Jollibee Foods Corp., the Philippines-based fast-food operator, is looking to acquire a U.S. quick-service chain with a market value of at least $1 billion and room to grow, according to a Reuters report Thursday.
Jollibee did not indicate interest in a specific company or brand, but a Wall Street analyst issued a report outlining six potential candidates, including El Pollo Loco, Fiesta Restaurant Group Inc., Jack in the Box Inc., Krispy Kreme Doughnuts, Popeyes Louisiana Kitchen Inc. and Sonic Drive-In.
Jollibee Foods could not be reached for comment.
Jollibee’s acquisition plans were first reported earlier this week in Business Mirror, a publication based in the Philippines. Jollibee chairman Tony Tan-Caktiong said in the report that the company is looking to shift away from its traditional market of serving Filipinos overseas.
Tan-Caktiong said the company was looking for “a strong regional brand so that we can expand. We don’t want a brand that’s already big.”
He also indicated that Jollibee may look for a partner, either private equity or a fund, with the goal of generating revenue from outside the Philippines, targeting China and the U.S.
Jollibee operates or franchises about 2,200 restaurants in the Philippines and 29 units in the U.S. under its namesake brand, according to its website.
In a report Thursday, Janney Capital Markets securities analyst Mark Kalinowski speculated that among his six potential candidates that fit Jollibee’s target, Jack in the Box and Krispy Kreme seemed the most likely.
But, he added that he wouldn’t rule out other privately held chains of similar size, including CKE Restaurants Inc., which operates and franchises the Carl’s Jr. and Hardee’s brands and was acquired by Roark Capital Group in 2013, as well as Whataburger or Culver’s.
Here’s how Kalinowski’s report described his six top publicly traded candidates:
Jack in the Box Inc. has a market capitalization of $3.2 billion and strength in many markets in the West. The chain is “the very definition of a fast-food brand with regional strength,” Kalinowski wrote. “We’ve long considered Jack in the Box a potential acquisition candidate and perhaps this is what finally happens in that regard.”
San Diego-based Jack in the Box Inc. also owns Qdoba Mexican Grill, which has been the cited by analysts as ripe for a spinoff. However, earlier this month, Jack in the Box chairman and CEO Leonard Comma said a spinoff isn’t likely anytime soon.
Krispy Kreme has a market cap of $1.3 billion, with strength in the Southeast, Kalinowski wrote. With about 263 units, the doughnut chain has room for long-term expansion potential of perhaps 700 to 900 more units over time.
“To the extent Jollibee prefers to own a non-burger business outside of the fast-casual realm, then this would be the top publicly traded concept meeting this description,” he said.
El Pollo Loco, which held its initial public offering in July 2014, has a market capitalization of $0.9 billion. With a restaurant base largely focused in California, the chain has room to grow, Kalinowski said.
El Pollo Loco, however, could be seen more as fast casual than quick service, he noted. The brand aims for a positioning it describes as “QSR plus,” and Jollibee may want to focus on fast food, Kalinowski said.
The same could be said about Fiesta Restaurant Group, Kalinowski said, with a market cap of $1.5 billion. Fiesta operates two brands: Pollo Tropical and Taco Cabana, both of which fall within the fast-casual space.
Kalinowski said both Popeyes, with a market cap of $1.3 billion, and Sonic, with a market cap of $1.7 billion, have opportunity for expansion in the U.S.
Based in Pasig City, Philippines, Jollibee restaurants are known for their Chickenjoy fried chicken, Jolly Spaghetti and Yum Burgers. The company also operates the Chowking, Greenwich Pizza and Red Ribbon brands.
Contact Lisa Jennings at [email protected].
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