What's on His Plate?
The Filipino palate is on Martin Lorenzo's business palette
by Ton C. Reyes
 Today’s casual diner is spoiled for choice. Wherever you go—from the newest malls to the neighborhood gasoline stations—there is almost always a friendly place that you can count on for meals that are both satisfying and affordable.
Until about three years ago, this was not the case. Diners’ choices were limited to the ubiquitous fast-food stalls serving the same old hash or the higher-end, higher-priced destinations. There were not too many choices in between for those who simply want a tasty meal in a homey atmosphere at prices that are just right on the pocket.
The Casual Dining Experience
If there is anybody that the Filipino diner ought to thank, it should be Martin Lorenzo, whose group, under the Pancake House flagship, has made the casual dining experience an everyday reality. Other than Pancake House, the group now includes Dencio’s Bar and Grill and the Japanese food chain Teriyaki Boy, both of which can be found in key points across Metro Manila and even as far as Baguio.
With a keen eye for trends and a knack for identifying needs, Lorenzo’s group has expanded into new areas with just the right amount of aggressiveness to keep pace with the market’s shifting tastes and preferences. With items priced higher than fast-food chains’ offerings and with pleasant, comfortable surroundings, the restaurants under the Lorenzo group answer the needs of two markets.
First, they cater to the market that wants a respite from the P500-plus meals one has to put up with to enjoy a restful dining atmosphere. Second, they also capture consumers who aspire for something more than the usual P80-plus meals in noisy fast-food outlets. A typical meal at Pancake House would cost around P180, inclusive of drinks—good enough for both the corporate executive and the overseas Filipino worker out to give his family a treat.
Reinvigorating Brands
Lorenzo obviously does not believe in building from the ground. In fact, all restaurants in the Pancake House chain were acquired by the group from previous owners. Although Lorenzo has clear ideas about the key criteria that he looks for in acquiring a food chain—franchising potential, strong company-owned stores, a commissary to build—he admits that the acquisition route is by no means easy.
All in the Family
Restaurant chains under the Lorenzo Group |
| Restaurant chain |
Number of Stores (by End-2006) |
Pancake House
|
66 |
| Dencio’s |
25 |
| Teriyaki Boy |
27 |
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He tells people, for instance, how his decision to buy Pancake House in 2000 seemed like “a big mistake.” The brand had not changed much since it was put up in the 1970s and was in an obvious state of stagnation. “We were just losing money,” he recalls.
Lorenzo, though, had always known the strength of the brand. He combined passion and investment to reinvigorate a sleeping brand. Outlets were refurbished, menus expanded, and the franchise system established. Starting with just 20 outlets, Lorenzo focused on building the brand’s image, not hesitating to tap the equities market for a much-needed financial boost. In no time, revenues were up, as were profits, and Pancake House became a household name—loved by the young and old alike.
By 2003, Pancake House was named the “Most Promising Filipino Franchise” by the Philippine Franchise Association. This year, it proved true to its promise and went on to bag the “Most Outstanding Filipino Franchise,” besting numerous other contenders. “We’re happy and honored that Pancake House has been given this recognition. It’s a great validation of the efforts we’ve put in since acquiring the business,” acknowledges Lorenzo. The Pancake House brand’s system sales grew 24% to P693 million in 2005, while net income rose 50% to P39 million.
By far, the story has been the same for all restaurants under the Pancake House umbrella.
Recipe for Success
Lorenzo similarly had to battle red ink when it acquired Dencio’s in June 2004 and Teriyaki Boy in October 2005. But using the same formula of brand building by refurbishing and building new stores, enhancing the menus, franchising, and improving supply chain efficiencies, both Dencio’s and Teriyaki Boy have managed to quickly get into the growth path.
For Dencio’s, net income reached P385 million in 2005 from P70 million for about six months (196 days) in 2004. Teriyaki Boy had system sales of P85.8 million in the first quarter of 2006 for a net income of P1 million.
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| At one point, Lorenzo thought his decision to buy Pancake House in 2000 was “a big mistake.” This year, Pancake House was named “Most Outstanding Filipino Franchise” by the Philippine Franchise Association |
Today, Pancake House has a network of 59 restaurants, 33 of which are managed by franchisees. The restaurants should number 66 by the close of the year. Dencio’s is expected to be 25 stores strong by the end of 2006, while Teriyaki Boy is expected to hit 27 outlets by the end of the year.
“It is always exciting to take a brand that has developed on its own strengths, bring it to the next level, then hone and adapt it to new challenges to enable it to dominate its own future,” says Lorenzo. A brand, he adds, has to be strong enough to be top of mind among consumers. Consumer studies show that the average diner usually has just eight choices of food places at any one time. The challenge for the restaurateur then is to make sure that his brand remains in this magic circle. The higher the ranking, the better.
Multibranding
The problem with consumers, of course, is that they can get tired of brands as well, which was why Lorenzo’s group saw it fit to expand beyond the flagship brand. As a brand matures, the pace of its growth is expected to slow down. Thus, when Pancake House’s growth began to plateau, it was imperative to acquire a fresh, promising brand that had the potential to grow fast. Dencio’s proved to be a good way to boost consolidated sales. With Dencio’s approaching saturation, Teriyaki Boy came into the picture.
Even as the different brands under the same umbrella compete for the same market, there is an effort to make sure they do not impinge on each other. Pancake House serves the widest market. It caters to customers from age 2 to 36 and above, and is very much a family restaurant. Pancake House is, after all, a brand that today’s parents grew up with. “It’s a place where you will feel safe to meet your kids or your wife,” Lorenzo elaborates. Dencio’s, with its grilled specialties and beer, is favored by those aged 22 and above. Teriyaki Boy is yet another family place, targeting teeners to those aged 36 and above.
Multibranding, points out Lorenzo, has certain advantages, synergy being the most important. “We are able to maximize resources while sharing knowledge and expertise. However, being on top of a number of brands has its challenges as well, such as maintaining each one’s unique characteristics and blending these with the new strengths we inject into them.”
Achieving a balance adds to the brands’ value and translates into replicable improvements as the group refines certain aspects of each brand’s identity—from the menu to the quality of food, to the service and atmosphere in restaurants, to the overall dining experience.
For sure, the group will continue to look out for potential acquisitions—“I would love to have a bakery and a doughnut chain,” shares Lorenzo—and no doubt, whether it’s cakes or doughnuts, the public is assured that Lorenzo will have more satisfying dining experiences in store for them.
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