Franchising to Indonesia

(Last updated: 13 Jul 2007)

Trends and opportunities

The market

In 1991, 29 foreign and 6 Indonesian franchisors had granted franchises for more than 300 outlets in Indonesia. By August 1997, the number of franchisors reached 253 (230 foreign and 23 local) with a total of more than 2000 outlets. After the monetary crisis in 1997, followed by political and social disorders in 1998, the Indonesian franchise industry faced a sharp downturn. Many franchisors left the country and approximately 500 outlets through out Indonesia were closed. The Indonesian franchise industry began to recover in late 1999 with the entry of more than 20 new franchisors.

Table 1: Growth of franchisors

	2002	2003	2004
Local franchisor	68	73	81
Foreign franchisor (Master franchise)	94	102	104

 

(Source: Bisnis Indonesia”, Tuesday 27 July 2004)

Foreign franchises are predicted to be increase – Amir Karamoy states that the number of foreign franchisors increased 20 per cent in 2005. (Source: Amir Karamoy AK Konsultan & Partner, Bisnis Indonesia, Thursday 6 January 2005).

Sugiyanto Wibawa, a retail marketing consultant, states there are two factors will push investors to look for an alternative investment instrument, that is, franchise. Firstly, retail space and number of malls have been increased. The retail space increased from 75,900 m2 to 1.78 million m2 in 2004 (Source: Sugiyanto Wibawa, Bisnis Indonesia, Monday 27 Dec 04) and 2.82 million m2 in 2006 (Source: PT Procon Indah, Bisnis Indonesia, Monday 27 Dec 04).

The property agents have been aggressively promoting the space in malls as an investment. Secondly, the time deposit rate has decreased gradually. It has pushed investors to look for investment instruments that are more prospective with lower risk.

The highest growth (local and foreign) with 60 per cent of total increase franchises is the service industry: education, business consultant, salon, health and beauty. (Source: Burang Riyadi, IFBM, “Bisnis Indonesia”, 2004)

Opportunities

Opportunities in the franchise industry include:

• Food and beverage
  Existing franchisors include: McDonald's, KFC, Pizza Hut, Dunkin' Donuts, Wendy's, A&W Restaurants, Saint Cinnamon, Oh La La, Häagen-Dazs, Baskin-Robbins, Chi-Chi's, Hartz Chicken, Subway Sandwiches and Salads, T.G.I. Friday's, and Bread Talk.
  Existing Australian franchisors include: Dome, La Porchetta, NZ Natural, Fantasy Donut, Gelare Café.
  
  
• Retail (including convenience and specialty stores)
  Existing franchisors include: Circle K, AM/PM, Manchester United, Athlete's Foot, and Body Shop.
  Existing Australian franchisor: Happy House
  
  
• Real estate services
  Existing franchisors include: Century 21, Ray White, Era, Coldwell Banker, and LJ Hooker.
  
  
• Laundry and dry cleaning services
  Existing franchisors include: One Hour Martinizing, 5 A Sec, Jeeves, and DeWaas.
  
  
• Education
  Existing franchisors include: Berlitz, Direct English, English First, and Gymboree
  Existing Australian franchisor: Kids2 Success.
  Other existing Australian franchisors are Lasik Laser Sight Centres and Action International.

Tariffs, regulations and customs

There are two important tools governing franchises in Indonesia:

• Government Regulations 16/1997
• Minister of Trade and Industry Decree No 259/MPP/Kep/7/1997 about Registration of Franchise.

The objectives these are to protect Indonesian franchisees and to foster local business development. The franchise law requires a franchise agreement to be executed in Indonesian language, governed by Indonesian law and to include specific matters, such as commercial agreement.

The law mentions that the franchisor is obliged to nurture, guide, and train the franchisee. Franchisor is also responsible to assist its franchisee by providing guidelines or advice in the area of marketing, financial and operation.

Marketing your products and services

Market entry

Flexibility to Indonesian rules and culture, in the area of product and promotion

Franchisors need to be flexible in deciding which materials and equipments need to be imported. Local goods in terms of delivery time and price are often more competitive than imported goods. Imported goods where local goods are available are inefficient. Those are more expensive, takes a long time to be received by the buyer, because of complicated custom procedures and bureaucracy.

Franchisors need to focus on competitive advantages of their products but the advantages should be still applicable in the Indonesian culture.

Strong promotion on brand awareness

As there are a lot of new brands and franchise around Indonesia, successful franchisees promote their brand names to gain brand awareness among the people. People who buy products and services from international franchises are usually those who enjoy a contemporary lifestyle.

Strong brand awareness in Australia among Indonesian society

Some international franchisees found that they could sell their product more easily when the franchise has been already well known in Australia among Indonesians.

Trade shows and events

Franchise and Business Opportunity Indonesia
Organised by: PT Panorama Convex Indah

International Franchise and Business Concept Expo
3–5 May, 2006
Jakarta Convention Center
Jl Johar No.9, Menteng
Jakarta 10350
Tel: +62 21 310 7117
Fax: +62 21 390 3824
Email: farah@dyandra.com or wahuaji@dyandra.com
Organised by: PT Dyandra Promosindo

Dyandra Promosindo has organised a few international exhibition in Indonesia. The company belongs to the Gramedia group – the biggest newspaper, magazine, and printing company in Indonesia. Dyandra Promosindo expects to recruit franchisors from Singapore, Korea, Thailand, and Australia to exhibit in the Expo.

Links and industry contacts

Franchise-related resources

Asosiasi Franchise Indonesia (Indonesian Franchise Association)
Jl Dharmawangsa X No A19
Kebayoran Baru
Jakarta Selatan 12150
Tel: +62 21 739 5577
Fax: +62 21 723 4761
Email: sukandar@indo.net.id

AK Consulting
Kompleks Taman Bintaro Kav E7-8
Jakarta 12330
Tel: +62 21 736 4288
Fax: +62 21 737 1217
Email: karamoys@link.net.id

Hans Consulting Indonesia
Jl Pangeran jayakarta 85 BP-BQ
Jakarta Pusat 10730
Tel: +62 21 628 2361
Fax: +62 21 628 7670

Inti Fokus Bina Manajemen (IFBM)
Plaza Mandiri, Penthouse 31st Fl
Jl Jend Gatot Subroto Kav 36-38
Jakarta 12190
Tel: +62 21 524 0155
Fax: +62 21 524 0110
Email: ifbm@consultant.com

Contact details

The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.

Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.

Austrade:

• Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
• Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
• Administers the Export Market Development Grants scheme.
• Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
• Provides advice to the Australian Government on its trade and investment development activities.
• Delivers consular, passport and other government services in designated overseas locations.

A list of Austrade offices (in alphabetical order of country) is available.

More information

For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au

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