Culinary Entrepreneurship: Readings

Philippine Business Magazine: Volume 11 No. 9 - Cover

The buzz behind Jollibee

Tony
Tan
Caktiong's
Jollibee
phenomenon
as a shining example of entrepreneurship
By Anne dela Cruz

is

recognized

globally

It came as no surprise when Tony Tan Caktiong, president and CEO of Jollibee Foods
Corporation, was voted the World Entrepreneur Of the Year 2004 by Ernst & Young.
Just two months before bagging this prestigious award, Tan Caktiong was named the
Entrepreneur Of the Year (EOY) in the Philippines when Ernst & Young launched the
awards locally. Ernst & Young established EOY in 1986 to honor pioneering
individuals who took risks in setting up enterprises and conquering all odds to make
their endeavors succeed.
Tan Caktiong's Jollibee story is considered a phenomenon in Philippine business. It is
the only homegrown brand that has outnumbered and outsold the foreign
competition in the Philippines.
Ice Cream to Burgers
It was a college class trip to the Magnolia Ice Cream parlor in Cubao, Quezon City
that gave Tan Caktiong the idea of going into the food business in the 1970s. Since
he already had acquired some experience while helping out in his father's Chinese
restaurant in Davao City, it only seemed natural that he would also be going into the
same line of business.
"We had two Magnolia Ice Cream houses which we
opened in 1975 but as time went on, we noticed that
people started asking for something hot in our menu
like sandwiches and burgers," Tan Caktiong relates.
So in addition to ice cream, Tan Caktiong's ice cream
parlor started serving hamburgers. When that
happened, more and more people started lining up not
for the ice cream but for the hamburgers. With that,
he decided to transform their ice cream parlor into a
hamburger
chain.
The next thing he did was to look for an appropriate
name for his new business. The name Jollibee was the
result of a brainstorming session with the members of
his family. "The bee is a symbol of diligence and Tony Tan Caktiong
teamwork," he explains. "The bee buzzes around the
beehive, working in perfect harmony with others in the colony."
Tips
from
Tony
To survive - and even excel - in difficult times, Tony Tan Caktiong
recommends the following:
> Focus on what you can control - your business, not the environment

Page 1

Culinary Entrepreneurship: Readings

> Find creative ways to grow your business and to reach your
customers
> Be conservative in your cash management
> Prepare for the bad times by making the right decisions during the
good times
> Make sure that you hire tough employees to help you weather the
storm
> Make it a habit to listen to everyone, including your employees

He adds that he added "jolly" because he believes that people should enjoy what
they are doing while they are working hard at it. Thus, Jollibee was born and Jollibee
Foods Corporation was incorporated in 1978 with seven outlets. Jollibee made P2
million
in
sales
in
its
first
year.
By 1984, Jollibee reached the P500 million annual sales mark, catapulting the
company into the list of the Top 500 Philippine Corporations. In 1987, barely ten
years in the business, the company joined the ranks of the Philippines' Top 100
Corporations.
One Thousand Stores
Today, Jollibee employs about 26,000 people in more than 1,000 outlets in seven
countries, including the United States and China. In the Philippines, Jollibee
commands 65% of the domestic fast food market, competing very successfully
against established global brands. In 1993, it became the first fast food service
company to be listed in the Philippine Stock Exchange. In the ten years since, the
company has been consistently profitable, reaching an annual net income of P1.170
billion as of September 2004.
Busy
Bees
Almost 60% of Jollibee stores are franchised, proof of investors'
confidence in the company's profitability
Companyowned

Franchised

No. of stores in the

1,008
Philippines

414

594

Jollibee

478

190

288

Chowking

276

82

194

Greenwich

226

119

107

Delifrance

28

23

Total

(as of 30 September 2004)

Page 2

Culinary Entrepreneurship: Readings

Profits in difficult times like these are unimaginable. Tan Caktiong admits that in
some way or another, Jollibee has been affected by the economic crisis because
prices
of
their
raw
materials
have
gone
up.
"The good thing with a fast food chain though is that when the economy is
experiencing good times, the mass market can come to our stores and enjoy our
food. But when the country is in an economic crisis, the upper market no longer goes
to fine-dining restaurants but they go to Jollibee. In other words, our market is
flexible," he states.
He believes that crisis or no crisis, consumers still look for the same qualities in their
food preferences - good taste, great service, warm ambiance, and affordability. "We
make sure we meet all these. We also take into account the need for variety and
novelty so we always improve our menu by adding variants and new products."
In a speech before the 3rd Management Association of the Philippines (MAP)
International CEO Conference, Tan Caktiong recalled the numerous crisis the country
faced like the political turmoil brought about by the EDSA Revolution, the fuel crisis,
and the Asian economic crisis. He recounted how Jollibee was able to emerge from
these crises, not only unscathed but with flying colors as well.
It is during times like these that Tan Caktiong focuses attention on things that he
could control -- and that is to do his business well. "During these times, we resolve
to continue aggressively growing our business in spite of reductions in our sales
levels," he said. Trying times force people to think of more creative ways of
improving the business and reaching out to more customers.
Conquering Foreign Markets
One of the decisions made during the difficult times was to venture into new
markets. Tan Caktiong opened Jollibee branches in unfamiliar places like Digos,
Kidapawan, Surigao, Vigan, Laoag, and Ozamis. He also made the bold step of
opening stores abroad like in Hong Kong, Dubai, Guam, Taiwan, Singapore, and the
United States.
Sweet as Honey
Combined
sales
and Delifrance stores

of

all

Jollibee,

2002 (full year)

P26.8 billion

2003 (full year)

P28.9 billion

Chowking,

Greenwich,

(8% growth over 2002)

2003 (Jan-Sept)

P20.7 billion

2004 (Jan-Sept)

P25.6 billion
(24% growth over year ago level)

Combined
income
and Delifrance stores

of

all

Jollibee,

2002 (full year)

P1.038 billion

2003 (full year)

P1.256 billion

Chowking,

Greenwich,

Page 3

Culinary Entrepreneurship: Readings

(21% growth over 2002)
2003 (Jan-Sept)

P910 million

2004 (Jan-Sept)

P1.170 billion
(29% growth over year ago level)

Not content with bringing Jollibee to foreign shores, Tan Caktiong also acquired four
new brands - Chow King, Greenwich, Delifrance, and Yonghe King (in China). These
acquisitions are in line with the goal to be the dominant food service company in the
country.
Following
Jollibee is present
communities

in

Filipinos
countries where

there

are

big

Abroad
Filipino

Total no. of stores abroad

120

Jollibee (United States)

Jollibee (Hong Kong)

Jollibee (other Asian countries)

12

Chowking (United States)

Yonghe King (China)*

89

* Yonghe is China's leading fast food chain which Jollibee Foods Corp.
acquired with its existing 80-store network

"But while we were aggressive in our growth plans, we were conservative in our cash
management," Tan Caktiong explains. "During times of crisis and turbulence, our
leadership team would roll up their sleeves and watch our cash position closely."
He is also a firm believer that the sort of decisions he makes during the good times
can affect how the bad times will impact on him and his business. "The time to
reorganize, the time to realign and reposition oneself is when times are good," Tan
Caktiong shares. "Then the change can be better managed without the sword of
closure hanging overhead."
Good Endorsements
Another factor that has contributed to the success of Jollibee is the use of celebrity
endorsers who embody the company's values and who believe in the firm, in their
people, and in their products. "But we don't rely on celebrities alone. We have been
able to grow our brand through advertising that is anchored on strong family values.
Many of our ads whet not only appetites but touch the heart as well."
When asked about his management style, Tan Caktiong answers that he spends
more time listening than talking. He recalls a time when he was tempted into
availing of dollar loans because interest payments cost less than peso dominated
loans. He was ready to make the plunge but there was an employee who cautioned
him on the risks involved. He listened and he managed to save significant amounts
because of the sudden devaluation of the peso that followed.

Page 4

Culinary Entrepreneurship: Readings

"It never ceases to amaze me how each and every person has one good or even
brilliant thing to say when you stop talking, just keep quiet, and start listening to
them."
Tan Caktiong also tries his best to motivate his employees to come out with excellent
results, "hoping that they will look at me as someone who will always inspire them to
give their best all the time."
He is grateful to his parents for making him what he is today. It was his parents, Tan
Caktiong proudly says, who always reminded him to be humble, to work for his
dreams, and to think of the good of others.

Page 5

Culinary Entrepreneurship: Readings

Readings:

Piece of cake? The reality of opening a restaurant might not be what

you expect.
By Dumas, Keasha Entrepreneur
Date: May 1998

So you want to open a restaurant? According to the National Restaurant Association,

more than 37 percent of all adults have worked in the restaurant industry at some
time in their lives. Unfortunately for entrepreneurs, this seemingly widespread
familiarity with the industry doesn't always translate into successful restaurant
ownership. Phyllis Ann Marshall, president of FoodPower, a national restaurant
industry consulting firm in Costa Mesa, California, answers some important questions
to help prospective restaurateurs get started on the right track.
What is the most common cause of new-restaurant failures?

Most new restaurants fail because of insufficient start-up capital. "You need enough
capital to see the operation through the first year if it makes no profit," explains
Marshall. After building the restaurant site, entrepreneurs should make sure they
have enough money left for menu development, personnel training, merchandising,
marketing and unforeseen developments.
How do I define the market for my restaurant?
Try to identify the specific demographic groups your restaurant concept will attract.
"Generally, entrepreneurs build a restaurant around the food, decor and prices they
like and target it to their age group and lifestyle," explains Marshall. Instead,
consider consumers' lifestyles, dining patterns, ages, income levels, ethnicities,
family status, tourism trends and even driving patterns when developing a market
profile.
How important is location; what should I consider when choosing a site?
"Location is vital. The better the location, the fewer marketing dollars you have to
spend," says Marshall. Your restaurant should be highly visible and located in an area
with a large number of the customers you're trying to attract. Don't make the
mistake of leasing a location before you've got a solid strategy. "Lease last," warns
Marshall. "Never sign a lease until the concept and the business plan are complete."
Once the restaurant is open, I won't have to be there every day, right?
Wrong. Says Mar shall, "Entrepreneurs starting out are going to be involved in every
detail of the business, working weekends, nights and holidays."
What obstacles am I likely to encounter in my first year of restaurant ownership?
You may encounter a lower sales volume than projected, due either to fewer people
coming in or patrons spending less money than expected. "Entrepreneurs thinking
about going into the restaurant business seem to have the idea that they can just
build it, open the doors and people will come," says Marshall. Increased marketing in
the restaurant's immediate vicinity often cures weak initial sales volume, she adds.
Being unprepared to deal with daily and weekly accounting responsibilities is another
common first-year challenge, but learning to manage and interpret numbers will
help.

Page 6

Culinary Entrepreneurship: Readings

New restaurateurs expecting a year of grand-opening festivities and fun are in for a
big surprise. Says Marshall, "Just keeping the thing operating is the first-year
challenge."
From www.allbusiness.com

Why restaurants fail.

By Self, John T. Cornell Hotel & Restaurant Administration Quarterly
Date: August 2005
(excerpts)

Conclusions
Combining our quantitative (longitudinal) and qualitative data, we present (in Exhibit
7) a model for future research. Our study indicates that the restaurant failure rate is
affected more by internal factors than by external factors, although both apply. Such
attributes as restaurant density, firm size, and managerial characteristics are
important to success. In particular, the manager's ability to balance family matters
with the development of the organization is critical. Along with that balance, it is
important for the owner-manager to have the requisite skills to run a restaurant.
While the restaurateur should plan carefully in growing the business, she or he
should be ready at any time to alter plans in response to changes in external factors.
Finally, while formal marketing and advertising seem not to be important to the
success of an independent restaurateur, the restaurant must pay attention to
community and customer relations so that it is perceived to be a part of its
community.
Further research should focus on those factors that have been found to be the most
critical to restaurant survival. Although it is comforting to work with numbers and to
look at external forces and failure rates, it is more important to get to the core
internal issues underlying restaurant viability. Future research on successful
ownership characteristics and managerial factors can be useful to aspiring restaurant
owners. Also, the complex roles of family and organizational life cycles in restaurant
viability warrant further investigation.
Elements of Restaurant Success and Failure
Elements of Success:
1. Have a distinctive concept that has been well researched.
2. Ensure that all decisions make long-term economic sense.
3. Adapt desirable technologies, especially for record keeping and tracking
customers.
4. Educate managers through continuing education at trade shows and workshops.
An environment that fosters professional growth has better productivity.
5. Effectively and regularly communicate values and objectives to employees. In one
instance, new owners credited communication of their values and objectives to
their employees as a major element in the successful repositioning of their
restaurant to better meet the needs of the growing neighborhood businesses by
adding lunch to their dinner-only concept.
6. Maintain a clear vision, mission, and operation strategies, but be willing to amend
strategies as the situation changes.

Page 7

Culinary Entrepreneurship: Readings

7. Create a cost-conscious culture, which includes stringent record keeping.
8. Focus on one concentrated theme and develop it well.
9. Be willing to make a substantial time commitment both to the restaurant and to
family. One successful owner refused to expand his business into lunch periods
because he believed that his full-service dinner house was demanding enough
from his family.
10. Create and build a positive organization culture through consistent management.
11. Maintain managerial flexibility.
12. Choose the location carefully, although having a good location seems to be more
a moderating variable than a mediating (causal) variable in restaurant viability.
Elements of Failure:
1. Lack of documented strategy; only informal or oral communication of mission and
vision; lack of organizational culture fostering success characteristics.
2. Inability or unwillingness to establish and formalize operational standards; seatof-the-pants management.
3. Frequent critical incidents; managing operations by "putting out fires" appears to
be a common practice.
4. Focusing on one aspect of the business at the expense of the others.
5. Poor choice of location.
6. Lack of match between restaurant concept and location. A night club failed, for
instance, because it opened across the street from a police station. The owners
thought that the police station would be a deterrent for potential criminal
elements and bar fights, but unfortunately it was also a deterrent for customers,
who were afraid of police scrutiny and potential DUI tickets. The club was closed
within eighteen months.
7. Lack of sufficient start up capital or operational capital.
8. Lack of business experience or knowledge of restaurant operations. The owners of
a successful night club expanded their business by investing more than $1.5
million in renovating an old bank building for a fine-dining restaurant. With no
knowledge of restaurant operations, they opened the restaurant with zero
marketing budget as they relied primarily on free publicity and word of mouth. In
less than one year, the restaurant was closed, with more than $5 million in debt.
The owners tried to salvage the business by converting it into a night club, but
with no success.
9. Poor communication with consumers. One restaurant failed to take off after a
major renovation because the owners did not communicate to their clientele their
reason for closing or their timetable for reopening. Their customers were long
gone by the time they reopened.
10. Negative consumer perception of value; price and product must match.
11. Inability to maintain operational standards, leading to too many service gaps.
Poor sanitary standards are almost guaranteed to kill a restaurant. One operation
was exposed by a local television station for poor sanitary practices. Though the
sanitary conditions subsequently improved as reported by the same television
station--the damage was done and the restaurant was closed. It later reopened
as a successful full-service restaurant.
12. For ethnic restaurants, loss of authenticity; for all restaurants, loss of conceptual
integrity.
13. Becoming everything to everyone; failure of differentiation or distinctiveness.
14. Underestimating the competition. A contemporary restaurant located near an
established restaurant adjacent to a golf club failed when it could not draw the

Page 8

Culinary Entrepreneurship: Readings

golfers from their traditional haunts. Owners thought that their new restaurant
would have no problem attracting the golfers.
15. Lack of owner commitment due to family demands, such as illness or emotional
problems. In an extreme example, a child with a long-term illness prevented an
owner from devoting necessary time to the restaurant, which soon closed.
16. Lack of operational performance evaluation systems. In one instance, new
owners did not know how to calculate food cost and relied on employees to
maintain proper inventory controls.
17. Frequent changes in management and diverse views of the mission, vision, and
objectives. In an example that is common in partnerships, the owners of a failed
restaurant could not agree on its direction after just one year of operation.
18. Tardy establishment of vision and mission statements of the business; failure to
integrate vision and mission into the operation; lack of commitment in
management or employee ranks.
19. Failure to maintain management flexibility and innovation.
20. Noncontrollable, external factors, such as fires, changing demographic trends,
legislation, economy, and social and cultural changes.
21. Entrepreneurial incompetence; inability to operate as or recruit professional
managers.
H. G. Parsa, Ph.D., is an associate professor at The Ohio State University (parsa.1@ osu.edu).
John T. Self, Ph.D., is an instructor at the Collins School of Hospitality Management at
California State Polytechnic University, Pomona (jtself@csupomona.edu). David Njite, MS, is a
doctoral student and Tiffany King is a graduate of The Ohio State University.
From: www.allbusiness.com

Page 9