Jollibee readies expansion in US, Hong Kong, Vietnam

JOLLIBEE FOODS Corp. signaled on Friday it was stepping up its expansion abroad as it announced plans to take a more active role in franchises in the United States while at the same time acquiring a stake in a firm operating food chains in Hong Kong and Vietnam.

For the Western market, the homegrown quick service restaurant said it was buying back all Chowking stores in the United States from its master franchisee for $16 million.

“Jollibee Foods, through its subsidiary Tokyo Teriyaki Corp., signed on Friday an agreement to acquire from Fortune Food Service Co., Inc. and its related companies the assets of all 20 Chowking stores in the US,” the homegrown fast food giant said in a disclosure to the local bourse.

“With this acquisition, Jollibee Foods will be poised to take a more active role in the further growth of the Chowking business in the US,” it added.

There are 18 Chowking stores in California, one in Nevada and one in Washington. Master franchisee Fortune group owns and operates all the Chowking stores in the US.

“The purchase price for the assets is $16 million, of which $12 million will be paid on May 27, 2011 and $800,000 shall be paid annually over the next five years,” Jollibee Foods said.

Under the deal, Tokyo Teriyaki will take over the operations of the Chowking stores at the end of business hours on May 27.

This, after Jollibee Foods paid $3.24 million to take majority control over Chow Fun Holdings, LLC, a small United States-based restaurant chain, as part of its long-term strategy of mainstreaming Asian joints in the Western market.

Jollibee Foods clarified that Chowking stores in the US posted a positive performance, recording earnings before interest, taxes, depreciation, and amortization of $68,000 last year on the back of $19.2 million in sales.

In a separate statement, Jollibee Foods went on to announce it was investing $60 million to acquire stakes in Vietnam and Hong Kong food chains.

Jollibee Foods said its subsidiary Jollibee Worldwide Pte., Ltd., signed on May 20 a deal to buy form a new company with Viet Thai International Joint Stock Company.

Under the agreement, the companies will “establish a platform for owning and operating a portfolio of restaurants in various territories including Vietnam, Hong Kong, Macau and Southern China.”

“Jollibee Worldwide intends to invest $25 million to own a 49% stake in the joint venture company in Vietnam and 60% of its company in Hong Kong, which will include the current restaurant businesses of Viet Thai and its related parties,” the company said.

Furthermore, Jollibee will lend $35 million to Viet Thai, which will paid with a 5% per annum interest until 2016.

“Part of the investment will be used to fund the joint venture’s acquisition of an additional restaurant chain,” Jollibee Foods said.

Viet Thai is the owner and operator of Highlands Coffee, Hard Rock Cafe in Vietnam and Hard Rock Cafe in Hong Kong.

When the joint venture company is formed, it will have a total of 139 outlets across all brands — 118 in Vietnam and 21 in other countries.

Viet Thai posted earnings before interest, taxes, depreciation, and amortization of $1.7 million last year on the back of $30.2 million in sales.

“Maybe they see another opportunity in the US,” Joseph Y. Roxas, president of Eagle Equities, Inc., said in a telephone interview on Friday, noting that the fast food giant has already saturated the Philippines.

“I think Jollibee Foods is getting into high-end [brands],” Claire S. Quiray, analyst of Regina Capital Development Corp., for her part said in a separate telephone interview.

So far, higher input costs cut profits of Jollibee Foods by 8.8% to P631 million in the first quarter. The latest figures contrast with the performance in the same period last year when profits grew by almost a quarter to P691 million.

Shares in Jollibee Foods sank by 0.58% to P86.50 each on Friday. – BworldOnline

Posted by VBN on May 22 2011. Filed under Food & Beverage. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry