Foreign food franchising may be curbed

Foreign food franchising may be curbed

JAKARTA (JP): The government is seeking a way to curb the
mushrooming activities of foreign food franchisees in the country
in a bid to protect the popularity of local foods, a minister
said.

State Minister of Food Ibrahim Hasan said yesterday that
President Soeharto had asked related ministers to seek a way to
restrict the activities of foreign food franchisees.

"The President wanted us to find a solution that is not
against international free trade principles to curb the foreign
franchise business," Ibrahim told reporters following a meeting
with Soeharto at the Bina Graha presidential office.

The minister was reporting the progress of the deliberation of
a proposed food law at the House of Representatives during the
meeting. The House is expected to approve the draft law next
week.

Ibrahim acknowledged yesterday that curbing the mushrooming
activities of foreign food franchisees would be difficult because
most of the country's growing middle-class population preferred
buying foreign food as opposed to local edibles.

"At least, we could limit the activities of foreign food
franchisees to the big cities. Their activities in towns should
be banned to protect local food vendors," he said.

Ibrahim said the President was very concerned about the
growing activities of foreign food franchisees because their
presence is posing a threat to the popularity of traditional
foods.

The country's retail sector remains closed to foreign
companies. The foreign food and beverage chains are only allowed
to operate under franchising agreements with local firms.

"The amount of their (foreign franchisers') investment is too
insignificant as compared to royalties they will reap from their
franchising contracts," the minister quoted the President as
saying.

The franchising business showed significant growth in the last
five years, with the number of foreign franchisers rising sharply
to 118 last year from only six in 1991.

Amir Karamoy, a noted franchising consultant, said here
recently that the foreign franchisers are mostly engaged in the
sale of fast food and fresh beverages.

He said many local companies have also developed their
marketing through franchising contracts to enable them to compete
in the tight market.

The number of domestic franchisers has, thus far, reached only
32.

The most successful franchisers, according to Amir, are
California Fried Chicken and fresh beverage seller Es Teller 77,
which respectively operate 178 and 150 outlets. (hen)