Jollibee Foods Corp

XPHS:JFC

Earnings Call Analysis

Earnings Call Transcript 2022-Q3

[Richard Shin, CFO]

[Abrupt Start] Actual results could differ materially from those contemplating the relevant forward-looking statement and the JFC Group gives no assurance that such forward-looking statements will prove to be correct, but that such intentions will not change. All subsequent written or oral forward-looking statements attributable to the company or persons acting on behalf of the company are expressly qualified in their entirety by the above cautionary statements.

So, without further ado, let's get right into Q3 results. I think most of you would have seen the press releases and our disclosures with the PSE but let me summarize it for you. We continue to sustain a very strong top line sales growth as well as our profit growth. What does that mean? That means we had the highest third quarter operating income margin since 2018, which was our peak year before 2019 and then subsequently COVID.

And this was driven essentially by our very sustainable and to -- continuing to be a very successful business in the Philippines, which was up near 220%. Having said that, international also scored very well. So on an SWS or system-wide sales basis, both Philippines and international businesses grew a record pace, so 51%. And on a revenue base or revenue line, 49% and with all brands registering pretty much a double-to triple-digit growth versus same period prior year. Our international business generated operating profits and some of the highlights here is our North America Jollibee business, our Vietnam Jollibee business, our Middle East Jollibee business as well as our beverage brands, Highlands Coffee and Milksha.

Now to the middle of the P&L, we also had another record gross margin profit rate of 17.1%. And yes, I just want to qualify that. This was not done all through pricing. We are, of course, pricing out as our competitors too, but we are not pricing out all of inflation. And again, so we are pricing up, but not all of the inflation.

And so therefore, we're also gaining margin through cost initiatives and efficiency programs. We had a chunky other income, and I'll going to the details of this a little bit later, just to be fully transparent. That added PHP 2.4 billion and in particular, there are 2 key events. We had a property in the U.S. that is owned by Coffee Bean & Tea Leaf, which we've disposed of and took the gain.

Now we're going asset-light, as mentioned in previous earnings calls. And of course, that fund coming from the gain will be put to good use. And we also had an asset swap in the Philippines that also produced a gain, which we disclosed in Q3. So our net income attributable to equity holders of the parent company landed at PHP 2.3 billion, which is 30% higher and ahead of Q3 pre-pandemic levels. And later, I'll walk you through some of the larger ticket items that affected the bottom line as well.

Now let me start with our store network. In short, we are on track to add 500 new stores by the end of this fiscal year, as we've announced in '20. So as we've announced in 2021 Q4. And you can see the numbers here, we sit today at 6,351 stores globally, of which roughly half of it is in the Philippines and half is in our international markets. This represents a growth of 8.3% in a store network basis.

We continued to be around 80-20 roll out every new store we open in the Philippines. We're opening 4 stores in -- sorry, for every 2 stores we open in the Philippines, we're opening 8 stores outside of the Philippines. Let me give you a high-level snapshot, and then I'll again go into the details of financials. So this is our quarterly system-wide sales graph that takes us back to the year 2018, as I mentioned earlier and right through the pandemic years of 2020, '21. And of course, where we are today in Q3 2022, which is the last set of data here.

And you can see here, as group PHP 77.8 billion of system-wide sales is a record high. And you can also see here Philippines PHP 45.1 billion, it's a quarter 3 record high. And you can see our curve here gradually but steadily growing international business, and that's a record of PHP 32.6 billion. If we now look at the middle the P&L or the gross profit, you can see the dip that happened during COVID period here where we had losses. But aside from that, I think the key message I'd like to share is that Q3 2023 is a record high 17.1% gross profit margin delivery.

So that, of course, is the food inventory cost, but also our stores, commissaries and supply chain costs that's factored into this equation. Philippines delivered 17.4%, and International delivered 16.6%. And if you look right across 15.4% in Q3 of 2018, 15.3% 2019, dip in 2020 and then a slight bounce back in 2021 and then the record in 2022 Q3. If you look at operating income, so this has been for other income. So purely from operations of our stores, our business, you can again see our OPM rate of 5.4% here, Q3 is a record high for Q3.

Philippines were at 8.4%. And international, we're at 1.3% despite the losses that we've been seeing in China. [Indiscernible] was the worse in terms of China losses, but Q3 also started to show an improvement on that until year breakeven, but nonetheless, we're still trailing behind in China. Now if you were to look at that and compare it to our same-store sales growth, of course, the balance of the system-wide sales is our new stores and some ForEx favorable impact from our international business. But the bulk of our growth, you can see here, 48.5% in the Philippines is coming from same-store sales.

I mean, in the balance will be from new stores. All the international markets, the balance will be coming from new stores plus some exchange favorable gains. So let's again focus on the same-store sales growth of 48.5% in the Philippines. Year-to-date 9 months, we're at 45% versus a year ago and international were up 8.5% in the quarter and year-to-date were up 35.3%.

The other piece of information that I thought was relevant to share to this group is that the composite of where this is coming from. So dining in is starting to become stronger, and we are seeing a return back and we're seeing a continuation of our off-premise growth. And then if you were to look at that from volume and value or a transaction count TC and average check AC, you can see that growth at the group level is coming 86% from transaction count or volume and 14% from average check. And just to note here, this is above our price increases. So it's actually organic natural average check growth.

In the Philippines, you're seeing a slightly different ratio. But nonetheless, I think still the same message. Majority is coming from new volume or volume increase with 78-22 split. And later, when I talk about the channel mix, you will see some interesting statistics on where some of those business is coming from.

So the split on the left is Q3 '2019 pre pandemic and the tower on the right is Q3 2022. You can see our dining is significantly lower at 38% versus Q3, but nonetheless, bigger in quantum. And you can also see here that takeaway remains relatively similar contribution. And the real growth again is coming through delivery and drive-thru is flat, and that data is found beyond the right, if you wanted to see it numerically. But the point here I wanted to make was that we are now running our business around 19% digital sales contribution to total sales.

This is a group view across all of our regions and markets. And later when Marcos shares with you his thoughts on digital, I think this data comes to -- I guess, it adds some color to this data. Okay. So the P&L summary here from system wide sales revenue all the way down to earnings per share. Again, I highlighted here in the 2 red boxes.

These are growth rates versus 2021. And you can see a revenue growth rate of 49%. I know the industry has done well, in particular the U.S. and so forth but I believe a growth rate of 49% still remains one of the top in our industry. That is having a very positive gearing, producing a near 63% growth on our gross profit line, and that is translating now into almost 220% growth in our operating income.

So we're getting positive gearing and also very strong operational leverage. Year-to-date, I just wanted to highlight earnings per share here. We're up 155% at [6.22%] Looking at some of the other ratios or percentages to revenues. So gross profit margin, again, I mentioned earlier, the 17.1% is 140 basis points higher than last year and 180 basis points higher than our prepandemic year of 2019. Year-to-date, we're running at that rate as well, and Q4 looks yet strong again.

G&A, we're seeing the opposite. We're seeing our cost controls coming down, so it's 9.8% versus 10.8% a year ago and 10% 2 years ago. Again, operating margin, this number was discussed earlier. Now let's -- I know there's a lot of numbers here, but I just wanted to walk you through a little bit in terms of how it splits between Philippines and international, so you get a better flavor. But before we get into that, let me start with the takeaway.

So 8.4% of our Philippines NOI represents, again, a record high quarter for the business. And this also reflects about a 70% franchise to 30% company on store mix. On the international side, the positive international OPM, despite COVID and restriction in China. And you can see if we were to add back China or to normalize it for China, we will be running our business around 2.1%. And this is still low compared to a domestic business.

And that's, again, as mentioned previously, this is due to our investments and the fact that we are relatively new with some of our brands in some of our markets. And later on, I have a slide bridging our operating income to our net income after tax. So I'll save that point for a little bit later. But again, you can see -- if you look across the line here, you can see the improvement rate. So if you take gross profit, [15.7], [15.3] 2 years back.

And on an OpEx for expense line, we can see it coming down versus last year and down also compared to 2019. And our operating income level is steadily climbing up. We're not there yet to where we want to be. But nonetheless, we are trending in the right direction, other income.

So earlier, I mentioned to you that we had a chunky other income contribution this quarter of PHP 2.4 billion. So let me just walk you through some of the key items in that other income. This is pretty much the last of the disposals or gains from disposals in the Philippines. And also I mentioned to you, CBTL had a gain. So that added 4.3%, so we're looking at this in terms of percentage to our profit line.

We had a significant reduction in accrual reversals. I know historically, we've been accruing and reversing at different pace and different rates and quantums, but I believe we're now running at a good pace and a good run rate, so 0.7% versus 1.5% a year ago. So we've lost -- if you want to look at it that way, we've lost some of the other income gains from lower reversals. This provision of minus 1.1% essentially represents the long tail that we have and our efforts to try to exit some of the brands that are not strategic and to focus on our strategic brands. And specifically here, Dunkin' Donuts was disclosed that we are now exiting that business in China. It's been a loss-making business. So for us going forward, it actually will be P&L accretive.

Then if you look at FX gain, this is the single largest movement in sort, if you will, movement of 130 basis, 2 point from [0.4%] gain or positive or favorable last year to a foreign exchange loss. I think we all understand the reason for this with the strengthening U.S. dollar or translation as well as our transaction losses coming are through in Q3. And then I also wanted to mention, if you were to look back to 2019 because some of you would be comparing the bottom percentage here to pre-COVID. And this PHP 3.1 was a onetime revaluation gain on CBTL in 2019.

So I think we need to discount that if you wanted to compare like-to-like. Gives us now a bridge taking us from our operating income down toward our net income after tax. And I just wanted to point out here our different income taxes. So we had an asset, DTA asset in 2021. This quarter, we have a liability, so that movement is quite significant [so brings in] 30 basis point.

And this is really related to timing of how we're recognizing our [NOCO], so loss from operating loss -- sorry, operating -- net operating loss carryforwards coming from our Smashburger business. So again, it's a timing. It will be set. But for this quarter, we're taking it into our books.

This is a new view. And I've borrowed this from one of our investors. So I just want to make sure that I give that claim out. So this is, in fact, a very good view to start measuring our business, and this is our EBITDA and free cash flow margin. So free cash flow margin of 10.9% in quarter 3 is our highest, a company record.

And Q2, we had significant improvement as well at 9.9%, coming up from Q1 at 3.1%. And so sitting at the first half of the year, we're at 6.8%. We've now gone to double-digit 10.9%. And you can see all the movement, some of the items I've mentioned earlier, which put here as adjustments, but nonetheless, a very solid free cash flow margin.

That takes us nicely into then the balance sheet. So again, similar to Q2 update, we have a very strong and fortified balance sheet. Let me start with the working capital. We are collecting the receivables 4 days quicker than December of last year. So 13 days DSO, our inventory -- this could be lower in theory, but at the moment, it's -- I think it's the right place to be, so 1.5 months of carry.

And the reason for that is we're trying to balance, of course, tie up of cash, but we're trying to balance that with supply disruptions and interruptions, which in Q2, I said, remained our most significant risk ahead. In Q3, I have a similar view, but having said that, I should qualify that by saying that we have very strong inventory hedges in place. And in terms of supplies, we are now looking quite safe, right into the end of first half next year on our key raw materials. And then if you look down to our covenant ratios, we are way below all the bridge limits. So again, remaining very strong with a very strong debt service coverage, debt to EBITDA. We continue to make inroads in progress.

Areas to focus for the rest of the year and going into Q1 next year. It continues to be and it remains to be consistent. We'll continue to push for growth at both the top and the bottom line. We'll be very cautious with our investments in particular CapEx, store expansion, capacity build-outs, less so on technology, and I'll save the thunder for Marcos later, but we are investing in technology. And we are, of course, aware of the micro headwinds.

We are aware of our borrowing rates and costs, but we're managing through that with a very strong fixed term rates that we've been in doing for the last 3 to 6 months. We again mentioned here, we'll continue to drive our business through digital revenue. So this is incremental. So it's additional transaction count, it's consumers that we didn't have, and it's also tapping into occasions or meal locations that we didn't have before. So we'll continue to focus on that.

And we will not forget about the Philippines business because this still remains our engine. And again, the prices that we have been taking, they've been very measured to make sure that we share the burden of inflation, but not pass on 100% of the burden of inflation. So I think we've done a very good job in balancing that, and we've been very competitive. We have not seen transaction count erosion due to price elasticity. So we continue to monitor that very carefully.

Second pillar of priority or focus is our balance sheet and our capital structure. I think I had a couple of slides last quarter, walking you through where we are in the capital structure. So not much has changed. So I decided this quarter not to regurgitate that but just to send the message that, again, we continue to monitor very closely, but we're quite happy with the structure that we have. We'll continue to tweak as needed.

We'll continue to have capital ready for opportunistic investments should any come forward. And then the last pillar here is we continue to build out. We have not implemented any hiring phase of sort. At the store level, of course, as we build in stores as we get new franchisees, we continue to make sure that resources are available. But also at the skills level, managerial level and leadership level, we continue to invest in our people so that we can grow and accelerate our international -- in particular, international division. Outlook.

What I can share with you today, we're very confident that we will increase the store network by circa 8% to 10% versus last year. And we believe that our system-wide sales and top line revenue will continue to be in strong double digits, somewhere around 35% to 40% range for the balance of the year. And our operating income is expected to be at par or beat our peak year of 2018. So with that, I'm going to now hand the floor over to my colleague, Marcos.

[Marcos Cadena, CTO and CDO]

Thank you very much, Richard. Let me just load my presentation in one second. Good morning, and good afternoon from people who are coming from the U.S. and those who are in Asia. Thank you very much for the opportunity to present today.

And really, today, we would like to present you a little bit the strategy that we have from JFC and what are we going to do from a digital perspective? And how this is adding a lot of value to everything that Richard just mentioned today. Maybe just to introduce myself, as I'm new to the organization, I just made my 1 year. Actually, we've got to make it in 2 weeks in JFC. I used to be the Head of Digital for Minor International Group, which is a group that was in Thailand and before that, I used to be the Head of Digital for [MPs Hotels] worldwide.

So I'm a Swiss citizen, also with a Mexican passport and very happy to have joined the family of JFC. Now just to give you a quiet element, the entire digital strategy is following our global strategy, which is to be the number top 5 restaurant company in the world, and it's really to bring that digital capability as a core competency of JFC in all business areas. And this is really sustained by our 3 pillars, really -- the marketing role, the digital component and our business technology role that all of them need to sustain this growth that we are aiming to build.

Now from a consumer perspective, I just wanted to give you a very quick background on where we are because JFC finds itself in a very unique situation where we have we have a multigenerational element of multi generations that are part of our consumers. And right now, majority of our generation is between the Generation X and Y. But right now, a big part of what we're building is to really build for that digital approach on the generation set, as you probably can see here in my slides. And why? It's because the generation sets differentiation is that they are digital natives and mobile driven.

So really, the expectations is that we have an omnichannel and a personalized marketing for the consumer segment. And then at the same time, we need to build for the consumers of the future, which will be the kids that they are the generation alpha, and we don't speak a lot about that generation alpha, but are the young kids of 0 to 9 years, but they will be our future customers, and we need to start building that trust with them. Now saying that, it's really important to be digital. Why? Because as raised by BCG, digital leaders generate [to build] returns, so we believe that by implementing all our digital strategy, we will be able to bring superior returns to our organization.

Now where we are because we are realistic. So we consolidated our report that is a mix of the data from Gartner, Digital IQ Index of 2020 to figure out where is our competition and where we sit today versus them. So today, when we add our strategy, we know that we are missing a lot of elements in our strategy, but I'll be able to show you today what are the elements that we're building to build that strategy. So what is the strategy that we're following? Well, we have identified that there are different elements that all organizations within the QSR are following to be the top digital leaders and how they're driving this.

So one of the big examples for us has always been organizations like Domino's Pizza and McDonald's and all the big, large organizations we know that there are certain elements that you can see here that we need to be working on to be able to bring our technology to the right level and all our digital experience for our consumers.

Now our objective is really to build that growth of all the elements that we have done. So as you can see, you can see an initial curve, what we call the building capability, where we have built really all the website deliveries and app delivery sites. We deliver all our digital campaigns and PPC programmatic. And now we're entering in a curve where we're building even more part of the infrastructure. So it's really building our SEO, building the digital asset management and building a lot of the technologies from a marketing perspective that allow us to build segmentation and also build all the content that we need to build for our tools.

And this will take us through a curve, which allowed us to increase our revenues and profitability. And then eventually, as every single technology curve on the top, it will arrive to flattening again, and we need to do new investments into the new cycle of technology that will happen. Now what is our objective for 2026? Really, our objective for 2026 is to achieve with Jollibee, as you can see here, to become a gifted brand as we believe that with the Jollibee network, we can reach that quite easily. Same thing with brands like Smashburger, Chowking and Mang Inasal, we believe that we can and -- Coffee Bean & Tea Leaf.

We can reach those levels moving from the feeble brand and really start becoming very competitive from a digital perspective. And not because we want to be digital for the sake of being digital, but because it adds to the contribution of the revenues. Now what are the pillars that we're building on to build these strategies? So we have focused on 4 main pillars that are also staying with the idea that we need to drive 50% of total digital sales by our own systems versus total system sales by 2027. So the 4 pillars we have is the first pillar is based on data capability.

And it's really we want to build a whole environment of data capacities, which comes from hiring the right people, having data analysts, having data scientists and data engineers, so that all our decisions are based on data-driven decision making. Second part of our content is the channel orchestration, which is building all the platforms that allows us to drive sales directly through our own channels and not to remove the aggregators but rather to have a better collaboration with them, but have a much balanced relationship with aggregators where we can have our own channels also driving a lot of these sales and helps us to optimize the relationship with the clients. Then our third pillar is the digital advertisement. And for that, I have a case study towards the end where I would really like to show you everything we have achieved with the changes to our ad tech and market components. And this is really to improve the way we sell and we present ourselves to the consumers knowing that Google, Meta and TikTok are making a lot of changes into their platforms and without us being able to do that, we won't be able to capture them in the right way.

And the last one is really the customer experience which today, they're called total experience, and it's about really the integration of all those elements to have the right type of customer experience centers so the people can go for loyalty, they can call for questions, they can go for sales, and we are able to serve them from anywhere in the world that we have our brands. Sorry, 2 -- 3 last items that forgot is that we're building a supplier ecosystem. We're building also our digital standards and KPIs and our privacy by design and governance as an overall arching element that is built to sustain these channels. And our digital academy and training because we know that we can put a lot of systems and a lot of tools, but the most important element is the adoption of those tools so that our staff and our teams are able to absorb all this information. So how do we -- how we will roll out this is our strategy is to have a global, regional and BU strategy, where we start from the concept of design of what we -- of all these pieces, then the development is in the combination between the regions and the global and then production and launch includes the BU, region and global, and then optimization happens directly at the business and then service and support, again, gets into region, BU and global and then -- until we have to either retire the product on a [devoted] product to come back into this cycle.

So this is a continuous cycle of technology that we are implementing through all the actions that we're building in JFC. Now to take into the approach of how we're growing, we have taken a transformation approach that is built on 3 elements: one, everything that we were building before we will continue driving it so that we can sustain the existing growth that we have for those channels. At the same time, we will do improvements to all those initiatives with mobile speed, search engine optimization on the elements, advertisement improvements. And at the same time, we're building those foundations, so that we can have the tools that we'll be powering up from the future for every single one of those elements. So maybe to show you one of those tools that we are building is the first element, which is data capability.

And it's really about how we collect the data, how we unify all that data and then how do we build those segments and predictive models to actually build the activation. And activation means being able to send e-mails, SMS, social messages, in-app elements, which we have seen and in previous organizations, it drives an incredible growth in our total sales to digital channels and also in-store channels because digital is not just about delivery. Now how does this work? It's really -- it's about having the right message to the right audience at the right channel at the right time. And as you can see here, this is our stack of technology that we're adding to all our brands worldwide, which is we are adding a content delivery network.

We adding CDP analytic tools, we are adding a lot of benchmarking tools, digital asset management to control all the images that we have worldwide and all that to be able to really send e-mail marketing, SMS, app push, to really get to where the consumer is, but not in a mass. And I think our approach is to move away from the shotgun approach to have a sniper approach of marketing, which is what the new generations are expecting from us. Now in terms of data gathering, we know that the data privacy elements have a little bit safeguarded, that data should not be moved from countries. So our strategy is really to build our data and data warehouses in each one of our regions with only reporting factors that are centralized, so that we can make better decisions at the center, but other regions can drive the regions independently as well. This also complies with all our privacy elements that really almost every country is implementing one by one after the launch of GDPR.

So what is really about data governance and data quality is that having a disorganized element -- and it's for us to harmonize all that data, so that we can utilize it for all the tools and systems. As you can see, we will work on the data not only for profiles and preference, which will be a very marketing element, but also financial data and behavioral data, which we know that are the key to increment the sales and really to drive all the elements of the Jollibee marketing database. Now how are we going to deal with the people? So our strategy to deal with the people and the learnings on the data-driven organization is that we are right now in data aware, right? Organization knows that they need to build the data and right now, our process is to build everybody to become data guided, which is what organizations identify their data needs, and they're learning and standardize all the data.

Why? Because once we reach a data savvy organization and we have a culture of data scientists, then the organization can make much better decisions on every day that are less based on instinct, but are all based on data. This will make us a lot faster and will also make our decisions to drive higher performance. Why? Because at the end, data strategy informs and guides business strategy, and then business strategy really sets a requirement for new data strategies that we will continue driving in an endless circle of how we drive our data.

As I mentioned to you before, another component for us is the content management system and how do we drive them. And it is about unifying all our portals. Instead of having 1 portal per country, we're going to unify it into a global strategy where we have a unified app that can be exported and localized in both markets, allowing us to really push content from 1 single click in a centralized way in a much more efficient format than we are today. This goes both from digital menu boards to marketing boards, order management, app cost and all the different elements that we are working right now from a content perspective to distribute better ourselves across the markets. In addition to that, we are working now on the development of new kiosk technology, knowing that especially in the markets in the Americas, Singapore, Hong Kong, there is a huge trend and where labor is becoming a very, very important component and it's getting really, really hard to find labor that wants to be qualified.

So the need of kiosk technology and kiosk technology for drive-thrus has become more and more important in the strategy. So enabling suggestive sales, it's also another element of the digital strategy. Why? Because kiosks have the capacity to also learn about the consumer and be able to propose products that people similar to them have purchased, similar to the model of the Amazons of this world. Just to touch on some of the last elements on total customer experience.

So total customer experience is really the union of CX and DX, which is customer experience and digital experience is -- and is unifying not only the experience that the customer has through all the loyalty, ticketing or quality or omnichannel contacts where we get contact from our consumers to deal with and remove the friction from the consumer, but also to deal with the friction at our staff, make sure that our staff deals with tools that have very little friction. Because if our staff is happy, then our customers will be happy. So our omnichannel contact center, something that we are developing right now where we're unifying all these elements will be channel that we'll be able to absorb information from all the different channels, including e-mail, chat, social media, mobile apps, kiosk, branch and websites, which is something that until now, very few organizations have managed to do correctly.

Of course, data privacy is still a very big concern for us. and knowing that our expansion to multiple countries adds a new level of platform. We're right now in the process of building a centralized and unified center for data privacy that will be also taken care of by the customer experience, making sure that the customer experience is at the top and the data privacy is one of the core elements of this, as this has a huge risk for organizations that don't deal with it on time. From an ad tech perspective. This is the design of everything we've been building, which is a unification of all our ad tech tools and how this will allow us to improve our performance by utilizing best-in-class tools in the market, utilizing this Play 360, Search 360, Google Analytics, professional tools and really putting all our marketing and ad tech perspective to appeal to all our customers through all the platforms in the best way possible.

And I would like to show you now a small case study of how we have used this technology and how this technology has really helped us to drive additional revenues to some of our brands. So first example that I'd like to show you, it is about Smashburgers and the success we had in September as we launched our new platform for app and website, together with our Paytronix loyalty systems that we launched in September. So the first element I'd like to share with you is really the online orders. The first thing we saw is an increment from 2,749 orders to [8,930] having an increase of 224% on the total growth of orders that we were seeing for Smash. In addition to that, we have seen an immediate feedback that showed an improvement in customer satisfaction because people were able to finish their orders correctly.

People didn't have concerns when they were making those orders. But while it's great that we were able to improve this by improving the quality of the tools we put in the market, I think the most important element for us was how do we bring more people to our stores so that we can increase those sales. So our paid media rollout that had now, it is -- we had really an increase of online transactions of 107%. We have an increase on store visits by 39% and an online revenue increase of 19% and [as limited] store revenue of 38%. So we are really seeing that our new strategies of advertisement that we will be rolling out in every one of the markets and all the brands, in our initial rollouts are having great advantages for all the brands, and we see an increment on revenue, sales, transactions and visits in stores.

As you can see here, since the launch of [Olin], the Paytronix app , really, we've seen 20% swing on the direct sales. You can see here how the sales had an increment just because we changed our advertisement strategy and our platforms. It had an incredible change on the curve. In addition, on -- we are seeing a significant amount of downloads with all the campaigns that we're seeing, which is a really key metric for us to understand that people are downloading our apps and they're using our apps. So we are really seeing something that we had never seen before.

So this strategy is actually paying off and we're seeing a significant change. And this, again, as I've mentioned before, is something we will be rolling out in every one of the markets. Additionally to that, is really if you see the unified of web and mobile, you can see that the overall price has been increasing. So that means that we're actually -- even with increase in price per order, we're still able to drive additional sales through those channels. So that means that we can make more money using those tools than just the traditional ones.

So I think that was it for me, and thank you very much for allowing me the time to present to you. I hope that I was able to give you some of the insights on the things that we're doing and how this is driving performance.

[Unidentified Company Representative]

Thank You, Mr. Cadena. Very, very interesting. And as you said, right, other fast food chains globally are already adapting to this kind of technology. So it's good to see that Jollibee is also investing in the same.

So we have, I think, about 10 minutes. Richard, Marcos, can you maybe answer a few questions that were sent ahead and maybe for those in the call, if you have additional questions, you can e-mail them to me and I get forward to Mr. Cadena and Mr. Shin for you.

So Richard, I think the question is mostly just on the news regarding Dunkin' Donuts, Tim Ho Wan. Basically, the questions were more can you give more details on what the agreement entails? What are you looking at, at least for the next year or so.

[Richard Shin, CFO]

Okay. Great. Let me take a step back and frame it by saying both of those brands mentioned are related to our China strategy. So for those who are not familiar with the China business, we have 3 active brands there. That's Tim Ho Wan, Yong He King and Hong Zhuang Yuan, which are all Chinese brands and Chinese food brands.

Dunkin' Donuts, although we've had it for a number of years, and I think there are many reasons, so probably not important to go through all the reasons. But we've made a conscious decision to exit that relationship with -- we were franchisees, of course, in China, but we decided to exit because we had not been profitable and we came to a point in time where we believe that Dunkin' Donut was more of a distractor rather than aiding our strategy to grow our China business. So we took a provision, as I mentioned earlier. And all the settlement discussions. It's all been amicable with Inspire Group, of course, whom we respect very much, and we decided to exit both sides very amicably.

Having said that, I think that also then now opens up other opportunities in China for certain beverages and so forth that -- I think everybody understands Dunkin' Donuts not just about doughnuts, but it was also about coffee. So I think it opens up really our opportunities to have more freedom with our China strategy. So that was the thinking there.

[Unidentified Company Representative]

And then Richard, from China maybe to North America, we know that inflation is very bad there. And we saw Smash and CBTL and your North America businesses have actually done quite well despite inflation. Could you give -- the question is actually, we had some investors send this ahead. The question is more on how are consumers behaving amid inflationary pressure in North America? Are you seeing any changes in behavior? And what is Jollibee doing to sort of like address the situation over there?

[Richard Shin, CFO]

Sure. So let me talk about North America, in particular, the U.S., which is our largest country in North America. I will start by saying we are relatively small, so we have several categories and several brands. So we have CBTL. So compared to Starbucks in North America, we are small. We also have our Philippine brands, so that's Jollibee, Chowking and Red Ribbon. And again, in the chicken or fried chicken segment, we still are very small with a huge opportunity for us to scale and grow. And then finally, in the burger space with Smashburger. we're not a QSR, we are fast cash flow, and we do benchmark ourselves to guys like Five Guys and Shake Shack. We know that these brands do not necessarily have a large store footprint, but we know that in particular, players like Shake Shack has a very strong brand.

So a lot of these Marcos shared around Smashburger, et cetera, it's now centering around increasing the brand value of Smashburger. So we continue to invest wisely. We are not opening new stores per se. But in fact, what we're doing is we're making sure our stores become more and more profitable. And I do see a very significant positive curve in terms of how many stores are now becoming profitable. So we're liking that strategy.

We're also attracting franchisees who've now signed up. So we have a pipeline of -- significant number of franchise stores that will start to open in the outer years. So starting from 2023 and into 2024. And that, again, I think, signifies that the brand has turned the corner and people are interested in becoming franchisees. I think the opportunity for us on chicken is really to make sure we do the crossover from what is right now mostly a Philippine community-based strategy.

That's been working very well for us. And we have very high average daily sales, and we have very high gross margins and success rates, but we're now starting to move into the mix populations and eventually into the general population. And of course, that entails different menu, different target audience, et cetera. So North America, because we're not that big yet. I think we're still able to take market shares and still able to weather through the storm.

So we continue to deliver double-digit growth, but we're scaling and sizing up. And I want to put that in perspective. We're not as big as our American counterparts yet, but we are growing at a faster rate than they in terms of percentage.

[Unidentified Company Representative]

Thanks, Richard. I think that's all the time that we promised for today. But for those -- Richard already said -- has said the questions that were sent over now, and we'll be sending you the questions, and hopefully, we can just get back to the participants of the call on these questions. But any closing remarks before we end the call?

[Richard Shin, CFO]

Yes. I want to firstly thank everyone for sending questions in. We do read and look at every single one, and we do try to make an effort to get back to you in one way or another. Some of it, I blended into my presentation, but some of we will go back. And also a big thanks to my dear colleague, Marcos.

Every time I see an present, I get excited about the possibilities of where Jollibee 2.0 is going. So I think it's fantastic that we have veterans like Marcos on board. So thank you for your time today, Marcos. And of course, Hazel T. and the team for always being such gracious hosts for us, and we appreciate it. So thanks, everyone, for joining, and have a lovely rest of the day or the evening [indiscernible].

[Unidentified Company Representative]

So with that, we end the session on Jollibee Foods. Let me take this time also to thank you, Mr. Shin, Mr. Cadena, again, Ms. Caset, Ms.Ariam, [ph] thank you for sharing your views and thoughts today. So to all the participants, thank you for joining us. You may now disconnect.

[Richard Shin, CFO]

Bye, bye.

[Unidentified Company Representative]

Bye.