Homegrown Indonesian franchise branches out

JAKARTA (JP): Sukyatno Nugroho never tires of telling the story of how his food franchise came into being 18 years ago.

Or the fact that, with only a junior high school education and a class ranking of 40th out of 50, he has been able to branch out with franchises in 22 provinces and two foreign countries.

"My mother won a national contest to make the best es teler (a traditional drink of coconut, avocado, jackfruit, syrup, milk and ice) and I decided to take it from there by opening a small restaurant in a tent," he said recently at a Central Jakarta hotel.

In the early days, he added, it was difficult with the restaurant which eventually became Es Teler 77. He needed to get up early in the morning to buy the fresh ingredients, the tent often flooded or was raided by the police.

But he persevered, and he had what he termed a "trick" in his arsenal to succeed. "I sold my product as the 'Indonesian champion', which, of course, was intriguing to people. They came in droves, and kept on coming back."

By 1987, his business of selling the drinks and meatballs was so successful that he decided to try his hand at franchising. He acknowledged the initial effort was a case of learning by experience.

"There was no information on franchises in Indonesian at the time, so I couldn't read up on it, because my English is not so good, so I went with my own system through trying this and that. The first franchise was in Solo (Surakarta), and then a week later we opened in Semarang."

He said he was able to iron out the initial difficulties and the reach of his franchises expanded.

"There were so many franchises at one point that I felt like my head was going to explode," Sukyatno said. "We didn't know the management, the standardization, but we were pioneers."

In 1994, he and his wife decided it was best to have all the franchises in shopping plazas and malls, a process which several years to realize. They also set standardization rules for their franchisees and opened a training center.

Two years later, the firm opened Mie Tek Tek, a decision Sukyatno said was based on national pride as foreign fast food chains devoured the local market.

"I'm an entrepreneur, but my hobby, including on the weekend, is to go with my wife to shopping plazas. At the time we were stunned that there were so many foreign companies around. I remember my wife said why don't you open a restaurant, call it Mie Tek Tek, because you know the tastes of local people," he said.

"Because for a foreign franchise, like Mexican food, maybe five million people know about it, maybe it suits the taste of 500,000 of them but only a few can afford it because it uses expensive foreign ingredients."

With his experience from the two franchises, in 1997 he opened Restoran Pasti Enak, specializing in fish dishes. It also was immediately sold as a franchise.

He defined the segment as for all Indonesian people from all walks of life, with stores in such upmarket malls as Plaza Senayan and Pondok Indah Mall as well as middle-range markets. It is, after all, part of the company's logo: "Proud to be a Product of Indonesia."

Crisis

Sukyatno said the franchise was not as affected by the economic crisis, which reached Indonesia's markets in mid-1997 from Thailand and intensified as the year went on, as foreign franchises dependent on costly imports of raw materials.

In fact, he added, his business perked up.

"I opened 50 new franchises during the crisis. We can't be dragged down by people saying 'crisis, this, crisis, that'. In fact, the crisis helped us in positioning and helped us streamline our operations."

With consumers counting their rupiah like at no other time during the previously boom years of the 1990s, Es Teler 77 and Mie Tek Tek, with its menu of noodles and fried rice, found itself with new consumers, he added.

The franchises also stayed in business because they occupied small spaces in malls, and thus were not saddled with huge rents.

In vetting new franchisees, Sukyatno said he could identify the right candidate "in five minutes. We have to be like police investigators, asking them what we need to make a decision and deciding then and there. Where is their location? What is their positioning? That is what we need to know".

Franchisees pay an initial fee, plus 4 percent of their revenue monthly.

In the instances where there have been problems in the franchise relationship, he said he was able to settle the problems without resorting to the courts. "I consider my franchisees to be family. We try to take care of things in a persuasive way."

It is a traditional franchise, he noted, because sometimes he had to understand if things did not go quite as planned with supplies.

"We have to be creative sometimes, because we are dependent on the seasons for many of our ingredients, like the jackfruit. I don't pretend to be like the big franchises, who can have everything ready to order in their franchises."

Franchises have been opened in Singapore, Malaysia and Melbourne, Australia.

"Our stand in Australia has done so well, and 50 percent of the patrons are westerners. Part of the success has been the tricks of our promotion, the fact that we can call ourselves national champion and that we have branches in Singapore and Malaysia, too. People are impressed."

Sukyatno said he was always looking for new opportunities, even those which were out of this world. "If there is a space shuttle going into space, and there was a market there, I would be willing to set up my stores."