IM for Lovelock & Wirtz, Services Marketing 6/e Teaching Notes for Cases - Section 5 59

CASE 7

JOLLIBEE FOOD CORPORATION

OVERVIEW

Jollibee Foods Corporation (JFC), a Philippine fast-food company, has achieved

market dominance in three segments in its home country—burgers and chicken,
pizzas, and Chinese food—beating such well-known international competitors as
McDonald’s and Pizza Hut. What is the key to its domestic success and what are the
lessons for its international ventures?

JFC operates Jollibee, the Philippines largest and most successful homegrown fast-
food chain. By targeting the niche Filipino market, Jollibee has beaten global players,
including fast-food giant McDonalds, in the Philippine fast-food scene with its own
unique menu and excellent service. Jollibee commands a 58 percent share of the
quick-service restaurant market in the Philippines and some 70 percent of the burger-
based meals market. To cater to the ever-changing needs of Filipinos, JFC has
acquired a portfolio of complementary fast-food concepts, Greenwich Pizza,
Chowking, and Délifrance (a French franchise). The company has been honored many
times, being recognized for its entrepreneurship, as the number one food company in
Asia, as the best-managed company in the Philippines, and as Asia’s most admired
company. It has also been consistently ranked among Asia’s best employers.

To secure its leadership position, JFC intends to focus its efforts on increasing its
presence in both local and international markets. However, it has not been particularly
successful in establishing the Jollibee and Chowking brands overseas. In 2004, it
purchased the Yonghe King chain of Chinese fast-food restaurants in China and has
high hopes for the future of this brand in the People’s Republic.

TEACHING OBJECTIVES

 Introduce students to the importance of gaining consumer insights,

understanding consumer markets, and consumer buying behavior

 Understand how local brands can compete in their homelands against big
global firms that have entered the market.

 Explore the problems and opportunities associated with overseas expansion.

__________________________________________________________________
© 2007 by Leonardo R. Garcia, Jr., Christopher H. Lovelock, and Jochen Wirtz
IM for Lovelock & Wirtz, Services Marketing 6/e Teaching Notes for Cases - Section 5 60

DISCUSSION QUESTIONS

1. Evaluate Jollibee Food Corporation’s performance in the Philippines. What

are the secrets of its success in terms of marketing, operations, and human
resource strategies?

2. In what ways does JFC’s strategy of adding new brands leverage or dilute the
strengths of the original Jollibee concept?

3. What rational and emotional attributes do you look for in a fast-food

restaurant? Do these attributes fit your favorite food establishment in your
country?

4. Evaluate JFC’s performance overseas. To what extent can the company

transfer its core competency to its overseas operations? Should it modify its
consumer-driven strategies to suit foreign markets, even if that means Jollibee
becomes much less Philippine in nature?

5. Should Jollibee continue in its efforts to go international or concentrate on

expanding and consolidating its foothold in the Philippines only? Why?

ANALYSIS

1. Evaluate Jollibee Food Corporation’s performance in the Philippines.

What are the secrets of its success in terms of marketing, operations, and
human resource strategies?

Going against a global competitor like McDonalds, the pioneers of Jollibee learned
that they did not have to reinvent the wheel in order to save its market position.
Lessons derived from observing the operations of big players drove the company to
identify its strengths as well as its limitations and from there to build a competitive
edge for the Jollibee chain.

Marketing

Concentrating on the Filipino palate and offering variety and convenience.

Jollibee’s phenomenal success in its hometown can be attributed to several factors,
one of which is its strategy of niche marketing. By concentrating its resources on
satisfying the Filipino palate, Jollibee has been able to serve localized dishes that are
unlike any found in the other fast-food chains in the Philippines. In addition to
offering the usual French fries that accompany the meals found in McDonald’s, KFC,
Burger King, and so forth, Jollibee also serves rice or spaghetti, Filipino style. Even
the burgers are cooked exactly as Filipinos want them done— sweeter and with more
seasonings, often likened to what a Filipino mother would cook at home.

By offering a menu with a wide variety of dishes that aims to satisfy children and
adults, families enjoy the convenience of a one-stop dining outlet that appeals to all
taste buds. Through the constant revamp of its menu lineup and introduction of
IM for Lovelock & Wirtz, Services Marketing 6/e Teaching Notes for Cases - Section 5 61

seasonal offerings (i.e., tuna sandwich during the Lenten season), Jollibee is able to
stir up excitement in its customers with each visit to the outlets.

Building brand equity. By having an integrated marketing communications strategy

anchored on the values of a closely-knit Filipino family, Jollibee was able to establish
a strong brand equity supported by heavy advertising in both traditional and
nontraditional media. As its advertising messages bore a tinge of nationalistic
sentiments captured in snippets of daily experiences of the common Filipino, Jollibee
soon became a household name. Filipinos were proud to have their very own local
fast-food chain that was able to compete head on with global names like McDonald’s
(see Exhibit 5, Value Proposition of Jollibee versus McDonald’s in the Philippines).
The well-loved bee, matched with a popular local movie screen idol, Aga Mulach,
further earned Jollibee a place in the hearts and minds of Filipinos.

Investing in socio-civic programs designed to serve its host communities further

secured Jollibee’s position as a Filipino company for the Filipino. Advocacy
campaigns such as the early Christmas drive “ma-Aga ang pasko sa Jollibee,” again
endorsed by Aga Mulach, the poverty housing project with Habitat for Humanity, and
the Kaya Mo Yan Kid” or “You can do it, kid!” campaign to encourage kids to show
their potential contributed to the company’s overall success, not only with its
customers but with all its stakeholders.

Operations

By benchmarking McDonald’s operations and developing an understanding of its

business model, Jollibee executives were able to bring their own chain up to world-
class standards. In particular, they focused on learning about the sophisticated
operating systems that enabled McDonald’s to control its quality, costs, and service at
the store level—an area of weakness in the local firm that had constrained further
expansion. Subsequently, through use of IT in its operations and state-of-the-art
automation in its commissary, Jollibee has been able to drastically reduce production
time and ensure quality consistency and the highest standard of cleanliness in its food
products.

Human Resource Management

High standards of service. Jollibee ensures that it provides top-notch services in all
its outlets. Jollibee’s success can also be attributed to its organizational culture.
Through stringent recruitment and selection procedures, Jollibee ensures a service-
oriented staff to man its outlets. Willing to pay above-average compensation, Jollibee
ensures loyalty among its staff members and this translates into better service
performance and dedication toward serving the customers. Training programs equip
its staff with the necessary skills needed to better perform their tasks. By hiring
professionals to devise strategies for its store operations, Jollibee is able to create a
working environment that boosts high standards of professionalism and service
excellence.
IM for Lovelock & Wirtz, Services Marketing 6/e Teaching Notes for Cases - Section 5 62

2. In what ways does JFC’s strategy of adding new brands leverage or dilute the
strengths of the original Jollibee concept?

JFC’s addition of three new brands to the original Jollibee has created a portfolio of
four brands, each with its own separate identity and menu: Greenwich Pizza (pizza
and pasta, purchased 1994), Délifrance (French bakery-café, franchise rights acquired
1995), and Chow King (Chinese fast food, purchased 2000). Greenwich Pizza and
Chow King were both the leading brands in the Philippines in their respective
categories at the time of purchase. Although each of these chains has its separate
identity in the marketplace, JFC can leverage its skills in site selection, management,
staff recruitment and training, logistics, and marketing, as well as achieving further
economies of scale in operation of its commissaries.

In the Philippines all four brands have seen significant growth in number of stores
since 2000 (source: Exhibit 1):

Q3 2004 2000
No. of stores % increase No. of stores
Jollibee 478 27.8% 374
Greenwich 226 17.1% 193
Chowking 276 68.3% 164
Délifrance 28 115.4% 13

It is noteworthy that the Chow King chain has grown at a much faster rate than either
Greenwich or Jollibee. Although the growth rate for Délifrance looks impressive, it is
on a very small base. Moreover, there has been no growth since 2002. In fact, the
chain has actually lost two stores since 2003.

So long as each brand continues to be marketed independently, there should be no

dilution of the original Jollibee concept. One can assume that most consumers are
unaware that all four brands are owned by JFC. The main risk is that management
time will be diverted to the other three brands and that insufficient attention will be
given to managing the evolution and expansion of the Jollibee chain. By offering four
different food concepts, JFC broadens its appeal in the fast-food market and hedges
against the risk that any single menu concept will either fall out of favor or be
upstaged by aggressive competition. However, there is probably less opportunity to
customize these other three food concepts to Filipino tastes. Also, advertising for
these brands probably cannot hope to employ the same level of appeal to nationalistic
pride exercised by Jollibee.

3. What rational and emotional attributes do you look for in a fast-food

restaurant? Do these attributes fit your favorite food establishment in
your country?

Based on the survey conducted by DLSU advertising management students (Exhibits

6 and 7), the following are the rational and emotional attributes people look for in a
fast-food restaurant:

Rational Attributes (see Exhibit 6)

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1. Affordability. Are the prices of the food items affordable enough?

2. Accessibility/many outlets. Is the outlet accessible to an interested customer?
Are there many outlets you can go to?
3. Taste. Are the food items tasty enough to allow you to keep on coming back?
4. Frequent and effective ads. Are the ads often seen on television, heard on
radio, read on print, and encountered in nontraditional media persuasive
enough to attract a potential customer to visit the outlet?
5. Variety of food chains. Is there a variety of food chains a customer can select
from particularly when he/she visits a mall or a chain of restaurants?
6. Faster service. Is the service crew efficient enough to render faster service?
7. Usefulness of promotional items. Are the seasonal promo items offered by the
food chain useful enough particularly to the kids who love to use or play with
them?
8. Accommodating personnel. Does the food outlet have courteous service crew
and do they attend to the customers when they need them?
9. Delivery services. For home delivery, does the crew deliver the food just on
time or does it get delayed?
10. Seasonal product offerings. Is there a variety of products particularly during
some special occasions like Valentine’s, Holy Week, or the Christmas season?

Emotional Attributes (see Exhibit 7)

1. Family togetherness. Does the food outlet encourage families to eat together?
2. Friendly atmosphere. Do the customers feel comfortable eating because of the
friendly ambience as shown by the service crew and staff?
3. Patriotic. Does the outlet nurture patriotism by providing local foodstuffs with
just the right taste appealing to a local customer?
4. Mass appeal. Does the outlet appeal to a mass audience and never discriminate
against them?
5. Likeable Filipino selections. Are the foodstuffs likeable enough and do they
stimulate their taste buds?
6. Better environment for kids. Does the food outlet provide a game area where
kids can play?
7. Use of Filipino/local language. Does the service crew talk to the customer in
his/her own native language to make him/her feel at home?
8. Wholesome/“cute” endorsers. Do the endorsers of the food outlet look
wholesome and appealing to the customers especially the kids?
9. Hang-out. Is the place a hang-out area particularly for teenagers?
10. Brings you closer to home. Do the customers feel as if they are eating from
home when they eat in the outlet?

The relative importance of these attributes may vary from one food outlet to another.
It would, therefore, be an interesting assignment to have your students conduct their
own survey to investigate the attributes of a local fast-food establishment in their
respective countries and undertake a comparative analysis of these attributes.

4. Evaluate JFC’s performance overseas. To what extent can the company

transfer its core competency to its overseas operations? Should it modify
its consumer-driven strategies to suit foreign markets, even if that means
Jollibee becomes much less Philippine in nature?
IM for Lovelock & Wirtz, Services Marketing 6/e Teaching Notes for Cases - Section 5 64

A review of data in Exhibit 1 reveals a disappointing performance for Jollibee

operations overseas. At the end of 2003, prior to the purchase of Yonghe King in
2004, JFC had only thirty-three overseas stores, representing a mere 3.3 percent of
total JFC stores, an increase of only six from the twenty-seven it had at the end of
1999 (at which point overseas stores represented 3.7 percent of total).

JFC’s key success factors in the Philippines are (1) its understanding of local tastes
and skills in catering to the needs of a specific niche market, (2) its operational
efficiency in its commissaries and use of IT, (3) its ability to deliver consistently high
levels of customer service, and (4) its skills in site selection. Exhibit A suggests how
these success factors might be translated to overseas markets. The large number of
stores in the Philippines also enables JFC to take advantage of economies of scale
(and the purchasing power this conveys) in buying food and other supplies or its
commissaries and in managing the logistics of delivering supplies to individual stores.

The Jollibee chain’s initial overseas expansion strategy sought to capitalize on its
understanding of Filipino tastes, because most outlets were established in
communities with large concentrations of Filipinos working overseas, thereby taking
advantage of awareness of the Jollibee brand. By the early 1990s, Jollibee restaurants
were operating in Hong Kong, Brunei, Saipan, and Guam (both islands in the
northwest Pacific), Vietnam, Indonesia, Dubai, and Kuwait. In 1998, the firm entered
one of the most demanding fast-food markets in the world, the United States, which
had at the time an estimated 2 million Filipino immigrants. True to the firm’s
consumer-driven strategy, some adaptations needed to be made in the Jollibee menu
to suit the local culture. In the UnitedStates, Jollibee had to serve larger portions to
cater to the eating habits of both the locals and those Filipino immigrants who had
already gotten used to the American way of life.

The company’s annual reports state that its international expansion strategy focused
on markets where management believed it “could successfully develop the Jollibee
brand and put up the supply chain to support the critical mass of stores in these
selected markets.” However, one must question whether critical mass has been
achieved in any of the foreign markets that JFC has entered, because the number of
stores in each country is very small. In the United States, by late 2004, six years after
its entry into this market, JFC only had seventeen stores—nine Jollibee and eight
Chow King. Marketing effectiveness has been diluted in the very competitive
California environment by the need to promote three separate brands, each
representing a different ethnic food category: Filipino, Chinese, and Japanese.
Management time and resources have been wasted on the purchase of a Japanese food
franchise (renamed Tomi’s Teriyaki), a food category in which JFC had no prior
experience.

In 2004, JFC decided to shut down the three-store Tomi’s chain. Elsewhere, JFC has
recently closed all three Chow King stores in Dubai and two of its four Jollibee stores
in Hong Kong (case text and Exhibits 8A and 8B). Earlier JFC closed its single
Jollibee store in Xiamen, China. However, JFC has plans to expand in the United
States, to add to its three-store store network in Vietnam, and is considering
introducing Chow King to the Indonesian market.
IM for Lovelock & Wirtz, Services Marketing 6/e
Exhibit A: Transferability of Jollibee’s Key Success Factors to Overseas Markets
Jollibee’s key success factors
(KSF)
Niche Market
Highly localized menu.
Food variety that targets the
Filipino palate.
Operations and IT
State-of-the-art automation of
commissary.
Use of IT to speed up operations
efficiency and study consumer
trends.
Customer Service
Fantastic customer service:
- Service orientation pervasive
in many of its activities.
- Recruitment, selection, and
training (cycle for success) of
staff.
- Empowerment and motivation
of staff.
Location
Good, high traffic and convenient
locations.
Communities are populated largely
with Filipinos.
Teaching Notes for Cases - Section 5
Transferability to overseas
markets
 Likely.
- Overseas markets that are
chosen are locations with high
concentrations of Filipinos.
 Likely.
- Replicate the same kind of
technology and operating
efficiency.
 Likely.
- The mission statement and
strong management beliefs in
recognizing the importance of its
front line staff in profit
generation.
 Moderate
- Jollibee may be a late comer in
the fast-food industry of the
overseas market.
- Launch pad strategy of setting
up outlets in places with high
Filipino concentration may help
offset the late comer
disadvantage.
65
Actions required to allow a
successful transfer of KSF
- Introduce the more popular
Jollibee meals that are found in
the Philippines.
- Slowly bring in the other
varieties.
- Ingredients used must be
identical to those used in the
Philippines to ensure consistent
quality and taste.
- Use a marketing strategy that
leverages on Jollibee’s brand
equity.
- Use the blueprint of the
commissary in the Philippines.
- High initial investment to bring
in state-of-the-art automation
that will help generate the
volume and efficiency required
by the overseas branch.
- Jollibee should seek to
understand the expectations of
local customers and adapt its
performance standards, and so
on accordingly.
- Jollibee should bring in the best
crew from its Philippines’s
branches to train the local hires
in Jollibee technology.
- Important that Jollibee has a
management team in the
overseas market that shares the
same zeal and ideals as those in
the Philippines headquarters.
- Jollibee should continue to
expand to areas with high
Filipino concentration and gain a
foothold in such areas first.
IM for Lovelock & Wirtz, Services Marketing 6/e Teaching Notes for Cases - Section 5 66

One possible conclusion that may be drawn from JFC’s international experience is
that there is only limited demand overseas for the Filipino-style fast food served by
Jollibee. Students can be invited to suggest which Asian foods are best known outside
their native countries. The answers are likely to be Chinese, Indian, Japanese, and
Thai. Typically, ethnic foods first get established in a table-service restaurant
environment and may later become available on a take-out basis from those same
restaurants. It is only much later (if at all) that a fast-food format is created. Thus
Jollibee, offering an unfamiliar cuisine in fast-food format, faces a much higher
hurdle in gaining acceptance among non-Filipinos than does Chow King.

JFC’s entry (or rather, re-entry) into China through purchase of an 85 percent interest
in the Shanghai-based Yonghe King chain, which serves Chinese-style fast food in ten
cities, plays to JFC’s capabilities in taking over ownership and management of an
already successful fast-food chain and strengthening its marketing and operational
capabilities.

5. Should Jollibee continue in its internationalization efforts or concentrate on

expanding and consolidating its foothold in the Philippines only? Give
reasons to support your answer.

This is not necessarily an either/or decision. Obviously, management’s primary focus

must continue to be on the Philippines market, because this is where 89 percent of all
stores are located and where rapid growth is continuing. It is noteworthy that most of
this growth seems to be accounted for by franchised outlets as opposed to company-
owned ones (Exhibits 8A and 8B).

The second most important area of focus is China, where JFC must manage the
growth of the eighty-nine-store Yonghe King chain and transfer relevant JFC
operational and marketing expertise to enhance both YK’s appeal to consumers and
its productivity. Given China’s rapid economic development and the success of both
the KFC and McDonald’s fast-food concepts in numerous cities, building sales and
market share for Yonghe King presents an outstanding opportunity. If YK stumbles,
competing chains may spring up and seize the initiative.

By contrast, expanding in other overseas markets—such as the United States and

Vietnam—and entering the Indonesian market—seems to offer less immediate
potential and should therefore receive lower priority. One question concerning the
U.S. market is which of the JFC brands to emphasize: Jollibee or Chow King? (Note
that there has been no attempt to export the Greenwich Pizza concept and JFC is only
a franchisee for Délifrance.) Expanding the Jollibee chain overseas cannot rely just on
sales to expatriate Filipinos. But selling to foreigners involves persuading them to try
a food concept from the Philippines, an unfamiliar source, which may require
significant marketing effort, whereas the Chinese food offered by Chow King is much
more widely known and accepted. A relevant strategic criterion for determining the
rate of expansion in each instance is the relative ease of attracting franchisees for each
concept (however, there is no information on this topic in the case). If JFC wishes to
capitalize on its strengths in logistics, then the firm should concentrate on building up
IM for Lovelock & Wirtz, Services Marketing 6/e Teaching Notes for Cases - Section 5 67

a critical mass of stores in a limited number of geographic areas. This strategy would
also facilitate more efficient marketing efforts.

SUBSEQUENT DEVELOPMENTS

The latest information available at the time of this writing updates the case by nine
months, to March 2006. As shown in Exhibit B, there has been continued rapid
expansion in the total number of JFC stores—from 1,200 in Q2-2005 to 1,448 in Q1-
2006 (compare with Exhibit 8B in the case). However, almost all this growth comes
from expansion of Jollibee and Chow King in the Philippines, plus the addition of the
Red Ribbon cake food chain (Philippines and USA) acquired in 2005.

The number of Yonghe King stores in China has grown from 88 to 104, while the
number of other overseas stores has risen from 33 to 55 (mostly from adding 17 Red
Ribbon stores in the United States. Despite an earlier decision (reported in the case)
to close all three Chow King stores in Dubai, two still remain open. However, the
company’s Web site does report that further franchise sales in Asia have been
suspended.

So, basically, it appears that JFC is focusing primarily on expansion in its home
country plus China and to a lesser extent the United States (where most stores are
located in California with expansion to Nevada planned in 2007).

EXHIBIT B

Location of JFC Group Stores by Brand, March 31, 2006

Jollibee Greenwich Chow King Délifrance Red Yonghe TOTAL

Ribbon King

Philippines 540 238 334 36 139 - 1,287

Hong Kong 1 - - - - 1

USA 11 - 14 - 17 - 42

Vietnam 3 - - - - - 3

Dubai - - 2 - - - 2

Indonesia - - 1 - - - 1

China - - - 104 104

Others 8 - - - - - 8
IM for Lovelock & Wirtz, Services Marketing 6/e Teaching Notes for Cases - Section 5 68

TOTAL 563 238 351 36 156 104 1,448

Company Web site: http://www.jollibee.com.ph/corporate/phenomenon.htm

(for financial data, click on “investor”)