Okay, good afternoon, everyone. Welcome to the Fourth Quarter and Full Year 2023 Earnings Results Call for Jollibee Foods Corporation. I'm Carissa Mangubat of Regis Partners. I'll be the moderator for this afternoon session. We will have a short presentation from the company, and then we will proceed to Q&A after that. To give us an update on the most recent results, we have Jollibee CFO Mr. Richard Shin. We also have the IR team headed by Ms. Cosette Palomar. We'll start off with a quick intro by Ms. Cosette before we move on to the presentation proper. Cosette, please go ahead.
Thank you, Carissa. Good afternoon, everyone. Thank you very much for joining JFC's investor briefing. Okay, just a few reminders. Today's earnings call may include forward-looking statements that are based on certain assumptions of management and are subject to risks and opportunities or unforeseen events. Actual results could differ materially from those contemplated in the relevant forward-looking statement, and the JFC Group gives no assurance that such forward-looking statements will prove to be correct or that such intentions will not change. All subsequent written and oral forward-looking statements attributable to the JFC Group or persons acting on behalf of the JFC Group are expressly qualified in their entirety by the above cautionary statements. Okay? I'll turn over now to Mr. Shin.
Thank you, Cosette. First of all, a very good afternoon and a good morning to all of you, joining us from outside of Asia. Really appreciate, as always, your interest in our company, and, very happy to now share with you a couple of key, observations first before we get into the details. So the first point, I think you've all seen the financials, but again, to reiterate that the performance, in fact, for both quarter, as well as for the full year, had delivered a record high system-wide sales. So, in particular, system-wide sales for the fourth quarter of PHP 94.2 billion, meant that we were 9.6% ahead of same quarter last year. And also, looking at quarter-on-quarter, meaning versus our third quarter of fiscal 2023, we're up a robust 8.4% as well. Full year results, PHP 345.3 billion, sets a new record, and it's a growth of 16.3%.
That, again, will be referenced back to later in my update. That then translated into our revenues of PHP 66.7 billion in fourth quarter, up 8.4%, which happens to be the same increase of 8.4% quarter-on-quarter. A full year revenues base of PHP 244 billion, again, record high of 15.2% growth year-on-year. Moving to the middle of the P&L or gross profits, we're very happy to report that we have another record high of gross profit of PHP 13.1 billion, which is 16.6% up versus prior year. Equally strong versus third quarter, up 16.4% with a GP margin rate of 19.7%. Full year GP margin rate was 18.6%, recognizing that there were still inflationary pressures, the company nonetheless not only maintained but grew its GP margin. In terms of absolute payrolls, it's PHP 45.3 billion for the year, which is a 22.6% increase versus last year.
So at this point, I want to reiterate that, in fact, quarter-on-quarter, as well as versus last year, our business has continued to grow and significantly grows. That translates into an operating income of PHP 2.5 billion, which is up 33.2% versus last year, with an OPM of 3.8%. However, we're down 41% quarter-on-quarter, and I do have some details on that to show you that we took consciously some timing differences in terms of how we recognize our OPEX. Again, I'll explain and walk you through the area of A&P and how we're investing behind the brands. On a full-year basis, PHP 14.4 billion or 45% increase versus last year delivered a enterprise-wide OPM of 5.9%. So now let's dive into the A&P component of what we took into the fourth quarter.
So if you can see here, I have five years comparable, so we want to be transparent and show you multiple years. You can see in the fourth quarter, the red bar being the most current fiscal year of 2023. The dark gray bar at the far right is the, excuse me, earlier year of 2018. You can see traditionally, fourth quarter did have a higher A&P spend rate for several reasons. There’s some catch-up, of course, that happens when key media vendors invoice us slightly late. We do catch up for the year on that. But also, if we have opportunities to spend wisely ahead of the new fiscal year, we take that decision as well. And certainly in 2023, with our performance, we had opportunity to spend wisely. To the far right side, you can see the full year percentage of A&P as a percentage of SWS.
The reason why we system-wide sales versus revenue is to recognize that we have both franchise and company-owned businesses, so therefore it's easier just to use the uniform system-wide sales. Clearly, our 2.6% A&P rate for the year is well within the range of the 2.5%-3% that we typically spend. So once again, A&P, thoughtful, some catch-up, but also spending ahead wisely. The second key message I'd like to share with the audience today is that the Jollibee brand, so not Jollibee Foods Corporation, but the Jollibee brand itself, was recognized by Brand Finance as the second fastest-growing restaurant brand in the world and also the fifth strongest restaurant brand globally. This was a result of the fact that the valuation of this brand surged 51% up to $2.3 billion per Brand Finance.
Graphically, just to show you, Luckin Coffee, sorry, was slightly ahead of us. There was ourselves and then the rest of the brands. This is in terms of growth. This one here is in terms of the strongest restaurant brands as defined by Brand Finance. You can see we are, in fact, ahead of the other top five restaurant chains. Moving on to the third key message. Our MSCI ESG rating up was upgraded from CCC to BB. We're very proud of the work the team has done behind this. You can see graphically here from August 2019 until now, how we've been evolving. We're very happy that we're back to the BB rating. All right, so now let's get into the performance summary before we get into the details. Once again, system-wide sales.
On the top left, on the left-hand side of each box is the quarter, and the right-hand side of each box is the full year. These are numbers I've just shared with you. Same store sales growth, equally, very strong, 5.4% on a larger value pool. And for the full year, it's 10.6%, recognizing also that the earlier parts of the, in particular Q1, we had a very strong same-store sales growth, in particular because our Philippines business in 2022 first quarter was under COVID lockdown. So I believe quarters two, three, and four are more like-for-like. This same system-wide sales growth was driven by transaction count or volume, as well as the average ticket increase. We opened a significant number of stores, 658, so ahead of guidance at 6.3% network growth.
At the bottom row now, in terms of revenues, I'm showing here quarter-over-quarter as well. Again, just to illustrate that we are not, in fact, slowing down, but rather at the same pace. So 8.4% in the fourth quarter, same for quarter-over-quarter. Gross profit, we were up 16.6% versus last year, and quarter-over-quarter we're up 16.4%. Full year net operating income, 45, sorry, PHP 14.4 billion or 45%, which we shared with you earlier. Just graphically, you can see here system-wide sales by quarter and how we've been trending since post-COVID. There's a couple of symbols up here, red and also black. The red trophy is to note that it's all-time high, and the black trophy denotes that it's the all-time high for that specific quarter. So it's been quite continuous since, you know, for the last six or seven quarters.
Top line metrics for fourth quarter as well as the full year. Just want to take time a little bit to share the key points. Now let's just switch to full year. You can see for system-wide sales and for same-store sales, other than Highlands Coffee, pretty much every single one of our regions, business, and global brands clusters have delivered a very strong growth rate. In total, 17.6% for Philippines system-wide sales, and for global, it was 16.3% with a very strong performance by international, 14.4% as well. I'll spend a bit more time later on diving through some of these businesses. This is a new chart, compared to previous earnings call, but I wanted to talk a little bit more in detail of our key market, which is the Philippines.
So this view here is system-wide sales and same-store sales growth, both quarter on quarter and also versus last year. Just to make sure that we understand that, in fact, Philippines remains strong, and let me break that down for you. So within the Philippines, we've clustered under champion brands, and that also denotes a certain level of investment behind these brands. Of course, Jollibee, as expected, but within the Philippines market, Chowking and Mang Inasal are considered champion brands in their dominance of their specific sectors. And so the way to read this is if you look at the second column here, fourth quarter, you can see system-wide sales in billions. You can see the growth rate of both system-wide sales and same-store sales growth. You can also see the same growth rates in the third quarter. So you can compare quarter on quarter how these brands are doing.
So if you were to take system-wide sales for Jollibee, fourth quarter growth was 10.4%. Whereas we had a stronger growth rate in the third quarter, but nonetheless, you can see still a robust growth happening for the Jollibee brand. Where we start to see some of the lag happening is in our other brands, in particular around Red Ribbon, where it competes in a very difficult bakery segment, and we're addressing that. They have quite a bit of work done, and we'll continue to work on addressing to improve within this difficult segment. And the foreign franchise brands, of course, are our strategic brands that we represent in the Philippines, which are Burger King, Yoshinoya, and Panda Express. So there's some learnings there as well. Although system-wide sales growth continues, the same-store sales growth of these brands, there are some challenges which we're working through.
So not all is perfect in the Philippines, but I would say, more so than not, for us to continue to deliver on a full-year basis. Sorry, on a Q4 basis. Here you can see a growth of 11.6% quarter-on-quarter. So let me repeat that again. Fourth quarter was stronger than third quarter by 11.6% for total Philippines. Led by, of course, Jollibee here, 11.2%. Total champion brand category of 10.8%. Although the percentages are good here, we still have some work to do, as I said, in some of our smaller brands. The other thing I want to address is why is our operating income down to PHP 2.5 billion from Q3 of PHP 4.3 billion? And the reason, again, is the timing of our A&P. You can see, as illustrated earlier, fourth quarter does have higher A&P spend traditionally.
Also, we're pulling forward some from early spend. There was also some adjustments that we've taken in our taxes and license. So essentially what this is, is withholding tax adjustments on royalty of prior years, which were not addressed in prior years, but we took the opportunity here to catch them up. Of course, other corporate events and expenses, which typically happens in the fourth quarter, or we booked them in the fourth quarter versus in the third quarter. This, to me, is timing as it represents the full-year expenses. When you look at these expense movements, you can see why our operating income is down. But again, as mentioned earlier, top line in the middle of the P&L continues to be robust and strong for the fourth quarter compared to the third quarter. Financial details.
Some of these numbers you've seen, so I just want to highlight again the gearing that we're seeing. The 16.3% system-wide sales growth. We're able to gear, positive gross profit of 22.6%. And of course, operating income at a faster gearing of 45%. Some footnotes on the side here to, to share with you. Essentially saying that these were, pretty much all record highs again. Now on the EBITDA, we did have an increase of, EBITDA of, 13.9% for the fourth quarter. And on a full-year basis, our EBITDA grew versus last year at 8.3%. Net income grew full year at 22.4%. And what we report here is a PHP 8.8 billion NIAT ahead of guidance. And it's a 16% growth with an EPS growth of 16.5% at PHP 7.455. Some key metrics, so let me show you fourth quarter first and then the full year.
The gray is 2022 and the red bars are 2023. So gross profit margin, earlier I showed this number 19.7%. Operating profit margin also grew as the NIAT. Our free cash flow margin significantly grew. And here is just another way of looking at it. If we were to compare our free cash flow to our NIAT dollars, you can see in 2023, it's almost 4x of cash flow to our NIAT dollars. Slightly down from the year before, but later I'll show you capex in our investments as well. On a full-year basis, however, you can see similar trends right across, finishing the year at 18.6% on GPM, 5.9% on OPM, 3.6% on NIAT margin, free cash flow margin, sorry. And of course, the ratio between free cash flow and NIAT is also higher than the year before.
Okay, now that's a nice way into our capital allocation, cash, and balance sheet. So again, our capex spending for the year was PHP 11.3 billion. In 2022, we have spent PHP 9.7 billion. So that is an increase and, where the significant increase, as always, you can see in terms of absolute dollars, not the percentage here, is, for our store operations. So that's new stores, that's renovations, that's upgrading our kiosks and upgrading our point of sale. So all that's necessary for consumer-facing goes in here. This is right across, as you can see, 42% of the Philippines. And the balance from our other businesses outside of the Philippines. This commissary is to make sure that we have enough capacity for demand. So there's always upgrades there, but it's not a significant portion of our capex.
And this last component here, what we call main office, but in fact, what's really in there is our technology. I think some of the Q&As sent, one of the questions was our level of investment in technology. So not all of 13 is for technology, but the majority. So I would say around 10% of that is for technology, which again is a significant, significant ramp-up from under 5% the year before. This is the plan for 2024. And as always, we take a conservative view. And when there are opportunities for us to buy franchises and or build company stores, we do take that decision as well. So historically, although we show ranges, such as this, it is not to say that we will spend all of it, but this is in fact the ceiling of what we're looking at.
So very, you know, similar proportion to where we spend our CapEx, but what will drive the P&L really is it's the store spend. What will ensure our stores have enough products is our commissary. The reason for the increase here is there will be a new commissary launch in 2024. Again, this had been planned a few years back because we're quickly reaching our capacity in some of our plants. So this is an expansion here. And of course, our investment in technology continues. Moving to a balance sheet, you can see from cash all the way down. I think what's important here is our net debt reduced to 9.7% from 16.2%. Our working capital metrics are all improving. So a day quicker on collections, two days lower on a larger base for inventory. And our ratios are all improving as such as well.
The right-hand side here, it's just information, but shows you in terms of our financial obligations, how that is structured at the moment. So you can see bank loans and senior bonds in total, around 60% of our capital structure is debt accounted and around 40% through our seniors and preferreds are equity accounted. So 60-40. In terms of bank loans themselves, we're about 2/3 floating, 1/3 fixed. And in terms of interest on total obligations, we're about 1/4 floating and 3/4 fixed. And it's important to mention fixed. Let me start with this because in 2023, we continued to enjoy a weighted average interest rate of 4.5%. And that's because we had locked in and we continue to enjoy those 10 years. You would have seen that we recently subscribed to further increase of preferred shares as we had upper ceiling limits.
So, we've done that and, essentially we're well positioned into the future. So recap on 2023 guidance. We've beat our guidance of, between, sorry, we've met our guidance of between 15%-20% in system-wide sales as we delivered 16%. And in terms of rolling base, we beat our guidance with 11% actual, slightly above our range of 7%-10%. Store network of 6% was within our guidance. And in terms of our operating income growth of 45%, that was ahead of our guidance of between 20%-25%. Sharing with you here now the 2024 guidance. System-wide sales on a larger pie, of course, will be somewhere between 10%-14%. Rolling base slightly lower in terms of number, 5-7, but again, we'll deliver more dollars and pesos in terms of absolute.
Store network growth will be somewhere between 7-8, so even ahead of where we are, which is to say we are continuing to find opportunities for new stores, both in the Philippines and outside. Operating income growth guidance of 10%-15%. Or PHP 15.9 billion-PHP 16.5 billion. Again, as a reference point, we finished 2023 at 14.4%. Just very quickly, our longer-term objective or five-year out view is to triple our NIAT. And when we set forth this five-year strategic plan, we had talked about PHP 8 billion as being the milestone for 2023. As I just shared with you, we're slightly ahead now because we delivered PHP 8.8 billion. But we are looking to triple the value from PHP 8 billion to PHP 24 billion of NIAT by 2028. These themes are not new. I've always spoke of the importance of the Philippines and continue to dominate in this market.
The importance of China and how we're going to play there building scale through our Chinese brands, led by Yonghe King, through franchising. We always talked about the coffee and tea category being a very large addressable market and also very profitable in terms of high margin. So we're going to continue to have several brands in here, but CBTL being the forefront brand. And of course, Jollibee, Jollibee, Jollibee, you can see our brand equity, sorry, brand value has significantly increased or will continue to drive efforts towards that, led by the U.S. and other key markets in Asia. Just want to end with our CEO's quote where I think he summarizes very properly and nicely here where he talks about looking forward to 2024. And that is looking ahead to 2024 and beyond, we'll continue to focus on our priorities.
We'll scale the business with our four big focus areas of expanding our Jollibee brand internationally, growing our coffee and tea businesses, exponentially growing in China in multiple lower-tier cities through franchising, sustain and sustain our strong growth and market leadership in the Philippines. We'll ramp up franchising to support our global expansion. We'll also accelerate our digital transformation and bring capabilities on par with global quick service restaurant leaders to increase operational efficiency and further improve customer experience and revenue management. We will work on driving JFC's long-term growth. We'll remain committed to governance, ethics, and sustainability and responsible business practices. Our strategies combined with a portfolio of strong and valuable brands and the support of our talented global team gives me the confidence that we'll be able to achieve our goal to triple our value in terms of NIAT in five years.
I believe everything I shared with you speaks to this summary and at this point, I shall take questions. Thank you.
Okay, thank you, Richard, for the presentation. We already have a few questions in the chat, so let me start off with that. In the interest of time, I'll just consolidate the similar questions. So there's quite a few questions here on Capex and store expansion. So the budget is PHP 23 billion for this year. Are you really expected to spend that much since historically the actual Capex always seems to be much lower? And of these 750 new stores, how much would be company-owned and franchised? And if you could provide a breakdown of how many stores you plan to open per market.
Okay. So the answer is we always show you the ceiling and the reason for that is when we get board approval, we ask for retainer and its appropriation to be linked to that ceiling. We do not plan to spend to the ceiling as in the past we've demonstrated ways to do so. So I think it'll be very similar in 2024 as well, Ken. Having said that, what drives the business really is growth and expansion. So we'll make sure that we're well indexed in terms of what drives us. So our quickest payback business is coffee and tea. Depending on the brand, it's somewhere between 2-3 years. So that'll be about 40% of our store openings in 2024. And of course, Philippines will be about 20%. And then the rest of international combined with the coffee business will be the balance of the 80.
Specific to China, we're looking very much at a very asset-light approach and looking to open very few stores with our own capital, but rather through the franchising model. In markets like Vietnam, we'll continue to open our company-owned stores because they're quite profitable. And I think the lesson there is if the franchise network isn't strong enough, we'd rather open our own. And that's been working for us in markets like Vietnam. Maybe I'll just address Kimberly's question on Smash because I'm sure many people are asking, is this real or is this not real? The answer is this is real. And I've always said there are some pillars that we're going after. So we stop building new stores, which slows down the losses of new investments. And we continue to work on quartile three and four to make sure that they get to profitability.
So yeah, a lot of work behind it, but the short answer to Smash is really focus on store-by-store level profitability. Okay, thanks, Richard. There's also a related question. If the losses of Smashburger and I guess CBTL also, did they narrow or widen in the fourth quarter? And would you expect these businesses to turn profitable? And what way to achieve this? Yeah, Smash, our losses definitely reduced. So we have a bit of work to go, but not much more. And soon I'll be very happily reporting Smashburger net operating income profits as well, but I don't want to overpromise on the timing, but very soon, as we're starting to see real good momentum. And I should say at this point that we've had the opportunity to now onboard a new CEO for Smashburger.
She comes, I think you'll know her reputation once you look her up. Her name is Denise Nelson, but she comes from Starbucks and I've spent some time with her actually last week in Denver. I have to say, she's an incredible executive and I think we're in good hands there. For CBTL, it's been bumpy, I have to tell you. Fourth quarter was worse than third quarter. The reason for that, I think, is because our North America company-owned store is not really positioned. We knew this when we bought the brand years back, but it's taken a bit of time. That's our priority for this year, is to make sure our positioning of our company-owned store in the U.S., in particular, it's mainly California. 95% of our stores that's company-owned is in California. We have some plans to address that.
Okay, thank you, Richard. So we'll go to the queue now. We have Divya. So Divya, you may now ask your question.
Thanks so much, Carissa. And thank you, Richard, for the presentation. I had two questions and just one follow-up on the CBTL and Smashburger. My first question is just on margins, specifically on international segment margins. We saw that slipped back into losses in the fourth quarter. Could you just help us understand why the operating income for international slipped into losses? Is it that the A&P is disproportionately higher there? And when we think about 2024, how should we think about this as an entire international segment? What kind of margins are you targeting for this year? That's my first question.
Okay, thank you, Divya. If I remember in Q3, I think we had reported something like 3.3% international margin and we're quite happy because that was the highest in the last five years. That's not saying that's a good number, but relative to the stage of our business in international. That had slipped, you're right. And the main reason in terms of the magnitude and contributors was CBTL and Highlands Coffee. Very different. Highlands Coffee is delivering about twice the profit of CBTL on a store basis, but store-level basis. However, Highlands Coffee did suffer quite a bit from a lot of the macro headwinds that we're seeing in that part of the world, Vietnam being very, I guess, dependent on China in many ways. In particular, in the tier three cities.
So when we did a deep dive analysis of what's driving Highlands Coffee down, it was really that tier three where the frequency was coming off. So people were not going as frequently as they were when they're more confident about the economy. But tier one and two still remained relatively strong. So we recognize that this is a bit of timing. And as things turn, we do see improvements in early months of this year. CBTL is simply the losses are coming from the U.S. company-owned stores. Because excluding that, it's pretty much a franchise business other than Singapore and Malaysia. We're a company-owned stores, but they're very profitable. So again, there's a very clear plan on addressing the company-owned stores in the U.S. So that's what's dragging it.
In terms of what do we anticipate for 2024, I anticipate that in the back half of 2024, the U.S. company-owned store issue will be resolved. And Highlands would have come to a better place. So I do see international pulling up. The rest of our businesses outside of those in international, such as Asia, North America, Asian brands, etc., they're all doing extremely well. Just in terms of the quantification of that margin, like you said, 3.3% was good, but it's not a good number standalone. What do you think international margins can go to by the end of this year? I think by the end of this year, we should be in the low singles. And more importantly, I think looking out to, we'll see quite a bit of momentum coming through in 2025 and in 2026.
What we're looking at really is getting this to a high single digit as soon as we can. Because on a unit economic basis, Divya, when you look at our business, for example, our Jollibee U.S. versus our Jollibee Philippines, just using that as an example, Jollibee U.S., on a per unit basis, we have about $12,000 average daily sales per store. Whereas in the Philippines, it's about PHP 5,200. So it starts from that. And also our gross profit margin on our food and packaging cost is about 66%-67% in the U.S. versus about 55% in the Philippines. So the more Jollibees we have in the U.S., our P&L starts to pull up the international segment.
To do that, I've always talked about the need to switch to franchising because at some point, we have to make sure we can build stores quickly rather than with our own capital all the time. You're going to start to see that coming through in other years.
Got it. Thank you. My second question is on Philippines. I just wanted to understand that the same store sales growth has been slowing and you showed that nice bifurcation by brand. Do you think that the foreign brands are underperforming because of downtrading? And what is the risk that the overall business also goes down to low single digit same store sales growth? And also, you know this is a question we've been asking in the past, but if you can refresh our view on it, why are we not more aggressive in store openings in the Philippines in the recent years and not even in 2024, I think?
Yeah, okay. So Philippines, I think it's the first time I've shown this chart because that's quite a bit of interest. This is all disclosed material, but we summarize it to call these champion brands, so Jollibee, Chowking, and Mang Inasal. And you can see there it's low double-digit in terms of growth rate. So those brands are doing extremely well. We're fantastic leaders on those brands. And we continue to invest at the right level and it's returning. So for example, Jollibee Philippines payback is now 3.3 years. So extremely good payback and good margins. The foreign franchise brands, it's really three.
What we notice on a brand like Panda Express, it has extremely high ADS. But we also noted that the frequency and trial rates are not as high as a lower price point Jollibee. So our consumers are not coming back as frequently as they are. So what are we doing? What we're doing is we're obviously going to make sure that the number of restaurants we built is limited for brands like that. And we're also looking at lower ADS or lower meal package options for consumers with perhaps slightly smaller quantity, but more affordable price point. That's really the brand that seems to be dragging everything down in that group. Burger King continues to grow, but again, you know it's at a slightly different price point to Jollibee. So we're seeing in the Philippines, the reality of different price point having different levels of growth rates.
If I remember, oh, the last part of your question is then why not more? We are building as much as it is necessary to build in the Philippines, meaning that we don't want to be overdependent on one market. And if that market, for whatever reasons, does not perform, then we don't have any other place to go to. So that's why we've been so aggressive on international to make sure that we have legs and pillars set. And this takes time, as you know. So that's the reason for that. The second reason is within Philippines, we are within Metro Manila, we are quite saturated. So therefore, growth is going to come from market share steal and same store sales growth predominantly, not to say we're not building stores, but a slower rate as in the provinces where we have more upside. So we're balancing that as well.
But the main reason, again, is box economics or unit economics and the opportunity to assign a price for us is really outside of the Philippines. We need to start seating that because in the future, you cannot go back in past to seat that. So we want to keep that right balance.
Perfect. This last small question, same store sales growth for Smashburger became negative in the fourth quarter. So while we saw profitability improvement, it seems that the same store sales growth was negative. Could you just comment on what's happening there?
Absolutely. Q4 of the prior year, being 2022, under the old management, there's quite a bit of promos. So you know the BOGOs and you know we're testing different things on the internet as well in terms of discounts for online orders, etc.
We've significantly reduced those promos and we're now positioning it to be a core sort of core menu. So we're seeing some of that, but that's purposely thought through. The reason for that is we don't want to build a business on promos. So we're seeing that coming down, but in terms of profitability, we're increasing because a lot of those promos that gave us the RB or same store sales growth in 2022 fourth quarter, we're seeing that profitability-wise, they're quite neutral. So it's a mix between more solid sales that's giving us better margins.
Thank you very much.
Okay, thank you.
Thank you. We'll go over to the chat again. There's a few questions here. Your long-term targets. The long-term target is to triple operating profit in 5 years. That implies 25% annual growth. However, you're just targeting 10%-15% for this year. So how do you reconcile that? And how does the how do these targets translate in terms of you know how much is coming from top-line growth and margin expansion between the Philippines and international? And where do you expect the split of Philippines and international to be in terms of net income?
Okay. I'm just going to refer to some notes. You're absolutely right. It is around a 25%-26% bottom line CAGR to get there. So let me just give you the shape of things that we're seeing. So revenues, we do see this to 2x. And that's about a 15% CAGR. And that gets us to that tripling bottom line. In terms of OPM, we're seeing around 10%. We're right now 5.9%. So we see that coming up mainly because Philippines will come up slightly, but international will pull up, as mentioned earlier.
In terms of the split between Philippines and the rest of the world, at that point, international will be the majority. So it'll be around 55%-60% with Philippines being about 40%. And in terms of franchising to company-owned stores, we think we'll be around the 80% franchise level. Today, we're at 57%. So that's the bigger shape of it. And I guess the specifics of it, it's going to take more than this call to go through, but it's based on following principle. Large markets where you have a higher value pool, our ability to grab that value pool means we need to get in there with some strategic alliances, whether it's around technology or it's around networking or real estate. So those are the seeds that we've been planting at the moment. Second, we need to get into arrangements with franchisees that's able to take cluster regions.
So we have mapped out already the areas that we need, we'd like to expand in. And the good news, if you take a look at a brand like Jollibee in the U.S. is we're just so tiny compared to the demand and the opportunity that we see there. So we've just entered our 14th state, which is to say we have many more places to go. And we are actually in the process of screening our franchisee partners for several of those states. So both existing states where we would open more stores through franchising, but also new states. So a market like the U.S. can accelerate and grow pretty quickly. So those are kind of the how.
And of course, China, we will continue to stick with our Chinese cuisine direction because we believe that if you're a multi-brand in a country like China, it may be quite difficult to manage. So we're staying very focused. And of course, our coffee brands are showing that they can be easily franchised. So we'll continue to expand those brands through franchising. Oh, we got John and Brian coming through.
Hi, Brian here. Can I just follow up on that comment that you made? Because if you look at the, Brian, you went on mute. Sorry, can you hear me?
Yeah, I'm okay now. Yeah.
Okay, great. I wanted to just clarify on the statement that you just made because if you look at the momentum of store openings, it's not really going to get you to those targets that you set. So just to clarify, what you're really going to see from the franchise side is really a lot more Jollibee stores in the U.S. through this plan through franchise out of the states. Is that correct?
Yes, you're absolutely right. Our momentum or store opening of 6%-8% or 500-700 stores is not going to get us there. So it's a completely different model that we need to get to. And that's what we've been working on. So Jollibee U.S., for example, will get to 500 stores from our 72 stores today. And of that 500 stores, other than 2024 where we still have 11 stores to build out, the balance of it predominantly is going to come through franchising as an example of how we're building this up. Can you just remind me again the timeline for when you'll be launching this new franchising model? 2025 is the first full year for franchising.
Got it. Just to clarify also on your guidance for 2024, because if you look at the system-wide sales growth targets versus your operating income targets, they are pretty similar. So that seems to imply not much operating leverage for this year. So I'm just wondering if you could elaborate on if there are any factors that we should consider and how we think about margins this year.
Yeah, I think 2024, there is a, I guess, a mix if you will, of the current model, which is still skewed to opening new stores. That shift is going to happen, as I say, a little bit out. So I think you're seeing some of that.
But what I'm really focused on, actually, Brian, is the top line and the middle of the P&L because I think on the expense and the rest of those components, those are variables that we can dial up or down. For example, technology, we can always dial up or down where a lot of our investments are going. But it's really focused on driving same store sales growth and not necessarily store expansion. So 2024, I think we will probably end up seeing similar or if not stronger key metrics, but it's not a transformational level. We don't get to 20%-30% OPM, for example, because simply the math doesn't work when you have 57% franchise stores only.
Right, but do we expect some operating leverage to feature this year as well?
Absolutely. Yeah. Well, we'll continue to the Philippines as such, the top line will continue to grow faster than our expense line. And Philippines is still our number one profit contributor. So I think our operating leverage will come through there. Absolutely.
Great. Thank you.
Okay, thank you, Brian.
Okay. Sorry about that. Our next question on the queue is from John there. John?
Hey, John.
Hey, Richard. Yeah, thanks, Chris. Actually, Richard, just three questions. Firstly, if you could just clarify, EBITDA for most of the international brands were actually positive during the fourth quarter. But the operating income line, as the question earlier alluded to, was negative. So is it just negative leverage impact from lower sales from CBTL in the U.S. and Highlands impacting, I guess, leases is what's in between? Did I catch it right?
Yeah. So everything below EBITDA, as you would imagine, so mainly depreciation, amortization, but also the interest component. So all those are unfortunately dragging down to that negative NOI. But the way I see it, if there's a couple of tweaks to some of the businesses that I mentioned, that tweak, it's not that difficult to make happen. But at the moment, it's mainly because of the DA and interest expense that's causing the negative versus a positive EBITDA.
Thanks. Second is on China. China was great. Can you explain what Jollibee has done differently compared to the other restaurant brands in China? Yeah.
I've always said China is challenging. So I know they're great numbers in terms of movements, but I don't want to take full credit in the sense that fourth quarter of 2022, China was still locked down. So I don't know.
I know there's a history lesson, but China really kind of reopened August 30th of 2023. So that's to say our fourth quarter of 2023 was the first quarter with no partial or full lockdown. So that's why quarter four 2022 versus quarter four 2023, you're seeing that significant movement. Having said that, the businesses are doing well in terms of Hong Zhuang Yuan is turning the corner. Yonghe King is our biggest and most strong brand. So yes, there is some hard work and good work there, but it's also relative to a lower quarter in fourth quarter 2022. But I am bullish on China because I do think that we have the talent there and we're seeing some positive momentum. But I'm always cautious about China because of its unpredictability as well.
Thanks, Richard. Maybe a longer-term question on franchising in particular. You already mentioned that 2025 will be the start of this big program to increase the share of franchised stores. Can you just elaborate more if you can on specific targets, particularly, say, in the U.S. or in Coffee Bean where these new brands will drive expansion?
Perfect. So Philippines, I think it's understood. The mix is not going to change that dramatically. So it's already running on 2/3 franchise model in the Philippines. Certain brands are already 98% franchised, like Mang Inasal and Chowking, which is one of our champion brands. So I think Philippines is not going to be that transformational change in terms of franchising. But if you look at, again, North America, what we are seeing is in 2025 onwards, predominantly, meaning more than 80% of all new stores should be through the franchise model. And that's what we're planning out.
That's the work that the team is leaning towards. When you look at Smashburger, we are not opening any new company-owned stores in 2024. So therefore, all new store openings, including those of international, which will start to happen late this year to early 2025, you'll see 100% of Smashburger going that direction, unless there's one or two for whatever reason we want to keep those as kind of the hub and spoke model where you have a store that releases a bit larger footprint, etc. But otherwise, that brand is going that direction. CBTL U.S., we're looking at all new stores being franchised as well. So the only company-owned stores for CBTL will be in Singapore and Malaysia.
And those, at some point, we haven't looked at franchising for those two markets, but other than that, U.S. and the rest of the world are a franchise model. So yeah, that's kind of some of the key brands and the severity of how we're swinging that pendulum.
Awesome. No, that's great news, Richard. Just a quick clarification in case I missed it. The 25% CAGR on EPS assumes that operating margins blended will reach 10% by the end of the period, right? 1-0?
I don't have a direct answer, but yes. I can't remember all the sort of the steps in between. But what's more important for me rather than the OPM margin, because again, that depends on how you dial up the franchise company-owned store mix, but it's the absolute dollars that we're chasing in terms of going after markets with better unit economics.
Okay. No, thanks. Thanks for the opportunity.
Okay. Thank you, John. Appreciate the questions.
Thank you, John. So we'll just take one more question. I guess we have time for one more. Just as a follow-up on the five-year plan, you highlight coffee and tea as the key pillar of growth, but yet in many markets, we are seeing rising competition in this segment. Easily, many of the Chinese competitors are now expanding beyond China. In Indonesia, you also have aggressive players. Can you give more color on your growth plans for coffee and tea?
Okay. Thank you, Raymond, for the question. You're absolutely right. To go into China with CBTL at the moment, which you may I mean, we can have different views of whether CBTL is in the same category as Starbucks, but it is a premium positioning with cafes.
That does not appear to be the right strategy as we can see what's happening to Starbucks in China as we can see what's happening to the Luckin Coffee. So for our coffee and tea strategy, we're not that bullish or aggressive in China. So I say that because the competition there is quite different in that they'll take losses for many years to scale. So before we take that on, we think there's plenty of opportunities outside of China for coffee and tea businesses. So one by one. So if you take a Highlands Coffee, we still have a lot more to go within its home market of Vietnam. But we are looking at some other markets outside of Vietnam at the moment to start slowly seeding.
And then if you look at Milksha, which is another brand in the category, we're looking at the U.S. as the next big international market to enter. And then, of course, CBTL, I think we spoke of, but the U.S., the footprint of 200 stores there is simply not acceptable. We're going to go larger but through franchising. And then, of course, there are opportunistic markets like the Middle East at the moment where it has some of the fastest growth rates for us in our coffee and tea business.
Okay. Thank you, Richard. So I think we can take one more last question. We have a follow-up from Brian. Brian, you may now answer your question.
Hi, Richard. Quick follow-up on Smashburger because if you look at what you've commented, we're not growing stores for this year. Franchise stores, actually, we saw a reduction in the number of stores in 2023. So with new management coming in, I'm just wondering, what's the strategy change, if any, there? And what are some of the milestones that you'd like them to hit as we turn this business around and stuff? So hopefully, we don't see growth on revenue stores or margin.
Yeah. Great question. So we did close down stores, Brian. You're right because the loss makers, we did close down in 2023. So we're now sub 240. I don't know what the latest number is, but I think it's around 236. That's the first point. The reason for that is we want to make sure we know what we're doing 100%. Then from there, we're going to spring forward, as we always talked about, the key steps to turning this business around.
So the magic number is around 3,300 ADS or EBITDA break-even across the board and in terms of consistency as well. You can't have some stores that's 2,000 and some stores that's 3,300. You have to pretty much get everybody up there. That's point one. So that's quite achievable. The target that I believe we're going to set is more in line with what we're seeing in other fast casuals. So there's no reason why we shouldn't be looking at the 4,500 and 5,000 levels going forward. So I think the new CEO will let her settle in and drive these KPIs. But at 4,000, you're at NOI positive, operating income positive. So you go beyond EBITDA. I mean, that's real view of the matter. Now you go for NOI positive. So I think it's going to be north of 4,000 in terms of being significantly positive.
So that's the key target at the moment, Brian, is we are absolutely focused on ADS, average daily sales. The reason is because the business has engineered itself to be running at a very solid 75%-78% food margin business. So again, higher than our chicken businesses. So we know that once we get the ADS, the box economics starts to work for this brand.
Thank you.
Okay. Thank you, Brian.
Okay. So I think that's it for today. It's all the time we have for today. I think there's still some questions, and maybe the IR team will just get back to them after the call. So thank you, everyone, for dialing in. Thank you, Richard, for giving us the very helpful discussion and the results. And we look forward to seeing more good things from Jollibee Foods in the coming year and years.
So again, thank you, everyone. Thank you also to Cosette and Mona who are on the call with us today.
Thank you, Chris. Thank you, everyone.
Have a good afternoon, everyone.
Okay. Thank you, Cosette. Thank you, Mona.
Thank you.