TONY TAN CAKTIONG
Business: Jollibee Foods Corp.
Category: The Business Icons
"It started with two ice cream houses. Then it just grew and grew."
In 1975, Tony Tan Caktiong wanted to work as a chemical engineer and marry his girlfriend when a field trip to a Magnolia plant in Laguna changed everything. He saw a poster a poster looking for franchisees, and thought it would be a good idea to sell ice cream to make money. The restaurant business was not new to Tan Caktiong then, because his father was a cook and used to own a small restaurant in Davao City where he and his siblings helped out in their spare time.
Tan Caktiong and his siblings pooled P350,000 to open two ice cream stores in Cubao and Quiapo. The siblings and the Tan Caktiong couple opened and closed the stores and became cashiers, waiters, and store managers. "We were really hands-on, but as we kept on growing we realized we couldn't do everything ourselves; we needed other people to help, " he says.
The started with ice cream. After two years they offered chicken and hamburger sandwiches, because customers were telling them they didn't want to eat ice cream all the time. Then in 1978, when the family had six ice cream parlors, they decided to change into a hamburger house, noting that more people were lining up for hamburgers than for ice cream. That was also the time they decided to incorporate and realized they needed a brand name. "We were looking for a symbol that would represent the group, and because I was very impressed with Disneyland characters, we decided on a bee," says Tan Caktiong. "The bee is a busy creature that produces honey - one of life's sweetest things. We thought it would be a very good symbol top represent everybody." They put the word jolly and just changed the y to i to form the brand name, Jollibee.
Soon they heard that the multinationals were coming in - McDonald's particularly. Friends were advising them to just fold up or get a McDonald's franchise, but Tan Caktiong had a better idea: he would fight the giant at his own game. Another reason he did not want a franchise was it would keep him from growing the company outside the Philippines. McDonald's indeed came in 1981, but it failed to intimidate the Tan Caktiongs because their business was already doing well. Instead, they looked closely at the McDonald's business format and noticed that its food did not fit the local taste.
"We felt it gave us an advantage. As long as other factors were equal, we thought we could win because we were all familiar with delicious food - thanks to my parents," says Tan Caktiong. "We found McDonald's to be very good at everything, but it didn't know the local culture. We did. We knew the Filipino's taste buds and what he liked in food, so we offered him flavorful and good-tasting products."
This streategy of catering to the local taste has served Jollibee in good stead. Three years after McDonald's arrival in the Philippines, Jollibee became the market leader in the fast food industry, landing it a spot in the top 500 corporations, and a couple of years later, in the top 100 corporations in the country. And it never looked back.
Jollibee offered its shares to the public in 1993 to finance its domestic and international expansion. The company acquired Greenwich Pizza Corporation in 1994, the Delifrance franchise a year after, Chowking Foods Corporation in 2000, and the Yong he King fast food chain in China in 2004. In June 2005, the Jollibee Group of Companies was touted as the Philippines' largest fast food network for commanding 75 percent of the market. It now counts a total of 1,200 stores, of which 508 are Jollibee, 310 Chowking, 228 Greenwich, and 33 Delifrance outlets. The Philippines aside, the Jollibee Group operates 121 outlets in eight other countries, among which is China, where it oversees 88 Yong he King branches. Late last year, the group acquired the privately held Red Ribbon Bakeshop - a 26-year-old business with 147 outlets here and in the United States - a transaction that should further strengthen its already powerful grip on the local market.
In monetary terms, the group has been posting a double-digit growth rate in the last few years. System-wide sales -- a measure of sales from company owned and franchised outlets - rose 18.8 percent to P24.11 billion in 2001, to P27 billion in 2002, and P28.8 billion in 2003 with its net income rising 20.8 percent to P1.25 billion. For the first quarter of 2004 alone, net income rose 41.6 percent to P382 million. As of the first half of June 2005, Jollibee declared revenues of P10.2 billion, or a net income of P894.6 million. At the same time, all companies grew by an average of 10 percent compared with the same period in 2004.
Jollibee has also been making steady inroads in establishing its presence in the international market. Its push toward international expansion actually began in 1987 when it opened its first branch in Brunei. The next foreign branch was put up in 14 years later in Daly City, California in 1991. China followed, and the the Middle East. Aside from consolidating its hold on the Chinese market, the group was training its sights on Indonesia and India, countries with huge populations.
Not everything that Jollibee touched has turned into gold, however. In 2001 it closed its Mary's Chicken and Ribs operation for failing to take off. Later, it also let go of Bingo!, its convenience store outlets, because it had problems supplying the stores with merchandise. They also had to close franchised outlets in Middle East, China, and the United States for their failure to get the right partners and the right support.
What Tan Caktiong finds difficult in competing abroad is duplicating their products. "You may have the recipe, but you could get into trouble if your ingredients or way of doing things are different. Can you produce Chicken Joy in the U.S. exactly as we do it here? Can you use different breeds of chicken and still come up with the same product? These are challenges for R&D," he says. Another difficulty is the long time it takes to penetrate a foreign market. Tan Caktiong cites China with its 1.3 billion people. Growing by an average of 30 stores is ideal for a country like the Philippines with 80 million people, but it would hardly make a dent in China.
At home, Tan Caktiong says their secret to being the market leader does not lie in some complicated formula. "The food business is till very basic. It's still about taste. It's still about How did you serve me? Is your place nice? Am I treated well? Do I get value? If you think about it, if we're going out to eat, these are the basic things we look out for, but the execution is the difficult part," he says. "It's not like other businesses where it's the concept or the knowledge that's difficult. Here there's no secret; it's very easy, but it's the execution that's hard. If you ask a lot of restaurants, they know all these things. Executing day by day is what's hard."
GOLDEN RULE:
"Twenty-seven years ago we didn't have a firm vision that we would be number one, but we had a rough vision that we would go outside the Philippines. We also had a goal: to take care of our customers and employees and to enjoy what we're doing. Once we did all these things, the profits would come."
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