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)