Smashburger wants bite of Asian market

US burger chain looks to enter Ph lin partnership with Jo l li bee

Colorado-based Smashburger is targeting to make its foray in the Philippine market through the vast network of fast- food giant Jollibee Foods Corp. (JFC) as it sets its sight in Asia for expansion, its top official said.

In an interview with The STAR, Smashburger founder Tom Ryan said the company is looking forward to expanding in Asia through its partnership with JFC, a move that would mark its first bite into the vast Asian market.

“There’s nobody better in this part of the world than JFC. They are a powerhouse in this region. Their intrinsic knowledge of the customer base and business models would help us. We’re looking forward to having them manage and maneuver us in this part of the world,” said Ryan, who arrived in Manila last week for the Asia-Pacific Economic Cooperation CEO Summit.

He said the plan is to have “a couple of stores in Manila.”

“After that, we really are relying on the JFC team through all their brands to tell us where Smashburger would be in a sequential way and when it can happen,” Ryan said.

However, he said there’s no defi nite timetable yet for the expansion in Asia as Smashburger is still focused on growing its brand in the US.

In October, JFC acquired a 40 percent stake in Smashburger for $99.5 million.

Under the deal, JFC through its subsidiary Bee Good! Inc. has the option to purchase up to an additional 35 percent of Smashburger between 2018 and 2021 and the balance of 25 percent between 2019 at the earliest and 2026 at the latest.

The purchase price for the remaining 60 percent will be based on the achievement of certain financial performance targets agreed by the parties.

The move would enable JFC to penetrate deeper the $100 billion US burger market, its chairman Tony Tan Caktiong said.

Smashburger serves fresh 100 percent certified Angus beef burgers. It currently has 339 restaurants with sales of approximately $339 million for 2015, equivalent to 12 percent of JFC’s estimated worldwide system wide sales for the same year.

Outside the US, it has presence in Panama, Costa Rica, Canada, Kuwait, Saudi Arabia and we signed up to England and Egypt.

Smashburger’s system wide sales have been growing at an annual rate of approximately 30 percent between 2011 and 2015 while its store network has been increasing annually by approximately 20 percent.

Ryan said the company is very pleased to partner with Jollibee.

“Jollibee approached us. They were looking for a partner with an emerging and high growth plan. We really felt that we had many things in common. Both brands were very consumer centric versus investments from private equity groups. We got a beautiful opportunity to partner for the long-term-benefit,” he said.

JFC tapped J.P. Morgan served as financial advisor, Pillsbury Winthrop Shaw Pittman LLP as legal advisor and Isla Lipana & Co. as accounting and tax advisor for the transaction.

At present, JFC owns and operates 87 restaurants in the US, consisting of Jollibee units with 32 outlets, 33 Red Ribbon stores, 19 Chowking outlets and three Jinja branches. In all, system wide sales in the US account for five percent of JFC}s worldwide sales.

In the Philippines it has 2,384 outlets as of end-August. It also has 629 outlets abroad with 415 in China, 127 in Southeast Asia and the Middle East as well as the 87 branches in the US.

In terms of joint venture deals, JFC has 50 percent interest in the following stores: Highlands Coffee (Vietnam, Philippines) 85 branches; Pho 24 (Vietnam, Indonesia, Cambodia and Korea) 39 and 12 Sabu in China with 20 outlets.