Published online by the Business World, November 4, 2019
THE growing middle income class in the Philippines has made it the perfect time for Max’s Group, Inc. (MGI) to expand, and the company is putting all hands on the table to prepare for boodle fight.
The listed operator of casual dining restaurants said the increasing number of middle income earners is encouraging it to take a bigger chunk of the market through franchising.
“If you look at the consumer trends, it’s looking very optimistic. Data shows there’s an increasing middle income class. That alone is very attractive as a business,” MGI Chief Operating Officer (COO) Pyrus A. dela Cruz said in an interview last week.
“We’ve been targeting them (for years), and they’re the ones growing, so that becomes a bigger opportunity for us,” he added.
MGI, which handles brands such as Max’s Restaurant, Pancake House, Yellow Cab Pizza and Krispy Kreme, is targeting to have more franchises than company-owned stores across the country by 2020.
“We’re moving towards a 60-40 ratio, meaning 60% will be franchise and 40% will be company-owned,” John S. Amante, MGI COO handling Pancake House, said last week. MGI is looking to end the year with a 55-45 ratio for franchise to company-owned stores by the end of the year.
“It will be very hard to expand company-owned (stores) outside our homebase which is Metro Manila. I think local knowledge, especially in Visayas and Mindanao, will help us further develop the brands,” Mr. Amante added.
As of 2018, MGI has 695 stores across 10 brands, of which 411 are company-owned, 219 are franchises, six are joint ventures and 59 are international.
The 10 brands are Max’s Restaurant, Pancake House, Yellow Cab Pizza, Krispy Kreme, Teriyaki Boy, Dencio’s, Sizzlin’ Steak, Jamba Juice, Kabisera and Maple. MGI also owns Max’s Corner Bakery, which are attached to Max’s Restaurant branches.
Aside from expanding its geographic footprint, the company is also seeking to tap newer markets consumer-wise. Mr. Dela Cruz, who handles Yellow Cab Pizza and Krispy Kreme, said there is an active effort for the company to mainstream its products.
Among the strategies it is exploring is offering items for single customers at more affordable prices. For example, Yellow Cab has started offering pizza slices from only full-size pizzas previously. Max’s Restaurant also now offers rice bowls of its best-sellers that used to be only for sharing.
“It’s our way of giving our consumers a taste of our brands without actually breaking the bank, and at the same time, their first entry and experience to our respective brands,” Mr. Dela Cruz said. “It’s not just an expansion as far as landscape is concerned. It’s also an expansion as far as target consumers are concerned.”
Paolo S. Serrano, MGI COO handling Max’s Restaurant, also noted how the digitalization of its operations helps the company craft its next move. He said the data they gather is able to help them analyze consumers, and from there come up with offers. “And it’s very mainstream already moving forward,” he said.
The company is targeting to open more multi-brand stores next year, which will feature various MGI restaurants under one roof. Mr. Serrano said having all these brands within its portfolio gives the company confidence in staying relevant despite the entry of several foreign restaurants. The group’s pool of menus of various cuisines helps it find consumers for every product, making multi-brand stores interesting for all types of market.
For this effort, Mr. Dela Cruz said it is helpful that the different COOs for different brands are able to come together to synergize operations. Externally this is seen through multi-brand stories, but internally this means a stronger backend support for its supply chain.
He also said having independent teams running the brands helps allow different ideas to flourish. “It gives us confidence even more as we move forward to the next year and the years forward, because coming from different backgrounds, we give each other different points of view on what we can do better,” Mr. Dela Cruz said.
With a loaded team paving the way for the company to grow, MGI is bracing itself for what Mr. Serrano calls the upscaling of the Filipino amid the turn of the decade.
“From our standpoint, it’s actually the best outlook that we can think of. It’s the perfect storm for us,” Mr. Dela Cruz said.
Earnings of MGI rose 10.4% to P366.45 million in the first semester on the back of improved margins. Its shares inched up 0.04 points or 0.30% on Thursday to close at P13.24 apiece.
This article is originally published by the Business World which can be accessed online at https://www.bworldonline.com/maxs-maps-expansion-as-mid-income-class-grows/