This is a part of a series of articles on the country’s booming franchising business.

For those who want to have a new business but afraid of starting it from zero, to be franchisees is among the best and safest alternatives they may consider.

Chairman of Kadin’s national committee on franchise and license Amir Karamoy said Tuesday that many people were interested to be franchisees because it was safer than starting new businesses from zero.

He said that if a person started a new business from zero, it took between one to three years to build a good management system and promote the new brand and there was an ample chance of failing during that period.

“But, if you become a franchisee, the franchise company has already had a good management system and popular brand image,” he told The Jakarta Post.

Government decree No. 42/2007 also obliges franchisers to give assistances in terms of management training, marketing, and research and development to franchisees.

“The risk of success if a person buys the license of a franchise company is more than 90 percent, while if the person starts it from zero, the success opportunity is only about 60 percent,” Amir said firmly.

The franchise business has currently emerged as one of the most promising businesses in the country. The Indonesian Chamber of Commerce and Industry (Kadin) has estimated that the business grows consistently between 10 percent and 12 percent a year.

In 2009, as many as 1,010 franchise companies comprising 260 foreign brands and 750 local brands
operated in the country. According to franchise consultancy company Francorp Indonesia, currently, 42,900 outlets of franchise companies operate and absorb 819,200 workers nationwide.

Amir said that franchise business was currently more attractive because it was no longer dominated by food and beverage companies. Nowadays, many franchise companies operated in other fields like helmet wash, car and motorcycle wash, laundry and even painting gallery.

“Potential franchisees now have many options because innovation to expand the field of franchise business is still very aggressive,” he added. The expansion in the franchise business is relatively fast. Francorp Indonesia notes that the earning of the franchise business has climbed convincingly in the past several years. In 2008, the earning of the business grew by 15 percent to Rp 93 trillion (US$72.7 billion) from Rp 81 trillion in the previous year. In 2009, the earning increased by 5 percent to 95 trillion.

The company estimates that in 2010, the business’ earning will go up by 20 percent to Rp 114,64 trillion. However, Amir said that the expansion of the franchise
business was still facing several constraints particularly in regional level. “Many regional governments intentionally block permits for franchise companies,” he said. He added that those governments did not understand their legal obligation to support the development of franchise business.

Law No. 20/2008 on micro-, small- and medium-scale industry (MSMEs) obliges the governments, both central and regional governments, to simplify the procedure of making business permit for MSMEs and make it free of charge.

The 2007 government decree also obliges regional governments to empower the franchise business, such as by holding franchise trainings, recommending businessmen to use available marketing facilities and providing business consultancy.

“Most of regional governments don’t understand that actually the franchise business empowers local businessmen and absorb local workforce,” said Amir. (rdf)

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