Homegrown Indonesian franchise branches out

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."