With Red Ribbon now a part of Jollibee Food Corporation, franchisees revel in the fact that they can have their cake and eat it, too

One good thing about the recent global economic downturn is that it has awakened the entrepreneurial spirit among many of the world’s citizens. Recent statistics have shown a growth in the working middle class sector of society, and that growth brought with it an increasing number of people interested in investing their hard-earned savings into starting their own businesses.

The cruel irony, however, is that starting one’s business from scratch is tricky given today’s upside-down economy—which is why people are choosing to run franchises instead of floating new business ideas. With franchising, all the basic market surveys, research and business plans are already in place and working. In the Philippines where the eat-out industry has grown significantly in recent years, franchising food businesses eat up a huge chunk of the franchising pie, with people gravitating toward big businesses like Jollibee, Chowking and Red Ribbon which implement heavy marketing efforts to promote their products.

“Overall, the food category is doing well,” shares Froilan Manotok, Red Ribbon’s South Luzon operations head. “I guess when the Jollibee group is doing well, that’s a good measure that the whole industry category is robust because we hold more than 60 percent of the market.”

Have Your Cake and Eat it, too

Since its acquisition by the Jollibee Food Corporation in 2005, Red Ribbon has expanded its 180 branches into the 213 branches it owns today, 36 of which are overseas. “When we acquired it from the Mercados, it was a P2 billion company,” shares Manotok. “Right now we’re tracking that it is around P3.5 billion, which means we’ve grown 75 percent in five years.”

The growth is largely due to Red Ribbon’s leveraging on Jollibee’s strength in operations and marketing systems. “When Jollibee took over, they invested heavily on marketing so we’re now more visible in the media,” says Manotok. “We’ve also benefited from Jollibee’s expertise in technology, equipment and systems. We leveraged on that and it has brought good results.”

More investors seem to think so, too, as 40 percent of Red Ribbon’s branches are now run by franchisees. And that number is likely to grow as this year, the company has expanded its franchise model to accommodate people who have been asking for a lower investment franchise. “This year we are already franchising the cake shops, which feature take-out of our baked products only,” says Manotok. “Whereas before, if you wanted to get the cake shop, you have to franchise a full store or café. That’s an P8 million investment compared to our cake shop franchise model, which only costs around P2 to P3 million.”

Why Franchising Takes the Cake

When it comes to franchising a Red Ribbon café or cake shop, the primary benefit would have to be Winnerrisk minimization. Starting a new business from scratch is risky, mainly because owners have to go through the learning curve of operating a new venture. Franchising reduces that curve substantially.

Franchises like Red Ribbon, which already offer national brand recognition, would not make it hard for franchisees to sell to customers as the company is synonymous to premium high-quality cakes, breads and pastries. “We value product innovation—not only in terms of creating new products but improving existing ones as well,” says Manotok. “We believe that the benchmark for Black Forest Cake is still Red Ribbon’s because it remains our best-seller to this day.”

Brand recall aside, a franchisee also benefits from Red Ribbon’s streamlined system of operations. This year, the company has decided to regionalize its operations. “We now have North Luzon, South Luzon and Visayas-Mindanao groups to centralize and hasten our expansion plans,” reports Manotok. “This lets us focus more on the growth of each region. And we already have several commissaries set up all over the country to ensure the daily delivery of fresh products to our stores.”

Red Ribbon and the rest of the Jollibee Group are participating in the Philippine International Franchise Conference and Expo 2010 held at the SMX Convention Center, Mall of Asia, Pasay City from July 14 to 18. For more information, visitwww.pfa.org.ph.

Published in Manila Bulletin’s Business Agenda section. July 12, 2010