The challenge primarily is to gain better brand awareness that will translate to better volumes and better profits.
Consider it symbolic that the first American franchise of Jollibee Foods Corp opened in Daly City, California on Mission Street. The address underscores the huge task the Filipino fastfood chain has set itself.
'We would like to become the best Asian global brand in this market,' says Noli Tingson, general manager for international operations. With 28 branches already open outside the Philippines, - from Saudi Arabia to Indonesia to Saipan - Jollibee has always known that it was only a matter of time before it set foot on the other half of the globe. That time came in June.
The pace of expansion has not been ideal, however, due to the peso's steep depreciation. The company recently announced it spent 385 million pesos (about US$9.23 million), or about 40% of the amount set aside for expansion last year, on servicing interest payments for its US$28.9 million dollar-denominated loans.
Global networking plans, for which the loans were obtained, suffered painfully. Only two of the 20 international franchises or joint ventures targeted to open in 1997 were actually pushed through - one in Hong Kong, the other in Malaysia.
Jollibee had planned to open six stores in the United States in 1997, but the regional financial crisis reduced that possibility to two, including the one in Mission Street. Both openings were also delayed until this year.
In Indonesia, the economic and political turmoil ruled out the establishment of five new stores, while the five existing stores were forced to close during the two weeks of upheaval prior to the resignation of former President Suharto.
In spite of these setbacks, Tingson maintains that the company's strategy is on target and on time. 'The expansion programme is meeting its target, although initially we experienced some bumps,' he says. 'If there is a blot on our programme, it is Indonesia. In all other markets, we are moving on as planned.'
Along the way, Jollibee is learninglessons about how to manage the brand and build its network. One store in Riyadh, Saudi Arabia, was closed after more than a year of operations, apparently due to poor sales. Tingson says the move allowed the company to focus on branches that have proven to be profitable.
'We have nine or 10 stores in the Middle East,' he says. 'We thought it would be better to focus on active markets like Jeddah, which has been very, very good. That closure [Riyadh] didn't even have a significant impact.'
In Bahrain, one franchise was relocated and then saw a three-fold improvement in sales. In Kuwait, one branch entered into a co-branding scheme with a local store to boost its profile, not only to Filipino contract workers but to locals as well. Following on from that success, Tingson says another co-branded store is likely to open in Jeddah.
One promising new addition is an outlet that opened this year in Papua New Guinea. Prior to Jollibee's entry into that 'virgin market', Tingson says only one branch of an Australian fastfood chain was tapping the market of 3 million people in the capital city of Port Moresby.
'We thought we could offer a superior alternative to that brand and we were very happy with the result,' Tingson says.
Jollibee also extended its reach to Xiamen, China, in the first quarter of this year.
Product awareness is the main factor in the company's bid to dominate the competitive fastfood market in all of the countries in which it operates. It tackles this by widening the network and creating a niche.
'The challenge primarily is to gain better brand awareness that will translate to better volumes and better profits,' Tingson says. 'We are in the introductory stage at the moment, so the challenge is how to expand our presence and niche and make it a a meaningful investment.' Jollibee hopes to end 1998 with 37 stores - eight more than it had in mid-June. Tingson expects overseas operations to eventually grow at a rate of between 12 to 15 new stores a year.
'The most important thing for us now is [building a] network. Even if you pump in thousands in advertising, if you don't have the network, it doesn't do anything for you,' he says.
This renewed optimism is backed by a liberal yet consistent management style. Because no Jollibee store outside the Philippines is fully-owned, the company allows each franchisee or joint venture to develop new products - as long as its original menu, developed in Manila, is kept. Customers can find a nasi lemak in Malaysia and Brunei and chicken masala in the Middle East alongside the Chicken Joy.
'In terms of management, I think the critical factor is that we have tried our best to transfer our product and service superiority to our franchises,' Tingson says. 'Yet the way we do business is flexible in that we allow them to develop and implement new programmes and menu items to tap the local market. We are the quickest among our competitors in terms of localisation of items.'
Jollibee also operates from a position of renewed financial strength. Through an issue of warrants in March, the company now enjoys freedom from the kind of debt undermining numerous other companies.
The warrants were issued by Queenbee Resources Corp, in which Jollibee has a 50% stake, and the issue raised a total of 1.4 billion pesos. Spencer Yap, an analyst at BPI Securities, says 1.2 billion pesos of that amount went to payment of the dollar loans, while the balance of 200 million pesos was allocated for store expansion, adding to internally-generated cash.
The company has now retired all of the US$28.9 million in dollar-denominated debt it borrowed from a consortium of banks in 1996, at a time when internal cash flows could not keep up with rapid expansion.
The company's present outstanding debt amounts to only 27 million pesos, making it 'virtually debt-free', according to Tony Tan Caktiong, Jollibee's chairman.
As such, he says, Jollibee will be able to sustain growth and profitability, 'regardless of the economic situation and the apparent uncertainties' brought about by the regional financial crisis.
Despite the discouraging outcome of Jollibee's globalisation bid last year, the company showed no let-up on the domestic front. Thirty-five new stores opened in the Philippines last year, only slightly off the target of 40. With 217 outlets nationwide as of last year, Jollibee has more stores than its closest competitors - the American burger chains McDonald's and Wendy's - operate between them. 'Jollibee has been very aggressive in terms of store expansion,' says Vladi Carandang, an analyst at securities company All Asia Capital.
This shows in the number of franchises it has sold. By the end of March, 142 Jollibee stores had been franchised, many of them in areas outside of metropolitan Manila. The company hopes to end the year with a total of 256 stores nationwide.
Profits are also expected to bounce back this year from the 29% slump last year. BPI Securities estimates Jollibee's 1998 net profit will hit 832 million pesos, an 83% jump from last year. 'What is important is for us to be quick enough to recognise and take advantage of opportunities,' says Tingson.
Analysts say that it is all about taste. 'Filipinos prefer the Jollibee taste and not only in hamburgers but in chicken, which is their bestseller. Consumers will try new products, but they always go back to Jollibee,' says Spencer Yap, an analyst with BPI Securities.