|JUNE 14, 1999|
|THE STARS OF ASIA|
Tony Tan Caktiong
CEO, Jollibee Foods, Philippines
TONY TAN CAKTIONG, 46, knows recession can help the fast-food business. The Philippines' middle classes, instead of spending $10 for a sit-down meal, are flocking to his Jollibee outlets for "value meals" of spaghetti, burgers, and fried chicken--each costing less than $2. To keep them coming, Tan has cut prices "up to the point," he says, "where my friends were asking, `Are you sure you're making money?"'
He certainly is. By renegotiating with suppliers for lower prices and keeping operations like bun-baking in-house, Tan has slashed costs to offset the discounting. Last year, Jollibee posted a 33% profit increase. Already the most popular chain in the Philippines, Tan added 50 stores last year, lifting the total to more than 300.
Tan and his brothers, who grew up working in a Chinese restaurant, started Jollibee as an ice cream shop in 1975. Eventually they offered burgers and other fast food. Now Jollibee is Asia-wide and has moved to the U.S., recently opening in California. While Tan could easily afford to eat shark's fin soup at every meal, he has Jollibee food three times a week. "I still prefer burgers and chicken," he says. So do millions of Filipinos.
Tony Tan Caktiong is the CEO of Jollibee, the most popular fast-food chain in the Philippines. With meals that average less than $2, the 46-year-old Tan now has more than 300 stores across Asia and has recently entered the U.S. market, in California. Business Week Asia Editor Sheri Prasso interviewed Tan recently in his office in Manila. Here are edited excerpts of their conversation:
Q: How are you able to make money in a recession?
A: Since the overall environment is not great, I felt we were still able to grow despite economic difficulties. We were able to offer value in difficult situation, such as through more value meals, up to the point where my friends were asking "Are you sure you're making money at that price?" In a difficult situation, everyone's level of spending is cut, and we were able to capture the people turning to fast food.
Q: So people who would normally eat at a sit-down restaurant go to
Jollibee instead? How much price difference is there?
A: In a high-end, like a Chinese restaurant, you might pay 200-400 pesos ($8-$10) per person. You would spend 40-80 ($1-$2) pesos at Jollibee. That's for a hamburger meal, or a fried chicken meal, something like that.
Q: Why is Jollibee so popular in the Philippines?
A: There's a unique flavor. Filipinos really like it. Hamburgers, they appeal to any culture. But the spaghetti is a little on the sweeter side. It's a native Filipino type of spaghetti. It's very sellable here.
Q: Are you expanding?
A: We opened our first restaurant in California in June. It's not yet profitable because of office costs in the U.S. The way we look at the U.S. market, in the Filipino community, we have a certain awareness already. We plan to open in New Jersey in August.
In the Philippines, last year we opened 50 stores despite economic difficulties. This year we are planning another 50 [on top of 300-plus].
Q: How are you able to do that in a recession?
A: [We save money] by negotiating with suppliers, telling them we can get more volume if we lower the price. We are able to give good value because we hit a certain volume already. We also have a cost advantage by baking our own bread, the buns. We started the bakery at the beginning because at that time nobody would supply us. Now it's a cost advantage.
Q: You started the business with your brothers? How do you maintain
A: Very early when we started with the family business, we started to professionalize it. It's not just the brothers. For example finance and marketing are handled by outsiders. We looked at ourselves and said, "We know how to run a restaurant," and we said, "If we're not good at this [aspect], let's get outside professionals." Also, we are good at delegation. We have a good business plan, and we have stock options for employees. It's not common yet in the Philippines. Almost every manager gets them. That means they have some money invested of their own. The atmosphere here is like a family.
Q: How did you get started?
A: Our father was a chef in a Chinese restaurant. The interest in food is in the family. When we were small, we were asked to help in the restaurant. We were exposed to all kinds of problems in the kitchen with management. We saw that it is very difficult to run.
So we started with an ice cream parlor in 1975, the five brothers. In 1978, we converted it. One step at a time we added hamburgers. We found it was easy. I like to eat hamburgers.
Q: How many brothers are in the business?
A: One of the brothers passed away, so now I'm the eldest. The four of us are still working. They sort of look at me as the founder. I make sure they have proper credit also. One is in charge of Greenwich Pizza [Jollibee bought 80% of it in 1994]. He built it up. Another is in charge of Jollibee Philippines. Another is in charge of locations.
Q: What do you do in your free time?
A: Tennis. Golf still takes too much time for now. I also read self-help books, like about Warren Buffett, and about GE.
Q: Do you like all the food on the menu at Jollibee?
A: I taste all the products before launching. We can really distinguish what tastes good. We enjoy food.
Q: Now that you run a big successful company, you can afford to eat
shark's fin soup or filet mignon every day. How often do you still eat Jollibee
A: Almost every day, if not three times a week. I have it for lunch, and maybe have something else for dinner. I still prefer burgers and chicken.