Jollibee embarks on global business restructuring

Homegrown fast-food giant Jollibee Foods Corp. (JFC) is shelling out P7 billion to embark on a “significant” global business restructuring to cope with what could be a prolonged fallout from the new coronavirus di­sease (COVID-19) pandemic.

As Asia’s most valuable restaurant chain braces for poor earnings performance this year, it intends to streamline nonperforming stores and beef up deli­very, takeout and drive-through services across its businesses around the world, especially in its largest markets—the Philippines, China and North America, the company told the Philippine Stock Exchange on Friday.

The expense provision for this transformation—which assumes that the world will not quickly revert to the pre-COVID-19 pandemic period—will be set up in the second quarter of 2020 and will be incurred mostly within the year.

JFC chair Tony Tan Caktiong said that with this global transformation, JFC aimed to emerge in 2021 as an “even stronger business and organization”

“Our vision remains the same: to be one of the top five restaurant companies in the world,” he said.

“In the next few months, even as lockdowns begin to be lifted, we forecast that sales will continue to be much lower than year-ago levels. Our estimate is that our profit for 2020 will not be good at all due to the overall economic environment,” JFC chief financial officer Ysmael Baysa said.

The COVID-19 pandemic caused the temporary closure of a high number of stores and dramatically reduced or eliminated dine-in sales at its restaurants, starting in China in February, and the rest of the business in March, leading to poor first quarter sales and profit performance.

“We are taking this opportunity to implement truly major changes in 2020 so that JFC will start 2021 in a much stronger position in terms of business model, operating efficiency, profitability and organization strength. We will then resume strong and consistent profitable growth for the years ahead,” Baysa added.

The planned changes will include the rationalization of the number of restaurants wi­thin certain geography or area, the rationalization of resour­ces deployed in the restaurants, implementation of safety and social distancing protocol in the dining area, investment in digi­tal commerce and technology, increase in the capacity for deli­very-to-home and -office, takeout and drive through, installation of mobile applications to facilitate food ordering and payment, establishment of “cloud kitchen” or unmarked delivery outlets with no dine-in facility located in discreet, low rent sites and the rationalization of production and distribution facilities. The changes will also include the transformation of support and management groups in the field and in the offices.

JFC chief executive officer Ernesto Tanmantiong said that throughout JFC’s journey from a single store business in the Philippines into a multinatio­nal multibrand company, the group had always achieved improvement in the effectiveness of the organization from deliberate changes in its operations.

“It is again time to embark on another business and organization transformation in response to changing consumer behavior caused by the COVID-19 pandemic,” he said.

The group reported that the fastest growing business in the JFC group to date is American hamburger chain Smashburger, with delivery sales growth of 600 percent and overall same- store sales growth at company-owned stores of single digit to double digits in recent weeks.

In March, JFC announced the deferment of about P9 billion worth of capital expenditures from 2020 to 2021 given the operational constraints to the construction of facilities and to the uncertain volume of demand due to the limited mobility of consumers. Its planned capital expenditure for 2020 was reduced by 63 percent from P14.2 billion to P5.2 billion.

While operating costs are significantly being reduced at all levels—at the stores, commissaries, support services and main offices in all regions in the world—the group expects to continue to open new stores on a very selective basis for the balance of 2020. It expects to open a worldwide total of 171 company-owned new stores and renovate 96 existing stores this 2020.

It also aims to secure for its future stores excellent locations that will become available due to weak economic environment.