Overseas sales are growing more than twice as fast as the domestic business, but weaker food-service margins, Coffee Bean losses and rising finance costs are limiting the payoff to shareholders
Jollibee Foods Corp.’s global expansion is delivering the growth that Chairman Tony Tan Caktiong has long sought. It is also making the company bigger faster than it is making shareholders richer.
The Philippine restaurant group generated ₱162.45 billion in revenue during the first half of 2026, up 9.9% from a year earlier. System-wide sales—the measure that includes sales from company-owned and franchised stores—increased 12.4% to ₱244.67 billion. But net income fell 16.7% to ₱4.93 billion, while earnings attributable to the parent company declined 13.3% to ₱4.87 billion.
The mismatch reflects the mounting cost of Jollibee’s transformation from a Philippine fast-food champion into a sprawling international restaurant operator. Its overseas businesses are growing considerably faster than its home market, but they aren’t yet producing comparable returns. Some are profitable growth engines. Others are being integrated, restructured or expanded—and are absorbing earnings that might otherwise strengthen the company’s bottom line and support larger distributions to shareholders.
International revenue increased approximately 14.5% to ₱70.32 billion before eliminations, more than twice the growth rate of the Philippine business. Domestic revenue rose about 6.8% to ₱93.43 billion. Overseas operations consequently accounted for a larger portion of Jollibee’s consolidated sales.
That is strategically encouraging for a company seeking growth beyond an increasingly mature home market. Yet the first-half results show that not every peso of international revenue is as profitable as a peso earned in the Philippines—or through Jollibee’s asset-light franchise network.
More Sales, Less Margin
Jollibee’s problem wasn’t a shortage of customers. It was the rising cost of serving them.
Direct costs increased 11.6% to ₱133.93 billion, outpacing the company’s 9.9% revenue growth. Cost of inventories rose 11.9% to ₱79.31 billion, while store and manufacturing costs climbed 11.2% to ₱54.62 billion. Those expenses consumed 82.4% of revenue, compared with 81.2% a year earlier.
As a result, gross profit increased just 2.4% to ₱28.52 billion, despite Jollibee generating nearly ₱15 billion in additional revenue.
The company’s gross margin contracted to 17.6% from 18.8%, a decline of roughly 1.2 percentage points. Operating margin fell to 6.2% from 7.4%, and net margin narrowed to 3% from 4%. Operating income declined 7.1% to ₱10.11 billion.
Put another way, Jollibee sold considerably more food but retained less profit from each peso of sales.
The pressure was especially evident in food service, the segment that includes restaurant operations and the manufacture of products supplied to company-owned and franchised stores. Its segment result dropped about 39% to ₱2.06 billion from ₱3.37 billion, even as food-service revenue expanded.
Franchising told a different story. Its segment result increased to ₱8.96 billion from ₱8.31 billion. Franchise operations are generally more profitable because franchisees shoulder much of the expense of opening and running restaurants, while Jollibee collects royalties and related fees. Company-operated stores expose Jollibee directly to food, labor, occupancy, utility, logistics, and depreciation costs.
The numbers suggest that Jollibee’s asset-light franchise engine remains healthy. The drag lies mainly in the more capital- and cost-intensive food-service businesses, many of which are central to the company’s international ambitions.
Coffee Bean’s Losses Deepen
The clearest example is the entity holding The Coffee Bean & Tea Leaf operations.
Its revenue rose to approximately ₱12 billion from ₱10.91 billion, but its net loss widened to ₱783 million from ₱435 million. The business therefore generated roughly ₱1.08 billion in additional revenue while losing about ₱348 million more than it did a year earlier.
That means Coffee Bean’s sales growth didn’t merely fail to generate incremental profit. It coincided with a deeper earnings shortfall.
The widening loss is significant because Coffee Bean is one of the largest pillars of Jollibee’s international portfolio. Its global brand, store network and presence in the coffee category offer substantial long-term potential. But until the business produces consistent profits, its scale can dilute Jollibee’s consolidated margins and absorb cash and managerial attention.
The international picture isn’t uniformly weak.
The Vietnam-based SuperFoods group, which includes Highlands Coffee, increased revenue to ₱7.18 billion from ₱5.60 billion. Net income climbed to approximately ₱304 million from ₱188 million. Milksha also reported higher revenue and profit, demonstrating that some parts of the international portfolio are beginning to deliver stronger operating results.
South Korea was more mixed. Jolli-K, the holding company that includes Compose Coffee and the newly acquired Shabu All Day, reported nearly flat revenue of ₱7.09 billion, while net income declined to ₱765 million from ₱1.10 billion.
Shabu All Day itself contributed about ₱568 million in revenue and ₱130 million in net income from its acquisition date on April 16 through the end of June. Jollibee paid approximately ₱4.85 billion for the Korean hot-pot restaurant company, adding another platform to its growing collection of Asian brands.
The acquisition was immediately profitable on a reported basis. Still, the weaker overall result at Jolli-K indicates that adding brands and revenue doesn’t automatically translate into higher earnings for the broader Korean business.
Domestic Strength Is Carrying a Heavier Load
For decades, Jollibee’s Philippine operations supplied the earnings power, cash generation and brand strength that allowed the company to venture overseas. The latest results show that the domestic business is increasingly sharing the benefits of its profitability with a global portfolio whose returns remain uneven.
That doesn’t make international expansion inherently misguided. A restaurant company that relies too heavily on one country eventually faces constraints on store growth, market share and long-term earnings. Jollibee’s overseas push diversifies the group and expands its addressable market.
But diversification creates value only when the returns from new businesses eventually exceed their acquisition, financing and operating costs.
Jollibee’s financing burden is already rising. Net interest expense worsened by approximately ₱327 million to ₱3.67 billion during the first half. Financing interest rose 9.7%, while interest associated with leases and other obligations increased 7.6%.
The company completed the Shabu All Day purchase during the period and continued investing in new stores and international expansion. Long-term debt, including its current portion, stood at about ₱40.56 billion at the end of June, compared with ₱19.17 billion at the end of 2025, though part of the increase reflected a shift in the composition of Jollibee’s borrowings as senior debt securities were repaid.
Results from joint ventures and associates also deteriorated. Equity-accounted earnings swung from a ₱230 million profit to a ₱94 million loss, a negative year-over-year movement of approximately ₱324 million. Combined with higher interest costs, that placed further pressure on income below the operating line.
Pretax income declined 11.4% to ₱7.60 billion. Income-tax expense remained broadly unchanged at ₱2.68 billion, causing the effective tax rate to rise and turning the pretax decline into a steeper 16.7% drop in reported net income.
Shareholders Wait for the Payoff
The strain is relevant to shareholders because Jollibee is balancing competing claims on its cash: acquisitions, store construction, debt service, business turnarounds and dividends.
The company declared approximately ₱1.68 billion in cash dividends during the first half, broadly unchanged from the same period in 2025. Against ₱4.87 billion in parent-attributable earnings, that represents an implied payout of roughly one-third of reported earnings.
For shareholders seeking income, the unchanged peso amount underscores the opportunity cost of Jollibee’s expansion strategy. Capital being used to acquire and rehabilitate overseas businesses can’t simultaneously be returned as dividends.
The company’s dividend isn’t technically being reduced by the first-half earnings decline. But neither is the rapid growth in international sales translating into a materially larger distribution. Shareholders are being asked to accept modest current income in exchange for the prospect that Jollibee’s global brands will eventually become more profitable.
That bargain may prove rewarding if Coffee Bean narrows its losses, acquired brands maintain growth and the international network gains operating leverage. For now, however, domestic profits remain the foundation supporting that wager.
Q2 Offers Evidence of a Turn
The six-month figures obscure a meaningful improvement during the second quarter.
Second-quarter revenue rose 10.7% to ₱85.91 billion, while operating income increased 1.8% to ₱6.16 billion. Net income rose 3% to ₱3.52 billion, and earnings attributable to the parent increased 5.7%.
That indicates most of the first-half earnings decline occurred during the first quarter. Based on the difference between the half-year and second-quarter figures, first-quarter net income fell approximately 44%, while second-quarter earnings returned to growth.
Gross margin improved to 18.5% in the second quarter, from an implied 16.5% in the first. It remained below the 19.1% recorded in the second quarter of 2025, but the gap narrowed considerably.
The recovery gives Jollibee a credible argument that some of the first-half pressure was transitional rather than permanent. But a quarter-point improvement doesn’t settle the larger question facing Tan Caktiong’s global strategy.
Jollibee has already proved that it can buy brands, open stores and increase international sales. It has yet to prove that every part of its global portfolio can consistently earn returns comparable to those of the domestic and franchising businesses financing its expansion.
Until it does, Jollibee’s overseas empire will continue to produce an uncomfortable result: more restaurants, more revenue—and a payoff to shareholders that remains comparatively small.
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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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