Franchise law should protect local firms: Amir

JAKARTA (JP): Amir Karamoy, consultant, suggested yesterday that the planned regulation on business franchising should protect domestic firms' interests.

"The planned regulation being formulated by the government must restrict the expansion of foreign franchising businesses into the country's regional areas to give opportunities to domestic companies and franchisees to grow," Amir Karamoy told reporters at a seminar on franchising.

The government has spent the last four years preparing a regulation on business franchising. It is expected announce the regulation later this year.

Amir said the regulation should limit the number of outlets run by foreign franchise holders: "For instance, a franchisee with an overseas license could only run a maximum of 30 outlets throughout the country to avoid monopolistic practices."

He said using Indonesian in contracts between foreign franchisers and domestic franchisees would help local parties.

The number of foreign franchise businesses in Indonesia has grown by an average of 445.8 percent annually for the last four years, while the number of local franchisers grew only 5.9 percent.

Amir said there were 121 foreign, but only 35 domestic, franchising firms in Indonesia.

Of the foreign franchise businesses in Indonesia, 76 percent were from the United States and the rest were from Japan, Britain, the Philippines and other nations, he said.

About 60 percent of the franchising businesses in Indonesia operated restaurants or other food outlets and 18 percent operated retail businesses. The rest were involved in training and consulting, laundry, fitness and health care, Amir said.

Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaya said recently that the planned regulation would also require local content to be used in foreign franchises.

He said that about 90 percent of the profits earned through foreign franchise restaurants went overseas because the franchisees had to import raw materials to maintain the quality of their products.

Not all foreign franchises have been successful in Indonesia. Sources said that a number of outlets such as Dairy Queen and Burger King, which serve food and beverages, had been closed in the city because of mismanagement. (icn)