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T Indomarco Prismatama, which controls the country’s renowned minimarket network Indomaret, plans to open 800 new stores this year, 40 percent of which are to be franchised, after partnering with local lending giants to finance the stores’ franchisees.

CIMB Niaga (BNGA) was the latest in line after an agreement with Bank Mandiri (BMRI) to provide credit for Indomaret’s franchisees with special rates of between 11 to 12 percent per year, Indomaret finance director Hendarto Josojuwono said Friday.

Indomaret, established in 1988, had 6,161 stores as of February this year, 34 percent of which are operated by other companies under franchise agreements. Only 5 to 7 percent of Indomaret’s over 6,000 minimarket stores could be considered to have “failed”, he added.

An Indomaret store requires a Rp 600 million to Rp 700 million (US$77,000) investment, including for the franchise fee, but store renovation and other expenses may require another Rp 300 million, Hendarto said.

“But there are capitalization issues that vendors are facing. That is why we have teamed up with the banks,” he told reporters after a signing ceremony at CIMB Niaga headquarters. Indomaret is now in the process of finalizing a partnership with Bank Mega (MEGA) for franchisee financing.

CIMB Niaga expected 200 Indomaret stores to be funded by the bank with total financing of Rp 50 billion, vice president director Catherine Hadiman said without disclosing a timeframe. In comparison, Indomaret’s similar partnership with Bank Mandiri had financed less than 10 stores over the past year.

CIMB Niaga, however, has readied a Rp 100 billion credit ceiling for Indomaret franchisees, as the partnership could boost the bank’s credit portfolio for the commercial sector, widen its customer base and boost fee-based income, Catherine said. CIMB Niaga’s corporate loans reached Rp 39.12 trillion last year, up 19 percent from 2010.

“Instead of spending money to open stores, if we can grow through the franchising business, than
why not? The demand for the Indomaret franchise has been high,” Hendarto said.

Foreign interest in the Indomaret franchise has also surfaced recently, but these potential investors have yet to realize any plans, Hendarto said without elaborating. “They [foreigners] were surprised that there is a huge minimarket network here in Indonesia.”

Indomaret receives about 2 to 4 percent of the price of goods it sold. Indomaret’s sales reached Rp 8 trillion last year.

The company expects sales of goods sold at Indomaret to grow by at least 30 percent this year to Rp 10.4 trillion, despite the threat that the government’s planned fuel price hike will affect prices across the board due to ballooning operating expenses.

“Producers of goods have gradually begun increasing prices. They have already priced in the fuel price hike factor, for some time now. Once fuel prices do increase, it’s not like all prices of goods will increase at once. Producers still want to sell their products,” Hendarto said.