Despite crisis, local franchise market still growing
Despite crisis, local franchise market still growing
The Jakarta Post, Jakarta
Despite the economic crisis, the local franchise business grew
by an average 13.2 percent over the past six years, while the
foreign franchise business contracted by an average 3.6 percent
during the same period, a consultant said.
"This ... creates optimism that the local franchise business
will be able to steadily grow and significantly control the
domestic market," franchise consultant Amir Karamoy of Ak &
Partners said in the firm's year-end review made available to The
Jakarta Post on Friday.
It noted, however, that despite the growth, about 70 percent
of local franchisors had yet to have an "established concept of
business or a proven system of business operation."
"This is shown by the fact that many of their franchisees have
stopped operating," Amir said, adding that the number of outlets
carrying the brands of local franchises had dropped to 237 today
from about 400 in 1999.
This indicated that many local firms were not yet fully
prepared to enter the franchise business, he said.
According to Amir, the success rate of local franchise
businesses averaged 30 percent, compared to 92 percent in
developed countries.
Investors should be extra-careful in selecting local franchise
brands, while local firms should establish a good business system
before offering their brands to potential franchisees, Amir
explained.
He said that the franchise business in Indonesia had been
pioneered by foreign franchisors. This was then imitated by local
firms, including state-owned companies such as securities firm PT
Danareksa, mail carrier PT Pos Indonesia and oil and gas company
PT Pertamina.
The entry of state-owned companies into the franchise business
had support the development of the business in Indonesia as they
were able to set a good example for local private sector firms
who also wanted to enter the business, Amir said.
Given the continued uncertainties in the country's social and
political life, Amir predicted that foreign investors would
continue to be reluctant to set up the business in the country
next year, but they might be interested in entering the country's
franchise market as the risks were lower in this sector.
He noted that the number of foreign franchisors, which
contracted by 40 percent at the peak of economic crisis between
1997 and 1999, grew 10.9 percent between 1999 and 2002, when the
economic crisis had abated somewhat.
"This is already close to the growth rate of local
franchisors. It is thus projected that in 2003, foreign
franchisors will grow as fast as local franchisors," he said.