Food tops franchise business

The Jakarta Post, Jakarta

Forty-nine-year-old Kalista Darmadipuro likes to visit bubble drink stalls, which are highly popular with teenagers and can be found in most malls in Jakarta.

While enjoying the beverages on offer, she questions the uniformed staff on how many customers the stall gets and how the business is developing.

"I'm interested in obtaining a license to open one of these stalls. I figure that going into the franchise business would be more challenging than other investment instruments," said the human resources manager who works for a foreign bank representative office in Jakarta.

Kalista is trying to decide whether to open a beverage stall or an English language center, either of which she plans to do by obtaining a franchise license.

"F&B (food and beverages) has become part of the urban lifestyle, while the demand for English courses will grow as the population grows," Kalista reasoned.

According to the License Holders and Franchiser Forum (Wali), food and beverages as well as the education business are the top options for those wanting to start a franchised business.

Currently, 237 foreign companies franchise their businesses in Indonesia, of which more than 50 percent are in the thirst- quenching and taste-bud-teaser business.

Meanwhile, the same proportion of the 70 local franchisors are also in the food and beverages business.

Although the Indonesian Franchise Association predicts a slower growth of 7 percent for next year, this year's total turnover of Rp 30 trillion (US$3 billion) is considered highly attractive.

"Aside from F&B and education, health, books and the toy businesses will also develop, especially in major cities," said Wali chairman Amir Karamoy last week.

The situation reflects the better living standards of the urban middle to upper class.

The increasing interest in such businesses was evident at a three-day expo in the Jakarta Convention Center that closed on Sunday, showcasing 120 foreign and local franchisors.

Franchising is a business concept in which a company -- the franchisor -- lends its know-how and license to another -- the franchisee -- to sell its products or services under a royalty- based scheme.

Through the mechanism, a franchisor can expand its business without having to raise its own capital, while a franchisee can open its own business without the need to establish a brand name.

Kalista said she had set aside Rp 500 million for a license as well as to rent a strategic place for the business.

Starting a business through franchising has indeed become an attractive option for newcomers. At present, with a paid-up capital of Rp 10 million, one can obtain a local burger franchising license.

The fee could amount to more than Rp 200 million for a license for an educational business, which requires a more complicated managerial system as well as a quality supervising system.