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ocal business players in the restaurant and fast-food business have thrown their support behind a new restaurant franchise rule, saying the rule is in keeping with their aim to spur growth in the industry.

Indonesia Restaurant and Café Entrepreneurs Association (Apkrindo) chairman Eddy Suyanto said on Friday that the new rule, which puts a ceiling on the number of company-owned outlets for restaurant franchisors, would help generate a proliferation of restaurants and cafes.

“On paper, if we team up [with other parties], the business will grow faster because business opportunities are spread to other business players that can provide capital, resources and workers,” Eddy said during a media gathering at the Trade Ministry.

The new rule, he continued, would also stimulate diversification in terms of products offered to consumers; although he acknowledged that despite the benefits, major challenges, such as hygiene standards and food-handling management, remained, which needed to be overcome.

In a bid to avoid monopolies in the restaurant franchise business and encourage a greater involvement by local business players through third-party ownership, the Trade Ministry passed last month a new rule
limiting the number of company-owned outlets.

A single master franchisee or franchisor will now be allowed to own a maximum of 250 outlets, and it should sell franchise licenses to third parties or allow them to join through equity participation.

Under the equity participation, the third party may control 40 percent of a restaurant outlet worth less than Rp 10 billion (US$1.03 million) and 30 percent of an outlet worth more than Rp 10 billion, a move that still allows the master franchisees or franchisors to retain control of the business and its management.

Before the rule takes effect, licenses of foreign franchises in Indonesia, including those for restaurants, are mostly dominated by a single master franchisee, which tends to expand its own outlets rather then selling to multiple franchisees.

As more than half the country’s population prepares to enter the middle class, a number of new foreign restaurant franchisors are aiming to tap into the potential of this vast market of around 240 million people; escalating competition with global brands like McDonald’s and Kentucky Fried Chicken.

Last year, at least six Japanese brands voiced their expansion plans for Southeast Asia’s largest economy.

The new rule on restaurant franchises is the latest in a series of government steps to rein in the
fast-growing franchise industry in the country.

Beni Widjajanto, the head of education and small and medium enterprise empowerment at the Indonesian Franchise Association (AFI), also described the new franchise rule as a positive measure to distribute opportunities among local players, allowing them to gain benefits from a proven business model.

“This rule offers opportunities for local players to operate established franchise outlets, which means when the franchisors reap benefits from their business, the franchisees will likely reap similar gains,” he said, stressing that local players could especially enjoy benefits from well-known foreign food chains.

The transfer of franchise business through equity participation would also allow benefits from the franchise business to be shared more widely among local business players