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Indonesia's franchise industry burgeoning
While many industries are struggling to survive, franchises in Indonesia are surviving the test of times and have become a lucrative industry, generating close to Rp 50 trillion (US$4
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While many industries are struggling to survive, franchises in Indonesia are surviving the test of times and have become a lucrative industry, generating close to Rp 50 trillion (US$4.96 billion) in sales annually.
The industry has grown by double digits over the past few years, both in sales and in the number of outlets, said Anang Sukandar, chairman of the Indonesian Franchise Association (IFA).
Anang was speaking to reporters during the International Franchise, License and Business Concepts Expo and Conference, in which 175 companies took part, including some 25 franchise companies from Singapore, Malaysia, and Australia.
The event concluded on Sunday.
Anang said that, judging from the amount of growth in recent years, the country may see as many as 840 franchises by the end of 2010.
"It is probable that the number of local franchises will increase by 12 percent from the current number by the end of next year," Anang said.
According to data from the Trade Ministry, there are currently 1010 franchises and business opportunities (BO).
BOs are companies which operate in a similar way to franchises but hold regular business licenses.
Some businesses prefer to operate as BOs as no fees are required for potential partners to join their network, unlike franchises, which require partners to pay a "franchise fee."
The 1000 plus franchises includes 260 foreign franchises and 750 local franchises and BO.
"About 700 of the local 750 are actually BOs," Anang said. About 45 percent of the local franchises are food-related.
Trade Minister Mari Elka Pangestu said during the opening of the event last Friday that, at present, there are 42,900 franchises and BO outlets, which employ nearly 820,000 people and have combined monthly sales of Rp 4.1 trillion.
She added that the franchise industry provides opportunities for the country's small-and-medium-sized enterprises (SME).
"The franchises industry provides a brand name, business networking, managerial training and an existing business system. This can help new entrepreneurs who do not have experience."
Since 2007 the ministry has helped develop more than 60 companies become franchises.
Mari said she hoped local franchises and other businesses could learn from the example of top local brands such as restaurant Es Teler 77, auto accessories retailer Auto Bridal, and the International Language Program chain, which have been able to expand their business not only in Indonesia, but also overseas.
Mari and Anang agree that the future looks bright for the industry, defying the current trend and the impacts of the global economic downturn.
The rising number of participants and visitors to the IFA's annual event is a telltale sign of the success of the industry.
The number of companies participating in the conference increased from 153 last year to 175 companies in 2009.
In 2007 9,000 visitors attended the conference, this more than doubled to 20,000 in 2008 and again rose to 50,000 visitors this year, Anang said. (mrs)
