr. Artiaga has a specific intent for the company. He
is very familiar in managing and sustaining a business for five years. He is focusing on
benefitting his gasoline station by using Jollibee franchise as a medium to get there.
This is a strategy called co-branding, the unifying of two products in synergy. One
product or service benefits from the other and vice versa. Mrs. Ng may have greater
income with Php 40 M, but it is not enough if her aim towards Jollibee Foods
Corporation is to just acquire a career in the restaurant business. She has no specific
strategy. Her past record with her pawnshop indicates that she is unable to capture her
market.

Action Plan

What: The choice of franchise partner

When: The process for the entire franchising process will take less than a year

Who: Mr. Artiaga is granted by Jollibee Foods Corporation

How: Jollibee Foods Corporation proceeds Mr. Artiaga to the next step: Franchise Grant