Why Is McDonald's Struggling In The Philippines? Jollibee - YouTube

McDonald's is an American fast food behemoth

With more than 37,000 restaurants in 120 countries, the chain dominates pretty much every market it chooses to enter

It has a reputation for taking over, fast

But in the Philippines, where McDonald's has been trying, and failing, for nearly 40 years to be number one

there's a local chain giving McDonald's a run for its money

Jollibee

Jollibee, you know, came way back in 1978, really established its presence and, you know, captured the market, a lot

So then subsequently when these brands like McDonald's and KFC came in

you know, it was hard for them to take away the value acquisition that Jollibee offered

Filipinos love Jollibee and it's not just because it was their first or that it undercut its competition on prices

They nailed their recipes

And of course I think they positioned themselves a bit cheaper than McDonald's

So when McDonald's came in, the difference was maybe 50 cents to a dollar for every value meal

So that's how they had to position themselves

Filipinos love American food but there's also a twist in it because we like it sweet

For example, we serve spaghetti and they try to make the sauce a bit sweet

The menu covers a lot of ground, fried chicken, french fries, sweet burger steaks

chicken sandwiches, and a spaghetti with a sweet banana ketchup sauce and hotdog chunks

Culture also plays into it

They have a tagline, it's called "Langhap-Sarap" meaning it smells really good

So it's really inviting to smell

And I think they they know where they should be targeting the market so it's really

Its really the middle class market for Filipinos because they initially presented it as a fast food

But now I think since the mass market is developing, I think they positioned it as a QSR so a Quick Serve Restaurant

Its mascot is a human sized, red and yellow bumblebee wearing a blazer and chef's hat

It's meant to epitomize the Filipino spirit of an always busy but cheerful people

Jollibee is the biggest fast food chain in the Philippines itself

So it is hugely popular and a lot, lot part of this is because of its branding itself

So it has become to be known as a very household and a family oriented brand

That, you know, that really connects and resonates and strikes a cord among Filipinos

Jollibee has also pushed out TV commercials and ads that are big on family values

And the numbers show that so far, Jollibee indisputably trumps McDonald's in the Philippines

McDonald's has roughly half as many locations as Jollibee there

And while neither company isolates its revenues in the Philippines, Euro Monitor estimates

show that Jollibee pulled in nearly twice as much as McDonald's in 2017

Jollibee captured nearly 36% of the fast food market in 2017 and McDonald's took roughly half that

And Jollibee's hold on the market doesn't end with its own chain

Jollibee Foods Corp. also owns chains in the Philippines like Chinese fast food chain ChowKing

Greenwich pizza, Red Ribbon which sells pastries and even U.S. based Burger King

Almost all of which rank in the top five list of chain fast food restaurants in the Philippines

So the company literally owns its competition but Jollibee is now at a crossroads

The domestic market is oversaturated, so it's instead setting its sights on the Filipino diaspora

If you look at the international expansion, I think year to date, at least

they've gone around 25% so it's already starting to overtake the domestic front

The same store sales growth, meaning it compares stores that they're already operations from the previous year

So it's only been growing 8% and it is a publicly listed company, 8%

isn't enough if you're just going to grow organically so they have to expand

So far Jollibee has more than 200 international locations in countries ranging from Saudi Arabia and Kuwait to Italy and Canada

The Filipino chain is also taking on rival McDonald's on its home turf

Since 1998, Jollibee has opened 37 locations in the U.S. all in cities with big Filipino communities

Just take New York City

There are more than 250,000 Filipinos living in the New York metropolitan area

In the fall of 2018, Jollibee opened its second location in the city, this one in the heart of Times Square

Jollibee has a very distinct Filipino taste

So most, most of the dishes here have a sweet taste to it

I always loved Jollibee since birth because back in the Philippines we always do, we always eat there

CNBC decided to fact check

Our team of producers put Jollibee's sweet and savory menu to the test

Oh, that's good

I think it's good, it's not that spicy, yet

Our producers approved for the most part

Yeah, I don't like that at all

Jollibee may be striking a nerve with Filipino Americans, but the company appears to be thinking much bigger when it comes to dominance

With only 37 Jollibees and roughly 4 million Filipinos living in the United States

Jollibee's reach in the country is far from the command it had in the Philippines

And targeting Filipinos in the U.S. isn't enough for the company to skyrocket to success

That's why Jollibee Foods Corp. decided to take a majority stake in a popular American burger joint called Smash Burger

We, we wanted to replicate the success of the Philippines in the U.S.

Which is to have a multiple number of brands that they're successfully American and that's why we have the Smash Burger

We have Tortas Frontera and we're continually exploring other possible acquisitions

Smash Burger only has 323 restaurants in the United States, a far cry from McDonald's more than 14,000 stores

But it gives Jollibee the opportunity to increase its presence in the U.S. and allows it to target American consumers as well

That's kind- that's more of their foray, one into the overseas market and second into QSRs

In September 2018, Jollibee said it was also looking to get in on America's $41 billion Mexican food market

by purchasing a stake in Tortas Frontera, a small Mexican sandwich chain in the U.S.

But the United States isn't the only country where Jollibee has set its sights

They've also been expanding in China for example

So I think the experiment and I think that's been more successful

The owners have roots from China so I think that has proven to be more successful

And of course, logistically it's more accessible to, to I guess like expand, I guess in the area that's closer to home

Jollibee has also made a few strategic acquisitions in China and in Vietnam, where it's leaned into coffee and pho

Though Jollibee has expanded its reach to other countries, McDonald's still squashes the company when it comes to revenues

McDonald's made nearly $23 billion in 2017, while Jollibee Foods Corp. brought in only 10% of that

Jollibee has a long way to go until it can replicate the success McDonald's has seen around the world

But until then, it comfortably holds its number one spot back home in the Philippines