New investors to beef up Wendy’s capital

The Pardo family, which operates the Wendy’s hamburger chain in the Philippines, is finalizing a deal that will allow it to take on a new strategic partner to boost its restaurant business and take advantage of rising income levels in the country.

Wenphil Corp. is now set to wrap up talks with the group of Michael Kho, former Duty Free Philippines general manager, for a capital build-up program.

The proponents are now only waiting for the approval of Wendy’s International in the United States, two sources familiar with the transaction told the Inquirer.

One source said the deal would give the 28-year-old Wendy’s franchise in the Philippines an enterprise value of about P1 billion.

Another source said the transaction would allow the Kho-led group to acquire 30 percent of the business.

The capital build-up program will allow Wendy’s to scale up operations in the Philippines.

At present, the burger chain has 31 branches nationwide.

Wendy’s is “working to be a major player” in the Philippines, one industry source said, adding that the capital build-up program still “has to be cleared by the Americans.”

Wenphil founder Jose Pardo, former trade and finance minister and now chairman of the Philippine Stock Exchange, brought in new investors into 24/7 convenience store chain operator Philippine Seven Corp., enabling it to expand its business nationwide.

Majority of Wenphil is now owned and controlled by Pardo’s children. In February last year, daughter Elizabeth Pardo-Orbeta signed a long-term agreement with Wendy’s International Inc. to significantly expand Wendy’s brand presence in the Philippines.

The new agreement with Wenphil—a Wendy’s franchisee since 1983—calls for the development of 44 additional restaurants, which will increase the total number of Wendy’s branches in the country to 75.

As part of the agreement, Wenphil will open branches outside of Metro Manila through sub-franchising.

The source noted that Wenphil had not been allowed to undertake sub-franchising for a long time.

When the elder Pardo put up Wendy’s nearly three decades ago, he chose not to expand as aggressively and thus avoided borrowings.

This allowed the hamburger chain to hurdle economic cycles in the country, but also limited its geographical expansion.

With Kho’s group now in the picture, a more rapid growth is envisioned, especially with a new concept of franchising.

Kho is expected to ably lead Wendy’s into a new era in the Philippines, having substantially grown the Duty Free business when he was head of the government corporation.

Meanwhile, the looming buy-in deal in Wenphil reflects a growing trend of consumer-oriented companies recently attracting new investors, like in the case of leading milk-maker Alaska Milk Corp. and upscale grocery operator Shopwise and Rustans Supercenter.

Based on Wenphil’s latest regulatory filing at the Securities and Exchange Commission, the privately held company had total assets of P343.71 million as of end-2010. It also had P160.1 million in equity.

Revenue amounted to P902.46 million in 2010, during which it chalked up a net income of P9.19 million.

Over the years, Wenphil has spent about P1.3 billion in advertising alone, giving the local company an enterprise value of P1 billion after 28 years in operation.

In the United States, the Wendy’s/Arby’s Group is the third-largest quick-service restaurant company, with a combined restaurant system of more than 10,000 branches in the US and 26 other territories and countries worldwide.