Shakey’s Pizza Asia Ventures Inc. (PSE: PIZZA) continues to expand its business. Its global network has surpassed 3,000 restaurants and kiosks, while systemwide sales continue to grow at double-digit rates.
Yet despite its expanding presence, the company is earning less money.
In the first half of 2026, Shakey’s reported consolidated revenues of ₱8.17 billion, up 9 percent from ₱7.48 billion in the same period last year. Systemwide sales, which include sales generated by franchised outlets, increased 12 percent to ₱13.02 billion.
However, net income declined 33 percent to ₱231.5 million from ₱346.9 million.
The deterioration was not limited to the bottom line. Operating income fell 22 percent to ₱505 million from ₱648 million, despite the increase in revenues.
This raises an important question for investors: Why is Shakey’s becoming a bigger company but earning less from its operations?
When higher sales produce lower profits
One way to understand the problem is to examine how much profit Shakey’s generates from every peso of revenue.
In the first half of 2025, the company earned approximately ₱8.70 in operating income for every ₱100 of revenue. By the first half of 2026, that amount had declined to ₱6.18.
Its operating margin had fallen from 8.7 percent to 6.2 percent.
The decline suggests that the company is spending more to generate each peso of revenue.
During the first half of 2026, consolidated revenues increased 9 percent, but cost of sales rose 11 percent to ₱6.52 billion.
As a result, gross profit increased by only 3 percent to ₱1.64 billion.
General and administrative expenses also increased significantly, rising 21 percent to ₱1.14 billion from ₱943 million.
These figures indicate that higher operating costs are absorbing much of the additional revenue generated by the company’s expanding network.
The pressure on profitability is not entirely new.
In 2025, Shakey’s reported net income of ₱816 million, down 32 percent from ₱1.19 billion in 2024, even as consolidated revenues increased 11 percent.
Management attributed the decline partly to product improvements, store pre-operating expenses, and softer restaurant sales that reduced operating leverage.
Operating leverage refers to the ability of a company to increase profits faster than sales because many of its operating expenses are fixed.
When restaurant sales are strong, additional revenues can contribute disproportionately to profits. But when sales weaken, rent, salaries, utilities, and other expenses continue to accumulate.
For a restaurant operator, this can significantly reduce profitability even when total revenues continue to grow.
More stores, but slower sales growth
Shakey’s has aggressively expanded its network in recent years.
At the end of 2024, the company operated 2,619 restaurants and kiosks worldwide. This increased to 2,970 at the end of 2025 and reached 3,039 by June 2026.
However, much of the company’s sales growth has come from network expansion rather than stronger sales at existing locations.
In 2024, same-store sales growth reached 4 percent. This slowed to just 1 percent in 2025 before becoming flat in the first half of 2026.
Same-store sales growth measures the performance of outlets that have been operating long enough to allow a meaningful comparison with the previous year.
It is an important indicator because it separates sales growth from existing stores from growth generated by new openings.
A company can increase total revenues by opening more outlets even when its existing stores are no longer generating higher sales.
This distinction matters because expansion requires capital, additional personnel, operating expenses, and management resources.
If new stores contribute less profit than expected, the company may become larger without necessarily becoming more profitable.
Another warning sign: Slowing franchise income
There is another development in Shakey’s financial statements that deserves attention.
The company’s royalty and franchise fee income, which comes from its network of franchised outlets, has started to lose momentum.
In 2024, royalty and franchise fees reached ₱804.7 million, up 65 percent from ₱487.4 million in 2023.
Growth slowed considerably in 2025, when franchise-related income increased just 8.7 percent to ₱874.6 million.
The slowdown continued in the first half of 2026. During the first quarter, royalty and franchise fees increased 9.7 percent to ₱197.6 million from ₱180.0 million a year earlier.
However, in the second quarter, franchise-related income declined 1.3 percent to ₱209.1 million from ₱211.9 million.
Consequently, total royalty and franchise fees increased only 3.8 percent during the first six months of 2026.
This is an interesting development because the company’s global store network continued to expand during the same period.
Ordinarily, a larger franchised network should provide opportunities to generate additional royalty income.
But the relationship is not automatic. Franchise income depends on several factors, including the sales performance of existing franchisees, the number of franchised outlets, the timing of new openings, and the terms of franchise agreements.
The company’s audited financial statements explain that franchisees pay continuing franchise fees equivalent to a certain percentage of their net sales.
However, the company does not disclose the actual percentage charged to franchisees.
Moreover, the reported amount combines recurring royalties and franchise fees. Changes in upfront franchise fees could therefore affect quarterly comparisons.
Nevertheless, the decline in second-quarter franchise income raises a question about whether the company’s growing franchise network is generating sufficient additional revenue.
Is Potato Corner carrying the business?
The question becomes more interesting when the company’s different brands are considered.
Although Shakey’s Pizza remains the flagship brand, the company has transformed itself into a diversified foodservice group following its acquisitions of Peri-Peri and Potato Corner.
Potato Corner, in particular, has become an important source of network expansion.
According to the company’s 2024 Annual and Sustainability Report, Potato Corner operated 1,841 kiosks in the Philippines at the end of that year.
This compared with 275 Shakey’s restaurants and 77 Peri-Peri outlets.
Potato Corner therefore accounted for approximately 83 percent of the company’s Philippine store network.
However, these figures do not mean that Potato Corner generates 83 percent of group revenues.
The two businesses operate under very different models.
Shakey’s restaurants generally occupy larger spaces, require more employees, and generate substantially higher sales per location than small food kiosks.
Potato Corner, meanwhile, relies heavily on franchising.
According to the 2024 report, approximately 79 percent of the group’s kiosk network was franchised.
This means that a significant portion of Potato Corner’s retail sales belongs to independent franchise operators rather than directly to the listed company.
Shakey’s earns income from these operations through royalties, franchise fees, and sales of products and supplies to franchisees.
The distinction is important because systemwide sales include revenues generated by both company-owned and franchised outlets.
Consolidated revenues, on the other hand, include sales recognized by the company itself, together with franchise-related income and other revenues from its subsidiaries.
As a result, rapid expansion in Potato Corner kiosks does not necessarily translate into an equivalent increase in consolidated revenues.
It may also produce a different profit margin and capital requirement compared with company-operated restaurants.
What the financial statements do not reveal
This leads to one of the biggest limitations in evaluating Shakey’s financial performance.
Despite operating several major food brands, the company does not separately disclose the revenues, operating income, and net income generated by Shakey’s Pizza, Potato Corner, and Peri-Peri in its audited financial statements.
The company reports consolidated financial results, together with revenue categories such as restaurant sales, sales of goods, and royalty and franchise fees.
But these categories do not identify the contribution of each brand.
For example, the company’s 2025 audited financial statements reported approximately ₱10.29 billion in restaurant sales, ₱4.88 billion in sales of goods, and ₱874.6 million in royalty and franchise fees.
However, investors cannot determine how much of the restaurant revenue came from Shakey’s versus Peri-Peri.
Similarly, they cannot identify how much of the sales of goods and franchise-related income came from Potato Corner. This makes it difficult to assess the profitability of each business.
Is the original Shakey’s restaurant chain experiencing declining margins because of weaker consumer demand and rising operating costs?
Is Potato Corner generating sufficient franchise income to compensate for the pressure on the restaurant business?
Or are both businesses experiencing slower growth as the company expands into increasingly competitive markets?
The available financial statements do not provide enough information to answer these questions.
This does not necessarily mean that any particular brand is losing money. Nor does it establish that Potato Corner is subsidizing weaker operations elsewhere in the group.
But the absence of brand-level financial information makes it harder for investors to evaluate the economic performance of the company’s major businesses.
Growth is not the same as value creation
Shakey’s expansion strategy is understandable. A larger network can increase brand visibility, strengthen purchasing power, improve distribution efficiency, and provide opportunities to enter new markets.
Its diversified portfolio also allows the company to serve different consumer segments, from full-service dining to affordable food kiosks.
However, the financial benefits of expansion ultimately depend on the returns generated by the additional investment.
If revenue increases but operating margins continue to decline, the company may need to generate substantially higher sales just to maintain its previous level of profitability.
The same principle applies to franchising. A larger franchise network can be attractive because franchisees provide much of the capital required to establish new outlets.
But the value of that network depends on the continuing profitability and sales productivity of individual franchisees.
If royalty income fails to grow alongside the network, investors need to understand why.
For Shakey’s, the recent figures present a mixed picture. Systemwide sales continue to increase, and the company has successfully expanded its geographic reach and brand portfolio.
Yet operating margins have weakened, net income has declined for two consecutive reporting periods, and franchise income growth has slowed.
The company may eventually benefit from the investments it has made in new stores, products, technology, and organizational capabilities.
But until those investments translate into stronger earnings, investors have reason to question whether the pace of expansion is creating sufficient value.
More importantly, as Shakey’s becomes a diversified foodservice group, greater disclosure of the financial performance of its major brands would help shareholders understand where that value is being created.
After all, the success of an expanding restaurant business should not be measured simply by how many stores it opens or how much revenue it generates.
