Mary Jane Javier-Mollenido

Masters in Government Management

Managerial Accounting
Dr. Roberto Gonzales, PhD
Graduate School of Business
San Pedro College of Business Administration
POSITION PAPER ON JOLLIBEES ACQUISITION OF CAFFE TI AMO
USING THE BALANCE SCORECARD
I.

Introduction

With Jollibees diversification into the coffee and gelato business, as evidenced by its franchise
of Caffe Ti Amo, a Korean owned coffee business that opened in 2006, the fast food giant is right on its
track towards achieving over 4,000 stores in year 2020. Caffe Ti Amo has 269 stores after four years of
operation. Currently, expansion objective for the said coffee business is set at 100 stores within the
country and an additional 100 stores outside of the Philippine territory. In addition, this 50-50 joint
venture of JFC with businesswoman Pamela Tan and siblings is expected to augment the current 1,569
stores owned by JFC to 2,082 by end of the year.
1. Coffee Culture
The Philippines produces four varieties of commercially-viable coffee: Arabica, Liberica
(Barako), Excelsa and Robusta. Coffee was first introduced in Lipa City, Batangas by a Spanish
Franciscan monk in 1740. From the province of Batangas, it has found its way towards the lands of
Amadeo, Cavite in 1876. In 1880, the Philippines was the fourth largest exporter of coffee beans, and
when the coffee rust hit Brazil, Africa, and Java, it became the only source of coffee beans
worldwide. However, similar catastrophe hit the Philippine coffee industry when coffee rust and
infestation destroyed trees in Batangas reducing production to one-sixth of its original quantity. In
2008, production is pegged at 97,430 Metric Tons (Philippine Coffee Annual).
Coffee, apart from water, has become a medium of hospitality often served during early
morning or late afternoon breaks. For how could coffee break have a meaning without coffee itself?
Accordingly, a person reveals his social class by his way with coffee. If he goes for the instant kind
and takes it with canned milk and sugar hes middle class. If he uses real cream or those powdered
substitute instead of canned milk, hes upper-middle class or really upper class. If he prefers brewed
coffee and takes it black, that is without cream hes individualistic and sophisticated, and savors his
coffee like its his cup of tea so to speak. If he prefers it black but instant, hes Americanized and
perhaps licks cake icing off his fingers.
2. Demand for Coffee
Increasing number of yuppies or young urban professionals working in late night shifts
coupled with the emergence of Business Process Outsourcing (BPO) such as call centers have

contributed to the increase in the demand for specialty coffee found in coffee shops. Generally,
there is a 3.1% annual increase in domestic demand for coffee (www.dost.gov.ph), however, a 20%
increase in demand for specialty coffee has been observed in 2009. Aside from the business
development perspective, another contributory factor that led to the increased demand for coffee is
the awareness that made coffee a health value adding beverage through its advertised health
benefits decreasing cancer risks etc.
Coffee drinking has become a very popular social activity among yuppies and mostly if not all
flock coffee shops for late afternoon, small meetings discussions while enjoying good company and a
hot cup of coffee. Generally, Filipinos are avid coffee drinkers. Some, go to coffee shops for chatting,
meeting new people and enjoying a wifi free access service coffee shop offers for internet surfers.
Coffee shops are not just stores, but symbols of a good coffee experience to share with family,
relatives, loved ones, and friends.
Recognizing the increasing demand and growing market share for coffee, the government thru
the Department of Science and Technology (DOST) have extended rehabilitation efforts to cover the
increasing annual output for coffee thru expansion of areas for planting of coffee, building
capabilities, provision of post harvest facilities and equipment, introduction and promotion of
sustainable coffee production such as organic growing, conduct information dissemination on
diversified coffee production, Train people on coffee production technologies and strengthen
institutions and conducting aggressive market research and marketing among others.
II. Background
1. Jollibee Foods Corporation
Vision
We are the best tasting QSR.. (Quick Service Restaurant)
The most endearing brand...
that has ever been...
We will lead in product taste at all times...
We will provide FSC excellence - (Food, Service, Cleanliness)
in every encounter...
Happiness in every moment...
By year 2020, with over 4,000 stores worldwide,
Jollibee is truly a GLOBAL BRAND. (and the Filipino will be admired worldwide)
Mission
To serve great tasting food, bringing the joy of eating to everyone.
Values

Customer Focus
Excellence
Respect for the Individual
Teamwork
Spirit of Family and Fun
Humility to Listen and Learn
Honesty and Integrity
Frugality

I have identified the mission, vision and values of Jollibee as a restaurant, seeing their success
throughout years of operation in the country, top management would best implement their strategy
upon initially applying their goals to best integrate Caffe Ti Amo into the market. Keeping the core
values of Jollibee and aligning the vision and mission of the restaurant with Caffe Ti Amo, the following
has been determined:
Vision
To be the best tasting coffee and gelato shop that offers a unique experience of fun and healthy
dining, leading in product taste and innovation which provides service excellence at all times.
Mission
To serve great tasting coffee and gelato, bringing a healthy and joyous experience of eating to
everyone.
III. Conceptualized In store operation
The table below shows the proposed TOWS analysis for Caffe Ti Amo, followed by the working
Balance Scorecard for CY2010:

Proposed TOWS Analysis for Caffe Ti Amo

Threats
Inconsistency of market demand for coffee
as observed during historical trends
Susceptibility of coffee shops to increasing
costs of coffee and dairy products
Increasing number of competitors (new
entrants)
Stiff competition among existing coffee
shops

Weaknesses
Relatively new business as compared to
other coffee shops with renowned
marketing and excellent product offerings
and service

Opportunities
Introduction of new products and services
in the form of coffee and gelato mixes
Healthy combination of products offered
Possibility for global expansion especially
that a surge in demand for specialty coffee
has been evident
Co-Identification of product/service with a
renowned fast service quality restaurant
like Jollibee.
Strengths
Fast rising coffee brand with 269 stores
after just 4 year of operation
Extensive product offerings ranging from

Target market is limited as compared to

the known business which made Jollibee
popular

coffee to healthy gelatos for the health

conscious market
First store opened at SM Annex, a known
hub for yuppies working during late night
shifts

Caffe Ti Amos Balance Scorecard

Champion:

Key Result
Area

CEO/Vice President for Coffee Ti Amo Operations

Weight
0.1

Objective
Increase number
of stores &
franchises
Employee
commitment &
turnover

Number of existing
and newly opened
stores
Contract period &
personnel
absences

0.03

Training on
technological
aspect for
operations

0.03

Provide Training
to all members
that upholds
"Jolli"-values and
applies it to
Coffee Ti Amo
services
Conduct
monitoring &
validation of
service provided

Conduct initial
training on in store
computer
operations for
managers & key
personnel
Complaints and
grievances against
staff/ employees

0.03

Learning
and Growth

0.1

Customer
0.1

Internal
Business
Process

Output Measure

0.05

Number of
customers (new &
retained) speed,
pricing, quality &
service
Product
innovation
coffee and gelato
mixes

Employment of a
mystery shopper
thru instore
purchases of
products and
services
Sales growth,
patronage cards,
implementation of
survey
questionnaires
Customer
acceptability

Time :

Target
Open 10 stores by
end of CY2010

May December 2010

Commitments
Champion

Time

Sales &
Marketing
Department
Human
Resource
Department

Before
end of
2010
Before
end of
2010

IT Department

Before
end of
2010

Zero complaints

Human
Resource
Department

Before
end of
2010

Zero complaints &

Customer
satisfaction survey

Audit
Department

Before
end of
2010

Increased
patronage and sales
growth

Sales &
Marketing
Department,
staff
employed
Sales &
Marketing
Department,
staff

Before
end of
2010

Maximize 5 month
contracting period
of personnel and
reduce employee
absences by 10%
Increased
Knowledge and skill
competency level

Increased sales for

specific product and
good feedback

Before
end of
2010

Rem
arks

employed

0.08

Cut off
ordering/waiting
times
Increase market
share

Decrease average
ordering & service
time
Inclusion of caffe ti
amo in the top ten
coffee shops
identified

Decrease average
ordering & waiting
time by 5%
Increase sales by
20%

0.05

Speeding
production &
delivery times
Profit

Decrease waiting
time

Minimum delivery
time

0.1

For sales cost

leadership,
efficiency and
consistency
Profitability

Reduce
operational costs

5% reduction in
electric bills

Do suggestive
selling

Increased sales of 5
% for featured item

Increased franchise
stores & royalty
fees
Global expansion
of store operations

20% increase in
franchises

Decrease cost of
unnecessary
toiletries, dining
aides such as table
napkin

Decrease in-store
operational
expenses by 5%

0.1

0.03

0.08
Financial
0.08
Sales
0.04

Total

10% increase in
franchises

Dine in staff,
chef and
manager
Sales &
Marketing
Department,
staff
employed
Sales &
Marketing
Department,
staff
employed
staff
employed

Before
end of
2010
Before
end of
2010

Sales &
Marketing
Department,
staff
employed
Sales &
Marketing
Department
Sales &
Marketing
Department
Manager, staff
employed

Before
end of
2010

Before
end of
2010

Before
end of
2010

Before
end of
2010
Before
end of
2010
Before
end of
2010

100%

The above Balanced Scorecard or BSC focuses on Growth as an initial strategy for Caffe Ti
Amo as evidenced by the focus on increasing the number of franchise stores and royalty fees by 20% for
in country operations and 10% increase in franchises outside the country before end of 2010. (see KRA
for Finance) and placing a 10% weight on increasing the number of outlets to 10 stores by the end of the
year (refer to learning and growth KRA).
However, if strategy changes from growth to extract profits, the Balance scorecard will focus
on, net sales increases, improved efficiency and production outcomes like minimum waiting time, faster
delivery and ordering service for store operations and reduction in operational costs that are not value

adding. It will place a higher percentage on sales and profitability from 0.04 and 0.03 to 10% each and
reducing percentage weight for areas pertaining to store expansion within and outside the country.
Refer to the table below for possible changes in areas in the scorecard that will be affected if strategy is
diverted from growth to extract profits.
Key Result
Area
Learning
and
Growth

Weight
0.03

0.1

Objective

Output Measure

Target

Champion

Increase
number of
stores &
franchises
Profitability

Number of existing
and newly opened
stores

Open 10 stores by
end of CY2010

Sales &
Marketing
Department

Before
end of
2010

Do suggestive
selling

Increased sales of
5 % for featured
item

Before
end of
2010

Increased franchise
stores & royalty
fees
Global expansion
of store operations

20% increase in
franchises

Decrease cost of
unnecessary
toiletries, dining
aides such as table
napkin

Decrease in-store
operational
expenses by 5%

Sales &
Marketing
Department,
staff
employed
Sales &
Marketing
Department
Sales &
Marketing
Department
Manager,
staff
employed

0.04
Financial

0.06

0.1

Sales

10% increase in
franchises

Time

Remarks

Before
end of
2010
Before
end of
2010
Before
end of
2010

IV. Internal Operations and Management

With the opening and extensive introduction and expansion of the coffee shops brand name into
the market, its executives and/or managers play a significant role towards the achievement of its target
objectives especially during the crucial stage wherein preparation for expansion activities and business
sustenance is in full operation. New measures that would be implemented by the coffee shop that
negates the norm as dictated by the usual Quick Service Restaurant (QSR) applied in Jollibee
restaurants should be integrated in seminar/trainings and orientations. This new measures shall
differentiate Caffe Ti Amo from Jollibee giving the Coffee shop individuality.
Resistance of managers to new measures must be handled with extra care. First, the need to
identify the new measure being implemented that has caused the resistance. Second, is to extend the
reason behind the implementation of the new measure e.g. Extended late hour shift. At first, this may
entail resistance on the part of managers especially with the late night shift extension despite additional
pay they may get from overtime. On the part of Cafe operations, this is necessary because the market
they cater extends to yuppies who enjoy afternoon until late night breaks or for people working in call
centers. Sales increase may be observed during the latter part of the day than during the morning
because of the type of product they offer. It is important that the managers as well as the staff,
understand new measures that are planned to be implemented prior to actual implementation so they

can take part in achieving the desired goal rather than be contributory to the problem just because of
miscommunication and misunderstanding on their part. Lastly, to solicit other measures that may ease
up operations and ultimately help achieve the coffee shops goals.

V. Sub-optimization
In any business operation, it is best to employ the method that yields great or best results,
however, in reality that does not always happen which results to suboptimization. Defined as a
situation where a process, procedure, or system yields less than the best possible outcome or output,
caused by a lack of best possible coordination between different components, elements, parts, etc.
(http://www.businessdictionary.com/definition/suboptimization.html).
For Caffe Ti Amo, possible events that may lead to sub-optimization would be in terms of outlet
expansion as a growth opportunity for operations department which may come in conflict with sales
and marketing department- as projected sales may not align with expected expansion budgetary
requirements. In a situation where managers sub-optimize and focus only on the reward matrix with
the largest payoff like Economic Value Added (EVA) and Customer Satisfaction, only one aspect of
performance is measured and that is in terms of revenue, other moderators that affects outcome like
manufacturing unit costs, employee retention rate and product innovations is not given additional value
and importance which are equally significant as customer satisfaction.
It is best for a starting business like Caffe Ti Amo, to design a scorecard that best reflects their
vision into a quantifiable strategy, so as to effectively operate the business taking into considerations
both financial and non-financial measures. Both measures could be employed by the manager to
effectively control business and promote both growth and sustainability in the long run.
VI. Summary
It is another wise business decision by Jollibee to acquire Caffe Ti Amos franchise, as the demand
for coffee is on the rise. Market demand for specialty coffee is increasing along with the boom in late
night employment shifts such as call centers. It is beneficial for Caffe Ti Amo to be identified initially with
Jollibee because of the numerous and strategic locations of their outlets. However, Caffe Ti Amo, should
offer their products and services less the QSR motto employed in Jollibee because the store offers
coffee and gelato drinking and eating experience with the savouring identity. Management should
employ the use of the balance scorecard in the coffee business to best measure and analyze
performance indicators that affect the growth, revenue and profitability of their business.