Franchise Information Manual

Presentation to the BOD of Sriboga

By David Daniel Luthen

2014

Master Index

• 15 Franchise Statistics 2014• How to Franchise a Business• Top 10 Global Franchises• The Big 3 in Food & Beverage globally• Malaysia Top F&B Franchises • Australia Top F&B Franchises • Indonesia Top F&B Franchises• Philippines Top F&B Franchises • Philippines Field Survey

15 Franchise Stats for 2014

Want some factoids to inform your franchise growth strategy in 2014? Take a peek at these stats to inform your franchising decisions this year.

JOBS, JOBS, & MORE JOBS

Franchising accounts for roughly 10% of new U.S.

jobs. Source#2

#1 Franchises are expected to add nearly 200,000 new jobs in 2014. Source

#3The pace of employment gains created by franchises will continue to outpace total private sector employment growth by 0.3%. Source

US related

THE GROWTH FACTOR

The 2014 establishment growth rate is expected to

rise 1.7% from 1.4% in 2013. Source

#5

#4 The number of franchise businesses in 2014 is expected to rise by 12,915 in 2014, bringing total establishments to 770,368. Source

SHOW ME THE MONEY

Franchise businesses are forecasted to represent

4.5% of U.S. GDP or $493 billion in 2014 – up from

3.5% of U.S. GDP or $472 billion in 2013. Source

#7

#6The output of franchise establishment, in terms of dollar revenue, is expected to increase 4.7% in 2014 – up from the 4.3% recorded in 2013. Source

ONES TO WATCH Business services has the fastest growth rate and is expected to add 35,109 franchise jobs in

2014, while quick service restaurants, the largest sector in franchising, is expected to generate

75,596 new jobs. Source

#9#8Within the franchising sector, business services, commercial and residential services, and quick service restaurants are expected to be the biggest drivers of job creation in 2014. Source

#10

Restaurants are the largest franchisors, with roughly 155,571 quick service franchise restaurants and 36,981 full-service franchise establishments in operation in 2014.

HEAVY HITTERS

#11

Multi-unit franchise operators control 55% of all franchised units in the U.S. Source#1

2

At 64%, West Virginia has the highest concentration of multi-unit franchisees. All other states with high concentrations of multi-unit franchisees are southern states including: Arkansas, Mississippi, Kentucky and Alabama with 62% each. Source

CONCENTRATED EFFORTS

The industries with the highest concentration of

multi-unit franchisees are in food. Source

#14

#13

The average multi-unit franchisee owns 5 franchised locations, up from about 3.5 in 2007. Source

#15

The top 10 industries by multi-unit franchise control are:  Source

THE END

Some more Statistics

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3 of the biggest Global Restaurant Chains globally are:

-SUBWAY-Mc Donalds-KFC

Let’s look at some of their Facts !

Biggest global restaurant Player Run Up’s – SubWay

SubWay Facts:- More than 42.000 Restaurants since 1965- 49 years of Operation- Operate in 108 Countries- Estimated 300.000 people work for SubWay and it’s Franchisees- Brand Value = 5.7 Billion USD- Revenue = 18.1 Billion USD- Initial Franchise Fee = 15.000 USD- Royalty Fee/weekly = 12.5% (gross sales minus sales Tax)

Biggest global restaurant Player Run Up’s – Mc Donalds

Mc Donalds Facts: - More than 35.000 Restaurants world wide since 1955 - 59 years of operation- More than a 100 countries- 1.9 Million people work for Mc Donald and it’s Franchisees- 80% of restaurants are franchised- Average numbers of customers served every day = 70 Million- Franchise Fee = 45.000 USD- Royalty Fee = 4% of Gross Sales

McDonald’s Revenues

McDonald’s Revenues

McDonald’s Consolidated Operating Results

19.87% 19.82% 20.38%Net income %

YUM! 2013 Financial Reports

Biggest global restaurant Player Run Up’s – Kentucky Fried Chicken (KFC)

KFC Facts: - Established 18.875 Restaurants since 1952- 62 Years of Operation- Operate in 118 Countries- Estimated 500.000 people work for KFC and it’s Franchisees- Brand Value = Estimated 6.5 Billion USD- Revenue = 19 Billion USD- Franchise Fee = 45.000 USD- Royalty = 5% of Gross Revenues + Advertising Fees = 5% of Gross

Revenues

THE END !

Malaysia Top 10 in the F&B sector !

1. McDonald’s2. Starbucks3. KFC4. Old Town White Coffee (local)5. Burger King6. Sushi King7. Marrybrown (local)8. A&W9. Kenny Rogers Roasters10. Secret Recipe (local)

Malaysia:Population of 30 Million GDP = USD 312 Billion GDP per Capita = USD 6.990Growth Rate +/- 5% annually

Malaysia local successful restaurant chains !

Pappa Rich: Created in 2005Premium Dining 50 OutletsExpanded to Australia

Malaysia local successful restaurant chains !

Old Town White Coffee: Created in 1999Coffee Shop & Dining255 Outlets throughout Malaysia, Australia, Singapore, Indonesia and

China

Malaysia local successful restaurant chains !

Marrybrown:Created in 1988Quick Service Restaurant (QSR)130 local; more than 350 Restaurants in 15 countries, Asia, Middle East

& Africa

Malaysia local successful restaurant chains !

Secret Recipe:Created in 1997Cakes and Café Dine InOver 300 outlets in Kuala Lumpur, Singapore, Jakarta, Manila, Brunei

and Shanghai

THE END !

Australia Top 10 in the F&B sector !

1. McDonald’s (QSR)2. KFC (QSR)3. Subway (QSR)4. Hungry Jack’s (QSR)5. Domino Pizza (QSR)6. Red Rooster (QSR)7. Pizza Hut (Full Service Restaurant)8. Nando’s (Full Service Restaurant)9. Eagle Boys Pizza (QSR)10. Oporto (Full Service Restaurant)

Australia:Population of 24 Million GDP = USD 1.560 Billion GDP per Capita = USD 37.492Growth Rate +/- 5% annually

Australian local successful Restaurant Chains:

• Hungry Jack’s- Created in 1971- Wholly owned subsidiary;

exclusive Australian franchisee of Burger King- Over 340 Stores in Australia only- Revenue: A$ 1.043 Billion (as of 2010)- Operating Income: A$ 538 million (2010)- Net Income: A$ 246 million (2010)- Total Equity: A$ 1.289 billion (2010)- Employees: 15.000 (2010)

Australian local successful Restaurant Chains:

• Eagle Boys Pizza- Created in 1987- More than 300 Stores- Franchise Fee = 45.000 USD for 5 years- Royalty Fee = 7.5% + 3.5% Marketing Fee

THE END !

Population of 248 Million GDP = USD 859 Billion GDP per Capita = USD 3.417Growth Rate +/- 6% annually

Indonesia's recent economic growth and the increasing wealth and size of the local market has seen a growing demand for local and foreign brands and a corresponding increase in international businesses entering the market through franchising. Franchising in Indonesia was introduced in 1950s, but just has been regulated since 1997.

In recent years, foreign and domestic franchise systems have spread across a number of sectors, including retail, F&B, healthcare and the services sector. All foreign and domestic franchisors are required to register with the authorities for a franchising license prior to

appointing a local franchisee.

How does it look in Indonesia actually ? How does it look in Indonesia actually ?

TOP 10 Chained Fast Food Brands

1. KFC2. Es Teller 773. McDonald’s4. A&W5. Hoka Hoka Bento6. J-Co Donuts & Coffee7. California Fried Chicken8. Texas Chicken9. Dunkin Donuts10. Baskin Robins

Top 10 Chained Full Service Restaurant Brands

1. Pizza Hut2. Sederhana, Rumah Makan3. Bakmie GM4. Fish&Co5. Papa Ron’s6. Planet Hollywood7. Sizzler8. Hard Rock Café 9. Tony Roma’s (Steakhouse Restaurant with Seafood)10. Hot CMM (Cwie Mie Malang)

With its booming, domestic consumption-driven economy, a fast-growing middle class and the world’s fourth-biggest population, Indonesia is considered a “must-have” market by global consumer goods companies.

As they become more cash rich and time poor, Indonesians are eating more fast food. Sales are forecast to reach Rp15tn ($1.5bn) this year and grow by 7 per cent a year until 2016, according to Euromonitor, a market research company.

But it is not easy building a successful restaurant business in this sprawling, archipelago nation of 240m people, with its poor infrastructure and confusing regulations.

MAP’s food and beverage business, which includes Domino’s Pizza and Starbucks, saw 2012 revenue rise 32 per cent year on year to Rp969bn. It did not break out profits by sector

Indonesia’s middle class doubles to 140m people by 2020, according to a forecast by Boston Consulting Group.

Location plays a role in the success of franchise. Fast food is usually more popular in the capitals of the provinces such as Bandung, Surabaya and Jakarta.

The biggest franchise market in Indonesia is food franchise

• Indonesian food is less popular worldwide than that of its Asian peers like Chinese or Thai, but its popularity is likely to grow as a number of restaurant franchises have expanded overseas to take Indonesia’s unique cuisine to markets like Australia, Malaysia and Canada.

Local food chain Bumbu Desa, famous for its wide array of Sundanese buffet-style food, for example, has opened four outlets in Malaysia since 2010 and plans to open four more in the neighboring country, where it also serves Minang cuisine adjusted to the taste buds of Malaysians, who share close ancestry with the Malay people of Sumatra. The outlets in Malaysia are operated by a local partner under a master franchise agreement.

The chain also plans to open its first outlet in Vancouver, Canada, this year.

Satria Yanuar Akbar, the chain’s marketing and business development senior manager, said that Bumbu Desa would initially set up a joint venture with a local partner to develop its business in Canada, which, based on a survey, was quite receptive to spicy food as its inhabitants were highly influenced by Asian culture due various diasporas.

“We will start by maintaining the strong Indonesian taste with minor adjustments only in serving techniques to meet demand from local customers,” he said. Instead of offering a buffet as in its Indonesian and Malaysian outlets, it will serve the food a la carte in Canada, he went on. After Canada, Bumbu Desa is eyeing Qatar and the United Kingdom as it next markets.

The presence of its new overseas restaurants will add to the 57 outlets across 16 provinces it currently has nationwide, 39 of which are under the control of franchisees. Bumbu Desa is not the only Indonesian restaurant to find success overseas.

Who are the most successful Indonesian Restaurant Franchises ? Who are the most successful Indonesian Restaurant Franchises ?

Kebab Turki Baba Rafi, which offers Indonesian-style Turkish kebab, has been expanding

aggressively in Malaysia and the Philippines, with 16 and five outlets respectively.

Hendy Setiono, the founder and president director of PT Baba Rafi Indonesia, said that in the next three years, his food chain aimed to launch 100 outlets, in the form of stalls or restaurants, each in Malaysia and the Philippines

“Expanding overseas is part of my ambition as an entrepreneur who wants to see a small enterprise like mine go international. So we are starting with neighboring countries as an entry point to reach other markets,” Hendy said, adding that it also planned to set up outlets in new locations — Thailand and Vietnam — this year. Locally, Kebab Turki Baba Rafi, which was established 10 years ago, controls more than 1,000 outlets across the archipelago, 85 percent of which are operated by franchisees and the remaining 15 percent by the firm. Just like any food entrepreneur, Kebab Baba Rafi also has to be flexible when it comes to taste.

Es Teler 77, named after its flagship tropical fruit drink, plans to open three outlets through a joint venture with local partners in India this year; one of them in New Delhi. It also plans to open an outlet in Jeddah, Saudi Arabia, where the company will target Indonesians on the haj pilgrimage as some of its prospecting customers.

“Of course, we see enormous untapped potential in Indonesia, but we want to extend our presence overseas as part of our branding strategy, which will be good to raise Es Teler’s profile as an international-class restaurant,” said Anton, the brother-in-law of founder Sukyatno Nugroho.

Entering the overseas market in 1997, the restaurant chain currently operates eight restaurants abroad: two in Singapore, three in Malaysia and three in Australia. Initially finding Indonesian communities as a captive the chain is increasingly gaining a foothold among the general public, with Australians, instance, accounting for half of its customers in the country.

Kebab Turki Baba Rafi:

- 1200 Outlets in total - 11 years of operation- 5 types of boot sizes choises

Bumbu Desa:

- Franchise Fee = 450jt / 5 years- Royalty Fee = 5-8% of Nett Sales / month- Brand Image Fee = 1% of Nett Sales / month- ROI = 24-48 month- 57 Outlets in Indonesia / 39 of which are under control of Franchisees- 4 Outlets in Malaysia - 2 Outlets in Singapore

Es Teller 77:

- Over 200 outlets in 50 cities in Indonesia- 8 outlets in 3 different countries. Malaysia, Singapore & Australia- Franchise Fee = 100.000.000,- IDR/5 years + 10% PPN- NO Royalty Fee, but 50% Profit Sharing from Nett Profit- 4% from turnover for management and marketing fee

Papa Ron’s

- 39 Restaurants in Indonesia- 4 Restaurants owned by Franchisor / 35 Restaurants by Franchisee- In operation since year 2000- Franchise Fee = 25.000 USD / 8 years- Royalty Fee = 5 % / month from Nett income + before Tax

THE END !

Jollibee Food Group PhilippineJollibee Food Group Philippine

1.42 billion USD Sales

Philippine: Population of 100 Million GDP = USD 272 Billion GDP per Capita = USD 1.581Growth Rate +/- 6% annually

- Founded in 1978- Started Franchising in 1979- Fast Food Type- 11 Countries: Philippine, Brunei, Hong Kong, Kuwait, Malaysia, Saudi Arabia,

Singapore, Vietnam, United States, Canada. - Indonesia to be launched in 2015 according to Web Sources- Franchise Fee is between 266,455 to 532,890 USD- 765 Stores in the Philippines

Jollibee PhilippineJollibee Philippine

JolliBee Group

• Chowking is a Philippine-based chain that pioneered the Asian quick-service restaurant concept in the Philippines. The concept combines a Western fast food service style with Chinese food. Chowking predominantly sells noodle soups, dim sum, and rice toppings. The company was founded in 1985, at a time when Western-style burger joints were dominating the Philippine fast food scene.

• More than 400 Outlets worldwide• 300 Outlets in the Philippines

JolliBee Group

• Greenwich Pizza is a top pizza and pasta chain in the Philippines. Greenwich started as an over-the-counter pizza store in the Greenhills Shopping Center in Metro Manila in 1971.In 1994, Jollibee Foods Corporation obtained a deal acquiring 80% of Greenwich shareholding. Then in 2006 Jollibee Foods Corp. bought out the remaining shares of its partners in Greenwich Pizza Corp., equivalent to a 20% stake, for P384 million in cash. The new company was called Greenwich Pizza Corporation, and the franchise experienced rapid expansion.From 50 stores in 1994, as of 2005 there are over 240 stores and an annual revenue of over P4 billion. As of 2011

there are over 330 stores.

JolliBee Group

• Mang Inasal (Hiligaynon for Mr. Barbecue) is a barbecue fast food restaurant chain in the Philippines established in Iloilo City in 2003. It is one of the fastest growing food companies in country specializing in grilled chicken.

JolliBee Group

• Red Ribbon Bakeshop is a popular fast-food chain and bakery in the Philippines and the United States, offering a wide range of cakes and pastries. The chain began in the Philippines in 1979 in Quezo City along Timog Avenue and started franchising in 1999. In 1984, they opened their first US branch in West Covina, California. Today, there are more than 200 branches all over the Philippines, and there are now 32 stores all over California, two in Las Vegas, two in Ne Jersey (Jersey City and Bergenfield), one in metro Phoenix, one in New York and one in Virginia Beach, Virginia. Other expansion plans continue to be worked out.

• In 2005, Red Ribbon was acquired by Jollibee Foods Corporation, a conglomerate of popular fast-food chains in the Philippines.

THE END !

How to Franchise a BusinessBy: David Daniel Luthen

THE END !

Indonesia Full Service Restaurant Forecast Foodservice Value !

Indonesia Full Service Restaurant Forecast by Units/Outlets !

Indonesia Forecast Foodservice Value – by Category !

Indonesia Forecast Foodservice Value – by Category !

Indonesia Forecast Foodservice Units/Outlets !

Philippine Survey !

…what we’ve learned !

1. Jollibee2. Chowking3. Mang Inasal4. Red Ribbon

These are the Jollibee Food Group Brands that are most interesting in terms of outlet numbers and market strategy. Here some pictures straight from the Phillies…

Filipinos love Meat (Chicken in particular), Noodles (Spaghetti in

particular) and all with a sweet taste !

Mang Inasal ! …they love it a lot !Mang Inasal !! …they love it a lot ! Mang Inasal !! …they love it a lot !

Crowded !

Mang Inasal ! …they love it a lot !Mang Inasal !! …they love it a lot ! Mang Inasal !! …they love it a lot !

Crowded !

Red Ribbon ! Red Ribbon !

Not so crowded !

JolliBee..the champion !JolliBee..the champion !

We got a winner here !

Facts !!

1. JolliBee, Red Ribbon and Mang Inasal are found often in groups at most locations. When there is JolliBee the other brands of the Group are not far away.

2. In some areas there might as well be two outlets of the same Brand and also same size in the very same street or building. And interestingly, both are equally occupied with customers.

3. It is very easy to find any of the Groups Restaurants as there are a lot of them spread out evenly throughout the Metropolis and also the suburbs.

Facts !!Facts !!

Facts !!

- The food the Jollibee Group throughout their Brands are based on the same main ingredients but differ in variety of the end products. They all have Meat, Chicken and Noodles. Though, they have different side offerings, such as snacks, deserts and drinks.

- Ambience is playing a key role here as well, as they are all very different from Brand to Brand.

- Portions in all Brands are fairly small, therefore prices are all very affordable while the taste is great.

Facts !!Facts !!

And we love it very much ! They are our

Brands !

THE END !