Good afternoon, everyone, and welcome to Jollibee Group's second quarter and first half 2026 results briefing. Thank you for taking the time to join us today. To begin, let me turn the floor over to Cossette Palomar, Head of Investor Relations, for the opening remarks and forward-looking statement reminder. Cossette, please go ahead.
Thank you, Tris. Good day, everyone, and thanks for joining us today. We appreciate your continued interest in the Jollibee Group. We would also like to welcome those joining us for the first time. Glad to have you with us. Our Chief Financial and Risk Officer, Mr. Richard Shin, will walk us through the second quarter and first half 2026 results. After his presentation, Tris Lopez will moderate the question-and-answer. Before we begin, let me just remind everyone that today's presentation and discussion 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 Jollibee Foods Corporation gives no assurance that such forward-looking statements will prove to be correct or that such intentions will not change.
All subsequent written oral forward-looking statements attributable to Jollibee Foods Corporation or persons acting on behalf of Jollibee Foods Corporation are expressly qualified in their entirety by the above cautionary statements. With that, let me turn it over to Mr. Shin to take us through the results. Mr. Shin, please go ahead.
Thank you very much, Cossette, and thank you, Tris. Let me start by first welcoming everyone. Again, a very good afternoon to all joining this time zone and a very good morning to those joining from other time zones. We do take note that we will get better at the timing to ensure that those of you who wish to join us from the U.S. can do so at a more reasonable hour. We will be shifting time and date to avoid this complication in the future. I just want to mention that. Our apologies for the way it was set up this time, but nonetheless, we shall improve on that going forward. Let me start by sharing with you at a glance.
I know most of you, or a lot of you, may have seen the results that have been released. Again, let me put it here on a slide to show you from top to bottom system-wide sales to EBITDA. You can see not only the growth rates, but you can see the improvement to our margin rates where applicable in areas such as gross profit, operating income, NIAT, and also our cash profits of EBITDA. This happened really across most of our businesses, both domestic and international, despite the fact, and I will get into this, that we took some price increases, as we said we would in Q1, to rectify some of the inflationary challenges that we have seen coming through. Having said that, let me make this statement here, and apologies for the bold, but really was to emphasize that we are stronger than ever.
I can say that because right across the board, we have hit new historical highs in the top line as well as our profit delivery. I want to just mention that. That is to say that our planned price increase in Q2, although, of course, there is always an impact when we take price, but because we took it in a way that we took it, not across the board, but through specific SKUs in a very thoughtful manner, we are happy to report that we have also held our volume. I think that is very important as we build this momentum to second half of this year, which will be much stronger than the first half of this year. Again, growth is broad-based, margin recovery is real, and system-wide sales and earnings reached record high.
As a result, we delivered a 5.7% year-on-year net income after tax growth versus what was previously Q2 high, historical high in 2025. So healthy demand across our global brands, together with disciplined execution, as we said we would do, enabled us to deliver a stronger growth and a meaningful recovery from Q1. These are the words of our CEO, Sir Ernesto Tanmantiong. Let us keep diving deeper into that. On a P&L basis, revenue growth of 10.7%. Again, system-wide sales 14.2%, and I will break this down a little bit here through this chart. As you can see, the broad base really means it is coming not only from Philippines, but it is also coming from our international businesses, whether it be in EMEA, North America, China or our other businesses such as our coffee businesses.
Same-store sales growth were within the range and compared to industry, which I will show you a little bit later on. We believe this is a solid 2.7%, and we like the quality of it in that traffic or volume was 1.5%, and average check rounded the growth by contributing 1.1%. Global store network, we grew 6.4%, and we are still at 70% franchise. I will speak to a little bit more later on our CapEx investments and our real push into becoming higher percentage franchise business. You will see the data set a little bit later. Quality of expansion, 461 new stores opened.
The mix holds but outside of places where we are very company-owned concentrated, strategic reason for that, with quick paybacks, such as Highlands Coffee in Vietnam, where we predominantly open with company-owned stores. Or CBTL in Malaysia, where we are company-owned stores. Or Jollibee Vietnam, we are company-owned stores.
Apart from these strategic places, we are shifting more to a franchise mix. Execution. This is what we said we would do in Q1, in particularly around managing price, but also managing costs and continuing to manage our processes around growth. I am happy to report that the priorities that we had set out in Q1, and there were three main ones. One was to address the inflationary impact of our cost of goods or margin erosion, which I explained in Q1, through pricing. That has been done for all three months of April, May, and June. We talked about our cost discipline. This is an annual number, PHP 2.8 billion, across all of our businesses and also our corporate functions.
We are well on track to that, and that is right across the board, whether it is headcount management or efficient use of external services or whether it is being very prudent about contracts that we sign in terms of services. Asset-light expansion. Here are the numbers. 77% is the number in terms of our new recent store openings. Conversion path. We have either closed or converted 31 stores in our two businesses that we said we are changing our business model, and that is in Smashburger and Yonghe King in China. Let us talk about the P&L a little bit more in detail. Strength across the P&L. Q2 growth from revenue to NIAT. These numbers I shared before, from a quarter versus last year, same quarter. Here, this view is really quarter on quarter. Q2 versus Q1. Again, stronger than ever.
Every key metric improved from the first quarter to the second quarter. This is, again, to say we are building momentum for Q3 and into our strongest quarter, which is Q4. Actions delivered. Topline momentum continues. Operating leverage becoming stronger. Profit growth delivered. Execution discipline will continue into the second half of the year. Why does this build confidence? The rebound is actually broad based. Again, it is not driven by one market or one brand. The growth is a quality-led growth, and that is, again, to say very thoughtful actions around pricing and cost management and not to ever skim on things like quality of our products. Of course, the model is scaling. What I really like is the fact that for the first time in the history of our business, of the stores we have opened, 77% have been franchised.
Let us go into the middle of the P&L a little bit more because this was really the area of focus in Q1, and we said we will rectify it. This is a look at our gross profit margin. Just as a reminder, we ended the quarter Q1 at 16.5%. For those who are not familiar with what is captured in our GPM, it is really everything related to cost of inventory, cost of sales, meaning stores, so rent, labor, et cetera, but also all of our manufacturing logistics costs. So it is really total cost before G&A and A&P. 16.5% went up to 17.3% as we took some price in April. We carried that momentum through May, got our GPM up to 19%, and this is a good level to be holding the business at, and it continues into June. Operating and net income margin.
You can see here in the top line or the black line, that is your OPM margin rate. We are now operating our business at 9.1% compared to 5.2% at Q1. From a NIAT margin delivery, so including now interest, expense, tax, et cetera, we are operating our business at 6.2% versus 1.9% back in Q1. We can say here Q2 recovery is real, despite the challenges that we saw in the first half of H1. The cost pressures has not gone away. We all know that. We know inflation is still there. That is to say, we will continue to take smart, calculated, timely price increases in the second half of the year. That is to the tune of about four more price increases coming in the back half.
We will continue to protect our margin, and we will continue to drive the top line and control our costs to give us the strongest delivery at bottom line as we can deliver for second half, to round the year very nicely with a double-digit net operating income growth. Taking a look here now in a little bit more detail. The numbers themselves, so beyond the percentages. We deliver PHP 6.2 billion in terms of operating income. We delivered also some restructuring actions that we said we would do around China and Smashburger. Later, I have slides that explain both of these businesses. Let me just summarize it by saying there was a non-recurring, if you will, PHP 240 million impact for these one-off transition-related costs, and that is closures or conversions.
Net of that, of course, we would have an adjusted net income after tax of around 14%, sorry, 13% for Q2 had it not been for this restructuring cost that came into Q2. All right. I have not done this in the past so much, but let me highlight a few of our key businesses so that you can see really beyond the consolidated numbers, what we are seeing at the unit level. First, the Philippines. JFC Philippines, it continues to be very resilient and it continues to grow. I think the bottom line here is the runway is still very long. I say that because if you think about how our business is structured in the Philippines, 2/3 of our business today comes from the provinces, 1/3 comes from Metro Manila.
In the provinces, in terms of number of network or stores, we are only 15% market-penetrated, which is to say there is ample room for new stores. We are running our business around 70% franchise in the Philippines, and really the top three brands of Jollibee, Mang Inasal, and Chowking deliver 90% of the business. We are very focused in those categories and in those brands, and we will take a look to see what is the best way to expand into the provinces, whether it makes sense to open our own stores where we have very good payback, and the capital allocation model is strong. Our ROIC on those investments are very strong. We will also, of course, take a look at franchise, continue to do franchising, in particular brands like Mang Inasal, which is running at 98% franchise today.
Every new Chowking store we've opened this year has been a franchise store. We'll continue to do that for those two brands. For Jollibee, we'll take a look at both opportunities, franchise and company-owned, as we expand into these new markets. Right across our systemwide sales, PHP 70 billion or 5.7% year-on-year. Remember, Q2 of last year had a growth rate of 11.3%, so that's really comping on a very high base. Operating income, 9.6% margin rate or 5.4% year-on-year growth at PHP 4.6 billion. Our average daily sales, which is a very important metric for us internally as we evaluate investments across different brands. On a consolidated or average basis for the Philippines, it's at PHP 221,000 or nearly 3% up year-on-year.
We sit with a network of just over 3,500 stores, and that is to say we've added another 92 stores in the first half. Sorry, year-on-year and 44 new stores in Q2. Then some of the breakdown here by month. You can see how we've been ramping up. If you take out June, our latest month in Q2 or final month in Q2, you can see where we were at in terms of transaction count growth, 4.1%, and systemwide sales growth, which also includes the new stores that are coming into the system at 8.2%. Continuing with Philippines, let's talk about Jollibee the brand, which is our most important brand. In the Philippines, you can see 6.6% systemwide sales on this brand.
If you look at again versus last year, off of a very high base, which also grew 13.3% from 2024- 2025, we added another 6.6%. Same-store sales continues to be robust at just over 2%. The network of Jollibee stores in the Philippines now, it sits at 1,359. We've added 23 stores in the second quarter, which puts us number one in terms of all of our competitors in the Philippines. In terms of shares, this is very interesting. Our branded eat-out share you can see, and that's measured really in Metro Manila, but it gives a good sense of where the brand is nationally as well. Occasion share as well as value share will continue to grow and widen the gap versus our next competitor. Chickenjoy itself, our best seller, despite price increase, you can see continues to grow 3%.
As I mentioned earlier, we're very thoughtful about which SKUs to price up against. Mix & Match allows for the more affordable options for those who are extremely price-sensitive. You can see here, even though Chickenjoy continues to grow. Same-store sales 2.1%. Chickenjoy at 3%. You can see Mix & Match here at 12% growth. Again, I think that says a lot about how we price and how we continue to get our volumes in as well. On coffee, I want to show you this slide here. We're happy to announce that in the Philippines, Jollibee has now become the number one coffee brand sold through outlets and restaurants and cafes. Green here is Starbucks. Yellow here at 17.4% is McDonald's or McCafé. 19% is where we ended up. We're very happy with this result.
Our beverage category, along with our food, continues to show great promise for continued growth. Now if we move to our number two brand in the Philippines, Mang Inasal, you can see it's really growing at a very fast rate with 10.7% systemwide sales, again, off of a high base that grew at 13.9%. So year-on-year on year, it's over near 25% growth, which is phenomenal growth rate for any brand or any business. Our BU operating income is up 32%. Our margin rate is around 40%. Again, this is because of the model. The model is 98% franchise. The network continues to grow. We've added another 32 year-on-year, another eight in Q2. We're sitting at 615 stores. And really, sky's the limit for this brand as there's quite a bit of demand to fulfill.
One of the key reasons, of course, is our payback for this brand is around three years, which is very competitive in this market. Okay. Last piece on Philippines. We've added one more leg into the Philippines, which is another beverage brand, Compose Coffee. This makes Philippines our second international market within this year in which we expanded into. We're looking at somewhere around 1,000 Compose Coffee over the next development periods. And so that's store number 1. But quite outstanding first week or so of soft launch opening. Just anecdotally speaking, we had lineups for people who were curious and wanted to try as early as 4:00 A.M. before store opened. Again, I think it's the power of our brand ambassador. It's the power of this brand coming from Korea. We just wanted to share that with you. All right.
Now let's shift gears to international. And let's start with, again, our top brand, Jollibee. So Jollibee international. You can see here our key markets of North America, EMEA. And systemwide sales growth at very high double digits of 21.6% in North America. What's interesting is if you look at same-store sales growth in North America, again, this is industry high of 8.6%. So that is to say our existing assets continue to be very productive. And also we're adding more stores into the pipeline. And if you look over here, the table down here and also the chart here, you can see some of the competitor brands that we benchmark against in terms of growth rates. So doing extremely well. Let's stay on North America, Jollibee, for a little bit longer as we talk about our franchise scaling strategy. It's starting to come into effect.
What do I mean by that? We now have 100 committed stores. And we say committed because it really depends on a few things like timing of how the franchisees get licenses, et cetera. But these stores will open over the next couple of years. And so that's, again, eight franchisee partners that have now committed to 100 stores, and more are coming into the pipeline as we speak. Again, just the U.S. alone, the same-store sales growth was slightly higher than North America of 8.6% and 9.8% here. And that is to say U.S. is performing extremely well. And 66 straight months of same-store sales growth. So growth on growth on growth. In terms of the franchise part of it, which is really what we've been talking about for a while now, we're starting to see some momentum.
I have another slide later that talks about Canada a little bit. You can see that it is really all the new stores going forward predominantly will be through a franchise model. The brand is strong. Named number one for the third year in a row as USA Today's best fast food fried chicken brand. Apologies for the typo. It is actually three years in a row, not two years. The product quality continues to be very engaging with our customers, as they talk about it quite often on social media. Our loyalty platform continues to grow and attract. Therefore, we are able to produce a $5 million AUV box, which makes them very interesting and very desirable. More than interesting, very desirable for franchisees to sign up to. That is what we are seeing at the moment.
Staying in North America for a little bit longer, I just wanted to mention to you something that we have announced recently. But in case you have not seen it, in Canada, historically it was about 25% of our network, when we look at North America, U.S. and Canada, and that represented around 28 stores. We recently signed in two major areas, and there is more areas coming in Canada, which we will report in future quarter earnings calls. But in British Columbia, we signed a deal with one franchisee who are really experienced operators. They have several international brands and financially equipped. They signed up for 16 stores in five years. In Edmonton, we have another franchisee who signed up for 10 stores in five years. Just those two sign-ups doubles our footprint in Canada. Again, as I mentioned, more coming.
It is also interesting to see channel mix happening in the sense that non-traditional pipeline continues to grow, and that is to say, airports start to become very attractive for the Jollibee brand as well. Three known and identified store openings coming through on the balance of the next few months. Of course, this will be 100% franchise model. Today, we have 108 stores in North America, of which 106 are company-owned and two are franchised. We will continue to scale and ramp that up. Shifting now to EMEA, and if I can talk about Vietnam, a little bit, which is our clear star. System-wide sales, and this is not a typo, this is an actual number. Q2 system-wide sales growth is 47.6%, or nearly, at this pace, we will be doubling our business every two years or so.
What is very interesting is, as much as we are opening new stores, so we opened 19 new stores in Vietnam out of the 27 across EMEA, so other markets in Asia, Middle East, et cetera. What is interesting is our same store sales are growing at a whopping rate of 17.9%. The reason, again, is the brand strength and so forth. Momentum builds momentum. But we are also seeing that in trade areas where KFC's and Lotteria and others were present in the past. Some of them have been closing down, and we have been taking that trade area as well because consumers are really gravitating towards what we are offering in Vietnam. Some of the accolades here, being named the number one QSR brand in Vietnam, et cetera.
But again, this momentum is very encouraging because it really proves the model that we can have a business outside of Philippines that is nearly 100% local. And that is what our business in Vietnam is. Let me give you an update on Smashburger. I did say last year that we had a clear path for financial viability of this brand, and that hinged on conversion, so re-franchising our company-owned stores and also closing the bottom quartile stores where it is better off that these are closed.
In addition to that, it is to really drive hard a channel that does really well for us, which is the non-traditional led by airport. Let me give you some highlights on that. So this is what we call our shrink to growth strategy, in that we have gone now from 203 stores a year ago, same time, to 180 stores. So we have taken 23 stores out of system.
And that is what you are seeing in Q1 and Q2 in terms of restructuring costs coming through. However, we have also seen an uplift in our existing network base. So we have seen TC or transactions grow by 7% in Q2, and we have seen also, if you adjust out the restructuring costs, an improvement to our losses of 10.4%, if we were to adjust that out, despite smaller footprint restaurant. Now, for the same basis, same store sales growth was 7% for the quarter, and that was really driven by traffic. You can see, 10.4%. And our average daily sales also went up by 14.7%. As I have mentioned earlier, what is a very important channel to continue to build stores in is the airport channel, and so the non-traditional pipeline. Today we have 10 in the pipeline that we are looking to convert into store openings.
In addition to all that, we are talking to some of the larger operators for completing multi-unit conversions. So taking on our existing company-owned stores. And they have full confidence in the brand and their ability as operators to be able to really drive those businesses hard. Therefore, this could accelerate the conversion as we get these multi-units converted. And we got a couple of those that we are in discussion with, one in Long Island and one in Phoenix. Tim Ho Wan, a relatively new brand. Again, it is in the early stage of its growth, but let me walk you through some of the highlights. So system-wide sales grew at 23%, and in terms of same-store sales growth, around 2%, which again, in this, I think, sector where we compete, this is a respectable number. Hong Kong, system-wide sales grew by 74.8%.
That is to say, that is where we have opened a few new stores, as well as continued to drive same-store sales growth. Of course, our customer experience, which is very important to us, our net promoter score also continues to improve. So I think I mentioned these in the past, but pricing and menu architecture, timeless, classic.
So campaign and smart marketing and advertising, really working on the heritage of dim sum and the heritage of Taste of Hong Kong seems to be resonating really well. And, of course, our service model has improved. So doing well, but still a relatively small brand. But we are very bullish on this brand, as you know, as it has huge upside, white space opportunity in markets like North America. China. I think the main thing here to point out is, in China, in 2025, we did enjoy several months of aggregator war.
That is to say, the growth rate of many businesses in China that were reliant on delivery and the aggregators grew last year. We are kind of coming off of that. Nonetheless, system-wide sales, we continued to grow double digit. What is the highlight for China? The highlight for China is we do have the number one brand, the Chinese QSR brand in the breakfast space, which we have migrated also into lunch occasions and beyond. We have now modeled, and it is working. We modeled out a two-year payback, CapEx, which is the reason why in China today, we are 65% franchise versus 58% for the same period last year. We started really experimenting with a different size, different CapEx, different locations, et cetera. We believe we have landed now on the right size, CapEx cost, and location, and that is focused on residential to give us this.
Because of that, we were able to open 70 new stores in the first half of this year. Put that into context. Today, Yonghe King sits at 537 locations in China. Very happy with this model and will continue to push forward. We think the magic number is around 800 stores and above 90% franchise ratio. That is when, I will never say bulletproof, but as close to bulletproofing a model in China that works. Because again, it is authentic Chinese, and we do have the uniqueness of that strong breakfast presence. Compose Coffee. It has only been two years since we acquired this business. Nonetheless, I will share with you some of the highlights. New openings, 145. Our run rate is roughly around 30 openings per month. International market. In April, we opened in Taiwan.
We will close in Taiwan this year with around 19 stores since opening our first one in April. Philippines, our first store just opened, as I mentioned. The annualized savings here, this is really about the coffee blend optimization. As we all know, bean prices have been on the rise last year. The first half of this year really reflects the impact of the higher coffee bean price for first half of 2026 versus first half of 2025, which means the beans were purchased in 2024, held in inventory, and released in 2025 first half. We are comparing against that. There has been a bean price increase. The good news is the second half of this year's bean price or beans purchased were at more depressed or lower prices as they did come back down to below $3 per pound, where we started to build up our inventory again.
That is going to be released in the second half of this year. In addition to that, we have not gone and changed sources of beans per se. What we have done is we have re-blended with superior taste as the trials indicated that the blend taste has even improved to what we thought was really the best Iced Americano in the country, but it has even gotten better. Through that process, on an annualized basis, we found KRW 2 billion to come out of the system. We have a lot of momentum going to the second half of the year. We think we will finish the full year at par, despite this bean price increase. The other thing in Korea, I think that is important to note here really is the first half investment in A&P and marketing.
I don't know if you've seen in the news, but Starbucks Korea has been in trouble for a number of months. Because of that, we took an opportunity to really make sure we had the right A&P support to get new customers. The last box here really is very important part of how we reach the end consumers in Korea, and these are through our corporate partnerships. What's a corporate partnership? Corporate partnership is working with the telcos, is working with the credit card companies, et cetera. There are four categories of corporate partnerships in Korea, and we are able to pick a lot of those up as some of them had left Starbucks and was looking for new partners, new coffee partners to team up with. The marketing cost in the second half of the year, proportionally, will be lower than the first half.
Net-net, compared to 2025, our marketing cost investment has gone up by only 14%, but in the first half, of course, it's indexed higher. That comes through our numbers because you've all seen our top line growth and you're trying to match that to our profit growth and so I'm explaining these are the two main reasons. Then finally, it's our investment in people. If you recall, two years ago when we bought this business, it was really almost 100% outsourced business in the sense that the 100+ headcount were really dedicated to servicing our franchisees, so salesforce, if you want to call it. They didn't even have a Chief Financial Officer or a finance. They outsourced accounting and finance. They outsourced marketing, et cetera. We knew that we would have to put some infrastructure and bones.
It's still very lean, but the impact of that is about 45 headcounts. The cost of that G&A has come into the P&L on the first half of the year. Having said that, the benefits of that is what you're seeing, the high double-digit system-wide sales growth, the high double-digit same-store sales growth. Not only that, but there's two other KPIs that you may not have seen, but one really is the gap between us and Mega in terms of ADS. That gap has dramatically closed. What that means is we're attracting more franchisees, in particular in Greater Seoul, where we were very under-indexed. That's the market really that is an opportunity for us.
By not taking direct inflation pricing to our franchisees and working with our franchisees through A&P support and through G&A support and the rest of it, we're seeing that metric as an indicator of more franchisees coming in. For the existing franchisees, when we bought the business, they were operating their business roughly around 14% margin level.
Today, with all the assistance we've been giving them and working with them very closely on new product launches and how to upsell from Iced Americano to higher price point products, et cetera, we've seen their margins go up now to somewhere between 23%-27%, which is where the stores are now operating. All of this now has created a very positive reputation for Compose Coffee as really the one that you should sign up with if you're interested in a value segment coffee business.
I wanted to explain a little bit of that on this slide. Okay. I am going to have to pick it up. From EBITDA point of view, I think the key message here is 2025, we ended around 60:40, and we are still at that ratio. It is very important to note that international markets, and particularly the top two countries of U.S. and Korea, are where we get the highest unit level margins. That is why we have been talking so much about U.S. and Korea, because that is really, pound for pound, that is where we have the greatest opportunity in terms of unit level economics. The numbers are here. You would have seen it. But the takeaway here is continued growth. Philippines continues to anchor this growth. But really, the international is where the future is at in terms of scale opportunities, but also unit level economics.
Converting international growth into higher quality earnings, and this is what I know all shareholders want, as we in management want as well, and we always said there is one component that we need, which is time. As we continue to drive very hard the top line, momentum, volume, start to build a brand out, scale, penetration, expansion, et cetera, we will continue to work on driving that through as a flow-through to the profit line. This slide really shows you that the first part of that growth engine, top line growth, we are delivering, I will say delivering plus. Then the other part of it that we are talking about, getting the profit to catch up to that, is really what is coming through the balance of this year and going into next year and beyond.
We believe that the business model is the right one as we are very focused and concentrated really on profitability as the next step. In terms of cash flow, free cash flow for second quarter, it grew by 28%. Very happy with this result. And you can see here the growth rate in EBITDA, growth rate in operating cash flow, and also cash flow from operations. I will just move a bit faster. In terms of balance sheet discipline, again, our covenant level 4x, we are way below that at 2.2x. We will continue to use leverage, as leverage does have a return on it. But in terms of cash and investment, we are sitting on nearly $500 million worth of cash as well. We want to be well-balanced and conservative, but at the same time, recognizing that we still have room for leverage.
In terms of debt service coverage, way above the minimum of 1.3x. And in terms of maturities and so forth, 83% is really long-term. In terms of productivity of our asset base, we are now running our business on a six-day cash conversion cycle, and that is from collections, inventory management, and of course, accounts payable. Our collection is slightly faster than a year ago at 12 days versus 13.
Inventory is a bit of a strategy as well as cash management because things like The Coffee Bean & Tea Leaf, which I was speaking to earlier, which starts to become a bigger part of our inventory as nearly half of our 10,000+ stores are coffee or beverage in nature. We do want to make sure we are buying beans short, medium, and long to make sure we smooth out, if you will, the price increases and price dips. That is what you are seeing here.
In terms of guidance, this was reported, but essentially, no change on the top line. In fact, we are ahead of our original guidance. Same-store sales, we recognize the world has changed slightly, and therefore, we wanted to bring it down slight, but still, I would not say it is a large change to what we had guided initially last year. In terms of operating income, again, double-digit delivery is what we are aiming at with the second half, in particular Q4, being our strongest quarter. Store growth, again, we are tracking to that.
Store openings, we are bringing it down slightly, but the quality of these openings continues to be very good. Of course, we are very conscious of our cash and capital. So we have also been very strict on company-owned store openings and been opening, as I said, 77%, which is a record high number in terms of franchise store openings.
The second quarter represents an important step forward in our earnings momentum. Pricing actions implemented beginning April all the way to June, and we have, as I mentioned, four more coming. Together with productivity, sourcing, and cost discipline initiatives contributed to the recovery in gross profit margin, which was our number one challenge in Q1, and supported stronger operating income and net income attributable margins in the second quarter. July was a solid month. We are entering the second half with stronger momentum, a sharper focus on sustaining margin recovery, and continued confidence in long-term growth prospects of Jollibee. Strong fundamentals. Essentially, I try to lay out here all the reasons to believe, if you will, despite our Q1 results, which I had explained in the past, and which now Q2 has explained that it was only a timing impact right across.
When you look right across, whether system-wide sales, revenue, gross profit, operating income, right across, we believe that we now have the business models in place. Some are generating lots of cash and income for us now, some have the potential to do so in the mid, and some have the potential to do so in slightly after the midterm. As we balance that right across, we will continue to be, let me just get to this one, very, very focused on a few things, and that is of course, growth in our home market, Philippines. We will continue to invest capital to deliver that, in particular against the Jollibee brand, but not necessarily against Chowking or Mang Inasal, which will be predominantly franchise network expansion. Jollibee North America, as we talked about.
Authentic Chinese, Tim Ho Wan, as we spoke of, the opportunity to really differentiate in a space that is a very large value pool, which is the Chinese cuisine space. Of course, the fastest-growing segment within coffee, which is the value segment. We will continue to focus on that. I will pause here and take any questions. Over to you, Tris.
Thank you, Sir Richard. We will now move on to the question-and-answer session. We received a handful of queries during the registration process, and those are the questions we will be taking on first. For everyone in this call, questions may be submitted through the question-and-answer panel. Alternatively, you may use the raise hand function to ask your question live. Please wait to be acknowledged and unmuted before speaking. Once called upon, kindly introduce yourself and the organization you represent before asking your question. Lastly, to ensure that all participants have an opportunity to engage, we ask that you limit your initial turn to one or two questions before rejoining the queue. First question, Sir Richard, that we received is: what is your outlook for margins given the risks of El Niño?
When we think about pricing and when we think about other actions to protect our margins, we don't look at it specific to weather patterns. We look at it right across the board, what we call inflation and what we call supply chain disruptions or limitations. They're all included in the way we built our pricing model. As you can see, in June, we peaked again through our price increase. As I said, we'll continue that momentum to protect our margin, including things like weather patterns.
Great. Can you elaborate further on Compose Coffee's expansion in the Philippines, and will their growth be prioritized over CBTL?
The idea for Compose Coffee in the Philippines is, first of all, recognizing that the Philippines is a very large coffee-consuming market. If you add instant coffee, where you can also convert out into cafes, if you will, the market's actually very large. That was the starting point. Second, we also recognize that there's room for both premium, from an experience point of view, from a sit-down point of view, et cetera, like The Coffee Bean & Tea Leaf, which we have over 200 cafes in Philippines and doing very well. Also, the fastest-growing segment, even in the Philippines, which is value segment, and there are some competitors who are scaling quite fast. Our plan is to get to 1,000 store.
We said initially over 10 years, but we'll revisit that target and see if we could even accelerate it as we think creatively about how to engage with our existing franchisees, because we do have that network advantage.
Are we looking to return to the capital markets anytime soon to support our CapEx requirements?
As you can see, we're very conservative in I shouldn't say conservative. We're very thoughtful in how we spend our CapEx, so we're always trying to find ways to explore other options other than company-owned stores, et cetera. Having said that, we have enough cash, we have enough term loans, we have short, mid, long-term, so we probably do not need to go to the market to raise for capital expansion. Sorry, for CapEx needs.
Moving on to the question-and-answer box, we received this question: could you talk about the timing of the four price increases planned for the second half, as well as the extent of the price increase?
I don't think I should spell it out in details because I don't want to give competitive disadvantage to ourselves. But, again, we are very committed now that we've tested, and we know that the elasticity portion of it needs to be managed. As I said, four more to come in second half of this year.
All right. And could you refresh our memories why the Jollibee brand has not been launched in China, and is this being reassessed given the success in North America and Vietnam?
Yeah. China, as we all know, you better know what you're doing once you get into a market like that. We think Chinese cuisine is a safer way. We think franchising is a better way. So we're converting. I think if you go back 10 years, we're probably less than 20% company-owned store. I think we're at something like 12%. I can't recall the exact number, but you can see today we're sitting at 65% and on our way to be above 90%. So, the model is important. The cuisine type is important. So we have, I think, other opportunities ahead of China for Jollibee, such as North America, where we are seeing a lot of momentum. Having said that, if there is a franchisee partner that's very experienced, that has a very specific zone or region within China, we may be open to taking a look that way.
All right. Looking into our attendees, we do have a few hands raised. Calling on John Tay. We will be unmuting your line shortly.
Hi.
John, please go ahead.
Hey, Richard. How are you?
Hey, John.
Thanks for taking my question. First is on the guidance, which implies 30% growth in the second half from -13% in the first. There is a big delta there. Can you just walk us through the main two to three main drivers of which brands and which geographies will drive that growth, and how that performance for these brands or geographies differ from the first half? That is my first question. Yeah.
Sure. As you have seen in a few of our past years, John, Q4 is our strongest quarter, and that is for several reasons. Markets like Philippines, really it is our strongest quarter with Christmas ramping up and holidays, et cetera. I think the growth will continue to be similar to what we have seen in Q2 that is going to carry into Q3. That is one. We also anticipate that below NOI items will probably finish stronger in the fourth quarter as well.
On specific categories, say like Compose Coffee, where EBITDA was actually down year-on-year, even though we saw a really strong top-line growth. Could you-
Yeah
give us some feedback on what the gross margins are today versus maybe the same period of last year, just to show how much coffee prices have weighed on your margins? Is there a strategy to, I guess, increase that to, I guess, to what we have seen in the Philippines.
Yeah. I will just summarize my earlier Compose slide, be more specific around bean price. That was our number one biggest impact. Again, those are beans that were purchased at probably at the peak prices in the second half of last year, John. If I am roughly looking at it on a kilo or a dollar basis, the bean price last year was hovering above $4, and in some cases, even above $4.20. Then we saw it coming down to below $3. So we are talking about roughly 25% price movements in bean price. If you were to model that out to the size of our business, that is clearly our number one impact. Number two impact is the timing of the marketing, as I mentioned, as we are only going to be 14% up in total marketing spend versus last year.
Net-net, I would say if you add those two plus the G&A investment, which I spoke of, which again, is yielding returns in a different way through top line, but also making sure our ADS for our stores, our franchisees are increasing and the store profitability also is increasing, which is very important as we're pretty much a 99.9% franchise model in Korea. Those are the three items. Net-net, John, I think we're going to end up around the same place where we ended last year, despite the 25% impact on coffee bean price.
Just to follow up on that, would you consider pricing on Compose Coffee or would we have to just wait for this inventory to cycle through?
Yeah. Last year, what we did was instead of taking price to our franchisees, we allowed our franchisees to take price to consumers. Iced Americano is about 40% of their business, and they went from KRW 1,500- KRW 1,800 . That's a lot. That's KRW 300 that went immediately to them, and we held our bean price out. That strategy worked because the benefit of that again is growth, and that's what we got. I think we'll continue with that, John, until we narrow the gap to Mega MGC Coffee, who's number one, and we'll be in a place to take pricing fairly soon. But right now, I think the better strategy is to grow volume and scale.
Okay. That's helpful.
Thank you, John. Thank you very much.
Sorry, can I ask one last question? Just on Smashburger, because
Yeah
even excluding the PHP 300 million kind of impairment that you recognized in the quarter, I think
Yeah
the losses would still translate to around PHP 800 million for the first half. So any disconnect between the same store sales and
No. It's a good pickup, John. As I reported, system-wide and same-store sales was up. Our margin, because we didn't take aggressive price throughout the year, was mid-single digit depressed. Having said that, we recently took price. We're looking to see some recovery coming back from that.
Okay. Thank you, Richard.
Yeah. Thank you, John.
All right. Thank you. Going back to our question-and-answer box, we have a question on Jollibee North America. How many franchise stores are we planning to open this year? Can we provide some guidance on how fast the rollout's going to be?
Yeah. I always should explain this by saying that nothing's linear, meaning momentum creates momentum. As we get the box economics up, as we get the brand stronger, as we get the product superiority message right across, starting from consumers actually saying this is a better-tasting chicken, I think what we then see is we see opportunities of larger franchises coming into the system, and that's what has happened already. We're very happy with that because it took many years for that to happen. The number of stores open this year, the team is saying three. They're all franchise, but there might be a few more, but it's really about those 100 that's in the pipeline. In particular, I think it was 56 that came in this year as new commitments.
That to me tells me that 2027, 2028 onwards, that's when you're going to start to see the benefit of these stores that committed coming into the pipeline and when they open. I always said the back half will be much stronger than the first half because of the momentum created by these larger franchisees coming into the system.
Okay. Up next, how are our third quarter SSSG trends moving so far, and which commodities are you seeing the biggest pressure in?
Without saying too much, July's been very, very pleasing. I'll leave it at that. Having said that, again, I said and I'll keep saying it, inflation's not over. We're seeing similar commodity pressures as I've shared with you earlier. The good thing again is chicken is all domestic, and that has a lower inflation impact than beef, which is a smaller part of our business, and that's all imported. Beef continues to be in the high double digit. Everything else seems to be similar to what we've seen in the past.
All right. On switching gears to our channels. On off-premise channel trends, can we provide an update on delivery, takeout, and drive-thru in the Philippines? Are there any notable shifts in channel mix or customer behavior?
I think specifically in the Philippines, we thought perhaps with the price of gasoline or pump price going up, et cetera, we would see a shift maybe in channel behavior. But it's been fairly consistent. We continue to grow all channels. I think delivery still is around 20%, but we're not seeing it spike. That is to say that the dine-in, very strong, which of course, is always best for us in terms of margins.
Great. Given the time, I think we have some time for, I think, two more live questions.
Okay.
Divya, we'll be unmuting your line shortly, and you may ask your two questions, please.
Thank you very much. It's Divya from Morgan Stanley. Richard, my first question is just to follow up on your second half outlook. If you look at the fourth quarter, while it's strong for Philippines every year, the international business actually doesn't make money in the fourth quarter based on the last four to five years. Could you maybe comment on what's different this year in terms of the mix that gives you the confidence, and we assume that the international business continues at this trajectory into the fourth quarter as well? Also, are you worried about any lagged impact of these price hikes on same-store sales growth? I understand
right now you're not seeing it,
generally it comes at a lag,
Yeah
how are you thinking about that? That's my first question.
Yeah. Great to see you again, Divya, and excellent question. Let me tackle those separately. What's interesting is our composition of businesses are shifting and changing. Our Jollibee business as a proposed international, I'm speaking of, our Jollibee business is getting larger faster. I think you've seen the data on North America and EMEA, et cetera. Our beverage business is also growing larger and faster. It's not just Compose Coffee, but Highlands Coffee also had a very good EBITDA. I think it was about 70% up. As our composition of our chicken and our coffee business is getting bigger and faster, that softens the impact of our two challenged businesses right now, which we're very open about, which is China. But again, the turnaround plan is very clear and it's happening, and for Smashburger.
That's why we think fourth quarter, even though these two businesses will lose money in the fourth quarter, we think the impact of the other businesses which are profitable absorbs that differently. To your second question, I think if anyone says taking price continuously and you 100% guarantee your volumes will hold forever, I think really it's probably not understanding the market. Having said that, we understand the market, and that's why it's hard to articulate this, but the way the teams go about taking price is very meticulous. SKU by SKU, timing. They want to avoid, for example, price increase around times when we want to push volume because it's seasonality opportunities, et cetera. Yes, there might be some impact, but I don't think it's as dramatic or drastic as if we were to take, I guess, price across every SKU blindly.
Our confidence level, Divya, if you're asking me, is fairly high that our strategy is the right strategy.
Got it. Thanks. My second question is just on your long-term net income outlook, because we had talked about tripling net income by 2028.
Yeah.
The growth rates that we were expecting into 2027 were obviously higher than this 10% to 15%.
Yeah.
We were going into the 25% range. Would you mind just recalibrating that for us? I mean, do we still
Yeah
believe that we can grow at that 25% next year?
Yeah. So that tripling, when we put that flag in the ground, we saw momentum across various parts of our geographies and our businesses. We still do. What I guess is different, Divya, is our aggressive decision, if you will, to speed up the conversion and the transformation of the two lighter businesses, which is Smashburger and China. So I think we didn't want to space it out for many, many years. We wanted to just deal with it, and then from there, go on. The last component, which I can't speak too much of, but the spin-off I think provides us also different opportunities to create value for shareholders. So we think we'll still continue to be a double growth company, top line and bottom line.
This year is really the year where we're taking the hard knocks to take those costs into our P&L so we can get ready for that.
All right. Thank you. For our final question this afternoon on Smashburger, do you think the Q2 SSSG is sustainable moving forward? And how is competition reacting considering that Smashburger appears to be gaining traction?
Is the same-store sales question on Smashburger, or is it-
Yes
general? Oh, okay.
On Smashburger, yeah.
What's interesting is I was a bit nervous around July because July was Summer of Smash. I do not know if you remember last year we had phenomenal growth with our Summer of Smash campaign, one of the campaigns that really made an impact. We introduced new products and so forth. This year we comped it. I am optimistically confident that we will continue to grow same-store sales in Smashburger. At the same time, I think where the real exciting part of Smashburger comes in is through nontraditional space where I put up the number 10. There is a lot more in discussion, but I do not want to put numbers up there that are just discussions. But 10 committed and a lot more in discussion. That is very promising for our overall P&L. July, I think I can share this number, but July was 8.2% same-store sales growth.
That was the Summer of Smash lapping.
Great. That is all the questions we have this afternoon. Richard, would you like to offer any closing remarks before we wrap up today's call?
Yeah. Again, I am going to just repeat maybe. What we said in Q1, we did in Q2, and we will continue to do onwards. The momentum has been built in Q2. Again, the strongest ever. So we will continue to confidently but smartly push forward with our investments. We are very cautious about how we spend cash as well. And we will clean up what we need to clean up and get us ready for fantastic investment opportunities going forward.
All right. And with that, thank you everyone for joining JFC's Q2 2026 investors and analysts briefing. The presentation deck as well as the recording of the call will be uploaded to our corporate website. Thank you for your time and interest in JFC and have a good day. You may now disconnect.
Thank you, everyone.