Government regulates franchise operation

Government regulates franchise operation

JAKARTA (JP): The government has ruled that franchises in the
country will be limited to provincial capitals unless they meet a
new set of operating conditions.

Government Regulation No. 16/1997, effective June 18, states
that franchises in towns outside provincial capitals must
consider the towns' social and economic development.

The 11 article regulation also says that franchisees must use
as many local products as they can, as long as they comply with
franchisers' standards.

But franchisees worry that the newly established rules will
discriminate against foreign franchises.

Chairman of the Indonesian Franchise association, Bambang N.
Rachmadi, called on the government to ensure that the new rule
treats foreign franchises the same as it does local franchises or
companies distributing imported products.

"But these local companies (which distributes imported items)
are allowed to enter regencies," Bambang, who is also the
president of McDonald's Indonesia, was quoted by Bisnis Indonesia
daily as saying.

He said he was worried that the new regulation would take away
McDonalds' chance to cooperate with small businesses.

In a similar bid to protect local small and medium businesses,
the Ministry of Industry and Trade recently issued a joint
ministerial decree with the Ministry of Home Affairs forbidding
new big retail centers in towns outside of provincial capital
cities to open.

The decree also requires existing big retail chains in towns
outside provincial capitals to cooperate with local small and
medium retailers. (das)