Foreign chains no threat to local food business
By Sri Wahyuni
JAKARTA (JP): Despite the deluge of foreign restaurant chains, many local restaurant businesses are thriving.
Es Teller 77, an originally small-scale cafe selling fruit concoctions and meatball noodle soup, is an example of success in the local food business chain. In l987, the company started franchising its business nationwide.
Eight years after its franchising expansion, Es Teller 77 has 148 outlets throughout the country. By the end of this year the number of outlets is expected to reach 200, said Sukyatno Nugroho, who owns the franchising rights for Es Teller.
"Almost every week we open a new outlet," Sukyatno said.
Franchising is unpopular with most Indonesian restaurant owners, although a large number of them have the potential to expand their businesses through franchising.
A few success stories are of restaurants which serve fried chicken, noodles, Sundanese, Padang (West Sumatran) and Javanese cuisines. Many restaurants serving these popular dishes have done well and have branches all over the country. But they are still reluctant to franchise their businesses.
Widyanto, owner of popular meatball noodle soup restaurant Bakso Lapangan Tembak in Central Jakarta, commented that he considered the franchise business inappropriate for his business as he has not found the right partner to help start it up.
"The idea has entered my mind but it's not going to happen in the near future," Widyanto said. He admitted he is afraid that the system would affect his current profitable business.
He said there are very few people who are willing to conduct business sincerely. Many are enthusiastic only at the beginning. Later, when they feel they are quite successful, they start to lower the quality of their products. "This will certainly ruin their reputation. When it happens to a franchise partner, it will destroy the image of the franchisor," Widyanto explained.
Sukyatno of Es Teller started his franchise business unintentionally. During the early years of his business as a vendor the authorities kept demolishing his stall.
"I felt so frustrated because I was only a small-scale vendor. I started looking for a permanent place and expanding my business," said junior high school graduate Sukyatno.
He lacked adequate funds to expand on his own and so tried to franchise his business.
"I had no knowledge or experience about the franchise business. I did it instinctively without consulting experts. It was really trial-and-error," admitted Sukyatno.
Initially his franchise business did not run as smoothly as he expected. "I failed so often, but it did not discourage me at all. I have kept fighting," the 47-year-old Sukyatno maintained.
His tirelessness began to pay off in early l990. He established various outlets in a number of large-scale department stores and malls. Although each outlet is small, ranging from 30 to 50 square meters, it is profitable. "We receive encouraging response from our customers," he noted.
At present, he charges between Rp 50 million (US$21,880) to Rp 100 million for a five year franchise license.
Noted economist Laksmana Sukardi of the Econit Advisory Group has said that in order to help develop local franchising, the government must provide adequate legal apparatus.
"A franchise product cannot be seen solely as a trade product. A franchise is a legal product," Sukardi explained.
Sukardi elaborated that it requires a special legal structure to develop local franchises. Indonesia requires, for instance, a proper patent law, a standard franchise agreement to avoid possible dispute between a franchisee and the franchisor.
The franchise business has grown rapidly in foreign countries. This could be due to franchisors having a strong legal basis to protect their businesses, Sukardi said.
"No wonder they can easily expand their business chains worldwide," he concluded.