Business report jfc presentation

BusinessReport:
JollibeeFood
Corporation
Presented by Edmon P. Manaloto

In this business report the author will assess Jollibee Food
Corporation by using cost-behavior analysis, performance
analysis, capital investment analysis, competitive analysis
and present a balanced scorecard based on the available
financial reports of the company and other relevant
information.
3
Jollibee Food Corporation thrives in the Food, Beverage
and Tobacco sector and in fact is the 4th largest player in
the sector here in the Philippines. For 2019, the company’s
CM ratio is 29% and has been stable for the last 5 years
ranging 25% - 31% the CM ratio would tell us that the
products contributes well to the organization’s profitability
and allows managers to make decisions such as which
product lines they should expand or which might be
discontinued.
It is found that Jollibee lagged behind its main competitor
McDonald’s in terms of income growth. At the end of the
report, the balanced scorecard includes two
recommendation to cut electricity and utilities,
transportation and travel expense to improve income

Jollibee Foods Corporation (JFC) is a Philippines-based
company engaged in the development, operation and
franchising of quick-service restaurants (QSR) under the
trade name Jollibee.
By the end of 2019, there were
• 1,195 Jollibee stores in the Philippines nationwide(680 were franchised
and 515 were Company-owned)
• 39 stores in the US
• 9 in Canada
• 1 in Guam
• 1 in Italy
• 1 in United Kingdom
• 130 in Vietnam
• 18 in Brunei
• 10 in Hong Kong
• 9 in Singapore
• 1 in Macau
• 1 in Malaysia
• 46 in the Middle East
5

With its introduction of in-store play activities for
children and a cast of brand mascots, it reaches and
appeals to the children and is evidently more popular
than its nearest competitors
JFC’s revenue climbed to PHP 179.6 billion in 2019, up
11.45% year on year, lifted by the consolidation of
Coffee Bean Tea Leaf starting the 4th Quarter (4Q) of
2019. Revenues excluding CBTL grew 8.7% to PHP 175.2
billion on sales contribution of 270 new stores.
6
₱179,626.00
₱161,168.00
₱133,613.00
₱113,811.00
₱100,779.00
₱0.00
₱20,000.00
₱40,000.00
₱60,000.00
₱80,000.00
₱100,000.00
₱120,000.00
₱140,000.00
₱160,000.00
₱180,000.00
₱200,000.00
2019 2018 2017 2016 2015
Revenue in Millions
Revenues
According to JFC Annual Report dated April 10, 2019 the
company, its local business and support units have
approximately 14,644 employees in the Philippines as at
December 31, 2018.

JFC obviously have a high market capitalization.
JFC experiences slow growth, but assumes low
risk. Large-cap firms like JFC often have a
reputation for producing quality goods and
services, a history of consistent dividend
payments, and steady growth.
Although there is a 26% drop on market
capitalization for 2019, JFC is still worth a lot
and considered a dominant player in the open
market.
There is still a positive market's perception of its
future, the stock price reflects what investors
are willing to pay for its stock which at that time
was 216 per share.
UPDATE: As of January 8, 2021 JFC stock is
trading at 192.50 per share
7
In Millions 2019 2018 2017 2016 2015
Market Capitalization ₱ 236,214.36 ₱ 317,707.97 ₱ 274,586.21 ₱ 228,979.80 ₱ 220,835.70
Growth rate -26% 16% 20% 4% -
Reference price/Averageprice 216 292 253 214.2 206.8
Number of stocks (In thousands) 1093.585 1088.041 1085.321 1069 1068
₱-
₱50,000.00
₱100,000.00
₱150,000.00
₱200,000.00
₱250,000.00
₱300,000.00
₱350,000.00
2019 2018 2017 2016 2015
Market Capitalization in Millions

MISSION STATEMENT
To serve great tasting food, bringing the joy of eating to everyone.
VISION STATEMENT
All our brands are trusted and well-loved, craved around the world:
• Renowned for consistently great tasting food.
• Recognized for high value for money.
• Endeared for warm and sincere distinct service to our
customers.
• Admired for our beautiful stores in excellent location.
We are acknowledged as one of the Best Companies to Work for,
regarded for our efficient systems and processes, highly engaged
teams and people-focused culture.
8
Mission,Vision and Strategies
KEY STRATEGIES
1. Global Expansion & Brand Acquisition - JFC continues to
expand its brand portfolio to cater to different market
segments and establish business presence across the globe
through organic growth and acquisitions to boost growth and
profitability.
2. Increasing Number of Stores -Jollibee Philippines ended the
year 2019 with a total of 1,195 stores locally. Overseas, 39 new
stores were opened, bringing its international store network to
266 by year-end.
3. Strong Domestic Business -Jollibee, Chowking, Greenwich, Red
Ribbon and Burger King stores in the Philippines all showed
strong performance and exceeded target sales and return on
investments with some brands posting double-digit growth in
system-wide sales.

9
Cost-behavior
Analysis
In this section, the nature of related costs and
the changes in relation to sales is presented to
identify whether the costs of Jollibee Food
Corporation are variable or fixed.

• Cost behavior means how a cost will react as changes take place in the level of business
activity.
• Managers who understand how costs behave are better able to predict what costs will
be under various operating circumstances. An understanding of cost behavior under
varying conditions is essential to adequate decision making in the planning and control
of firm activity.
10
Jollibee Food CorporationVariableCosts and Fixed Costs
Variable costs
In thousands 2019 2018 2017 2016 2015
Cost of Sales 122,971,574.00 107,359,529.00 88,304,336.00 76,128,270.00 72,331,328.00
General and administrative expenses 4,441,278.00 3,379,870.00 3,638,934.00 3,234,309.00 3,377,368.00
Total 127,412,852.00 110,739,399.00 91,943,270.00 79,362,579.00 75,708,696.00
Fixed costs
In thousands 2019 2018 2017 2016 2015
Cost of Sales 27,286,307.00 25,061,056.00 20,259,558.00 16,687,218.00 10,560,373.00
Cost of Services 3,982,583.00 4,027,609.00 3,342,911.00 2,669,495 2,244,943.00
General and administrative expenses 14,443,304 12,080,749 10,290,441 8,627,131 6,910,675
Total 45,712,194 41,169,414 33,892,910 25,314,349 19,715,991
References: Management Accounting Concepts and
Applications by Ma. Elenita Balatbat Cabrera and handouts
from the Review School of Accountancy Manila

Variable Costs
• Variable costs are those costs that change in total as the
level of activity changes in the short run and within
relevant range. The short run is the time period long
enough to allow management to change the level of
production or other activity within the constraints of
current total productive or operating capacity. Relevant
range is the range of activity within which assumptions
relative to variable and fixed cost behavior are valid.
• Variable cost per unit is assumed to remain constant
within the relevant range.
• For a cost to be variable, it must be variable with respect
to its activity base. An activity base is a measure of
whatever causes the incurrence of variable cost. This is
also referred to as the cost driver.
11

12
• The figures above were taken from note 21 of the consolidated statements of comprehensive income of the Jollibee Food Corporation from years 2015 to
2019.
• Under direct cost the following accounts are identified generally as variable and deemed to follow an activity base to predict the incurrence of the
variable cost. Cost of inventories, personnel costs, electricity and other utilities (classified as direct cost therefore assumed to be closely identified with
store production), supplies, repairs and maintenance, security and janitorial, communication, representation and entertainment and others consisting
mainly of delivery cost and insurance expense.
• Under the general and administrative expenses we have taxes and licenses, professional fees, transportation and travel, impairments, repairs and
maintenance, training, corporate events, membership and subscriptions, other losses and gains, communication, reversals, donations, supplies,
representation and entertainment, electricity and other utilities and security and janitorial. Those not classified as fixed are deductively classified as
variable.
• It is worth noting that the variable costs steadily increased from 2015 to 2019. This will ultimately affect contribution margin which will be analyzed
further in the coming sections.
Let’s look further on theVariable Costs
-
50,000,000.00
100,000,000.00
150,000,000.00
200,000,000.00
250,000,000.00
300,000,000.00
2019 2018 2017 2016 2015
Variable Costs in Thousands
Cost of Sales General and administrative expenses Total

Fixed Costs
• Fixed costs are costs that remain constant in total
regardless of changes in the level of activity within the
relevant range. Fixed costs, however, may change due to
some outside force such as price change. Fixed cost per
unit will react inversely with change in activity.
• Fixed costs are sometime referred to as capacity costs,
since they result from outlays made for buildings,
equipment, skilled professional employees, and other
items needed to provide the basic capacity for sustained
operations.
• Fixed can either be committed or discretionary
13

14
• From the consolidated statements of comprehensive income of the Jollibee Food Corporation from years 2015 to 2019
the cost of sales generally classified as fixed cost are depreciation and amortization, contracted services, rent,
professional fees and advertising expense.
• Fixed cost under general and administrative expenses are all personnel costs, professional fees, depreciation and
amortization, contracted services, rent, insurance, association dues and research and development and other expenses.
• Compared with the variable costs, fixed cost remain relatively the same with minimum increase year on year.
Let’s look further on the Fixed Costs
References: Management Accounting
Concepts and Applications by Ma. Elenita
Balatbat Cabrera and handouts from the
Review School of Accountancy Manila
-
10,000,000.00
20,000,000.00
30,000,000.00
40,000,000.00
50,000,000.00
60,000,000.00
70,000,000.00
80,000,000.00
90,000,000.00
100,000,000.00
2019 2018 2017 2016 2015
Fixed Costs in Thousands
Cost of Sales Cost of Services General and administrative expenses Total

15
• We will use cost-volume-profit analysis to help understand the
interrelationship between the cost, volume and profit in an organization
by focusing on interactions between prices, volume, variable costs per unit
and total fixed costs.
Impact of the variable and
fixed costs
a.) Contribution Margin Ratio – this is the excess of sales over the total variable cost and amount which
contributes to covering fixed costs and providing operating profits.This is also the percentage of
contribution margin to total sales.
The CM ratio above shows how the contribution margin of the Jollibee Food Corporation will be affected by a given peso change in total sales. For 2019, the
company’s CM ratio is 29%, it means that for each peso increase in sales, total contribution margin will increase by P0.29. Net income likewise will increase
by P0.29 assuming that there is no changes in fixed costs.
The CM ratio is particularly valuable in those situations where the company must make a trade-offs between change in selling price and change in variable
costs. The contribution margin ratio is computed by dividing the total contribution margin by the total sales for each year.
2019 2018 2017 2016 2015
CM Ratio 29% 31% 31% 30% 25%
In Millions
Sales revenue 179,626.00 161,168.00 133,613.00 113,811.00 100,779.00
Variable costs 127,412.00 110,739.00 91,943.00 79,362.00 75,708.00
Contribution Margin 52,214.00 50,429.00 41,670.00 34,449.00 25,071.00

b.) Break-even point in Sales is likewise important for businesses to determine a breakeven point which is
described as the level of sales volume where total sales revenue and total expenses are equal, that is, there is
neither profit nor loss.This point can also be determined by using CVP analysis.
c.) Margin of Safety measures the potential effect of the risk that sales will fall short of planned levels.This is
the excess of actual or budgeted sales over the breakeven sales and indicates the amount by which sales
could decrease before losses are incurred. A relatively low margin of safety is riskier and therefore requires
more of management’s attention.
16
-
20,000.00
40,000.00
60,000.00
80,000.00
100,000.00
120,000.00
140,000.00
160,000.00
180,000.00
200,000.00
2019 2018 2017 2016 2015
In Millions
Sales Breakeven Point in Peso
Margin of Safety

17
d.) Degree of Operating Leverage is the ratio of the contribution margin to profit.The potential effect of
the risk that sales will fall short of planned sales as influenced by the relative proportion of fixed to variable
manufacturing costs can be measured by operating leverage.
2019 2018 2017 2016 2015
Degree of Operating
leverage 2.28 2.59 2.41 2.37 2.00
Income from
Operation 22,867 19,488 17,272 14,530 12,532
Contribution Margin 52,214.00 50,429.00 41,670.00 34,449.00 25,071.00
-
0.50
1.00
1.50
2.00
2.50
3.00
2019 2018 2017 2016 2015
Degree of Operating leverage

18
• For 2019, the company’s CM ratio is 29% and has been stable for the last 5 years ranging 25% - 31% from 2015 to 2019. The CM ratio
would tell us that the products contributes well to the organization’s profitability and this allows managers to make decisions such as
which product lines they should expand or which might be discontinued. As a general rule of thumb, a 10% net profit margin is
considered average, a 20% margin is considered good, and a 5% margin is low.
• The breakeven sales and margin of safety is noticeably higher in 2019 than the last 4 years. This puts JFC in a safer position and
mitigates risk of incurring losses even when sales volume is low.
• 2020 hits most if not all businesses here in the Philippines, so we can count that JFC is still earning despite the lockdowns and health
protocols that resulted to a lower level of sales thank to the high breakeven sales and margin of safety.
• The degree of operating leverage of JFC in 2019 is lower than in 2018, 2017 and 2016 but is higher than 2015. The formula can reveal
how well JFC is using its fixed-cost items, such as its warehouse and machinery and equipment, to generate profits. From the figures
above JFC is able to generate more profit out of the same amount of fixed assets, thus the higher it’s operating leverage.
• A higher value of operating leverage indicates a higher risk in the sense that a given change in sales will have a relatively greater
impact on profit. When sales volume is strong, it is desirable to have a high level of leverage, but when sales begin to fall, a lower level
of leverage is preferable. It is concluded therefore, that the question of whether having a certain level of leverage is favorable is
relative to the sales volume.
Conclusion and recommendation

As far as the annual reports state the financial budgets are approved by the BOD
covering a five-year period. JFC may have had a master budget.
A master budget is a comprehensive budget that consolidates the overall plan of the
organization for a specified period. The master budget is mainly composed of a)
operating budgets and b) financial budgets. The master budget, in some
organizations, is also referred to as pro forma budget, planning budget, forecast
budget or master profit plan.
The most critical account to budget is the sales for the coming period. We often hear
some news of forecasted sales figures from various news groups.
In a news article from Business World Online dated July 24, 2020 the Jollibee Foods
Corp. said it expects to see improved earnings next year and to return to normal
growth in 2022.
“Starting in 2022, we expect that JFC will grow at least in line with its historical
growth rate of about 15% per year. In the succeeding years, we expect JFC to grow at
that rate, which is doubling the size of its business every five years.” JFC President
and CEO Ernesto Tanmantiong said during the company’s annual stockholders’
meeting. The figures stated is most likely the outcome of the budgeting process.
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Master budget, Operating and
Financial Budget
Master Budget
Operating Budget
Financial Budget
(income statement accounts)
(cash budget, budgeted balance sheet,
budgeted cash flow statement, capital
expenditure)

21
Budgeting, managerial reporting and control is mostly internal matter and rarely published specially for a competitive listed
firm like the Jollibee Food Corporation. The reporter therefore will only present hypothetical figures and methods that the
Jollibee Food Corporation may have taken in its budgeting, managerial reporting and control.
JFC may also produce
• Production budget which can be broken down into the
• Direct materials budget
• Direct labor budget and
• Factory overhead budget
• Budgeted cost of goods sold
• Operating expenses
• Net income and even the income statement itself can be budgeted.
The JFC may have already anticipated a decrease in sales revenue due to the coronavirus as early as close of 2019 so if they
budgeted a sale of 100 million for 2020 then they also likely have a certain percentage that will go to profit.
In this sense a budget percentages will most like look like this;
• Profit 10% sales,
• While expenses can be estimated as follows; selling = 15% of sales; administrative = 10% of sales. Personnel cost can be
estimated to be 12% of total direct cost based on historical data.
• Application rate can also be used for budgeting the factory overhead for example 75% of the direct cost.

FinancialPerformanceAnalysis
22

Financial Ratios
ROE
The Return on Equity ratio essentially measures the rate of
return that the owners of common stock of a company
receive on their shareholdings. Return on equity signifies
how good the company is in generating returns on the
investment it received from its shareholders.
23
ROA
The return on assets shows the percentage of how
profitable a company's assets are in generating revenue.
Financial Leverage
Financial leverage which is also known as leverage or
trading on equity, refers to the use of debt to acquire
additional assets. The use of financial leverage to control a
greater amount of assets (by borrowing money) will cause
the returns on the owner's cash investment to be
amplified.
Net Profit Margin
The net profit margin is equal to how much net
income or profit is generated as a percentage of revenue. Net
profit margin is the ratio of net profits to revenues for a
company or business segment. Net profit margin is typically
expressed as a percentage but can also be represented in
decimal form

24
Return On Equity
The figures are taken from the consolidated statements of financial position from the annual reports
published by the Jollibee Food Corporation. The return on equity is computed using the net income and total
equity or shares representing entity's ownership and include; ordinary shares held by majority and minority
interest also known as non-controlling interest and preference shares if they carry voting and other
important equity related characteristics.

25
DuPont Analysis
To dig deeper on the drop of JFC’s ROE we take a look at the DuPont equation. A DuPont analysis is an
assessment of a company’s Return on Equity (ROE). According to the DuPont analysis, ROE is affected by
three elements:
• Operating efficiency, which is measured by profit margin
• Asset management, which is measured by total asset turnover
• Financial leverage, which is measured by the equity multiplier
The DuPont equation can be applied by multiplying:
• ROE = Net Profit Margin (Profit/Sales) x Return on Assets (Sales/Assets) x Financial
Leverage (Assets/Equity)

For JFC, the ROE dropped from 16% to 12% in 2019.This shows that the company's management is not
making decisions that is good enough in order to generate income for shareholders from the past years.
Declining ROE suggests the company is becoming less efficient at creating profits and increasing
shareholder value.
Of all the fundamental ratios that investors look at, one of the most important is the return on equity. It's a
basic test of how effectively a company's management uses investors' money. ROE shows whether
management is growing the company's value at an acceptable rate.
From the DuPont analysis the net margin was steady from year 2015 to 2019. Return on Asset, however,
went down from 156% in 2015 to 96% in 2019.
In management by exception, we pay more attention to the drop in the ROA.The ROA significantly drop
because JFC’s asset substantially grew understandably because of major acquisitions like when they
acquired Smashburger in 2015 and Coffee Bean &Tea Leaf in 2019 which is biggest purchase yet. It is as if
JFC is starting new businesses with its new acquisitions, therefore, the learning curve is still in its early stages
and knowing JFC it will exhaust all management efforts to reap the returns on the newly acquired
businesses.
26

27
Market share, Customer satisfaction and Recognitions
A dominant market leader in the Philippines, Jollibee enjoys the lion’s share of the local market that is more than all the
other multinational brands combined.
JFC is 4th largest player in the Food, Beverage and Tobacco sector with total market capitalization of ₱
218,770,408,325.00 as of December 23, 2020 as per COL Financial Philippines sectoral price list.
Customer satisfaction has always been key to Jollibee’s success. Never losing sight of its goals, Jollibee has grown to be
one of the most recognized and highly preferred brands in the Philippines. Now the market leader among fast food
chains in the Philippines, claiming a market share that totals to more than half of the entire industry.

28
• JFC is the first ever Philippine-based company to be recognized with the Gallup Exceptional Workplace Award (GEWA), given to only 38 organizations
worldwide whose cultures drive high engagement among its employees.
• In this year’s Forbes’ list of the World’s Best Employers, the Jollibee Group is one of only three Philippine-based companies that were cited.
Aside from these Jollibee received the following awards in 2020
• Silver award in the Specialized PR Programs – Advocacy Campaign category for 9th JFVA Filipino Families at the core of Doing Good – Anvil
• Silver award in the Special Events category for 9th JFVA
Showcasing Families who Work Wonders for GoodA Filipino Families at the core of Doing Good – Anvil
• Silver award in the PR Programs on a Sustained Basis – Community Development category for 9th JFVA Family Values for Great and Lasting Difference – Anvil
• Gold award in the PR Programs Directed at Specific Stake Holders category for Kwentong Jollibee: Love, the Main Source of Joy at Jollibee – Anvil
• Silver award in the PR Programs Directed at Specific Stakeholders – Tourism category for Project Nation DOT Jollibee Showcases the National Passion for Food –
Anvil
• Silver award in the Specialized PR Programs – Advocacy Campaign category for Project Nation DOT Food as a National Passion of Filipinos – Anvil
• Silver award in the Specialized PR Programs – Advocacy Campaign category for Project Nation DOT Food as a National Passion of Filipinos – Anvil
• Silver award in the Special Events category for Project krissy
Scarlet Snow Starts a Reign of Joy – Anvil
• Silver award in the Special Events category for Funko Pop
Proudly Pinoy Funko Pop Fashion Coup: Jollibee in Barong – Anvil
• Silver award in the PR Programs Directed at Specific Stake Holders – Arts & Culture category for Funko Pop Proudly Pinoy Funko Pop Fashion Coup: Jollibee in
Barong – Anvil
• Silver award in the PR Tools: Exhibit & Special Events category for Micro Saving Launch:#kayanatinto the road to inclusive road forum – Anvil

29
Capital
Investment
Analysis

There are 2 broad types of capital budgeting techniques that are widely used in the corporate world –
Non-discounted methods
1. Payback period method
2. Bail-out payback method
3. Accounting rate of return method
4. Payback reciprocal method
Discounted methods
1. Net present value method
2. Profitability index method
3. Internal rate of return method
4. Present value payback method
30
Capital BudgetingTechniques

31
Application
According to its 2019 annual report, JFC spent Php10.0 billion in capital expenditures for new stores and the
renovation of existing stores and supply chain facilities.That was 5.5% higher than the level of investment
for 2018.
JFC opened 273 stores in the Philippines and 224 new stores abroad, ending 2019 with 5,971 stores.This was
32.1% higher compared to 4,521 stores at the end of 2018, with CBTL adding 26.0% to the growth.
Organically, JFC grew by 6.1%. Some highlights from 2019 include the opening of the first Jollibee store in
Guam in April and the first Panda Express franchise store in the Philippines in December, which generated
sales above expectations. Zenith Foods Corporation, a wholly-owned subsidiary of JFC also started the
operations of its new commissary in Canlubang, Laguna that supplies the products of Red Ribbon stores to
major parts of Luzon Island.
For the purpose of this presentation the reporter assumed the whole Php10.0 billion mentioned above in
capital expenditure is a single project and will be analyzed as such.The discount rate is at 2.25% which is
taken from the PhilippinesCentral Bank key rates dated June 26, 2020. It is assumed further that the inflow
of cash in uniform in the next 5 years attributable to the capital expenditure that is subject to analysis.

32
Net Present Value and Internal Rate of Return
• The calculated positive net present value indicates that the projected earnings generated by a project or
investment exceeds the anticipated costs, in present value of money. It is assumed that an investment
with a positive NPV will be profitable, and an investment with a negative NPV will result in a net loss. This
concept is the basis for the Net Present Value Rule, which dictates that only investments with positive NPV
values should be considered.
• The calculated Internal Rate of Return is a discount rate that makes the net present value (NPV) of all cash
flows equal to zero in a discounted cash flow analysis. IRR calculations rely on the same formula as NPV
does. Generally speaking, the higher an internal rate of return, the more desirable an investment is to
undertake. IRR is uniform for investments of varying types and, as such, IRR can be used to rank multiple
prospective investments or projects on a relatively even basis. In general, when comparing investment

Financial Measure
While there is no available full set of financial statement for McDonald’s, which precludes the reporter to make a direct
comparison of the metrics mentioned in the requirement. The figures presented above are taken from the AGI annual
report. McDonald’s is a subsidiary of AGI so the reporter is able to extract the amounts from the overview report of the
listed firm.
If we take a look at the revenues, gross profit and net income figures alone for Jollibee and McDonalds. It is obvious
that the former is leading. Note, however, that the amounts already include the other brands that JFC is currently
holding like Mang Inasal, Chowking, Greenwich and the rest. Unlike with McDonald’s which only includes the actual
McDonald’s stores.
To analyze further and even out the comparison, the net income growth rate is computed. By 2019 McDonalds grew by
19% compared with Jollibee’s negative growth of 16%. McDonald’s 50% growth from 2016 sustained in 2017 then fell
to negative 6% in 2018 only to recover at 2019.
In this aspect Jollibee lagged behind McDonald’s.
33
Competitive analysis

34
Though Jollibee is already thriving and obviously winning the game in the Philippines there are still
opportunities that are left untapped.
1.Venture in the online market - JFC can also tie up with various social marketing platform to market its
brand and attract more customers to purchase their brand. Social media influencers also pose a different
way of introducing and pushing for new products nowadays and it is best to ride on and utilize these talents.
2. Emphasis on healthy diet -The recommendation is to put more emphasis on healthy diet food like vegan
patty for its burger offerings. Low-sugar beverage and desserts can also be introduced in its stores especially
in the geographical locations where the population practice this kind of diet.

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